POLYNOUS GROWTH FUND
345 California Street, Suite 1220
San Francisco, CA 94104
Class A Shares PROSPECTUS dated November 28, 1997,
as Revised July 28, 1998
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
$50 million and $5 billion and which, in the opinion of Polynous
Capital Management, Inc., will have an annual company revenue growth
rate of between 15% and 30%.
The Fund is a separate series of shares of Polynous Trust (the
"Trust"), an open-end, management investment company commonly known
as a mutual fund. Polynous Capital Management, Inc. (the "Adviser"),
serves as the investment adviser of the Fund managing its assets in
accordance with its investment objectives stated in this Prospectus.
The Fund offers its shares through two separate classes of shares:
Class A Shares and Class D Shares. Both classes of shares are
identical except as to the expenses borne by each class. These
alternative classes permit investors to choose the method of
purchasing shares most beneficial to them. This Prospectus provides
information concerning Class A Shares. You may receive information
concerning Class D Shares by calling (800) 924-3863 or (415) 956-
3384.
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 November 28,
1997, as Revised July 28, 1998, which may be revised or supplemented
from time to time, provides a greater in-depth discussion of certain
areas which may be of interest to some investors. It has been filed
with the Securities and Exchange Commission and is available upon
request and without charge. To receive a copy, write to the Fund at
the address above or call (800) 924-3863 or (415) 956-3384.
*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.
TABLE OF CONTENTS
Page
Prospectus Summary
Expense Summary
Financial Highlights
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:
FPS Broker Services, Inc. Polynous Capital Management, Inc.
3200 Horizon Drive 345 California Street, Suite 1220
King of Prussia, PA 19406-0903 San Francisco, California 94104
(800) 528-8069 (800) 924-3863
(610) 239-4700 (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.
Prospectus Summary
What is the Fund's Investment Objective? Polynous Growth Fund (the
"Fund") seeks to achieve long-term capital appreciation.
There can be no assurance that the Fund will be able to achieve its
investment objective. See "Investment Objective."
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 $50 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," "Investment Policies and Strategies," 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?
First Data Investor Services Group, Inc. serves as the administrator,
transfer agent and fund accounting agent for the Fund. See
"Management of the Fund."
Who is the Underwriter? FPS 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 initial sales charge of 4.50% and annual 12b-1 Plan expenses
of 0.25%. See "The Distribution Plan" and "How to Purchase Shares."
Is there a Minimum Investment? The minimum initial investment is
$2,500 or $1,000 for IRA, Roth IRA and SEP accounts, or $500 for
Uniform Gift to Minor Accounts ("UGMA") and Uniform Transfer to Minor
Accounts ("UTMA"). The subsequent investment minimum is $100.
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 of 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 be distributed in the form of annual dividends.
Substantially all capital gains realized 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 or on the initial application. See "Dividends
and Taxes."
Expense Summary
Shareholder Transaction Expenses:
Class A
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50%/1/
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price) None
Deferred sales charge (as a percentage of
original purchase price) None
Redemption fees (as a percentage of
amount redeemed) /2/ None
/1/ Reduced for purchases of $50,000 and over. See "How to
Purchase Shares."
/2/ If you want to redeem shares by wire transfer, the Fund's
transfer agent charges a fee (currently $9.00) for each wire
redemption. Purchases and redemptions may also be made through
broker-dealers and others who may charge a commission or other
transaction fee for their services.
Class A
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)/3/ 0.27%
12b-1 Fees 0.25%
Other Expenses 1.48%
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 reimburse certain expenses of the Fund
necessary to limit the total operating expenses for the second
year of operation to 2.00% of the Fund's average net assets.
The Adviser reserves the right to terminate this waiver or any
reimbursement at any time, in its sole discretion. Absent such
fee waivers, advisory fees for the Fund would have been 1.00%
and total operating expenses would have been 2.73% of the
Fund's average daily net assets on an annualized basis for the
Fund's first fiscal year ended July 31, 1997.
Example
Based on the level of expenses listed above and assuming (1)
imposition of the maximum sales charge, (2) a 5% annual return and
(3) 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 3 Years 5 Years 10 Years
$64 $105 $148 $267
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."
Due to the 12b-1 distribution fees, long-term shareholders of the
Fund may eventually pay more than the economic equivalent of the
maximum initial sales charges otherwise permitted by the Conduct
Rules of the National Association of Securities Dealers, Inc. (the
"NASD").
Financial Highlights
The following financial highlights for the period presented was
derived from the Fund's financial statements dated July 31, 1997,
which were audited by Deloitte & Touche, LLP, independent
accountants, and whose unqualified report thereon is incorporated by
reference into the Statement of Additional Information. The Fund's
Statement of Additional Information is incorporated by reference into
this Prospectus and may be obtained without charge by writing the
Fund or calling (800) 924-3863. The table below sets forth financial
data for one share of Class A capital stock outstanding throughout
the period presented.
For the Period August
12, 1996/*/ through
July 31, 1997
Net Asset Value, beginning of period $12.00
Income from investment operations:
Net investment income 0.96
Net realized and unrealized gain on investments 1.41
Total from investment operations 2.37
Less Distributions:
Distributions from net capital gains (0.02)
Net Asset Value, end of period $14.35
Total Return/^/ 20.53%/1/
Ratios/Supplemental Data
Net assets, end of period (in 000's) $22,509
Ratio of expenses to average net assets:
Before expense reimbursement 2.73%/1/
After expense reimbursement 2.00%/1/
Ratio of net investment income to average net assets:
Before expense reimbursement 9.44%/1/
After expense reimbursement 10.17%/1/
Portfolio turnover rate 925.07%/2/
Average commission rate $ 0.0308
/*/ Commencement of investment operations
/^/ Total return calculation does not reflect sales load
/1/ Annualized
/2/ Not Annualized
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, the
Adviser 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
the Adviser 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 needed
to make an informed decision 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 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 a diversified, 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. Except for these
differences, each share of the Fund represents an undivided
proportionate interest in the Fund. This Prospectus concerns the
offering of Class A Shares. For more information regarding Class D
Shares, please call (800) 924-3863 or (415) 956-3384.
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
$50 million and $5 billion and which, in the opinion of the Adviser,
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 and preferred stocks.
Private Placements: The Fund may invest up to 5% of its total assets,
at the time of investment, in securities which are subject to
restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined
to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction). These
securities are generally referred to as private placements or
restricted securities. Limitations on the resale of such securities
may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The
Fund may have to bear the expense of registering such securities for
resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted
securities to qualified institutional buyers without limitation. The
Adviser, pursuant to procedures adopted by the Trustees of the Fund,
will make a determination as to the liquidity of each restricted
security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within
the category "illiquid securities", which under current policy may
not exceed 15% of the Fund's total net assets. The Fund's policy is
to limit illiquid securities (which include, but are not limited to
private placements) to a maximum of 15% of total net assets.
Repurchase agreements with maturities in excess of seven days will be
considered illiquid securities.
Covered Call Writing: The Fund may write covered call options on
equity securities to the extent permitted by applicable law. When
the Fund writes a covered 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 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. The Fund's ability to use this strategy
may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that this strategy 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 limit 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 both value and growth
investing, 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: (1) Research and (2)
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. Financial Assessment
5. Functional Assessment
6. Comprehensive Risk Assessment
7. Continuing Review
The Portfolio Management Process
1. Valuation
2. Portfolio Characteristics
3. Buy Discipline
4. Portfolio Monitoring
5. Sell Discipline/Portfolio Optimization
Although having this structure, control and discipline is no
guarantee of success, the Adviser believes that the requirements of
its process will result in both high levels of knowledge about each
company before it can be considered for inclusion in the Fund's
portfolio and high return prospects for the companies which then
satisfy its portfolio purchase discipline. At each step of the
process the primary focus is on risk management, not stock selection.
The Adviser believes that risk is managed best by knowing more about
the Fund's portfolio companies than might be typical and having less
expensive companies in the Fund's portfolio 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 which are guaranteed
by the full faith and credit of the United States. Pending the
investment of new subscriptions, the Fund may also temporarily hold
liquid assets until there are enough companies meeting the Adviser's
"buy discipline." To the extent that the Fund holds high levels of
liquid assets, the Fund will not be invested so as to achieve its
objective. Contrasted with some practices elsewhere in the
investment management industry, the Adviser does not automatically
add to existing position sizes when additional cash comes into the
Fund from new subscriptions. All purchases, either of new positions
or of additions to existing positions, require a certain minimum
projected annualized return based on the Adviser's research
conclusions. All position sizes must also comply with the Adviser's
strict position size limits as specified by the Adviser's "position
size/projected return matrix." The Adviser also believes that the
requirements of its research process and the time which the Adviser's
personnel spend on analyzing each company result in the Adviser
investing cash from new subscriptions more slowly than may be typical
within the investment management industry. As a result, there may be
times during which the Fund holds a higher percentage of its assets
in short-term, high-quality debt instruments than other growth
oriented funds. During periods of significant subscriptions inflows,
the Adviser reserves the right to close the Fund to new subscriptions
with little or no notice until the Adviser has sufficient new
investment opportunities to enable the Fund to be more fully
invested. There may also be periods where for defensive purposes
when market circumstances so warrant that the Fund may temporarily
convert up to 100 percent of its portfolio into liquid debt
securities, such as U.S. Treasury bills, notes and bonds.
Risk Factors
There is no such thing as a guaranteed investment and no one can see
into the future. Accordingly, the value of an investment in the Fund
will 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 risk 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.
Market Capitalization Considerations
The Fund's primary investment universe consists of companies with
market capitalizations at time of purchase of between $500 million
and $5 billion. This range of equity securities comprises stocks
which are commonly known as Mid-Cap, Small-Cap, and Micro-Cap equity
securities.
The Adviser attempts to reduce the overall risks connected with
investing in these 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 in the recent past, 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.
Small-Cap and Micro-Cap company stocks generally are considered to
offer greater potential for appreciation than securities of companies
with larger market capitalizations as they may benefit from the
development of new products and services. Small-Cap and Micro-Cap
company securities are also less researched and may be overlooked and
undervalued in the market.
Most Small-Cap and Micro-Cap company stocks pay low or no dividends.
The Fund seeks growth through long-term appreciation, rather than
income sources. Small-Cap and Micro-Cap company stocks also have
higher risk and greater volatility. Because most are not as broadly
traded as stocks of companies with larger capitalization their prices
may fluctuate more widely and abruptly. Such companies may have
relatively small revenues and limited product lines, markets, or
financial resources; their securities may trade less frequently and
in more limited volume than those of larger, more mature companies.
These companies may lack depth of management and may be unable to
internally generate funds necessary for growth or potential
development or to generate such funds through external financing on
favorable terms. In addition, these companies may be developing or
marketing new products or services for which markets are not yet
established and may never become established.
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 oversee 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 contained in the Statement of Additional
Information.
The Investment Adviser
Polynous Capital Management, Inc. serves as the Fund's investment
adviser and manager, and is registered as an investment adviser 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 while employed for five years by a previous
advisory firm. See "Portfolio Management" below. The principal
business address of the Adviser is 345 California Street, Suite 1220,
San Francisco, California 94104.
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 Adviser 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 net 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 net assets of
$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
net asset 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 0.850%
$500 million 0.725%
$ 1 billion 0.6125%
$ 2 billion 0.50625%
As the assets of a mutual fund 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 net 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, results in fees higher than that paid
by most investment companies, although the Adviser believes the fees
are comparable to those 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
second year of operation to an annual rate of not more than 2.00% of
the Fund's average daily net assets. Thereafter, the Adviser reserves
the right to terminate its voluntary fee waiver and expense
reimbursement at any time, in its sole discretion. At this time, the
Adviser will continue to reimburse the Fund for the remainder of this
fiscal year. 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, Inc. 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. Capital Management (renamed LGT Asset
Management in 1996) included portfolio manager for the G.T. Global:
America Growth Fund, which he managed from July 1, 1991 through April
30, 1996. During this period that Fund grew from approximately $100
million in assets to over $700 million in assets and was ranked 22nd
out of 286 growth funds as classified by Micropal over the four year
and ten month period ending April 30, 1996. Mr. Wenck's investment
process which the Adviser exclusively uses, has remained virtually
unchanged since 1987. Mr. Wenck's other professional investment
experience includes three years managing small-cap growth stock
portfolios with Matuschka & Co.
Mr. Wenck's other principal business experience includes two years
with Advanced Micro Devices where he was responsible for
corporate-level budgets and forecasts as a member of the Corporate
Planning department. Additional experience includes product
development work with Applied Expert Systems, an artificial
intelligence software company, and also a number of entrepreneurial
activities in various types of businesses.
Mr. Wenck's professionally oriented educational experience includes
being awarded an M.B.A. degree in 1985 from Amos Tuck School of
Business at Dartmouth College and being awarded his C.F.A.
designation in 1986. Mr. Wenck's undergraduate degree was awarded by
Marlboro College in 1981 where he majored in Philosophy and Classical
Literature.
The Underwriter
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406-0903, serves as statutory Underwriter
pursuant to an Underwriting Agreement. The Underwriter serves the
limited purpose of facilitating the registration of shares of the
Fund under state securities laws and assisting in the sale of shares.
The Administrator
First Data Investor Services Group, Inc. ("Investor Services Group"),
a wholly owned subsidiary of First Data Corporation, which has its
principal business address at 4400 Computer Drive, Westboro, MA
01581, serves as administrator of the Fund. . The services that
Investor Services Group 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 of
securities and cash of the Fund.
Investor Services Group 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) 528-8069 or (610) 239-4600.
Investor Services Group 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 (i.e., costs of printing
annual reports, semi-annual reports and prospectuses which are
distributed to existing shareholders); brokerage commissions; the
expenses of registering and qualifying shares of the Fund for sale
with the Securities and Exchange Commission and with various state
securities commissions; expenses of the organization of the Fund;
transfer agent, custodian and administrator fees; the expenses of
obtaining quotations of portfolio securities and pricing the Fund's
shares; trade association dues; all costs associated with shareholder
meetings and the preparation and dissemination of proxy materials;
costs of liability insurance and fidelity bonds; fees for Trustees
who are not officers, directors or employees of the Adviser; and any
extraordinary and nonrecurring expenses which are not expressly
assumed by the Adviser.
Class-specific expenses relating to distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares
and any other costs relating to implementing or amending such plan
(including obtaining shareowner approval of such plan or any
amendment thereto), will be borne solely by shareowners of such class
or classes. Other expense allocations which may differ among
classes, or which are determined by the Trustees to be class-
specific, may include but are not limited to: printing and postage
expenses related to preparing and distributing required documents
such as shareowner reports, prospectuses, and proxy statements to
current shareowners of a specific class; Securities and Exchange
Commission registration fees and state blue sky fees incurred by a
specific class; litigation or other legal expenses relating to a
specific class; Trustee fees or expenses incurred as a result of
issues relating to a specific class; and different transfer agency
fees attributable to a specific class.
Brokerage
The Fund may execute brokerage or other agency transactions through
an affiliate of the Adviser or through FPSB for which the affiliate
or FPSB may receive "usual and customary" compensation. The Adviser
will use its best efforts to obtain the 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
During the first year of operations, the Fund experienced a higher
than anticipated portfolio turnover rate of 925% in order to comply
with certain provisions of Subchapter M of the Internal Revenue Code.
Higher turnover rates result in higher broker fees, transaction costs
and higher capital gains which must be passed through to the
shareholder. It is currently anticipated that the Fund's portfolio
turnover rate for the current fiscal year should not exceed 200%.
The Distribution Plan
The Board of Trustees of the Fund has adopted a distribution plan for
the Class A 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 of 0.25% of the average daily
net assets attributable to the Class A Shares 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 Class A Shares
of the Fund or provide services with respect to the Class A 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
Class A Shares. The distribution fee of one class will not be used
to subsidize the sale of other classes of shares.
How to Purchase Shares
General
The Fund offers Class A shares of the Fund to the general public on
a continuous basis through the Underwriter. 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 Investor
Services Group in proper form by the close of regular trading on the
New York Stock Exchange ("NYSE")on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined public offering
price. Orders for Fund shares received after the close of the NYSE
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
First Data Investor Services Group, Inc., 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406-0903. If this is an initial purchase,
please send a minimum of $2,500 for regular accounts or, $1,000 for
IRA, Roth IRA and SEP accounts; or $500 for UGMA and UTMA accounts.
Subsequent investments ($100 minimum) in an existing account in the
Fund may be made at any time by sending a check payable to "Polynous
Growth Fund", c/o First Data Investor Services Group, 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) 528-8069 or (610) 239-4600 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: First Data Investor Services Group, Inc., 3200
Horizon Drive, King of Prussia, Pennsylvania 19406-0903. 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: First Data Investor Services Group, 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 Investor Services Group 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 Investor Services Group 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 $100 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 First Data Investor
Services Group, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Orders to purchase shares are effective on the day
Investor Services Group 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 Investor
Services Group 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 initial 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 FPSB, the Fund's principal underwriter.
The minimum initial investment for Class A Shares is $2,500 for
regular accounts, $1,000 for IRA and SEP accounts and $500 for UGMA
or UTMA. Subsequent purchases must be at least $100.
The following table shows the regular sales charge on Class A Shares
of the Fund together with the reallowance paid to dealers and the
agency commission paid to brokers, collectively the "commission":
Sales Charge Sales Charge Reallowance &
as a % as % of Net Brokerage Comm-
Class A Shares of Offering Price Amount ission as % of
Amount of Purchase Invested offering price
Less than $50,000. . . . . 4.50% 4.71% 4.00%
50,000 or more but
less than $100,000. . . . 4.00% 4.17% 3.50%
$ 100,000 or more but
less than $250,000. . . . 3.00% 3.09% 2.75%
$ 250,000 or more but
less than $500,000. . . . 2.00% 2.04% 1.75%
$ 500,000 or more . . . . 0% 0% *
* There is no initial sales charge on purchases of Class A Shares of
$500,000 or more; however, a contingent deferred sales charge
("CDSC") of 1.00% is imposed on redemptions of such shares within 12
months of purchases. The distributor will pay authorized dealers,
and other qualifying financial institutions, except wrap fee client
accounts, 1% of the first $2.5 million of such purchases, plus 0.50 %
on amounts thereafter. A CDSC will be imposed on the proceeds of a
redemption of such shares if redeemed within 12 months of purchase,
based on the lower of the shares' cost or current net asset value. In
addition, shares purchased by certain investors investing $500,000 or
more that have made arrangements with the underwriter and whose
dealer waived commission, as described above, are not subject to any
charge. In determining whether a CDSC is payable, the Fund will
first redeem shares not subject to any charge. Redemption of shares
of the Polynous Money Market Portfolio are generally not subject to a
CDSC; however, a CDSC may be applicable to redemption of shares of
the Polynous Money Market Portfolio if the redeemed shares were
exchanged from the Fund. No CDSC charge is imposed on the redemption
of shares acquired through reinvestment of income dividends or
capital gains distributions. The distributor receives the entire
amount of the CDSC to defray its expense in providing certain
distribution-related services to the Fund, including payment of a
sales commission to selling dealers or qualifying financial
institutions, as described above.
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 initial 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, or 457 of the
Internal Revenue Code (but not IRAs or SEPs); (7) any non-profit
institution investing $1 million or more and (8) investors purchasing
shares of the Fund with redemption proceeds from other mutual fund
complexes on which the investor had paid a front-end sales charge or
was subject to a deferred sales charge, whether or not paid, if such
redemption has occurred no more than 30 days prior to such purchase.
The sales charge is also waived for any registered representatives,
employees or principals of securities dealers (including members of
their immediate families) having a sales agreement with the
distributor.
How to Sell Back (Redeem) Shares
Shareholders may redeem their shares of the Fund without being
subject to any redemption charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net
asset value per share next determined after the receipt by the
transfer agent of a redemption request meeting the requirements
described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request
for redemption to First Data Investor Services Group, 3200 Horizon
Drive, King of Prussia, Pennsylvania 19406-0903.
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) 528-8069 or (610) 239-4600 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.
Money Market Exchange Privilege
Shareholders may redeem any or all shares of the Fund and
automatically invest the proceeds through the Polynous Money Market
Fund account in the Cash Account Trust Money Market Portfolio (the
"Money Market Portfolio"), an unaffiliated, separately managed,
money market mutual fund. The exchange privilege with the Money
Market Portfolio does not constitute an offering or recommendation of
the shares of the Money Market Portfolio by Polynous or the
Distributor Investor Services Group is compensated for administrative
services it performs with respect to the Money Market Portfolio.
Shareholders who wish to use this exchange privilege may elect the
service on the account application. Fund shareholders should not
purchase shares of the Money Market Portfolio without first receiving
the current prospectus for the Money Market Portfolio. By giving
exchange instructions, a shareholder will be deemed to have
represented that he has received the current prospectus for the Money
Market Portfolio.
The Fund reserves the right to reject any exchange request or
otherwise modify, restrict or terminate the exchange privilege at any
time upon at least 60 days' prior notice.
Exchanges of Fund shares are subject to the other requirements of
Polynous Money Market Portfolio into which the exchange is made.
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)
528-8069 or (610) 239-4600.
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, Roth IRAs, 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) 924-3863 or (415) 956-3384.
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, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities and dividing by the total number of outstanding shares.
Expenses are accrued daily and applied when determining the net asset
value. The portfolio securities of the Fund listed or traded on a
stock exchange are valued at the latest sale price. If no sale price
is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the
latest bid and asked prices. When market quotations are not readily
available, securities and other assets are valued at fair value as
determined in good faith by the Board of Trustees. The Fund's equity
securities are valued based on market quotations or, when no market
quotations are available, at fair value as determined in good faith
by, or under the direction, of the Board of Trustees.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options
on futures are valued at the settlement price as determined by the
appropriate clearing corporation.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Trustees.
Net asset value is calculated separately for each class of the Fund
based on expenses applicable to the particular class. Although the
methodology and procedures for determining net asset value are
identical for the Fund's classes, the net asset value of the classes
may differ because of the different fees and expenses charged to each
class.
Dividends and Taxes
Dividends
The Fund will distribute its net investment income annually in
December. Any net gain realized from the sale of portfolio securities
and net gains realized from foreign currency transactions are
distributed at least once each year unless they are used to offset
losses carried forward from prior years, in which case no such gain
will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a
change in writing.
Dividends paid by the Fund with respect to Class A shares are
calculated in the same manner and at the same time. Both Class A and
Class D Shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the per share
dividends of Class A Shares will differ from the per share dividends
of Class D Shares as a result of additional distribution expenses
applicable to Class D Shares.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which has not been
cashed 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 (1) 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 (2) 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.
The Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 (the "Act"), which was signed into
law on August 5, 1997, is the most wide-ranging tax legislation since
1986. Several provisions therein will impact the taxation of capital
gains.
Change in Rates:
The Act has lowered the tax rate on individuals, estates and trusts
for long-term capital gains from 28% to 20%, but increases the
holding period of the assets from more than one year to more than
eighteen months. For persons in the 15% income tax bracket, the new
rate is 10%.
Realized gains from capital assets held more than one year, but
eighteen months or less, will be taxed at a 28% rate. Such gains
will be termed "mid-term" capital gains.
Also, capital gains in property held for more than five years will be
eligible for an 18% tax rate, but this only applies to assets
acquired after December 31, 2000; therefore, a shareholder will not
benefit from this provision until the year 2006.
Effective Dates:
The rates which applied under prior law are effective for sales of
capital before May 7, 1997.
Sale of capital assets on or after May 7, 1997, but before July 29,
1997, will be subject to a 20% tax rate for assets held more than one
year.
These new tax rates, including the new mid-term category, apply to
the sales of capital assets on or after July 29, 1997.
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 upon by Paul, Hastings, Janofsky &
Walker, LLP, 345 California Street, 29th Floor, San Francisco,
California 94104-2635. 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
Securities and Exchange Commission, 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., 345
California Street, Suite 1220, San Francisco, California 94104 (800)
924-3863 or (415) 956-3384. Purchase and redemption transactions
should be made through the transfer agent by calling (800) 528-8069
or (610) 239-4600.
INVESTMENT ADVISER
Polynous Capital Management, Inc.
345 California Street, Suite 1220
San Francisco, California 9410
(800) 924-3863
(415) 956-3384
UNDERWRITER
FPS Broker Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406-0903
(610) 239-4700
SHAREHOLDER SERVICES
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406-0903
(800) 528-8069
(610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, California 94104-2635
AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, California 94105
For Additional Information about Polynous Growth Fund call:
(800) 924-3863 or (415) 956-3384
or access our internet site at: www.polynous.com
POLYNOUS GROWTH FUND
345 California Street, Suite 1220
San Francisco, California 94104
Class D Shares PROSPECTUS November 28, 1997,
as Revised July 28, 1998
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
$50 million and $5 billion and which, in the opinion of Polynous
Capital Management, Inc., will have an annual company revenue growth
rate of between 15% and 30%.
The Fund is a separate series of shares of Polynous Trust (the
"Trust"), an open-end, management investment company commonly known
as a mutual fund. Polynous Capital Management, Inc. (the "Adviser"),
serves as the investment adviser of the Fund managing its assets in
accordance with its investment objectives stated in this Prospectus.
The Fund offers its shares through two separate classes of shares:
Class A Shares and Class D Shares. Both classes of shares are
identical except as to the expenses borne by each class. These
alternative classes permit investors to choose the method of
purchasing shares most beneficial to them. This Prospectus provides
information concerning Class D Shares. You may receive information
concerning Class A Shares by calling (800) 924-3863 or (415) 956-
3384.
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 November 28,
1997, as Revised July 28, 1998, which may be revised or supplemented
from time to time, provides a greater in-depth discussion of certain
areas which may be of interest to some investors. It has been filed
with the Securities and Exchange Commission and is available upon
request and without charge. To receive a copy, write to the Fund at
the address above or call (800) 924-3863 or (415) 956-3384.
*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.
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:
FPS Broker Services, Inc. Polynous Capital Management, Inc.
3200 Horizon Drive 345 California Street, Suite 1220
King of Prussia, PA 19406-0903 SanFrancisco, California 94104
(800)528-8069 (800) 924-3863
(610) 239-4700 (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.
Prospectus Summary
What is the Fund's Investment Objective? Polynous Growth Fund (the
"Fund") seeks to achieve long-term capital appreciation.
There can be no assurance that the Fund will be able to achieve its
investment objective. See "Investment Objective."
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 $50 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," " Investment Policies and Strategies," 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?
First Data Investor Services Group, Inc. serves as the administrator,
transfer agent and fund accounting agent for the Fund. See
"Management of the Fund."
Who is the Underwriter? FPS 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 of
0.35%. See "The Distribution Plan" and "How to Purchase Shares."
Is there a Minimum Investment? The minimum initial investment is
$2,500 or $1,000 for IRA, Roth IRA and SEP accounts, or $500 for
Uniform Gift to Minor Accounts ("UGMA") and Uniform Transfer to Minor
Accounts ("UTMA"). The subsequent investment minimum is $100.
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
of 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 be distributed in the form of annual dividends.
Substantially all capital gains realized 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 or on the initial application. See "Dividends
and Taxes."
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.
Class D
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)/2/ 0.27%
12b-1 Fees 0.35%
Other Expenses /3/ 1.63%
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 reimburse certain expenses of the Fund
necessary to limit the total operating expenses for the second
year of operation to 2.25% of the Fund's average net assets.
The Adviser reserves the right to terminate this waiver or any
reimbursement at any time, in its sole discretion. Absent such
fee waivers and presuming first year assets at $5 million,
advisory fees for the Fund would be 1.00% and estimated total
operating expenses would be 7.65% of the Fund's average daily
net assets on an annualized basis.
/3/ Since the Class D Shares did not commence operations and does
not have any actual operating history, 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 assuming (1)
imposition of the maximum sales charge, (2) a 5% annual return and
(3) 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 3 Years
$ 23 $ 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").
Due to the 12b-1 distribution fees, long-term holders of these Shares
may eventually pay more than the economic equivalent of the maximum
initial sales charge otherwise permitted by the Conduct Rules of the
NASD.
Mission Statement of Polynous Capital Management, Inc., Adviser
to the Fund
At a time when many organizations in the investment management
business have redefined their objective to be "asset gathering" and
"client retention" rather than investment management excellence, the
Adviser 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
the Adviser 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 needed
to make an informed decision 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 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 a diversified, 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. Except for these
differences, each share of the Fund represents an undivided
proportionate interest in the Fund. This Prospectus concerns the
offering of Class D Shares. For more information regarding Class A
Shares, please call (800) 924-3863 or (415) 956-3384.
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
$50 million and $5 billion and which, in the opinion of the Adviser,
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 and preferred stocks.
Private Placements: The Fund may invest up to 5% of its total assets,
at the time of investment, in securities which are subject to
restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined
to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction). These
securities are generally referred to as private placements or
restricted securities. Limitations on the resale of such securities
may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The
Fund may have to bear the expense of registering such securities for
resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted
securities to qualified institutional buyers without limitation. The
Adviser, pursuant to procedures adopted by the Trustees of the Fund,
will make a determination as to the liquidity of each restricted
security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within
the category "illiquid securities", which under current policy may
not exceed 15% of the Fund's total net assets. The Fund's policy is
to limit illiquid securities (which include, but are not limited to
private placements) to a maximum of 15% of total net assets.
Repurchase agreements with maturities in excess of seven days will be
considered illiquid securities.
Covered Call Writing: The Fund may write covered call options on
equity securities to the extent permitted by applicable law. When
the Fund writes a covered 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 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. The Fund's ability to use this strategy
may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that this strategy 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 limit 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 both value and growth
investing, 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: (1) Research and (2)
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. Financial Assessment
5. Functional Assessment
6. Comprehensive Risk Assessment
7. Continuing Review
The Portfolio Management Process
1. Valuation
2. Portfolio Characteristics
3. Buy Discipline
4. Portfolio Monitoring
5. Sell Discipline / Portfolio Optimization
Although having this structure, control and discipline is no
guarantee of success, the Adviser believes that the requirements of
its process will result in both high levels of knowledge about each
company before it can be considered for inclusion in the Fund's
portfolio and high return prospects for the companies which then
satisfy its portfolio purchase discipline. At each step of the
process the primary focus is on risk management, not stock selection.
The Adviser believes that risk is managed best by knowing more about
the Fund's portfolio companies than might be typical and having less
expensive companies in the Fund's portfolio 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 which are guaranteed
by the full faith and credit of the United States. Pending the
investment of new subscriptions, the Fund may also temporarily hold
liquid assets until there are enough companies meeting the Adviser's
"buy discipline." To the extent that the Fund holds high levels of
liquid assets, the Fund will not be invested so as to achieve its
objective. Contrasted with some practices elsewhere in the
investment management industry, the Adviser does not automatically
add to existing position sizes when additional cash comes into the
Fund from new subscriptions. All purchases, either of new positions
or of additions to existing positions, require a certain minimum
projected annualized return based on the Adviser's research
conclusions. All position sizes must also comply with the Adviser's
strict position size limits as specified by the Adviser's "position
size/projected return matrix." The Adviser also believes that the
requirements of its research process and the time which the Adviser's
personnel spend on analyzing each company result in the Adviser
investing cash from new subscriptions more slowly than may be typical
within the investment management industry. As a result, there may be
times during which the Fund holds a higher percentage of its assets
in short-term, high-quality debt instruments than other growth
oriented funds. During periods of significant subscription inflows,
the Adviser reserves the right to close the Fund to new subscriptions
with little or no notice until the Adviser has sufficient new
investment opportunities to enable the Fund to be more fully
invested. There may also be periods where for defensive purposes
when market circumstances so warrant that the Fund may temporarily
convert up to 100 percent of its portfolio into liquid debt
securities, such as U.S. Treasury bills, notes and bonds.
Risk Factors
There is no such thing as a guaranteed investment and no one can see
into the future. Accordingly, the value of an investment in the Fund
will 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 risk 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.
Market Capitalization Considerations
The Funds primary investment universe consists of companies with
market capitalizations at time of purchase of between $500 million
and $5 billion. This range of equity securities comprises stocks
that are commonly known as Mid-Cap, Small-Cap, and Micro-Cap equity
securities.
The Adviser attempts to reduce the overall risks connected with
investing in these 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 in the recent past, 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.
Small-Cap and Micro-Cap company stocks generally are considered to
offer greater potential for appreciation than securities of companies
with larger market capitalizations as they may benefit from the
development of new products and services. Small-Cap and Micro-Cap
company securities are also less researched and may be overlooked and
undervalued in the market.
Most Small-Cap and Micro-Cap company stocks pay low or no dividends.
The Fund seeks growth through long-term appreciation, rather than
income sources. Small-Cap and Micro-Cap company stocks also have
higher risk and greater volatility. Because most are not as broadly
traded as stocks of companies with larger capitalization their prices
may fluctuate more widely and abruptly. Such companies may have
relatively small revenues and limited product lines, markets, or
financial resources; their securities may trade less frequently and
in more limited volume than those of larger, more mature companies.
These companies may lack depth of management and may be unable to
internally generate funds necessary for growth or potential
development or to generate such funds through external financing on
favorable terms. In addition, these companies may be developing or
marketing new products or services for which markets are not yet
established and may never become established.
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 oversee 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 contained in the Statement of Additional
Information.
The Investment Adviser
Polynous Capital Management, Inc. serves as the Fund's investment
adviser and manager, and is registered as an investment adviser 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 while employed for five years by a previous
advisory firm. See "Portfolio Management" below. The principal
business address of the Adviser is 345 California Street, Suite
1220, San Francisco, California 94104.
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 Adviser 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 net 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 net assets of
$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
net asset 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 0.850%
$500 million 0.725%
$ 1 billion 0.6125%
$ 2 billion 0.50625%
As the assets of a mutual fund 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 net 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 Adviser believes the fees are
comparable to those 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
second year of operation to an annual rate of not more than 2.25% of
the Fund's average daily net assets. Thereafter, the Adviser reserves
the right to terminate its voluntary fee waiver and reimbursement at
any time, in its sole discretion. At this time, the Adviser will
continue to reimburse the Fund for the remainder of this fiscal year.
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, Inc. 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. Capital Management (renamed LGT Asset
Management in 1996) included portfolio manager for G.T. Global:
America Growth Fund, which he managed from July 1, 1991 through April
30, 1996. During this period that Fund grew from approximately $100
million in assets to over $700 million in assets and was on was
ranked 22nd out of 286 growth funds as classified by Micropal over
the four year and ten month period ending April 30, 1996. Mr.
Wenck's investment process which the Adviser exclusively uses, 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
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406-0903, serves as statutory Underwriter
pursuant to an Underwriting agreement. The Underwriter serves the
limited purpose of facilitating the registration of shares of the
Fund under state securities laws and assisting in the sale of shares.
The Administrator
First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly-owned subsidiary of First Data Corporation, which
has its principal business address at 4400 Computer Drive, Westboro,
MA 01581, serves as administrator of the Fund . The services that
Investor Services Group 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.
Investor Services Group 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) 528-8069 or (610) 239-4600.
Investor Services Group also performs certain accounting and pricing
services for the Fund, including the daily calculation of the Fund's
net asset value per share.
Fund Expenses
The Fund is responsible for all of its own expenses. Such expenses
may include, but are not limited to: management fees; legal expenses;
audit fees; printing and postage costs (e.g. costs of printing annual
reports, semi-annual reports and prospectuses which are distributed
to existing shareholders); brokerage commissions; the expenses of
registering and qualifying shares of the Fund for sale with the
Securities and Exchange Commission and with various state securities
commissions; expenses of the organization of the Fund; transfer
agent, custodian and administrator fees; the expenses of obtaining
quotations of portfolio securities and pricing the Fund's shares;
trade association dues; all costs associated with shareholder
meetings and the preparation and dissemination of proxy materials;
costs of liability insurance and fidelity bonds; fees for Trustees
who are not officers, directors or employees of the Adviser; and any
extraordinary and nonrecurring expenses which are not expressly
assumed by the Adviser.
Class-specific expenses relating to distribution fee payments
associated with a Rule 12b-1 plan for a particular class of shares
and any other costs relating to implementing or amending such plan
(including obtaining shareowner approval of such plan or any
amendment thereto), will be borne solely by shareowners of such class
or classes. Other expense allocations which may differ among
classes, or which are determined by the Trustees to be class-
specific, may include but are not limited to: printing and postage
expenses related to preparing and distributing required documents
such as shareowner reports, prospectuses, and proxy statements to
current shareowners of a specific class; Securities and Exchange
Commission registration fees and state blue sky fees incurred by a
specific class; litigation or other legal expenses relating to a
specific class; Trustee fees or expenses incurred as a result of
issues relating to a specific class; and different transfer agency
fees attributable to a specific class.
Brokerage
The Fund may execute brokerage or other agency transactions through
an affiliate of the Adviser or through FPSB for which the affiliate
or FPSB may receive "usual and customary" compensation. The Adviser
will use its best efforts to obtain 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
During the first year of operations, the Fund experienced a higher
than anticipated portfolio turnover rate of 925% in order to comply
with certain provisions of Subchapter M of the Internal Revenue Code.
Higher turnover rates result in higher broker fees, transaction costs
and higher capital gains that must be passed through to the
shareholder. It is currently anticipated that the Fund's portfolio
turnover rate for the current fiscal year should not exceed 200%.
The Distribution Plan
The Board of Trustees of the Fund has adopted a distribution plan for
the Class D 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 of 0.35% of the average daily
net assets attributable to the Class D Shares 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 Class D Shares
of the Fund or provide services with respect to the Class D 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
Class D Shares. The distribution fee of one class will not be used
to subsidize the sale of other classes of shares.
How to Purchase Shares
General
The Fund offers Class D shares of the Fund to the general public on
a continuous basis through the Underwriter . 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 Investor
Services Group in proper form by the close of regular trading on the
New York Stock Exchange ("NYSE")on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined public offering
price. Orders for Fund shares received after the close of the NYSE
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
First Data Investor Services Group, Inc., 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406-0903. If this is an initial purchase,
please send a minimum of $2,500 for regular accounts, or $1,000 for
IRA, Roth IRA and SEP accounts, or $500 for UGMA and UTMA accounts.
Subsequent investments ($100 minimum) in an existing account in the
Fund may be made at any time by sending a check payable to "Polynous
Growth Fund", c/o First Data Investor Services Group, 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) 528-8069 or (610) 239-4600 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: First Data Investor Services Group, Inc.,
3200 Horizon Drive, King of Prussia, Pennsylvania 19406-0903.
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: First Data Investor Services Group, 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 Investor Services Group 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 Investor Services Group 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 that 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 $100 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 First Data Investor
Services Group, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Orders to purchase shares are effective on the day
Investor Services Group 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 Investor
Services Group 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: First Data Investor Services Group, Inc., 3200
Horizon Drive, King of Prussia, Pennsylvania 19406-0903.
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) 528-8069 or (610) 239-4600 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.
Money Market Exchange Privilege
Shareholders may redeem any or all shares of the Fund and
automatically invest the proceeds through the Polynous Money Market
Fund account in the Cash Account Trust Money Market Portfolio (the
"Money Market Portfolio"), an unaffiliated, separately managed,
money market mutual fund. The exchange privilege with the Money
Market Portfolio does not constitute an offering or recommendation of
the shares of the Money Market Portfolio by Polynous or the
Distributor. Investor Services Group is compensated for
administrative services it performs with respect to the Money Market
Portfolio.
Shareholders who wish to use this exchange privilege may elect the
service on the account application. Fund shareholders should not
purchase shares of Money Market Portfolio without first receiving the
current prospectus for the Money Market Fund. By giving exchange
instructions, a shareholder will be deemed to have represented that
he has received the current prospectus for the Money Market
Portfolio.
The Fund reserves the right to reject any exchange request or
otherwise modify, restrict or terminate the exchange privilege at any
time upon at least 60 days' prior notice.
Exchanges of Fund shares are subject to the other requirements of
Polynous Money Market Portfolio into which the exchange is made.
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)
0528-8069 or (610) 239-4600.
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, Roth IRAs, 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) 924-3863 or (415) 956-3384.
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, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding shares.
Expenses are accrued daily and applied when determining the net asset
value. The portfolio securities of the Fund listed or traded on a
stock exchange are valued at the latest sale price. If no sale price
is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the
latest bid and asked prices. When market quotations are not readily
available, securities and other assets are valued at fair value as
determined in good faith by the Board of Trustees. The Fund's equity
securities are valued based on market quotations or, when no market
quotations are available, at fair value as determined in good faith
by, or under the direction, of the Board of Trustees.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Trustees. Options, futures and options
on futures are valued at the settlement price as determined by the
appropriate clearing corporation.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Trustees.
Net asset value is calculated separately for each class of the Fund
based on expenses applicable to the particular class. Although the
methodology and procedures for determining net asset value are
identical for the Fund's classes, the net asset value of the classes
may differ because of the different fees and expenses charged to each
class.
Dividends and Taxes
Dividends
The Fund will distribute its net investment income annually in
December. Any net gain realized from the sale of portfolio securities
and net gains realized from foreign currency transactions are
distributed at least once each year unless they are used to offset
losses carried forward from prior years, in which case no such gain
will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at
net asset value, unless a shareholder elects to receive them in cash.
Distribution options may be changed at any time by requesting a
change in writing.
Dividends paid by the Fund with respect to Class D Shares are
calculated in the same manner and at the same time. Both Class A and
Class D Shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the per share
dividends of Class D Shares will differ from the per share dividends
of Class A Shares as a result of additional distribution expenses
applicable to Class D Shares.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which is not cashed
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 (1) 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 (2) 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.
The Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 (the "Act"), which was signed into
law on August 5, 1997, is the most wide-ranging tax legislation since
1986. Several provisions therein will impact the taxation of capital
gains.
Change in Rates:
The Act has lowered the tax rate on individuals, estates and trusts
for long-term capital gains from 28% to 20%, but increases the
holding period of the assets from more than one year to more than
eighteen months. For persons in the 15% income tax bracket, the new
rate is 10%.
Realized gains from capital assets held more than one year, but
eighteen months or less, will be taxed at a 28% rate. Such gains
will be termed "mid-term" capital gains.
Also, capital gains in property held for more than five years will be
eligible for an 18% tax rate, but this only applies to assets
acquired after December 31, 2000; therefore, a shareholder will not
benefit from this provision until the year 2006.
Effective Dates:
The rates which applied under prior law are effective for sales of
capital before May 7, 1997.
Sale of capital assets on or after May 7, 1997, but before July 29,
1997, will be subject to a 20% tax rate for assets held more than one
year.
These new tax rates, including the new mid-term category, apply to
the sales of capital assets on or after July 29, 1997.
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 Paul, Hastings, Janofsky &
Walker, LLP, 345 California Street, 29th Floor, San Francisco,
California 94104-2635. 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
Securities and Exchange Commission, 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., 345
California Street, Suite 1220, San Francisco, California 94104 (800)
924-3863 or (415) 956-3384. Purchase and redemption transactions
should be made through the transfer agent by calling (800) 528-8069
or (610) 239-4600.
INVESTMENT ADVISER
Polynous Capital Management, Inc.
345 California Street, Suite 1220
San Francisco, California 9410
(800) 924-3863
(415) 956-3384
UNDERWRITER
FPS Broker Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406-0903
(610) 239-4700
SHAREHOLDER SERVICES
First Data Investors Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406-0903
(800) 528-8069
(610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, California 94104-2635
AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, California 94105
For Additional Information about Polynous Growth Fund call:
(800) 924-3863 or (415) 956-3384
or access our internet site at: www.polynous.com
STATEMENT OF ADDITIONAL INFORMATION
November 28, 1997, as Revised July 28, 1998
This Statement of Additional Information dated November 28, 1997, as
Revised July 28, 1998 is not a prospectus but should be read in
conjunction with the separate Prospectuses describing Class A Shares
and Class D Shares of the Polynous Growth Fund (the "Fund") dated
November 28, 1997, as Revised July 28, 1998. 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:
FPS Broker Services, Inc. Polynous Capital Management, Inc.
3200 Horizon Drive 345 California Street, Suite 1220
P.O Box 61503 San Francisco, CA 94104
King of Prussia, PA 19406-0903
(800) 528-8069 (800) 924-3863
(610) 239-4700 (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 underwriter. The Prospectus does not constitute an
offering by the Trust or by the underwriter in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
Table of Contents
Page
The Trust and the Fund
Investment Policies
Options
U.S. Government Securities
Repurchase Agreements
Convertible Securities
Illiquid Securities
Other Investments
Investment Restrictions
Investment Advisory and Other Services
Investment Advisory Agreement
Administrator
Underwriter
Trustees and Officers
Control Persons and Principal Shareholders
Net Asset Value
Taxes
Portfolio Transactions and Brokerage Commissions
Performance Information
In General
Total Return Calculation
Performance and Advertisements
Other Information
Limitations on Trustees' Liability
Reports to Shareholders
Financial Statements
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.
Investment Policies and Techniques
The following supplements the information contained in the
Prospectuses for the Fund regarding the permitted investments and
risk factors and the investment objective and policies of the Fund.
Unless stated that a policy is fundamental, all policies will be
deemed non-fundamental (i.e., may be changed without shareholder
approval).
Covered Call Options
The Fund will write call options on equity securities 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 Fund will write put options only if they are
"secured" by liquid assets maintained in a segregated account by the
Fund's custodian in an amount not less than the exercise price of the
option at all times during the option period.
The Fund's obligation to sell a security subject to a covered call
option written by it, or to purchase a security subject to a secured
put option written by it, may be terminated prior to the expiration
date of the option by the Fund's execution of a closing purchase
transaction, which is effected by purchasing on an exchange an option
of the same series as the previously written option. Such a purchase
does not result in the ownership of an option. A closing purchase
transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being
called, to permit the sale of the underlying security or to permit
the writing of a new option containing different terms on such
underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the
original option, in which event the Fund will have incurred a loss in
the transaction. There is no assurance that a liquid secondary
market will exist for any particular option. An option writer,
unable to effect a closing purchase transaction, will not be able to
sell the underlying security (in the case of a covered call option)
or liquidate the segregated account (in the case of a secured put
option) until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or
appreciation in the security during such period.
U.S. Government Securities
The Fund may invest in securities issued by the U.S. Government.
Such securities are backed by the full faith and credit of the U.S.
Government.
Repurchase Agreements
Although the Fund has no current intention of employing repurchase
agreements in its investment program, it may in the future choose to
do so and such change will be noted in the Prospectus. The financial
institutions with whom the Fund may enter into repurchase agreements
are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting
dealers and banks, if such banks and non-bank dealers are deemed
creditworthy by the Adviser. The Adviser will continue to monitor
the creditworthiness of the seller under a repurchase agreement, and
will require the seller to maintain during the term of the agreement
the value of the securities subject to the agreement at not less than
the repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security,
including interest accrued, will at all times be equal to or exceed
the value of the repurchase agreement.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies
the most junior position in a company's capital structure.
Convertible securities entitle the holder to exchange such securities
for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time, and to
receive interest or dividends until the holder elects to convert.
The provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible
debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors, and are senior to the
claims of preferred and common shareholders. In the case of
preferred stock and convertible preferred stock, the holder's claims
on assets and earnings are subordinated to the claims of all
creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value, and its price will be likely to
increase when interest rates fall and decrease when interest rates
rise, as is the case with a fixed-income security. If the conversion
value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the
price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
Illiquid Securities
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines
reviewed by the Board of Trustees. The Adviser will monitor the
liquidity of securities held by the Fund, and report periodically on
such determinations to the Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees
may, in the future, authorize the Fund to invest in securities other
than those listed here and in the prospectus, provided that such
investment would be consistent with the Fund's investment objective,
and that it would not violate any fundamental investment policies or
restrictions applicable to the Fund.
Investment Restrictions
The investment restrictions set forth below are fundamental
restrictions and may not be changed without the approval of a
majority of the outstanding voting shares (as defined in the 1940
Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply only at the time of the transaction.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which
results from a relative change in values or from a change in the
Fund's total assets will not be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE INVESTMENT POLICIES
AND STRATEGIES" and "RISK FACTORS" in the Prospectus, the Fund may
not:
1. purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's
total assets may be invested without regard to this limitation, and
except that this limit does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities
or to securities issued by other investment companies;
2. purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of
issuers having their principal business activities in the same
industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
3. issue senior securities or borrow money, except as permitted
under the 1940 Act and then not in excess of 33% of the Fund's total
assets (including the amount of the senior securities issued but
reduced by any liabilities not constituting senior securities) at the
time of the issuance or borrowing, except that the Fund may borrow up
to an additional 5% of its total assets (not including the amount
borrowed) for temporary or emergency purposes. The Fund will not
purchase securities when borrowings exceed 5% of its total assets;
4. make loans, except if collateral values are continuously
maintained at no less than 100% by "marking to market" daily and
through loans of securities or through repurchase agreements,
provided that, for purposes of this restriction, the acquisition of
bonds, debentures, other debt securities or instruments, or
participations or other interest therein and investments in
government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered
the making of a loan;
5. engage in the business of underwriting the securities of others,
except to the extent that the Fund might be considered an underwriter
under the Federal securities laws in connection with its disposition
of securities;
6. purchase or sell real property, including real estate limited
partnership interests, except that investments in securities of
issuers that invest in real estate or other instruments supported by
interests in real estate are not subject to this limitation, and
except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests to
hold real estate acquired by reason of such enforcement until that
real estate can be liquidated in an orderly manner; or
7. purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot
currency contracts, other financial contracts or derivative
instruments;
The following investment limitations are not fundamental and may be
changed without shareholder approval:
(i) The Fund does not currently intend to engage in short sales of
securities or maintain a short position, except that the Fund may (a)
sell short ("against the box") and (b) maintain short positions in
connection with its use of financial options and futures, forward and
spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
(ii) The Fund does not currently intend to purchase securities on
margin, except for short-term credit necessary for clearance of
portfolio transactions and except that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
(iii) The Fund does not currently intend to purchase securities of
other investment companies except as permitted by the 1940 Act and
the rules and regulations thereunder.
(iv) The Fund does not currently intend to invest in companies for
the purpose of exercising control or management.
(v) The Fund does not currently intend to invest in oil, gas or
mineral exploration or development programs or leases, except that
investment in securities of issuers that invest in such programs or
leases and investments in asset-backed securities supported by
receivables generated by such programs or leases are not subject to
this prohibition.
(vi) The Fund does not currently intend to invest more than 5% of its
net assets in warrants, including within that amount no more than 2%
in warrants which are not listed on the New York or American Stock
Exchanges, except warrants acquired as a result of its holdings of
common stocks.
Investment Advisory and Other Services
Investment Adviser
Polynous Capital Management (the "Adviser") serves as the Fund's
investment adviser and manager, and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended. The
Adviser was founded in 1996 and is 87% owned by Kevin L. Wenck. Mr.
Wenck may be deemed to be a "control person" of the Adviser. Mr.
Wenck currently serves as the President of the Fund. The Adviser
currently has $70 million in assets under management.
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. For the period ended July 31, 1997,
the Adviser was paid $147,881 pursuant to the Investment Advisory
Agreement. During that period, the Adviser reimbursed the Fund for
expenses exceeding 2.0% of the Fund's average daily net assets. For
the period ended July 31, 1997, such reimbursements totaled $107,880.
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
First Data Investor Services Group, Inc., (the "Administrator")
provides certain administrative services to the Fund pursuant to a
Services Agreement.
Under the 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 Agreement, First Data Investor Services Group, Inc.
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 average net assets in
excess of $100 million. For the period ended July 31, 1997, the Fund
paid $54,008 for administrative services to FPS Services, Inc., which
was subsequently acquired by First Data Investor Services Group, Inc.
Underwriter
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of
Prussia, Pennsylvania, 19406-0903, 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. As underwriter,
FPBS received $38,692.65 in underwriting concesssions for the Class
A Shares during the period ended July 31, 1997.
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
FPSB as compensation for its services. From this amount, FPSB 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 FPSB as distributor without regard
to the distribution or shareholder service expenses incurred by FPSB
or the amount of payments made to financial institutions and
intermediaries. FPSB was reimbursed $36,970 during the period ended
July 31, 1997 pursuant to this plan. The following costs are
associated with this reimbursement: printing costs $790, compensation
to dealers $31,219, compensation to underwriter $4,711 and $250
miscellaneous marketing costs. The Fund intends to operate the
Distribution Plans in accordance with their terms and pursuant to
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.
Principal Occupation[S]
Name and Address Age Position with Trust During Past 5 Years
Kevin L. Wenck 41 President President and founder of
Polynous Capital
Management, Inc.; formerly
portfolio manager for G. T.
Capital Management from
July 1991 through April
1996. Mr. Wenck's
experience includes the
management of mid-cap and
small-cap growth stock
portfolios including G.T.
Global: America Growth
Fund. Mr. Wenck also
managed small-cap growth
stock portfolios for
Matuschka & Co. Mr. Wenck
was awarded an M.B.A degree
in 1985 from Amos Tuck
School of Business at
Dartmouth College and was
awarded his Chartered
Financial Analyst
designation in 1986.
Ronald H. Kase 39 Trustee General Partner of
New Enterprise
Associates, a venture
capital firm located in
Menlo Park, California from
1991 through present. Mr.
Kase held the positions of
Associate and Partner with
this firm and became a
General Partner in 1995.
Richard H. Kimball 40 Trustee General Partner
of Technology Crossover
Ventures, a venture capital
firm located in San
Francisco, California from
January 1995 to present.
Mr. Kimball held the
positions of Associate,
Limited Partner and
Managing Director of
Montgomery Securities, a
stock brokerage firm, from
September 1984 to January
1995.
Compensation Table
Trustees and Officers
Aggregate Compensation From Total Compensation from
Trust for Fiscal Year ended Trust and Fund Complex
Name of Trustee July 31, 1997 Paid to Trustees /1/
Kevin L. Wenck/*/ $ 0 $ 0
Ronald H. Kase $2,000 $2,000
Richard H. Kimball $2,000 $2,000
/*/ This Trustee is considered an "Interested Person" of the Trust as
defined under the 1940 Act.
/1/ This amount represents the estimated aggregate amount of
compensation paid to the Trustees for service on the Board of
Trustees for the calendar year ending December 31, 1997.
No officer or Trustee of the Trust who is also an officer or employee
of the Adviser receives any compensation from the Trust for services
to the Trust. The Trust pays each Trustee who is not affiliated with
the Adviser a fee of $500 for attendance at Board Meetings and
reimburses each Trustee and officer for out-of-pocket expenses in
connection with travel and attendance at such meetings.
Control Persons and Principal Shareholders
As of November 17, 1997, beneficial ownership in the Funds by the
Trustees and officers as a group was as follows:
Shares Percentage
23,098 1.30%
As of November 17, 1997, the following shareholders owned of record
or to the best of knowledge beneficially more than 5% of the
outstanding shares of the Fund:
Name and Address Shares Owned Percent Owned
Trust Company of America
P.O.Box 6503 183,664 10.35%
Englewood, Co 80155
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, Martin Luther King, Jr., Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day.
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
advisers with specific reference to their own tax situations,
including their state and local tax liabilities. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of
ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% U.S. withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based
on the Internal Revenue Code ("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 has qualified and intends to continue 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, gains from the sale or other disposition of stock or
securities or certain other income; (ii) for taxable years beginning
on or before August 5, 1997, 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 RICs 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 RICs) 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 U.S. 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
In all purchases and sales of securities for the Fund, the primary
consideration is to obtain the most favorable price (including the
applicable dealer spread) and execution available. The Adviser
determines which securities are to be purchased and sold by the Fund
and which broker-dealers are eligible to execute the Fund's portfolio
transactions, subject to the policies of, and review by, the Fund's
Board of Trustees. Purchases and sales of securities other than on a
securities exchange will generally be executed directly with a
"market-maker" unless, in the opinion of the Adviser, a better price
and execution can otherwise by obtained by using a broker for the
transaction.
Purchases of portfolio securities for the Fund also may be made
directly from issuers or from underwriters. Where possible, purchase
and sale transactions will be effected through dealers that
specialize in the types of securities which the Fund will be holding,
unless better executions are available elsewhere. Dealers and
underwriters usually act as principals for their own account.
Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the
spread between the bid and the asked price. If the execution and
price offered by more than one dealer or underwriter are comparable,
the order may be allocated to a dealer or underwriter that has
provided research or other services as discussed below.
In placing portfolio transactions, the Adviser will seek to choose a
broker-dealer capable of providing the services necessary generally
to obtain the most favorable price and execution available. The full
range and quality of services available will be considered in making
these determinations, such as the firm's ability to execute trades in
a specific market required by the Fund, the size of the order, the
difficulty of execution, the operational facilities of the firm
involved, the firm's risk in positioning a block of securities, and
other factors.
Provided the Adviser is satisfied that the Fund is receiving the most
favorable price and execution available, the Adviser may also
consider the sale of the Fund's shares as a factor in the selection
of broker-dealers to execute their portfolio transactions. The
placement of portfolio transactions with broker-dealers who sell
shares of the Fund is subject to rules adopted by the National
Association of Securities Dealers, Inc.
While the Fund's general policy is to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer
to execute portfolio transactions, weight may also be given to the
ability of a broker-dealer to furnish brokerage, research and
statistical services to the Fund or to the Adviser, even if the
specific services were not imputed just to the Fund and may be
lawfully and appropriately used by the Adviser in advising its other
clients. The Adviser considers such information, which is in
addition to, and not in lieu of , the services required to be
performed by it under the Investment Advisory Agreement, to be useful
in varying degrees, but of indeterminable value. In negotiating any
commissions with a broker or evaluating the spread to be paid to a
dealer, the Fund may therefore pay a higher commission or spread than
would be the case if no weight were given to the furnishing of these
supplemental services, provided that the amount of such commission or
spread has been determined in good faith by the Adviser to be
reasonable in relation to the value of the brokerage and/or research
services provided by such broker-dealer, which services either
produce a direct benefit to the Fund or assist the Adviser in
carrying out its responsibilities to the Fund and other clients to
which the Adviser provides discretionary advisory services. The
Fund's Board reviews all brokerage allocations where services other
than best price and execution capabilities are a factor to ensure
that the other services provided meet the criteria outlined above.
Investment decisions for the Fund are made independently from
those of other client accounts of the Adviser. Nevertheless, it is
possible that at times the same securities will be acceptable for the
Fund and for one or more of such client accounts. The Adviser and its
personnel may have interests in one or more of those client accounts,
either through direct investment or because of management fees based
on gains in the account. The Adviser has adopted allocation
procedures to ensure the fair allocation of securities and prices
between the Fund and the Adviser's various other accounts.
To the extent any of the Adviser's client accounts and the Fund
seek to acquire the same security at the same general time
(especially if that security is thinly traded or is a small-cap
stock), the Fund may not be able to acquire as large a portion of
such security as it desires, or it may have to pay a higher price or
obtain a lower yield for such security. Similarly, the Fund may not
be able to obtain as high a price for, or as large an execution of,
an order to sell any particular security at the same time. If one or
more of such client accounts simultaneously purchases or sells the
same security that the Fund is purchasing or selling, each day's
transactions in such security generally will be allocated between the
Fund and all such client accounts in a manner deemed equitable by the
Adviser, taking into account the respective sizes of the accounts,
the amount being purchased or sold and other factors deemed relevant
by the Adviser. In many cases, the Fund's transactions are bunched
with the transactions for other client accounts. It is recognized
that in some cases this system could have a detrimental effect on the
price or value of the security insofar as the Fund is concerned. In
other cases, however, it is believed that the ability of the Fund to
participate in volume transactions may produce better executions for
the Fund.
For the fiscal year ended July 31, 1997, the Fund paid total
brokerage commissions of $352,410.85, the Fund's portfolio turnover
rate was 925.07%, and the average commission rate was $0.0308 per
share.
During its fiscal year ended July 31, 1997, and as described
above, the Adviser directed the Fund's brokerage in the following
amounts to the following brokers in return for research products or
services provided by such brokers to the Adviser:
Name of Broker Transaction Amount Amount of Commission
Standard & Poor's Securities 637,417 shares/*/ $38,245
PaineWebber Inc. 83,000 shares/*/ $4,980
William O'Neil 72,500 shares/*/ $4,350
Bear Stearns & Co. 22,100 shares/*/ $1,326
/*/ All transactions were effected for a flat commission rate of
$0.06 per share.
The Fund does not effect securities transactions through brokers in
accordance with any formula, nor does the Fund effect securities
transactions through such brokers solely for selling shares of the
Fund. However, brokers who execute brokerage transactions as
described above may from time to time effect purchases of shares of
the Fund for their customers.
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 execution taking
into account such factors as price (including the applicable dealer
spread), commission rate, 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 or
commission 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 separately 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 (the 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. Based on the foregoing calculations, the average
annual total return for the Fund for the period August 12, 1996
through July 31, 1997 was 20.53%.
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
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, 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)
924-3863.
Financial Statements
The Fund's financial statements, including the notes thereto, dated
as of July 31,1997, which have been audited by Deloitte & Touche LLP,
are incorporated by reference from the Fund's 1997 Annual Report to
Shareholders.
