UNITED STATES File No. 333-04983
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-07649
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
Polynous Trust
(Exact name of Registrant as Specified in Charter)
345 California St., Suite 1220
San Francisco, California 94104
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (415) 956-3384
Kevin L. Wenck, President
Polynous Capital Management, Inc.
345 California St., Suite 1220
San Francisco, California 94104
(Name and Address of Agent for Service)
COPIES TO:
Mitchell E. Nichter, Esq. Carolyn F. Mead, Esq.
Paul, Hastings, Janofsky & Walker, LLP First Data Investor ServicesGroup Inc.
345 California Street 3200 Horizon Drive,
San Francisco, CA 94104-2635 King of Prussia, PA 19406-0903
It is proposed that this filing will become effective (check
appropriate box):
immediately upon filing pursuant to paragraph (b)
/X/ on (NOVEMBER 25, 1998 ) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective amendment
TABLE OF CONTENTS
Registration Statement of Polynous Trust
Page
1. Cross-Reference Sheet . . . . . . . . . . . . . . . .
2. Polynous Growth Fund Class A Shares -
Part A - Prospectus. . . . . . . . . . . . . . . . . .
3. Polynous Growth Fund Class D Shares -
Part A - Prospectus. . . . . . . . . . . . . . . . . .
4. Polynous Growth Fund - Part B -
Statement of Additional Information . . . . . . . . . .
5. Polynous Growth Fund - Part C - Other Information . . .
6. Signature Page. . . . . . . . . . . . . . . . . . . . .
7. Index to Exhibits . . . . . . . . . . . . . . . . . . .
POLYNOUS TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
Form N-1A Item
Part A INFORMATION REQUIRED IN A PROSPECTUS
1. Cover page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense
Summary
3. Condensed Financial
Information Financial Highlights
4. General Description of Investment Objective and Policies;
Registrant Risk Factors; Prospectus Summary;
The Trust and the Fund; Investment
Limitations; General Information
Prospectus Summary; Mission Statement;
The Trust and the Investment Objective;
Investment Policies and Strategies; The
Polynous Dynamic Process; Risk Factors;
General Information
5. Management of the Fund Prospectus Summary; Management of
the Fund; The Distribution Plan
5A. Management's Discussion *
of Fund Performance
6. Capital Stock and Other Prospectus Summary; General
Securities Information; Net Asset Value; Dividends
and Taxes; Net Asset Value General
Information
7. Purchase of Securities Prospectus Summary; How to
Being Offered Purchase Shares; Shareholder
Services
8. Redemption or Repurchase Prospectus Summary; How to Sell
Back (Redeem) Shares
9. Pending Legal Proceedings *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page of the Statement of
Additional Information
11. Table of Contents Table of Contents
12. General Information and
History *
13. Investment Objectives Investment Policies and
and Policies Techniques; Investment
Restrictions; Portfolio
Transactions and Brokerage
Commissions
14. Management of the Fund The Trust and the Fund;
Registrant Investment Advisory and Other
Services; Trustees and Officers
15. Control Persons and Control Persons and Principal
Principal Holders of Shareholders
Securities
16. Investment Advisory Investment Advisory and Other
and Other Services Services
17. Brokerage Allocation Portfolio Transactions and
Brokerage Commissions
18. Capital Stock and Other Information
Other Securities The Trust and the Fund
19. Purchase, Redemption Purchases; Redemptions
and Pricing of Net Asset Value
Securities Being
Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Information
Performance Data
23. Financial Statements Incorporated by reference to
the Annual Report Dated July 31,
1998
Part C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration
Statement.
* Item is inapplicable at this time or answer is negative.
POLYNOUS GROWTH FUND
345 California Street, Suite 1220
San Francisco, CA 94104
Class A Shares PROSPECTUS dated November 25,1998
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 25,1998, 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 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Expense Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 5
Mission Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Trust and the Fund . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Policies and Strategies . . . . . . . . . . . . . . . . . 8
The Polynous Dynamic Value Process . . . . . . . . . . . . . . . . . 8
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . .11
The Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . .15
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . .15
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . .20
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . .22
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . . . . .24
Performance Information. . . . . . . . . . . . . . . . . . . . . . .25
General Information. . . . . . . . . . . . . . . . . . . . . . . . 26
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/ . . . . . . . . . . .0.17%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . 1.48%
Total Fund Operating Expenses (after fee waivers)(3) . . . . 1.90%
/3/ Effective June 22, 1998, 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 to 1.90% of the
Fund's average net assets. Prior thereto, the Advisor had waived fees
and reimbursed certain expenses of the Fund to limit the total operating
expenses 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 fiscal year ended July 31, 1998.
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
$63 $102 $143 $257
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 bedirectly 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, 1998, 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 to 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 Year For the Period
Ended July August 12,1996/*/
31, 1998 through July
31, 1997
Net Asset Value, beginning of period $14.35 $12.00
Income from investment operations:
Net Investment Income (0.21) 0.96
Net realized and unrealized gain on
investments 0.07 1.41
Total from investment operations (0.14) 2.37
Less Distributions
Net Investment Income (0.88) 0.00
Distributions from net capital gains (0.48) (0.02)
Total Distributions (1.36) (0.02)
Net Asset Value, end of period $12.85 $14.35
Total Return/^/ (1.33%) 20.53%/1/
Ratios/Supplemental Data
Net Assets, end of period (in 000's) $27,124 $22,509
Ratio of expenses to average net assets:
Before expense reimbursement 2.19% 2.73%/1/
After expense reimbursement 1.99%/3/ 2.00%/1/
Ratio of net investment income to average
net assets:
Before expense reimbursement (1.22%) 9.44%/1/
After expense reimbursement (1.02%) 10.17%/1/
Portfolio turnover rate 140.15% 925.07%/2/
Average commission rate NA/4/ NA/4/
*/ Commencement of investment operations
/^/ Total return calculation does not reflect sales load
/1/ Annualized
/2/ Not Annualized
/3/ Reflects reduction of the Operating Expense Ratio to 1.90% from 2.00% on
June 22, 1998
/4/ Effective June 1, 1998, this figure is no longer required to be reported
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 on April 10, 1996 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 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
Valuation
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 during which, for defensive purposes when
market circumstances so warrant, 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 $50 million and $5 billion. This
range of equity securities is comprised of 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 new, 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 NASDAQ
sometimes trade less often and in smaller volumes than securities listed on
larger exchanges. The value of NASDAQ securities may fluctuate more sharply
than 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 has not managed any other
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 below 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 third year of operation to an annual rate of not more than
1.90% 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. During the fiscal year
ended July 31, 1998, the Fund had a portfolio turnover rate of 140.15%. 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%. See "Dividends and Taxes"
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")(currently 4:00 p.m. Eastern time), on any day that the NYSE is
open for trading, will be purchased at the Fund's next determined public
offering price. Orders for Fund shares received after the close of the NYSE
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
Class A Shares of Offering Price Amount commission 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
shareholderwould 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, 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 the Fund 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 has elected and intends to continue 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.
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 25, 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 25, 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 . . . . . . . . . . . . . . . . . . . . . . .3
Expense Summary . . . . . . . . . . . . . . . . . . . . . . . .4
Mission Statement . . . . . . . . . . . . . . . . . . . . . . .6
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .6
The Trust and the Fund . . . . . . . . . . . . . . . . . . . . .6
Investment Objective . . . . . . . . . . . . . . . . . . . . . .7
Investment Policies and Strategies . . . . . . . . . . . . . . .7
The Polynous Dynamic Value Process . . . . . . . . . . . . . . .8
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .9
Management of the Fund . . . . . . . . . . . . . . . . . . . . 11
The Distribution Plan. . . . . . . . . . . . . . . . . . . . . 14
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . 15
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . 16
Shareholder Services . . . . . . . . . . . . . . . . . . . . . 19
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . 20
Dividends and Taxes. . . . . . . . . . . . . . . . . . . . . . 21
Performance Information. . . . . . . . . . . . . . . . . . . . 22
General Information . . . . . . . . . . . . . . . . . . . . . 23
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."
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/ . . . . . . . . 0.17%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . 0.35%
Other Expenses /3/ . . . . . . . . . . . . . . . . . . 1.48%
Total Fund Operating Expenses (after fee waivers)/3/ . . . .2.00%
/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 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 2.83% of the Fund's average daily net assets on an annualized basis for
the Fund's fiscal year ended July 31, 1998.
/3/ Since the Class D Shares did not commence operations and do not have
any actual operating history, for purposes of this table, "Other Expenses" is
based on the expenses of the Find's Class A shares, which have a different 12b-1
fee, for the fiscal year ended July 31,1998.
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
$ 20 $ 63
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 on April 10, 1996 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 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 $50 million and $5 billion. This
range of equity securities is comprised of 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 than securities listed on
larger exchanges. The value of NASDAQ securities may fluctuate more sharply
than 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 has not managed any other 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 below 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 third 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 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 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 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. During the fiscal year
ended July 31, 1998, the Fund had a portfolio turnover rate of 140.15%. 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%. See "Dividends and Taxes"
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")(currently 4:00 p.m. Eastern time), on any day that the NYSE is
open for trading, will be purchased at the Fund's next determined public
offering price. Orders for Fund shares received after the close of the
NYSE 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 the Fund 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.
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
POLYNOUS GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
November 25, 1998
This Statement of Additional Information dated November 25, 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 25, 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) 924-3863
(800) 528-8069 (415) 956-3384
(610) 239-4700
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.
Table of Contents
Page
The Trust and the Fund . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
U.S. Government Securities. . . . . . . . . . . . . . . . . . . . . 4
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . 4
Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . 4
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . 4
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Advisory and Other Services . . . . . . . . . . . . . . . . 6
Investment Advisory Agreement . . . . . . . . . . . . . . . . . . . 6
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 9
Control Persons and Principal Shareholders . . . . . . . . . . . . . .10
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Portfolio Transactions and Brokerage Commissions . . . . . . . . . . .12
Performance Information. . . . . . . . . . . . . . . . . . . . . . . .14
In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Total Return Calculation. . . . . . . . . . . . . . . . . . . . . .15
Performance and Advertisements . . . . . . . . . . . . . . . . . . . .16
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Limitations on Trustees' Liability. . . . . . . . . . . . . . . . .16
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . .17
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .17
The Trust and The Fund
This Statement of Additional Information relates to Polynous Growth Fund (the
"Fund"), a separate series of Polynous Trust (the "Trust"), an open-end
management company established on April 10, 1996 under Delaware law as a
Delaware business trust. The Trust Instrument permits the Trust
to offer separate series of shares of beneficial interest.
The Trust currently is comprised of one series, which offers
its shares through two separate classes: Class A Shares and
Class D Shares. The Class D shares are not currently publicly offered.
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 which 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. As of October 31,1998 the Adviser had approximately $155 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 and the
fiscal year ended July 31, 1998, the Adviser was paid $147,881 and $278,247
respectively pursuant to the Investment Advisory Agreement. For the period
August 12, 1996 (Commencement of operations), through June 22, 1998, the Adviser
reimbursed the Fund for expenses exceeding 2.00% of the Fund's average daily net
assets, which totaled $157,870. For the period June 23, 1998 through July 31,
1998, Advisor reimbursed the fund for expenses exceeding 1.90% of the Funds
average daily net assets, which totaled $6,887.
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 Securities and Exchange Commission 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
August 12, 1996 (commencement of operations) to July 31, 1997, the Fund paid
$54,008 for administrative services. For the fiscal year ended July 31, 1998,
the Fund paid $64,028 for administrative services.
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, FPsb received $902.00 in underwriting commissions for
the Class A Shares during the period from August 12, 1997 (commencement of
operations), to July 31, 1997. For the fiscal year ended July 31, 1998
underwriting commissions to FPSB totaled $443.
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 FPSB
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
reimburse FPSB for expenses incurred in distributing and promoting sales of the
Fund 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. FPSB was
reimbursed $64,668 during the fiscal year ended July 31, 1998 pursuant to this
plan. The following costs are associated with this reimbursement: printing costs
$1,338, compensation to dealers $63,130, and $200 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 42 President President and founder of
345 California Street Polynous Capital
Suite 1220 Management, Inc.; formerly
San Francisco, portfolio manager for G. T.
CA 94104 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 40 Trustee General Partner of
2490 Sand Hill Rd New Enterprise
Menlo Park, CA Associates, a venture
94025 capital firm located in
Menlo Park, California from
1995 through present. Prior
thereto, Mr.
Kase held the positions of
Associate and Partner with
this firm, beginning in
1991.
Richard H. Kimball 41 Trustee General Partner
575 High Street of Technology Crossover
Suite 400 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.
Erin Fry Sinclair 37 Vice president of Trading and
345 California Street Operation at Polynous Capital
Suite 1220 Management, Inc., formerly
San Francisco, CA specialized in small and mid-
94104 cap equity products at G.T.
Capital Management from
September 1993 through July
1996. Prior thereto, Ms.
Sinclair held positions at
Feshbach Brothers from January
1988 to September 1993 and
Kidder-Peabody from May 1983
to January 1988.
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, 1998 Paid to Trustees /1/
Kevin L. Wenck/*/ $ 0 $ 0
President and Trustee
Ronald H. Kase $2,500 $2,500
Trustee
Richard H. Kimball $2,500 $2,500
Trustee
Erin Fry Sinclair/*/ $ 0 $ 0
Treasurer
* Each of these persons is considered an "Interested Person" of the Trust as
defined under the 1940 Act.
1 This amount represents the aggregate amount of compensation paid to
the Trustees for service on the Board of Trustees for the calendar year ending
December 31, 1998.
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 1, 1998, beneficial ownership in the Funds by the Trustees and
officers as a group was less than 1%
As of November 1, 1998, no shareholders owned of record or beneficially
more than 5% of the outstanding shares of the Fund.
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) 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 subjec 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 years ended July 31, 1997 and July
31, 1998, the Fund paid total brokerage commissions of
$352,410 and $61,104 respectively, the Fund's portfolio
turnover rate was 925.07% and 140.15% respectively, and the average commission
rate was $ 0.0308 and $0.0602 per share, respectively.
During its fiscal year ended July 31, 1998, 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 Commissions
Standard & Poor's Securities 207,500 shares * $12,450
PaineWebber Inc. 64,600 shares * $3,876
William O'Neil 35,700 shares * $2,142
Bear Stearns & Co. 35,400 shares * $2,124
* 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 fiscal year ended July 31, 1998
was (1.33% ).
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
31,1998, which have been audited by Deloitte & Touche LLP, are incorporated by
reference from the Fund's 1998 Annual Report to Shareholders.
POLYNOUS TRUST
Form N-1A
Part C -- Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
(1) Included in Part A: The Financial Highlights
are included in Part A of this Registration
Statement on Form N-1A.
(2) Incorporated by reference in Part B hereof:
The audited financial statements and
related notes thereto as well as the
auditors report thereon for the period
ended July 31, 1998 contained in the
Annual Report to Shareholders, filed
with the Securities and Exchange
Commission on September 28, 1998
pursuant to Rule 30b2-1 of the
Investment Company Act of 1940, are
incorporated by reference herein.
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument is incorporated by reference
to Exhibit No.(1) of Registrant's
Registration Statement No. 333-04983 filed
June 3, 1996.
(2) By-Laws are incorporated by reference to
Exhibit No. (2) of Registrant's Registration
Statement No. 333-04983 filed June 3, 1996.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
-- None
(5) Investment Advisory Contracts -- Investment
Advisory Agreement between Polynous Capital
Management, Inc. and Polynous Trust is
incorporated by reference to Exhibit No. (5)
of Registrant's Pre-effective Amendment No. 1
to Registration Statement No. 333-04983 filed
July 24, 1996.
(6) Underwriting Agreement -- Underwriting
Agreement Between Polynous Trust and
Fund/Plan Broker Services, Inc. is
incorporated by reference to Exhibit No. (6) of
Registrant's Pre-effective Amendment No. 1 to
Registration Statement No. 333-04983 filed July
24, 1996.
(7) Bonus, Profit Sharing, Pension or Other
Similar Contracts -- None
(8) Custodian Agreements --
(a) Custody Agreement between The Bank of
New York and Polynous Trust is
incorporated by reference to Exhibit
No. (8)(a) of Registrant's Pre-effective Amendment
No. 1 to Registration Statement No.333-04983
filed July 24, 1996
(b) Custody Administration Agreement
between Polynous Trust and FPS
Services, Inc. is incorporated by
reference to Exhibit No. (8)(b) of
Registrant's Pre-effective Amendment
No. 1 to Registration Statement No.
333-04983 filed July 24, 1996
(9)
(a) Transfer Agent Services Agreement --
Transfer Agent Services Agreement
between Polynous Trust and FPS
Services, Inc. is incorporated by
reference to Exhibit No. (9)(a) of
Registrant's Pre-effective Amendment
No. 1 to Registration Statement No.
333-04983 filed July 24, 1996
(b) Administration Agreement --
Administration Agreement between
Polynous Trust and FPS Services, Inc.is
incorporated by reference to Exhibit
No.(9) (b) of Registrant's Pre-effective
Amendment No. 1 to Registration Statement
No.333-04983 filed July 24, 1996.
(c) Accounting Services Agreement --
Accounting Services Agreement between
Polynous Trust and FPS Services, Inc.is
incorporated by reference to Exhibit
No. (9)(c) of Registrant's Pre-effective Amendment
No. 1 to Registration Statement No. 333-04983
filed July 24, 1996
(10) (a) Opinion and Consent of Shartsis, Friese
& Ginsburg regarding the legality of
the Securities being issued is
incorporated herein by reference to
Exhibit 10(a) of Registrant's Pre-Effective
Amendment No. 2 to Registration Statement
No. 333-04983 filed on August 8, 1996.
(11) Consent of Independent Auditors -- enclosed herein.
(12) Financial Statements Omitted from Item 23. --
None
(13) Agreements or Understandings Made in
Consideration for Providing the Initial
Capital -- None
(14) Model Plan
(a) Form of Individual Retirement Account
is incorporated by reference to Exhibit
No. (14)(a) of Registrant's Pre-effective
Amendment No.1 to Registration Statement
No.333-04983 filed July 24, 1996.
(15) (a) Plan of Distribution pursuant to Rule
12b-1 with respect to Class A Shares is
incorporated by reference to Exhibit
No. (15)(a) of Registrant's Pre-effective
Amendment No.1 to
Registration Statement No.333-04983
filed July 24, 1996.
(b) Plan of Distribution pursuant to Rule
12b-1 with respect to Class C Shares is
filed herein.
(c) Plan of Distribution pursuant to Rule
12b-1 with respect to Class D Shares is
incorporated by reference to Exhibit
No. (15)(b) of Registrant's Pre-effective
Amendment No. 1 to
Registration Statement No.333-04983
filed July 24, 1996.
(16) Schedule for Computation of Performance
Quotations -- None.
(17) Financial Data Schedule is filed herein as
Exhibit 17.
(18) Plan of Distribution pursuant to Rule 18f-3
with respect to Multiple Class Shares is
filed herein.
(19) Trustees' Powers of Attorney --incorporated
by reference to Exhibit No. (19) of
Registrant's Pre-effective Amendment No. 1 to
Registration Statement No.333-04983 filed
July 24, 1996.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class (As of November 1, 1998)
Polynous Growth
Fund, Class A Shares 1,075
Item 27. Indemnification.
Reference is made to Article X of the Registrant's Trust
Instrument incorporated by reference to Exhibit No. (1)
of Registrant's Registration Statement No.333-04983 filed
June 3, 1996.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant by the
Registrant pursuant to the Trust's Trust Instrument, its
By-Laws or otherwise, the Registrant is aware that in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in
the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling
persons in connection with shares being registered,
the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser.
Polynous Capital Management, Inc, 345 California Street, Suite
1220, San Francisco, California 94104 provides investment
advisory services to individual and institutional
investors, and as of October 31, 1998 $155 million in
assets under management.
For information as to any other business, vocation or
employment of a substantial nature in which each Trustee
or officer of the Registrant's investment adviser has
been engaged for his own account or in the capacity of
Trustee, officer, employee, partner or trustee, reference
is made to Form ADV (File #801-49411) filed by it under
the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
(a) FPS Broker Services, Inc. ("FPSB"), the principal underwriter for the
Registrant's securities, currently acts as principal underwriter for the
following entities:
The Bjurman Funds
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Matthews International Funds
McM Funds
Metropolitan West Funds
Polynous Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Sports Funds Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc
Trainer, Wortham First Mutual Funds
(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
Kenneth J. Kempf Director and None
3200 Horizon Drive President
King of Prussia, PA 19406-0903
Lynne Cannon Vice President and Director
3200 Horizon Drive Principal
King of Prussia, PA 19406-0903
Rocco J. Cavalieri Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Gerald J. Holland Director, None
3200 Horizon Drive Vice President and
King of Prussia, PA 19406-0903 Principal
Sandra L. Adams Assistant Vice None
3200 Horizon Drive President and Principal
King of Prussia, PA 19406-0903
Carolyn F. Mead, Esq. Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903
John H. Leven Treasurer None
3200 Horizon Drive
King of Prussia, PA 19406-0903
Bruno DiStefano Principal None
3200 Horizon Drive
King of Prussia, PA 19406-0903
James W. Stratton may be considered a control person of the Underwriter
due to his direct or indirect ownership of FinDaSub, Inc., the parent
of the Underwriter.
(c) Not applicable.
Item 30. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act and
the Rules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder, are
maintained by the Trust's Investment Adviser, Polynous Capital
Management, Inc. 345 California Street, Suite 1220, San Francisco,
California 94101, except for those maintained by the Fund's
Custodian, The Bank of New York, 48 Wall Street, New York, New
York 10172 and the Trust's Administrator, Transfer Agent and
Fund Accounting Services Agent, First Data Investor Services Group Inc.,
3200 Horizon Drive, King of Prussia, Pennsylvania 19406-0903.
Item 31. Management Services.
There are no management-related service contracts not
discussed in Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of the
Registrant's latest Annual Report to Shareholders upon
request and without charge.
(b) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any director or directors when
requested in writing to do so by the record holders of
not less than 10 percent of the Registrant's outstanding
shares and to assist its shareholders in accordance with
the requirements of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder
communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it
meets all of the requirements for effectiveness of this registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 2 to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco,
and State of California on the 25th day of November , 1998.
Polynous Trust
Registrant
By /s/ Kevin L. Wenck
Kevin L. Wenck
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of Polynous Trust has been signed below by the
following persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ Kevin L. Wenck 11/25/98
Kevin L. Wenck President and
Principal Executive Officer
/s/ Kevin L. Wenck Principal Accounting 11/25/98
Kevin L. Wenck and Financial Officer
/s/Richard H. Kimball Trustee 11/25/98
Richard Kimball
/s/Ronald H.Kase Trustee 11/25/98
Ronald Kase
INDEX OF EXHIBITS
EXHIBIT NUMBER NAME
EX 99.B11 Consent of Deloitte & Touche LLP
EX 99.B15 Distribution Plan of Polynous Trust Class C
EX 99.B18 Plan of Distribution Pursuant to Rule 18F-3, as amended
EX 99.B27 Financial Data Schedule
First Data Investor Services Group, Inc
3200 Horizon Drive
King of Prussia, PA 19406-0903
VIA EDGAR
November 25, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: Polynous Trust
File No. File No. 333-04983 & File No. 811-07649
Rule 485(b) Filing, Post-Effective Amendment No. 2
To the Staff of the Commission:
On behalf of Polynous Trust (the "Trust"), and pursuant to paragraph
(b) of Rule 485 under the Securities Act of 1933, as amended,
enclosed is Post-Effective Amendment No. 2 to the Trust's
Registration Statement.
The purpose of this filing is to provide annual financial data
for Polynous Growth Fund (the "Fund") and other non-material changes.
This filing also constitutes filing of
Amendment No.4 to the Registration Statement under the
Investment Company Act of 1940,as amended.
Should you have any questions, I can be reached directly at (610)
239-4749.
Sincerely,
/s/ CAROLYN MEAD
Manager Corporate Compliance Administration
Enclosure
Exhibit 99.B18
POLYNOUS TRUST
Polynous Growth Fund
Multiple Class Plan Pursuant to Rule 18F-3, as Amended
Polynous Growth Fund (the "Fund") hereby adopts this Multiple Class Plan (the
"Plan") pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which sets forth the separate distribution
arrangements and expense allocations of each class of the Fund. This Plan has
been adopted by a majority of the Board of Trustees, including a majority of
the independent Trustees, of Polynous Trust (the "Trust").
The Board has determined that the Plan is in the best interests of
each class and the Fund as a whole.
CLASS CHARACTERISTICS
Each class of shares will represent interest in the same portfolio of
investments and be identical in all respects to each other class, except as set
forth below.
Class A Shares: Class A Shares are sold subject to a front-end sales charge of
4.50% for an investment less than $50,000, 4.00% for investments over $50,000
but less than $100,000, 3.00% for investments over $100,000 but less than
$250,000, 2.00% for investments over $250,000 but less than $500,000 and 0.00%
for investments $500,000 and over. Class A Shares are subject to Rule 12b-1
distribution charges with a fee of 0.25% per annum of the average daily net
assets attributable to the Class A Shares.
Class C Shares: Class C Shares are sold subject to a Contingent Deferred Sales
Charge (CDSC) of 1.0% for redemptions made within one year of purchase. Class C
shares are sold subject to a minimum initial investment of $________ and
subsequent investments of $_______ or more. Class C Shares are subject to Rule
12b-1 distribution charges with a fee of 1.00% per annum (of which, up to 0.25%
may be service fees) payable on a monthly basis, of the Fund?s aggregate
average daily net assets attributable to the Class C shares.
Class D Shares: Class D Shares are offered for sale at net asset value per
share without a sales charge. Class D Shares are sold subject to a minimum
initial investment of $10,000 and subsequent investments of $200 or more.
Class D Shares are subject to Rule 12b-1 distribution charges with a
fee of 0.35% per annum of the average daily net assets attributable to the
Class D Shares.
The Rule 12b-1 charges associated with the Class A Shares, Class C Shares and
Class D Shares shall be paid to FPS Broker Services, Inc. (the "Distributor")
for (i) expenses incurred pursuant to an agreement regarding the provision of
administrative support services to the holders of the respective class of
shares; (ii) distribution services provided and expenses assumed in connection
with distribution assistance, including, but not limited to, printing and
distributing prospectuses to persons other than current shareholders of the
Fund, printing and distributing advertising and sales literature and reports to
shareholders in connection with the sale of the Fund's shares, and personnel
and communication equipment used in servicing shareholder accounts and
prospective shareholder inquiries; or
(iii) payments to the Distributor pursuant to the
Underwriting Agreement between the Trust and the Distributor. The Distributor
may reallow a portion or all of the 12b-1 fees received to broker-dealers or
others who have executed a selling agreement with the Distributor on behalf of
the respective class of shares of the Trust.
INCOME AND EXPENSE ALLOCATION
Certain expenses attributable to the Fund, and not
to a particular class will be borne by each class on
the basis of the relative aggregate net assets of the
Fund. Notwithstanding the foregoing, the investment manager or other service
provider may waive or reimburse the expenses of a specific class or classes to
the extent permitted under Rule 18f-3 under the 1940 Act.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each class of shares, to the extent
that any dividends are paid, will be calculated in the same manner, at the same
time, on the same day, and will be in the same amount, except that any
distribution fees, service fees and class expenses allocated to a class will be
borne exclusively by that class.
EXCHANGES AND CONVERSIONS
There shall be no exchange or conversion features associated with the Class A
Shares, Class C Shares or Class D Shares.
GENERAL
The Fund's Rule 12b-1 Plans relating to the Class A Shares, Class C Shares and
Class D Shares shall operate in accordance with the Conduct Rules of the
National Association of Securities Dealers, Inc., Article III, Section 26.
Each Class shall vote separately and exclusively with respect to any matter
related to the respective Rule 12b-1 Plan. Each Class shall vote separately
with respect to any matter that relates solely to that Class.
On an ongoing basis, the Trustees, pursuant to their fiduciary responsibilities
under the 1940 Act, and otherwise, will monitor the Trust for the existence of
any material conflicts between the interests of the classes of shares. The
Trustees, including a majority of the independent Trustees, shall take such
action as is reasonably necessary to eliminate any such conflict that may
develop. The investment adviser and the distributor shall be responsible for
alerting the Board to any material conflicts that may arise.
Any material amendment to this Plan must be approved by a majority of the
Trustees of the Fund, including a majority of the Trustees who are not
interested persons of the Fund, as defined in the 1940 Act.
Date:________________, 1998
Exhibit 99.B15
DISTRIBUTION PLAN
OF
POLYNOUS TRUST, CLASS C SHARES
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act"), by
Polynous Trust (the "Trust") for the Class ?C? shares of the Trust and any
separate series of the Trust hereinafter organized. The Plan has been approved
by a majority of the Trust's Board of Trustees, including a majority of the
Trustees who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan (the "non-interested
trustees"), cast in person at a meeting called for the purpose of voting on
such Plan.
In reviewing the Plan, the Board of Trustees determined that the adoption of
the Plan would be prudent and in the best interests of the Trust and its
shareholders. Such approval included a determination that in the exercise of
their reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit the Trust and its
shareholders. The Plan has also been approved by a vote of the sole initial
shareholder of the Class C shares of the Trust.
The Provisions of the Plan are:
1. The Class C shares of the Trust shall reimburse the Advisor, the
Distributor or others for all expenses incurred by such parties in the
promotion and distribution of shares of the Class C shares of the Trust,
including but not limited to, the printing of prospectuses and reports used
for sales purposes, expenses of preparation of sales literature and related
expenses,
advertisements, and other distribution-related expenses, as well as any
distribution or service fees paid to securities dealers or others who have
executed a servicing agreement with
the Trust on behalf of the Class C shares or
the Distributor, which form of agreement has been approved by the Trustees,
including the non-interested trustees. The monies to be paid pursuant to any
such servicing agreement shall be used to
pay dealers or others for, among other
things, furnishing personal services and
maintaining shareholder accounts, which
services include, among other things, assisting in establishing and maintaining
customer accounts and records; assisting with the purchase and redemption
requests; arranging for bank wires; monitoring dividend payments from the Trust
on behalf of customers; forwarding certain shareholder communications from the
Trust to customers; receiving and answering correspondence; and aiding in
maintaining the investment of their respective customers in the Class C shares.
2. The maximum aggregate amount which may be reimbursed by the Class C shares
of the Trust to such parties pursuant to paragraph 1 shall be 1.0% per
annum (of which, up to 0.25% may be service fees) of the average daily
net assets of the Class C shares.
3. The Advisor and the Distributor shall collect and monitor the
documentation of payments made under paragraph 1, and shall furnish to the
Board of Trustees of the Trust, for their review, on a quarterly basis, a
written report of the monies reimbursed to them and others under the Plan as
to the Trust's Class C shares, and shall furnish the Board of Trustees of the
Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan as to the Trust's Class C
shares in order to enable the Board to make an informed determination
of whether the Plan should be continued.
4. The Plan shall continue in effect for a period of more than one year only
so long as such continuance is specifically approved at least annually by the
Trust's Board of Trustees, including the non-interested trustees, cast in
person at a meeting called for the purpose of voting on the Plan.
5. The Plan, or any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Trust, or by vote of a majority of the non-
interested trustees, on not more than sixty (60) days' written notice, and
shall terminate automatically in the event of any act that constitutes an
assignment of the management agreement between the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this Plan may not be
amended to increase materially the amount to be spent by the Trust's Class C
shares for distribution pursuant to Paragraph 1 hereof without approval by a
majority of the Class C shares? outstanding voting securities.
7. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by the non-interested trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested trustees shall be committed to the discretion of such
non-interested trustees.
9. This Plan shall take effect on the day of , 199 .
This Plan and the terms and provisions thereof are hereby accepted and agreed
to by the Trust, the Advisor and the Distributor as evidenced by their
execution hereof.
Polynous Trust Polynous Capital Management, Inc.
By:
By:
FPS Broker Services, Inc.
By:
Distribution Plan on behalf of the Retail Class Shares of Polynous Trust
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001015303
<NAME> POLYNOUS GROWTH FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-1-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 27760183
<INVESTMENTS-AT-VALUE> 25961200
<RECEIVABLES> 41905
<ASSETS-OTHER> 11347
<OTHER-ITEMS-ASSETS> 1531332
<TOTAL-ASSETS> 27545784
<PAYABLE-FOR-SECURITIES> 311875
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110026
<TOTAL-LIABILITIES> 421901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27246946
<SHARES-COMMON-STOCK> 2110232
<SHARES-COMMON-PRIOR> 1568072
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1675920
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1798983)
<NET-ASSETS> 27123883
<DIVIDEND-INCOME> 155133
<INTEREST-INCOME> 115438
<OTHER-INCOME> 0
<EXPENSES-NET> 553261
<NET-INVESTMENT-INCOME> (282690)
<REALIZED-GAINS-CURRENT> 3458474
<APPREC-INCREASE-CURRENT> (4261443)
<NET-CHANGE-FROM-OPS> (1085659)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1505415
<DISTRIBUTIONS-OF-GAINS> 810949
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 826466
<NUMBER-OF-SHARES-REDEEMED> 437986
<SHARES-REINVESTED> 153680
<NET-CHANGE-IN-ASSETS> 4614828
<ACCUMULATED-NII-PRIOR> 1505354
<ACCUMULATED-GAINS-PRIOR> (971605)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 278247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 610138
<AVERAGE-NET-ASSETS> 27824655
<PER-SHARE-NAV-BEGIN> 14.35
<PER-SHARE-NII> (.21)
<PER-SHARE-GAIN-APPREC> .07
<PER-SHARE-DIVIDEND> .88
<PER-SHARE-DISTRIBUTIONS> .48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.85
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 99.B11
Letterhead
Deloite & Touche LLP
50 Fremont Street Telephone (415)247-4000
San Francisco CA 94105-2230 Facsimile (415) 247-4329
INDEPENDENT AUDITORS' CONSENT
Polynous Growth Fund:
We consent to (a) the incorporation by reference in this Post-Effective
Amendment No. 2 to Registration Statement No. 333-04983 of
Polynous Growth Fund on Form N-1A of our report dated August 28, 1998
incorporated by reference in the Statement of Additional Information
and (b) the reference to us under the captions "Financial Highlights"
appearing in the Prospectus which is also part of such Registration
Statement.
/s/DELOITE & TOUCHE
November 24, 1998
