THE MEDICAL SPECIALISTS FUND
(A SERIES OF INGENUITY CAPITAL TRUST)
PROSPECTUS
MARCH 15, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Ingenuity Capital Trust (the "Trust") currently offers one series of shares to
investors, The Medical Specialists Fund (the "Fund"). The Fund is
non-diversified and its investment objective is long-term growth of capital.
Current income is not a consideration when selecting the Fund's investments.
TABLE OF CONTENTS
RISK/RETURN SUMMARY...........................................................2
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISK FACTORS........4
OPERATION OF THE FUND.........................................................6
HOW TO PURCHASE SHARES........................................................7
HOW TO REDEEM SHARES..........................................................8
SHAREHOLDER SERVICES..........................................................10
DIVIDENDS AND DISTRIBUTIONS...................................................10
TAXES.........................................................................10
CALCULATION OF SHARE PRICE....................................................11
FINANCIAL HIGHLIGHTS..........................................................12
RISK/RETURN SUMMARY
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WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Medical Specialists Fund's investment objective is long-term growth of
capital.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Medical Specialists Fund seeks to achieve its objective by investing at
least 65% of its assets in the medical/healthcare industry in common stock, of
companies that the Investment Adviser considers to have a strong earnings growth
outlook and potential for capital appreciation. The Investment Adviser defines
the medical/healthcare industry to include cardiovascular medical devices,
minimally invasive surgical tools, pharmaceuticals, generic drugs and managed
care providers. The Fund may invest in the stocks of small, medium and
large-sized companies.
WHAT ARE THE PRINCIPAL RISK FACTORS OF INVESTING IN THE FUND?
CONCENTRATION OF INVESTMENTS IN THE MEDICAL/HEALTHCARE INDUSTRY RISKS: The Fund
will be subject to greater risk because of its concentration of investments in
the medical/healthcare industry generally and within specific segments thereof.
Some of the special risks include substantial investments in technological
research and development that may or may not be successful, potentially rapid
obsolescence of products or technology, dependence upon governmental policies
regarding reimbursement of healthcare costs, above-average dependence upon
proprietary rights such as patents, and above-average governmental regulation,
including approval of products and services. Companies in some segments of the
medical/healthcare industry may be subject to short product cycles and
aggressive pricing which may increase their volatility. The value of investments
in the medical/healthcare industry can and often does fluctuate dramatically and
may expose you to greater than average financial and market risk. Additionally,
companies in this industry are dependent upon consumer and business acceptance
as new technologies evolve. Concentrating investments in a single issuer or a
group of issuers makes the value of the Fund's shares more susceptible to
adverse developments affecting a single issuer or industry than a more
diversified fund.
STOCK MARKET RISKS: The return on and value of an investment in the Fund will
fluctuate in response to stock market movements. Stocks and other equity
securities are subject to market risks and fluctuations in value due to
earnings, economic conditions and other factors beyond the control of the Fund
or Investment Adviser. As a result, there is a risk that you could lose money by
investing in the Fund.
PORTFOLIO MANAGEMENT RISKS: The strategies used by the portfolio manager in
selecting stocks for the Fund's portfolio may not always be successful. The
stocks selected by the portfolio manager may decline in value or not increase in
value when the stock market in general is rising.
SMALL AND MEDIUM-SIZED COMPANIES RISKS: Small and medium-size companies often
have narrower markets and more limited managerial and financial resources than
larger, more established companies. As a result, their performance can be more
volatile and they face greater risk of business failure, which could increase
the volatility of the Fund's portfolio.
NON-DIVERSIFICATION RISKS: The Fund is a non-diversified fund. As such, the Fund
has added risk because it may invest a greater percentage of assets in a more
limited number of issuers compared to other mutual funds.
PERFORMANCE SUMMARY
As a newly-organized series of the Trust, the Fund has no operating history.
However, the bar chart and table show performance information of the Firsthand
Medical Specialists Fund, a former series of Firsthand Funds, that was
reorganized into the Fund on March 15, 2000. The Firsthand Medical Specialist
Fund was managed by the same Investment Adviser and portfolio manager as the
Fund. The bar chart indicates the risks of investing in the Fund by showing the
changes in its performance from year to year (on a calendar year basis). The
table shows how the Firsthand Medical Specialists Fund's average annual returns
for one-year and since inception compare to those of broad-based securities
market indices. HOW THE FIRSTHAND MEDICAL SPECIALISTS FUND PERFORMED IN THE PAST
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
Medical Specialist Fund
Return for the Year ended 12/31
1998 -4.55%
1999 52.13%
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Best Quarter: Q4 1998 +31.97%
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Worst Quarter: Q2 1998 -19.74%
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AVERAGE ANNUAL TOTAL RETURNS
(ended 12/31/1999) One Year Since Inception*
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THE MEDICAL SPECIALISTS FUND 52.13% 20.57%
Standard & Poor's 500 Index(1) 21.04% 24.01%
Russell 3000 Healthcare Index(2) -7.96% 12.41%
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* The Fund commenced the public offering of its shares on December 10, 1997,
as The Firsthand Medical Specialists Fund, a series of Firsthand Funds.
(1) The Standard & Poor's 500 Index is a widely recognized, unmanaged index of
common stock prices.
(2) The Russell 3000 Healthcare Index is comprised of 255 healthcare stocks in
the Russell 3000 (large and small-cap) Index.
EXPENSE INFORMATION
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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Maximum sales charge (load) imposed on purchases None(1)
Maximum sales charge (load) imposed on reinvested None
dividends
Maximum deferred sales charge (load) None
Exchange fee None
Redemption fee None(2)
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
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Management Fees 1.50%
Distribution (12b-1) Fees None
Other Expenses(3) 0.45%
Total Annual Fund Operating Expenses(4) 1.95%
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(1) IRA Accounts are assessed a $12.50 annual fee and a $15 redemption fee.
(2) The Fund's transfer agent charges a wire redemption fee of $12.
(3)The percentage in "Other Expenses" is based on estimated amounts for the
current fiscal year. The Investment Adviser receives an annual compensation
of 0.45% of average daily net assets for Fund administration duties. From
this compensation, the Investment Advisor pays all expenses of the Fund.
(4)Under the Investment Advisory and Management Agreement dated November 24,
1999, the Investment Adviser has contractually agreed that the Fund's total
annual operating expenses will be 1.95% of the Fund's average daily net
assets up to $200 million, 1.90% of such assets from $200 million to $500
million, 1.85% of such assets from $500 million to $1 billion, and 1.80% of
such assets in excess of $1 billion. This arrangement is definite for two
years until November 23, 2001 and will continue thereafter as long as the
Fund's Board of Trustees annually renews the Investment Advisory and
Management Agreement.
EXAMPLE:
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year, your dividends and distributions have been
reinvested, and that the Fund's operating expenses remain the same. Although
your actual cost may be higher or lower, based on these assumptions your costs
would be:
1 YEAR 3 YEAR*
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$ 198 $ 612
*The amount shown assumes that the Investment Advisory and Management Agreement
is re-approved by the Fund's Board of Trustees after the initial 2-year period.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISK FACTORS
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INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
To achieve its goal of long-term growth of capital, the Fund invests at least
65% of its assets in securities of companies in the medical/healthcare industry.
At any point in time, however, the Fund may invest more than 25% of its assets
in any one segment of the medical/healthcare industry.
The Investment Adviser considers the medical/healthcare industry to consist of
companies primarily engaged in the design, manufacture or sale of products or
services used for or in connection with medicine or healthcare. The Investment
Adviser considers a company to be PRIMARILY ENGAGED in the medical or healthcare
industry if over 50% of the company's actual or anticipated (1)products or
services, or (2) assets, revenues or profits, are related to that industry.
The following list illustrates some of the types of medical/healthcare companies
in which the Fund may invest:
o NON-BIOTECHNOLOGY PHARMACEUTICALS
o BIOTECHNOLOGY PHARMACEUTICALS
o GENERIC DRUGS
o MINIMALLY INVASIVE SURGICAL TOOLS
o CARDIOVASCULAR MEDICAL DEVICES
o MANAGED CARE PROVIDERS
The equity securities in which the Fund may invest include common stock,
preferred stock, convertible preferred stock and warrants. The securities
selected will typically be traded on a national securities exchange, the NASDAQ
System or over-the-counter, and may include securities of both large (over $1
billion capitalized) companies as well as smaller (less than $1 billion
capitalized) companies. Although certain of the Fund's investments may produce
dividends, interest or other income, current income is not a consideration in
selecting the Fund's investments.
The Investment Adviser selects securities for the Fund's portfolio by valuing a
company and purchasing securities of the company when the Investment Adviser
believes that the company's value exceeds the market price. The Investment
Adviser values a company by focusing on the company's fundamental worth. A
company's fundamental worth is the value of the basic businesses of the company,
including products, technologies, customer relationships and other sustainable
competitive advantages.
The Investment Adviser considers the following factors when analyzing
fundamental worth of a company:
o assets and earning power;
o price-earnings ratios compared with sales;
o balance sheet strength; and
o a strong competitive position in market share, brand identification,
technological exclusivity, product and service.
The Investment Adviser considers three factors when selling securities from the
Fund's portfolio:
(1) Whether the performance of the security has achieved the Fund's objective of
long term capital growth;
(2) Whether the Investment Adviser's outlook has changed about the security
(e.g. anticipated changes in the company's market place do not result); and
(3) Whether the security is no longer attractive because it no longer meets
the Fund's criteria for purchase or because of circumstances impacting
the security's value (e.g. unexpected regulatory delays).
RISK FACTORS
CONCENTRATION OF INVESTMENTS IN THE MEDICAL/HEALTHCARE INDUSTRY RISKS
The Fund will invest primarily in companies within the medical/healthcare
industry. The Fund will be subject to greater risk because of its concentration
of investments in this a single industry. Some of the special risks include
substantial investments in technological research and development that may or
may not be successful, potentially rapid obsolescence of products or technology,
dependence upon governmental policies regarding reimbursement of healthcare
costs, above-average dependence upon proprietary rights such as patents, and
above-average governmental regulation, including approval of products and
services. Companies in some segments of the medical/healthcare industry may be
subject to short product cycles and aggressive pricing which may increase their
volatility. Investments in the medical/healthcare industry include the risk that
the economic prospects, and the share prices, of companies in the
medical/healthcare industry can fluctuate dramatically due to industry-specific
changes or developments in the regulatory or competitive environments.
Accordingly, investments by the Fund in companies in the medical/healthcare
industry may expose investors to greater than average financial and market risk.
STOCK MARKET RISKS
The Fund invests primarily in equity securities (principally common stocks),
which by definition entail risk of loss of capital. Investments in equity
securities are subject to inherent market risks and fluctuation in value due to
earnings, economic conditions and other factors beyond the control of the Fund
or the Investment Adviser. Securities in the Fund's portfolio may not increase
as much as the market as a whole and some undervalued securities may continue to
be undervalued for long periods of time. Some securities may be inactively
traded, and thus may not be readily bought or sold. Although profits in some
Fund holdings may be realized quickly, it is not expected that most investments
will appreciate rapidly. The Fund may invest up to 15% of its net assets in
illiquid securities.
SMALL AND MEDIUM-SIZED COMPANIES RISKS
The Fund may, from time to time, invest a substantial portion of its assets in
companies with small or medium-sized capitalization. Small or medium-sized
capitalization companies often involve higher risks because they lack the
management experience, financial resources, product diversification and
competitive strengths of larger corporations. In addition, in many instances the
securities of smaller companies are traded only over-the-counter or on a
regional securities exchange, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of small capitalization companies may be subject to wider price
fluctuations than the fluctuations for larger capitalization companies. When
making large sales of securities having small trading volumes, the Fund may have
to sell portfolio holdings at discounts from quoted prices or may have to make a
series of small sales over an extended period of time.
TEMPORARY DEFENSIVE MEASURES
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in money market instruments. Such action may help the Fund minimize or
avoid losses during adverse market, economic or political conditions. During
such a period, the Fund may not achieve its investment objective. For example,
should the market advance during this period, the Fund may not participate as
much as it would have if it had been more fully invested.
PORTFOLIO TURNOVER RISKS
The Investment Adviser may engage in active trading of its portfolio securities
to achieve its investment goals. This practice could result in the Fund
experiencing a high turnover rate (100% or more). High portfolio turnover rates
lead to increased costs, could cause you to pay higher taxes and could
negatively affect the Fund's performance.
YEAR 2000 PROBLEM
The Fund and its service providers depend upon the smooth functioning of their
computer systems. Unfortunately, because of the way dates are encoded and
calculated, many computer systems in use today cannot recognize the year 2000,
but revert to 1900 or another incorrect date. Computer failures due to the year
2000 problem could negatively impact the handling of securities trades and
pricing and account services. The Fund has received representations from its
software vendors and service providers regarding their readiness and initiatives
for the Year 2000 issue. However, due to the uncertainty of the Year 2000 issue
and the Fund's reliance on various service providers to perform essential
functions, the Fund could have difficulty calculating its net asset value,
processing orders for share sales and delivering account statements and other
information to shareholders. For instance, brokers and other intermediaries that
hold shareholder accounts may still experience incompatibility problems. It is
important to keep in mind that year 2000 issues may also negatively impact the
companies in which the Fund invests and, by extension, the value of those
companies' shares held by the Fund.
OPERATION OF THE FUND
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THE FUND
The Fund commenced the public offering of its shares on December 10, 1997, as
The Firsthand Medical Specialists Fund, a series of The Firsthand Funds, a
Delaware business trust. On March 5, 2000, shareholders of the Firsthand Medical
Specialists Fund approved reorganizing the fund into the Ingenuity Medical
Specialists Fund, a series of Ingenuity Capital Trust. The reorganization was
effective on March 15, 2000. The Firsthand Medical Specialists Fund was managed
by the same portfolio manager and Investment Adviser of the Fund.
INVESTMENT ADVISER
The Trust retains Ingenuity Capital Management LLC (the "Investment Adviser"),
to manage the investments of the Fund. The Investment Adviser is located at
26888 Almaden Court, Los Altos, California, 94022. Kendrick W. Kam is the
President of the Investment Adviser and also serves as a Trustee of the Trust.
The Investment Adviser has no other assets under management besides the Fund.
The Investment Adviser receives a management fee at the annual rate of 1.50% of
its average daily net assets from the Fund. The Investment Advisory and
Management Agreement requires the Investment Adviser to waive its management
fees and, if necessary, reimburse expenses of the Fund to the extent necessary
to limit each Fund's total operating expenses to 1.95% of its average net assets
up to $200 million, 1.90% of such assets from $200 million to $500 million,
1.85% of such assets from $500 million to $1 billion, and 1.80% of such assets
in excess of $1 billion.
PORTFOLIO MANAGER
Kendrick W. Kam has served as portfolio manager of the Fund ever since its
inception as a series of Firsthand Funds. From 1994 until 1999, prior to
becoming President of the Investment Advisor, Mr. Kam served as portfolio
manager for three Firsthand Funds, which were all technology and medical-related
mutual funds. Prior to 1994, Mr. Kam was co-founder and Vice President of
Marketing and Finance for Novoste Puerto Rico, Inc., a medical device company
headquartered in Aguadilla, Puerto Rico. Mr. Kam has a Bachelor of Science
Degree in Finance from Santa Clara University and a Masters of Business
Administration in Marketing from Stanford University.
FUND ADMINISTRATION, TRANSFER AGENT, AND CUSTODY SERVICES
Ingenuity Capital Management LLC provides administrative services to the Fund.
Firstar Mutual Fund Services, LLC provides transfer agent services to the Fund
and is located in Milwaukee, Wisconsin. Firstar Bank, N.A., serves as custodian
for the Fund.
DISTRIBUTOR
Rafferty Capital Markets, Inc. (the "Underwriter"), serves as principal
underwriter for the Fund and as such, is the exclusive agent for the
distribution of shares of the Fund.
HOW TO PURCHASE SHARES
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OPENING AN ACCOUNT - $10,000 MINIMUM
You may open an account directly through the Fund's Transfer Agent or through a
brokerage firm or financial institution that has agreed to sell the Fund's
shares. An account application is included with this prospectus.
Your initial investment in the Fund ordinarily must be at least $10,000. Lower
minimums are available if you are purchasing shares of the Fund through certain
brokerage firms. If you are investing for an IRA, the minimum initial investment
is $2,000.
ADDITIONAL INVESTMENTS - $50 MINIMUM
You may purchase and add shares to your account through the Fund's Transfer
Agent or through a brokerage firm or financial institution that has agreed to
sell the Fund's shares. The minimum additional investment is $50. Each
additional purchase request must contain the account name and number to permit
proper crediting.
PURCHASING SHARES THROUGH YOUR BROKER
Any order placed with a brokerage firm is treated as if it were placed directly
with the Trust. Your shares will be held in a pooled account in the broker's
name, and the broker will maintain your individual ownership information. In
addition, your brokerage firm may charge you a fee for handling your order. Your
brokerage firm is responsible for processing your order correctly and promptly,
keeping you advised of the status of your individual account, confirming your
transactions and ensuring that you receive copies of the Trust's Prospectus.
Purchase orders given to such agents must be received by the Transfer Agent
prior to 4:00 p.m., eastern time, on any business day to be confirmed at the net
asset value determined as of the close of the regular session of trading on the
New York Stock Exchange on that day. It is the responsibility of agents to
transmit properly completed orders promptly. Agents may charge a fee (separately
negotiated with their customer) for effecting purchase orders.
PURCHASING SHARES BY MAIL
You may also open an account and make an initial investment in the Fund by
sending a check and a completed account application form to the addresses below.
Checks should be made payable to "INGENUITY CAPITAL TRUST." Third party checks
will not be accepted.
BY REGULAR MAIL BY OVERNIGHT MAIL
Ingenuity Capital Trust Ingenuity Capital Trust
Firstar Mutual Fund Services, LLC Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
NOTE: THE FUND DOES NOT CONSIDER THE U.S. POSTAL SERVICE OR OTHER INDEPENDENT
DELIVERY SERVICES TO BE ITS AGENTS. THEREFORE, DEPOSITS IN THE MAIL OR WITH SUCH
SERVICES, OR RECEIPT AT FIRSTAR MUTUAL FUND SERVICES, LLC'S POST OFFICE BOX OF
PURCHASE APPLICATIONS OR REDEMPTION REQUESTS DO NOT CONSTITUTE RECEIPT BY
FIRSTAR MUTUAL FUND SERVICES, LLC OR THE FUND.
PURCHASING SHARES BY WIRE
Provided the Trust has received a completed account application form, you may
also purchase shares of the Funds by bank wire. Please telephone the Transfer
Agent (Nationwide toll-free 1-888-884-8482) for instructions. You should be
prepared to give the Fund name, the name in which the account is to be
established, the address, telephone number and taxpayer identification number
for the account, and the name of the bank that will wire the money. Your
investment will be made at the next determined net asset value after your wire
is received together with the account information indicated above. If the
Transfer Agent does not timely receive and complete account information, there
may be a delay in the investment of your money and any accrual of dividends. To
make your initial wire purchase, you must mail a completed account application
to the Transfer Agent. Your bank may impose a charge for sending your wire.
There is presently no fee for receipt of wired funds, but the Transfer Agent
reserves the right to charge shareholders for this service upon 30 days prior
notice to shareholders. You may use the following wire instructions:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA #: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further Credit:Ingenuity Capital Trust, The Medical Specialists Fund
(name/title on the account & account #)
WHEN PURCHASE ORDERS ARE RECEIVED
Shares of the Fund are sold on a continuous basis at the net asset value next
determined after the Trust or an agent has received your purchase order.
Purchase orders received by the Transfer Agent prior to 4:00 p.m., eastern time,
on any business day are confirmed at the net asset value determined as of the
close of the regular session of trading on the New York Stock Exchange on that
day.
The Transfer Agent (or your broker) mails you confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are not issued. The
Trust reserves the right to limit the amount of investments and to refuse to
sell to any person. If an order to purchase shares is cancelled because your
check does not clear, you will be responsible for any resulting losses or fees
incurred by the Trust or the Transfer Agent in the transaction.
HOW TO REDEEM SHARES
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You may redeem shares of the Fund on any day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of your redemption request in the form described
below. Payment is normally made within three business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Fund by certified check or wire. If you would like your proceeds to go
somewhere other than your home address or bank address of record, you may send a
letter of instruction signed by all owners of the account. The letter will need
to have all signatures guaranteed by an eligible guarantor institution.
REDEEMING BY TELEPHONE
You may redeem shares having a value of less than $50,000 by telephone. The
proceeds will be sent by mail to the address designated on your account or wired
directly to your existing account in any commercial bank or brokerage firm in
the United States as designated on your application. To redeem by telephone,
call the Transfer Agent (Nationwide toll-free 1-888-884-8482). The redemption
proceeds will normally be sent by mail or by wire within three business days
after receipt of your telephone instructions. IRA accounts are not redeemable by
telephone.
The telephone redemption privilege is automatically available to all new
accounts (except for IRAs). If you do not want the telephone redemption
privilege, you must indicate this in the appropriate area on your account
application or you must write to the Transfer Agent and instruct them to remove
this privilege from your account.
You may change the bank or brokerage account which you have designated at any
time by writing to the Transfer Agent with your signature guaranteed by any
eligible guarantor institution (including banks, brokers and dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations) or by completing a supplemental
telephone redemption authorization form. Contact the Transfer Agent to obtain
this form. Further documentation will be required to change the designated
account if shares are held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expenses in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
REDEEMING BY MAIL
You may redeem any number of shares from your account by sending a written
request to the Transfer Agent. The request must state the number of shares or
the dollar amount to be redeemed and your account number. The request must be
signed exactly as your name appears on the Trust's account records. If the
shares to be redeemed have a value of $50,000 or more, your signature must be
guaranteed by any of the eligible guarantor institutions outlined above. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed. Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
REDEEMING THROUGH BROKER-DEALERS
You may also redeem shares of the Fund by placing a wire redemption request
through a securities broker or dealer. Unaffiliated broker-dealers may charge
you a fee for this service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to promptly transmit wire
redemption orders.
ADDITIONAL REDEMPTION INFORMATION
If your instructions request a redemption by wire, the proceeds will be wired
directly to your existing account in any commercial bank or brokerage firm in
the United States as designated on your application and you will be charged a
$12 processing fee by the Fund's Transfer Agent. The Trust reserves the right,
upon 30 days written notice, to change the processing fee. All charges will be
deducted from your account by redeeming shares in your account. Your bank or
brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution by way of an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization.
The Trust reserves the right to require you to close your account, other than an
IRA account, if at any time the value of your shares is less than $10,000 (based
on actual amounts invested, unaffected by market fluctuations), or such other
minimum amount as the Trust may determine from time to time. After notification
to you of the Trust's intention to close your account, you will be given 60 days
to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission. Under
unusual circumstances, when the Board of Trustees deems it appropriate, the Fund
may make payment for shares redeemed in portfolio securities of the Fund taken
at current value. If you are an IRA shareholder, you must indicate on your
redemption request whether or not to withhold federal income tax. Requests that
do not indicate a preference will be subject to withholding.
SHAREHOLDER SERVICES
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Contact the Transfer Agent (nationwide toll-free 1-888-884-8482) for additional
information about the shareholder services described below.
RETIREMENT PLANS
You may purchase shares of the Fund for your individual retirement plans. Please
call the Transfer Agent at the above number for the most current listing and
appropriate disclosure documentation on how to open a retirement account.
AUTOMATIC INVESTMENT PLAN
By completing the Automatic Investment Plan section of the account application,
you may make automatic monthly investments in the Fund from your bank, savings
and loan or other depository institution account. The minimum investment must be
$50 under the plan. The Transfer Agent pays the costs associated with these
transfers, but reserves the right, upon 30 days written notice, to make
reasonable charges for this service. Your depository institution may impose its
own charge for debiting your account, which would reduce your return from an
investment in the Fund. You may change the amount of the investment or
discontinue the plan at any time by writing to the Transfer Agent.
DIVIDENDS AND DISTRIBUTIONS
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The Fund expects to distribute substantially all of its net investment income
and net realized gains, if any, at least annually. Unless you provide a written
request to receive payments in cash, your dividends and distributions will
automatically be reinvested in additional shares of the Fund. You may indicate
on your application whether or not you wish to have your dividends distributed
in cash payments. All distributions will be based on the net asset value in
effect on the payable date.
If you elect to receive dividends in cash and the U.S. Postal Service cannot
deliver your checks or if your checks remain uncashed for six months, your
dividends may be reinvested in your account at the then-current net asset value.
All future distributions will automatically be reinvested in shares of the Fund.
No interest will accrue on amounts represented by uncashed distribution checks.
TAXES
- --------------------------------------------------------------------------------
The Fund intends to continue to qualify and to be treated as a "regulated
investment company" under Subchapter M of the Code by annually distributing
substantially all of its net investment company taxable income, net tax-exempt
income and net capital gains in dividends to its shareholders and by satisfying
certain other requirements related to the sources of its income and the
diversification of its assets. By so qualifying, the Fund will not be subject to
federal income tax or excise tax on that part of its investment company taxable
income and net realized short-term and long-term capital gains which it
distributes to its shareholders in accordance with the Code's timing
requirements.
Dividends and distributions paid to shareholders (whether received in cash or
reinvested in additional shares) are generally subject to federal income tax and
may be subject to state and local income tax. Dividends from net investment
income and distributions from any excess of net realized short-term capital
gains over net realized capital losses are taxable to shareholders (other than
tax-exempt entities that have not borrowed to purchase or carry their shares of
the Fund) as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) by the Fund to its shareholders are taxable
to you as capital gains, without regard to the length of time you have held your
Fund shares. Capital gains distributions may be taxable at different rates
depending on the length of time the Fund holds its assets. Redemptions of shares
of the Fund are taxable events on which you may realize a gain or loss.
The Trust will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The Fund's
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions.
CALCULATION OF SHARE PRICE
- --------------------------------------------------------------------------------
The share price (net asset value) of the shares of the Fund is determined as of
the close of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the New York Stock Exchange is
open for business and may also be determined on any other day when there is a
purchases or redemption of the shares of the Fund. The net asset value per share
of the Fund is calculated by dividing the sum of the value of the securities
held by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of the
Fund, rounded to the nearest cent. The price at which a purchase or redemption
of Fund shares is effected is based on the next calculation of net asset value
after the order is placed.
Portfolio securities are valued as follows: (1) securities that are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the most recent bid price, (2) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
most recent bid price as quoted by brokers that make markets in the securities)
as of the close of the regular session of trading on the New York Stock Exchange
on the day the securities are being valued, (3) securities that are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (4) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
As a newly-organized series of the Trust, the Fund has no operating history.
However, the financial highlights table below shows financial performance
information of the Firsthand Medical Specialists Fund, a former series of
Firsthand Funds, that was reorganized into the Fund on March 15, 2000. The
Firsthand Medical Specialist Fund was managed by the same Investment Adviser and
portfolio manager as the Fund. Certain information reflects financial results
for a single share of the Fund. The total returns in the table represent the
rate that you would have earned or lost on an investment in the Firsthand
Medical Specialists Fund (assuming you reinvested all dividends and
distributions). This information has been audited by Tait, Weller & Baker, whose
report, along with the Fund's financial statements, are included in the Fund's
annual report, which is available upon request.
- -------------------------------------------- ----------- ---------- -----------
Year Year Period
Ended Ended Ended
12/31/99 12/31/98 12/31/97(A)
- -------------------------------------------- ----------- ---------- -----------
NET ASSET VALUE AT BEGINNING OF PERIOD $9.66 $10.12 $10.00
----------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.06) (0.10) 0.01
Net realized and unrealized gains
(losses) on investments 5.05 (0.36) 0.11
----------- ---------- -----------
Total from investment operations 4.99 (0.46) 0.12
----------- ---------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- --
Distributions from net realized gains (0.48) -- --
----------- ---------- -----------
Total distributions (0.48) -- --
----------- ---------- -----------
NET ASSET VALUE AT END OF PERIOD $14.17 $9.66 $10.12
----------- ---------- -----------
TOTAL RETURN 52.13% (4.55%) 1.20%(B)
----------- ---------- -----------
Net assets at end of period (millions) $16.6 $4.5 $2.4
----------- ---------- -----------
Ratio of expenses to average net assets 1.77% 1.95% 1.81%(C)
Ratio of net investment income (loss) to
average net assets (0.91%) (1.33%) 1.75%(C)
Portfolio turnover rate 71% 160% 0%
- -------------------------------------------- ----------- ---------- -----------
(A) Represents the period from the commencement of operations (December 10,
1997) through December 31, 1997.
(B) Not Annualized.
(C) Annualized.
INGENUITY CAPITAL TRUST UNDERWRITER
26888 Almaden Court Rafferty Capital Markets, Inc.
Los Altos, CA 94022 1311 Mamaroneck Avenue
White Plains, NY 10605
INVESTMENT ADVISER TRANSFER AGENT
Ingenuity Capital Management LLC Firstar Mutual Fund Services, LLC
26888 Almaden Court 615 East Michigan Street
Los Altos, CA 94022 Milwaukee, WI 53202
Additional information about the Fund is included in the Statement of Additional
Information ("SAI") dated December 14, 1999, which is incorporated by reference
in its entirety. Additional information about the Fund's investments is
available in the Fund's annual and semiannual reports to shareholders. In the
Fund's annual report, you will find a discussion of the market conditions and
strategies that significantly affected the Fund's performance during the last
fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make shareholder inquiries about the Fund,
please call:
1-888-884-8482
You may review and obtain copies of Fund information (including the SAI) at the
SEC Public Reference Room in Washington, D.C. Please call 1-202-942-8090 for
information relating to the operation of the Public Reference Room. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site at http://www.sec.gov. Copies of information may be obtained
after paying a duplicating fee, by electronic request at the following E-mail
address: [email protected], or by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-0102.
Investment Act No. 811-09445
