<PAGE>
As filed with the Securities and Exchange Commission on April 25, 2000
Securities Act File No. 333-92371
Investment Company Act File No. 811-09717
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. 3 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 3 /X/
(CHECK APPROPRIATE BOX OR BOXES)
--------------------------
VENUS SERIES TRUST
(Exact Name of Registrant as Specified in its Charter)
31 MILK STREET
SUITE #315
BOSTON, MA 02109
(Address of Principal Executive Offices)
(617) 423-1901
(Registrant's Telephone Number, including Area Code)
VIKAS MEHROTRA
VENUS CAPITAL MANAGEMENT, INC.
31 MILK STREET
SUITE #315
BOSTON, MA 02109
(Name and address of agent for service)
--------------------------
COPIES TO:
HARSHA MURTHY, ESQ.
DUVAL & STACHENFELD LLP
300 EAST 42ND STREET
NEW YORK, NY 10017
--------------------------
Approximate date of proposed public offering: As soon as practical after the
effective date of the Registration
Statement.
Registrant declares that it is registering an indefinite number or amount of its
securities by this Registration Statement.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 25, 2000
THE INDIA TECHNOLOGY FUND
The India Technology Fund (the "Fund") is a fund formed by Venus Series
Trust, an open-end management investment company (the "Trust"). The Fund is a
non-diversified fund having the primary investment objective of obtaining
long-term capital appreciation by investing in securities of Indian technology
companies. It is anticipated that the Fund will commence investment activities
upon capitalization of $1 million (which amount may include the Fund's initial
capitalization of $500,000). Until the Fund has received subscriptions
aggregating $1 million, the Fund's offering proceeds will be held in an
interest-bearing money-market account. If the Fund does not receive an aggregate
of $1 million in subscriptions within three months of the initial offering of
its shares, to the extent you have subscribed to purchase the Fund's shares and
have made payment for such shares, the Fund shall refund your payment plus
interest.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED THESE SECURITIES OR PASSED UPON
THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
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Risk/Return Summary.....................................................2
Fee Table...............................................................3
Investment Objective/Principal Investment Strategies....................3
Risk Factors............................................................4
Performance.............................................................8
How to Purchase Shares..................................................9
How to Sell and Redeem Shares......................................... 11
Investment Management..................................................12
Distributions and Taxes................................................13
Distribution Plan......................................................14
---------------------------------------------------------------------------
PROSPECTUS
APRIL , 2000
[REDHERRING]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The India Technology Fund seeks to obtain long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund's adviser, Venus Capital Management, Inc. (the "Adviser") will
generally invest at least 70% of the Fund's total assets in securities of Indian
technology companies. Investments will be concentrated on Indian technology
companies in the following sectors: software, hardware, telecommunications,
healthcare, biotechnology, media and entertainment, internet commerce, and
internet related services. The Adviser will look to invest in companies that
have, among other things, superior sales, earnings, growth, management and
industry position. The Fund will primarily invest in common and preferred stock,
convertible debt and equity instruments. The Fund's portfolio will also consist
of securities traded outside of India and the U.S. represented by American
Depository Receipts ("ADRs") and other similar receipts. For more information,
see "Investment Objective/Principal Investment Strategies" below.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- - The Fund is non-diversified, which may result in greater fluctuation in Fund
share value than would be the case if the Fund was diversified.
- - Because technologies continue to evolve, the Fund's success will depend on
the ability of the companies in which it invests to adapt to this rapidly
changing marketplace. There are no assurances that the companies in which
the Fund invests will be able to adequately adapt their products and
services to meet the needs of the changing marketplace.
- - The value of Fund shares is sensitive to stock market volatility. If there
is a decline in the value of exchange-listed stocks in India, the value of
Fund shares will also likely decline. Changes in stock market values can be
sudden and unpredictable. In addition, although stock values can rebound,
there is no assurance that values will return to previous levels. Because
securities markets in India are substantially smaller, less liquid and more
volatile than the major securities markets in the United States, Fund share
values will be more volatile.
- - The value of Fund shares may be affected by political, economic, fiscal,
regulatory or other developments in India. These risks can be significant.
- - Substantially less public information is available about Indian companies
than U.S. companies. As a result, certain material disclosures may not be
made by publicly traded companies in India and less information may be
available to the Fund.
- - India imposes certain foreign ownership limitations on direct investments in
India which, among other things, limits the percentage of foreign ownership
in any one Indian company, individually or collectively, by foreign
investors.
- - Because the Fund invests predominantly in Indian securities, the value of
Fund shares can be adversely affected by changes in the US dollar - Indian
rupee exchange rate.
- - The Fund may engage in certain other investment practices that are risky.
Such practices include investing in options, warrants and futures, and
engaging in currency transactions, hedging and short-selling.
2
<PAGE>
The Fund is not a complete investment program and you may lose money by
investing in the Fund. Because the Fund is new, it does not have a full
calendar year of performance. Once the Fund has had a full year of
performance, the Fund will provide you with its total and average annual
return information. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Shareholders of the Fund may realize substantial
losses by investing in the Fund.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses deducted from Fund
assets, expressed as a percentage of average net assets) BASIC MINIMUM MAXIMUM
----- ------- -------
<S> <C> <C> <C>
Management Fees* 2.50% 0.00% 5.00%
12b-1/Shareholder Services Fees** 0.25% 0.25% 0.25%
Other Expenses*** 1.00% 1.00% 1.00%
- ----------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses*** 3.75% 1.25% 6.25%
</TABLE>
- -------------------
* The management fee paid to the Adviser for providing advisory services to
the Fund consists of a basic fee and a performance adjustment calculated by
comparing the Fund's performance to a target. The basic fee for the Fund is
2.50% of the Fund's average net assets. The actual fees paid to the Adviser
may be higher or lower than the basic fee. The target for the Fund is the
investment record of the IFC India Index (the "IFC India Index"), a stock
index compiled by the International Finance Corporation (IFC), a member of
the World Bank Group. For more information, see "Investment Management --
Investment Adviser" and the Statement of Additional Information.
** The Fund will begin charging you the 12b-1 fees after it has entered into a
12b-1 distribution agreement.
*** Based on estimated expenses for the fiscal year ending December 31, 2000. If
you request that the proceeds of a redemption be sent by wire transfer, you
will be charged for the cost of such wire, which is $15.00 as of the date of
this Prospectus (subject to change without notice).
EXAMPLE
The following example indicates the basic/minimum/maximum expenses on a $10,000
investment in Fund shares, based on the redemption of Fund shares at the end of
each time period. The purpose of the following example is to assist you in
understanding the various costs and expenses that you, as a shareholder of the
Fund, will directly or indirectly bear, and to further assist you in comparing
such costs and expenses with that of other mutual funds.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
BASIC MINIMUM MAXIMUM BASIC MINIMUM MAXIMUM
<S> <C> <C> <C> <C> <C>
$375.00 $125.00 $625.00 $1,167.71 $379.70 $1,994.63
</TABLE>
3
<PAGE>
INVESTMENT OBJECTIVE/PRINCIPAL INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is to obtain long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Adviser will generally invest at least 70% of the Fund's total assets in
securities of Indian technology companies. Investments will be concentrated on
Indian technology companies in the following sectors: software, hardware,
telecommunications, healthcare, biotechnology, media and entertainment, internet
commerce, and internet related services. The Adviser will look to invest in
companies that have the following characteristics:
- - rapidly rising sales,
- - high earnings growth rates,
- - demonstrated superior long-term capital appreciation,
- - industry leaders, and
- - proven management teams.
The Fund will primarily invest in common and preferred stock, convertible debt
and equity instruments. The Fund's portfolio will also consist of securities
traded outside of India and the U.S. represented by ADRs and other similar
receipts. For more information, see the Statement of Additional Information.
PORTFOLIO TURNOVER
The Fund is not restricted with regard to portfolio turnover and will make
changes in its investment portfolio from time to time as political, business and
economic conditions and market prices may dictate and its investment policies
may require. It is estimated that the portfolio turnover rate generally will not
exceed 200%. A high rate of portfolio turnover in any year will increase
brokerage commissions paid and could result in high amounts of realized
investment gain subject to the payment of taxes by shareholders. However, the
Fund expects to minimize these potential adverse effects of portfolio turnover
through its use of discount brokers and through investment in a relatively small
number of portfolio securities. Any realized net short-term investment gain will
be taxed to shareholders as ordinary income. See "Dividends, Distributions and
Taxes" below.
RISK FACTORS
In addition to the other information contained in this Prospectus and the
Statement of Additional Information, you should also carefully consider the
following factors in evaluating an investment in the shares of the Fund, any of
which could materially reduce the Fund's net asset value. The risks and
uncertainties described below are not the only ones that could adversely affect
your investment in shares of the Fund. Additional risks and uncertainties of
which the Fund either is unaware or does not deem material at this time could
materially reduce the Fund's net asset value.
NON-DIVERSIFIED FUND
The Fund is a "non-diversified" fund. The Fund is considered "non-diversified"
because a relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers. The Fund's portfolio securities,
therefore, may be more susceptible to any single economic, political, or
regulatory occurrence than the
4
<PAGE>
portfolio securities of a more diversified investment company. The Fund's
classification as a "non-diversified" investment company means that the
proportion of the Fund's assets that may be invested in the securities of a
single issuer is not limited by the 1940 Act. The Fund, however, intends to
seek to qualify as a "regulated investment company" for purposes of the
Internal Revenue Code of 1986, as amended (the "Code"), which imposes
diversification requirements on the Fund that are less restrictive than the
requirements applicable to "diversified" investment companies under the 1940
Act. The Fund reserves the right to become a "diversified fund" by limiting
the investments in which more than 5% of its total assets are invested.
INVESTMENT IN THE TECHNOLOGY SECTOR
The Fund plans to invest primarily in the equity securities of Indian technology
companies. The value of the shares of the Fund may be susceptible to factors
affecting technology and technology-related industries and to greater risk and
market fluctuation than an investment in a fund that invests in a broader range
of portfolio securities. The specific risks faced by technology companies
include:
- - rapidly changing technologies and products that may quickly become obsolete;
- - exposure to a high degree of government regulation, making these companies
susceptible to changes in government policy and failures to secure
regulatory approvals;
- - cyclical patterns in information technology spending which may result in
inventory write-offs;
- - scarcity of management, engineering and marketing personnel with appropriate
technological training;
- - the possibility of lawsuits related to technological patents; and
- - changing investor sentiments and preferences with regard to technology
sector investments (which are generally perceived as risky).
There are no assurances that the companies in which the Fund invests will be
able to adequately adapt their products and services to meet the needs of the
changing marketplace.
POLITICAL AND ECONOMIC INSTABILITY
The value of the Fund shares may be adversely affected by political, economic,
social and religious factors, changes in the laws or regulations of India and
the status of the relations of India with other countries. Furthermore, the
Indian government exercises significant influence over many aspects of the
Indian economy, which could affect private sector companies and the Fund, market
conditions and prices and yields of securities in the Fund's portfolio.
Religious and ethnic unrest persists in India. In recent years, India has
experienced considerable sectarian tension between Hindus and Muslims, marked by
periodic violence. In addition, separatist movements have been ongoing in
several states for a number of years. Political extremists have been responsible
for assassinating two of India's Prime Ministers in the past ten years.
Notwithstanding such conflicts, India has experienced orderly governmental
transitions. India's relations with neighboring countries historically have been
tense.
The Indian government generally exercises substantial involvement in its
economy. From 1947 to the mid - 1980's, India maintained predominantly socialist
economic policies with a high level of state ownership and bureaucratic
intervention. Since the mid-1980's, India has adopted more liberal and
free-market economic policies. Despite these reforms, a large portion of
industry and the financial system remains under state control of or is
subsidized by the government. There can be no assurance that the Indian
government will continue to pursue liberal and free-market economic policies or,
if it does, that such policies will be successful. A return to more socialist
policies could adversely affect the Fund's investments in securities of Indian
companies.
5
<PAGE>
SECURITIES MARKET CHARACTERISTICS
The stock markets in India are undergoing a period of growth and change,
which may result in trading or price volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying
the relevant laws and regulations. The securities industry in India is
comparatively underdeveloped, and stockbrokers and other intermediaries may
not perform as well as their counterparts in the United States and other more
developed securities markets. Physical delivery of securities in small lots
generally has been required in India and a shortage of vault capacity and
trained personnel has existed among qualified custodial Indian banks. The
Fund may be unable to sell securities where the registration process is
incomplete and may experience delays in receipt of dividends. If trading
volume is limited by operational difficulties, the ability of the Fund to
invest its assets may be impaired.
The Indian securities markets are fragmented, substantially smaller, less liquid
and more volatile than the major securities markets in the United States. A high
proportion of the shares of many Indian companies may be held by a limited
number of persons and financial institutions, which may limit the number of
shares available for investment by the Fund. A limited number of issuers may
represent a disproportionately large percentage of market capitalization and
trading.
Anticipation by market participants of the initial offering period, and offering
of other investment funds seeking to invest in securities of Indian companies,
may increase demand for such securities and may adversely influence the prices
paid by the Fund in purchasing securities for its portfolio. The limited
liquidity of the securities markets of India may affect the Fund's ability to
acquire or dispose of securities at the price and time it desires.
FINANCIAL DISCLOSURE AND REGULATORY MATTERS
Substantially less public information is available about Indian companies than
U.S. companies. The disclosure and regulatory standards applicable to Indian
companies are in many respects less stringent than U.S. standards, and issuers
are subject to accounting, auditing and financial standards requirements that
are less rigorous than those applicable to U.S. issuers. As a result, certain
material disclosures may not be made by publicly traded companies in India and
less information may be available to the Fund and other investors than would be
the case if the Fund's investments were restricted to listed securities of U.S.
issuers. This lack of available information may be an even greater consideration
in the event that the Fund invests in unlisted securities. There is also
substantially less regulation of the securities markets in India and
substantially less enforcement of regulatory provisions relating thereto than in
the United States. Indian stock exchanges were subject to occasional suspensions
of trading in June and July 1992 and more recently in March 1995 in connection
with a governmental investigation of allegations of significant financial fraud
involving manipulative trading practices.
RESTRICTIONS ON INVESTMENTS BY FOREIGN INSTITUTIONAL INVESTORS
Foreign institutional investors ("FIIs"), including institutions such as
institutional portfolio managers, pension funds, investment trusts and asset
management companies, may invest in all the securities traded on the primary and
secondary markets in India. Under the guidelines established by the Securities
and Exchange Board of India ("SEBI"), FIIs are required to obtain an initial
registration from the SEBI before commencing investment activity in Indian
securities. The Fund intends to become a registered FII with the SEBI.
The guidelines set forth by the SEBI under which FIIs may invest directly in
Indian equity securities are new and evolving. Under the existing guidelines, no
FII, such as the Fund, may hold more than ten percent of the total issued equity
securities of any Indian company. In addition, portfolio investments by all
non-residents as a group, including those of all FIIs and their clients, may
not exceed 30 percent of the issued equity securities of any Indian company. Due
to the foregoing, the ability of the Fund to invest in certain companies may be
restricted. Under current guidelines, FIIs and their clients may freely remit
and convert into Indian rupees, amounts for investment into
6
<PAGE>
India and convert into US dollars and repatriate capital, income and gains
from India. There can be no assurance that these guidelines will not be amended,
clarified, interpreted by judicial or administrative ruling or superseded in
such a way that may adversely affect the Fund. With respect to investments in
Indian companies by members of the Advisory Board of the Adviser and the
Board of Trustees of the Trust, and the effect such investments could have on
the Fund's investment objectives, see "-- Conflicts of Interest."
FLUCTUATIONS IN CURRENCY EXCHANGE RATES
Because investment in Indian companies will usually involve Indian currency, the
value of the assets of the Fund as measured by US dollars may be adversely
affected by changes in the Indian rupee-US dollar exchange rate. Such exchange
rate may fluctuate significantly over short periods of time causing the Fund's
net asset value to fluctuate as well. In addition, costs are incurred in
connection with conversion between the Indian rupee and US dollar.
FOREIGN EXCHANGE RISK
The Fund's assets will be invested in securities primarily quoted or denominated
in Indian rupees. Accordingly, a change in the value of the Indian rupee against
the US dollar will result in a corresponding change in the US dollar value of
the Fund's assets quoted or denominated in Indian rupees as well as the US
dollar equivalent of dividends distributed in Indian rupees by Indian companies
and of capital gains realized by the Fund on a sale of such assets. In addition,
if the exchange rate of the Indian rupee against the US dollar declines between
the time the Fund incurs expenses in US dollars and the time such expenses are
paid, the amount of Indian rupees required to be converted into US dollars in
order to pay expenses in US dollars will be greater than the equivalent amount
in such currency of such expenses at the time they are incurred.
EXCHANGE CONTROL
The ability of the Fund to exchange Indian rupees into US dollars and repatriate
investment income, capital and proceeds of sales realized from its investments
in Indian securities is subject to regulation by the Reserve Bank of India under
the Foreign Exchange Regulation Act. Under the FII guidelines as currently in
effect, necessary action to establish bank and custodial accounts, convert
currency and repatriate capital and income on behalf of the Fund has been taken.
There can be no assurance that the Government of India in the future will not
impose restrictions on foreign capital remittances abroad or otherwise modify
the exchange control regime in such a way that may adversely affect the ability
of the Fund to repatriate its income and capital.
DELAY IN SECURITIES SETTLEMENT
In the past, Indian stock exchanges have been subject to repeated closure,
including a closure for nine days in December 1993 due to a broker's strike.
Recently, the Mumbai Stock Exchange was closed for 3 days due to suspected
default in payment by a broker. There can be no assurance that such closures
will not recur. The stock markets in India generally have settlement mechanisms
that are less developed and less reliable than those in more mature markets.
Recent increases in the volume of securities transactions, particularly those
involving FIIs approved by SEBI to invest in Indian securities generally have
strained the capacity of the settlement system and of custodial banks in India.
As a result of weaknesses in the settlement system, the Fund may experience
delays or other material difficulties in settling transactions effected in the
securities market of India which could adversely affect the Fund's net asset
value, the market price of the shares of the Fund's portfolio companies, the
ability of the Fund to effect portfolio transactions and the ability of the Fund
to obtain liquid capital to effect redemptions.
7
<PAGE>
RISKS ASSOCIATED WITH CERTAIN INVESTMENT PRACTICES
- - Use of put and call options could result in losses to the Fund, from the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, or cause the Fund to hold a security it
might otherwise sell.
- - Currency transactions could result in the Fund's incurring losses as a
result of the imposition of exchange controls, suspension of settlements, or
the inability to deliver or receive a specified currency.
- - Losses resulting from the use of hedging, such as short sale transactions,
will reduce the Fund's net asset value, and possibly income, and the losses
can be greater than if hedging had not been used.
- - Use of equity warrants and interest warrants could result in a greater
volatility in the Fund's net asset value and in sudden losses for the Fund.
- - The variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of the Fund
could create the possibility that losses on the futures contracts will be
greater than gains in the value of the Fund's position.
- - When the Adviser anticipates that a security is overvalued, it may sell the
security short by borrowing the same security from a broker or other
institution and selling the security. The Fund will incur a loss as a result
of a short sale if the price of the borrowed security increases between the
date of the short sale and the date on which the Fund replaces such
security. The Fund will realize a gain if there is a decline in price of the
security between those dates, which decline exceeds the costs of the
borrowing the security and other transaction costs. There can be no
assurance that the Fund will be able to close out a short position at any
particular time or at an acceptable price. Although the Fund's gain is
limited to the amount at which it sold a security short, its potential loss
is unlimited since it is directly tied to the maximum attainable price of
the security less the price at which the security was sold. Until the Fund
replaces a borrowed security, it will maintain at all times cash, U.S.
government securities, or other liquid securities in an amount which, when
added to any amount deposited with a broker as collateral will at least
equal the current market value of the security sold short. Depending on
arrangements made with brokers, the Fund may not receive any payments
(including interest) on collateral deposited with them. The Fund will not
make a short sale if, after giving effect to such sale, the market value of
all securities sold short exceeds 100% of the value of the Fund's net
assets.
CONFLICTS OF INTEREST
In addition to the Fund, the Adviser manages the Iris India Fund, which is a
broad-based fund that invests in Indian companies. The Adviser also manages
the Venus Value Fund, which is a broad-based fund that invests primarily in
U.S. securities; however, the Venus Value Fund does, on occasion, invest in
Indian companies. The Adviser also manages the assets of certain individuals,
but these clients do not invest in Indian companies through the Adviser.
Originally, the Adviser managed the assets of VLS Finance Ltd. and certain
relatives of Mr. Mehrotra; however, the Adviser no longer manages the assets
of VLS Finance Ltd. nor the relatives of Mr. Mehrotra. Conflicts of interests
may arise when the Adviser is offered a limited number of securities in a
given portfolio company or opportunity, and the Adviser must choose what
amounts of the investment will be allocated to the Fund, the Iris India Fund
and the Venus Value Fund. To the extent that two or more of the Fund, the
Iris India Fund and the Venus Value Fund have co-invested in a given
portfolio company, the interests of the three funds may diverge. The Fund and
the Adviser will adopt a code of ethics and other guidelines to provide
guidance for how each of the Fund and the Adviser will deal with limited
investment opportunities and co-investment conflicts. In the event that the
Adviser must allocate a limited investment opportunity in Indian securities
among the three funds, the Adviser intends to allocate
8
<PAGE>
such investment opportunity among the Fund, the Iris India Fund and the Venus
Value Fund pro rata based upon the assets under management in each fund.
It is anticipated that members of the Advisory Board of the Adviser (the
"Advisory Board") and the members of the Board of Trustees of the Trust (the
"Board of Trustees") may, from time to time, purchase shares of the Fund on
the same terms and conditions as that offered to other investors of the Fund;
provided, however, no such member will co-invest with the Fund or engage in
similar transactions with the Fund. These fiduciaries will not purchase
securities of a limited investment opportunity that impairs the ability of the
Fund to invest in such limited investment opportunity. In addition, it is
currently not anticipated that members of the Advisory Board or the Board of
Trustees will engage in frequent trades in securities of Indian companies in
which the Fund invests. None of the members of the Advisory Board or the Board
of Trustees are Indian nationals and, therefore, can only invest in Indian
companies through FIIs. To the extent that such members currently have
holdings in Indian companies, conflicts of interest may arise. Also, to the
extent such members make investments in the same Indian companies in which the
Fund invests, such investments may conflict with the objectives of the Fund
because such investments will be counted against the limitations on foreign
ownership in such Indian companies, which may limit the aggregate investment
that the Fund wishes to make in such Indian companies. See "-- Restrictions on
Investments by Foreign Institutional Investors." In light of such potential
conflicts of interest and to ensure compliance with all applicable laws,
including without limitation, Section 17 of the Act and Indian securities laws
and regulations, members of the Advisory Board and Board of Trustees will
regularly report their holdings and investment activities to the Adviser. The
Fund and the Adviser will take appropriate steps to protect the interests of
the Fund in light of investments made by members of the Advisory Board and the
Board of Trustees.
ENFORCEABILITY OF JUDGMENTS
Because the laws of India relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy of
state enterprises are generally less well developed than or different from such
laws in the United States, if may be more difficult to obtain a judgment in the
courts of India than it is in the United States.
YEAR 2000
The Fund's Year 2000 efforts have been successfully completed. As of April 15,
2000, the Fund has not experienced any significant problems, and the Fund is not
aware of any significant issues related to the Year 2000 problem that affect the
Fund.
PERFORMANCE
From time to time, the Fund may advertise performance data represented by a
cumulative total return or an average annual total return. Total returns are
based on the overall or percentage change in value of a hypothetical
investment in the Fund and assume all of the Fund's dividends and capital
gain distributions are reinvested. A cumulative total return reflects the
Fund's performance over a stated period of time. An average annual total
return reflects the hypothetical annually compounded return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. Because average annual returns tend to
smooth out variations in the Fund's returns, it should be recognized that
they are not the same as actual year-by-year results. Performance may be
compared to well-known indices such as the S&P 500 Index or IFC India Index
or BSE India Index. Also, the Fund may include published editorial comments
compiled by independent organizations such as Lipper Analytical Services or
Morningstar, Inc.
9
<PAGE>
HOW TO PURCHASE SHARES
Shares may be purchased by any investor without a sales charge. A minimum
initial investment of $1,000 is required to open an account with subsequent
minimum investments of $100. Investment minimums may be waived at the discretion
of the Board of Trustees.
SHAREHOLDERS ACCOUNTS
When you invest in the Fund, the Transfer Agent will establish an open account
to which all full and fractional shares (to three decimal places) will be
credited, together with any dividends and capital gains distributions, which are
paid in additional shares unless you instruct the Transfer Agent that you would
like your distributions in cash. The Fund will not issue share certificates
evidencing shares of the Fund. Instead, your account will be credited with the
number of shares purchased, relieving you of responsibility for safekeeping of
certificates and the need to deliver them upon redemption. You will be notified
of the status of your account following each purchase or sale transaction.
INITIAL PURCHASE
The initial purchase may be made by check or by wire in the following manner:
- - BY CHECK. You should complete and sign the account application which
accompanies this Prospectus, and send it along with a check for the initial
investment payable to Venus Series Trust, the India Technology Fund to the
Transfer Agent at:
Mutual Shareholder Services, LLC
1301 E. 9th Street, Suite 1005
Cleveland, Ohio 44114
Attention: Gregory Getts
- - BY WIRE. In order to expedite the investment of funds, you may advise your
bank or broker to transmit funds via Federal Reserve Wire System to:
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
ABA #0420-0001-3
Account #821661600
f/b/o Venus Series Trust
Your bank may charge a fee for the wire transfer of funds, which is your
responsibility. Your name and account number should also be provided.
- - THROUGH BROKERS. The Fund may be made available through the network of
brokers such as Charles Schwab and Fidelity. However, you will need to check
with the broker if the marketing agreement is in place between the Fund and
the broker so that you can invest in the Fund.
SUBSEQUENT PURCHASES
You may make additional purchases in the following manner:
- - BY CHECK. You should mail a check made payable to Venus Series Trust, the
India Technology Fund, along with the stub from a previous purchase or sale
confirmation, to the Transfer Agent.
- - BY WIRE. Funds may be wired by following the previously stated instructions
for an initial purchase.
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<PAGE>
- - BY TELEPHONE. In order to make telephone purchases, you must first complete
a Telephone Purchase Authorization Form which is available from the Fund.
Once the completed authorization form has been received, you may make
telephone purchases by calling the Transfer Agent at (877) 59-FUNDS
(1-877-593-8637). An order confirmation will be mailed to you. Payment must
be received within three business days of the date that the purchase is
made. If your payment is not received within three business days, the Fund
reserves the right to redeem the shares you purchased by telephone. If such
redemption results in a loss to the Fund, to the extent that you have shares
in your account, the Fund has the right to redeem sufficient additional
shares from your account to reimburse the Fund for any such loss. In no
event will any losses arising from such redemptions be liabilities of the
Fund. Payment for purchases made by telephone may be made by check or by
wire to the aforementioned address and wiring instructions. This telephone
purchase option may be discontinued without notice.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan permits you to purchase shares of the Fund at
monthly intervals; provided that your bank allows automatic withdrawals. At your
option, the bank account that you designate will be debited by an amount that
you specify, and such funds will be used to purchase shares of the Fund on a
monthly basis. Only an account maintained at a domestic financial institution
which is an Automated Clearing House member may be so designated. Should you
desire participating in the Automatic Investment Plan, you should call the
Transfer Agent at (877) 59-FUNDS (1-877-593-8637) or the Fund at (617) 423-1901
or (800) 720-6850 to obtain the appropriate forms. The Automatic Investment Plan
does not assure a profit and does not protect against loss in declining markets.
You may terminate your participation with the Automatic Investment Plan at any
time by notifying the Transfer Agent.
PRICE OF SHARES
The price paid for Fund shares is the net asset value per share of the Fund, as
determined by the Adviser, after the Transfer Agent has received the funds for
purchase, except that the price for shares purchased by telephone is the net
asset value per share determined after receipt of telephone purchase
instructions. Net asset value per share of the Fund is computed by the Adviser
as of the close of business (currently 4:00 P.M., Eastern Standard Time) each
day the New York Stock Exchange is open for trading and on each other day during
which there is a sufficient degree of trading in the Fund's investments to
materially affect the net asset value of the Fund shares. Net asset value of the
Fund is determined by calculating the total value of all portfolio securities,
cash, other assets held by the Fund, and interest and dividends accrued and
subtracting from that amount all liabilities, including accrued expenses. The
net asset value of the Fund is divided by the total number of shares outstanding
to determine the net asset value of each share.
For purposes of computing the net asset value per share, securities listed on a
securities exchange in India or a relevant exchange overseas will be valued on
the basis of the last sale of the date on which the valuation is made or, in the
absence of sales, at the closing bid price. Over-the-counter securities will be
valued on the basis of the bid price at the close of business on each day or, if
market quotations are not readily available, at fair value as determined in good
faith by the Board of Trustees. Unless the particular circumstances (such as an
impairment of the credit-worthiness of the issuer) dictate otherwise, the fair
value of short-term securities with maturities of 60 days or less shall be their
amortized cost. All other securities and other assets of the Fund will be valued
at their fair value as determined in good faith by the Board of Trustees.
11
<PAGE>
OTHER INFORMATION CONCERNING PURCHASE OF SHARES
The Fund reserves the right to reject any order, to cancel any order due to
non-payment and to waive or lower the investment minimums with respect to any
person or class of persons. If an order is canceled because of non-payment or
because your check does not clear, you will be responsible for any loss that
the Fund incurs. If you are already a shareholder, the Fund can redeem shares
from your account to reimburse it for any loss. For purchases of $50,000 or
more, the Fund may, in its discretion, require payment by wire or cashier's
or certified check.
HOW TO SELL AND REDEEM SHARES
All shares of the Fund offered for redemption will be redeemed at the net asset
value per share of the Fund determined after receipt of the redemption request,
if in compliance with the requirements described in this section, by the
Transfer Agent. Because the net asset value of Fund shares will fluctuate as a
result of changes in the market value of the Fund's portfolio securities, the
amount you receive upon redemption may be more or less than the amount you paid
for such Fund shares being redeemed. Redemption proceeds will be mailed to your
registered address of record or, if the redemption proceeds are $5,000 or more,
may be transmitted by wire, upon your written request to the Transfer Agent, to
your pre-designated account at a domestic bank. You will be charged for the cost
of such wire transfer. If Fund shares purchased by check are being redeemed,
such redemption proceeds will be paid only after the check used to make the
purchase has cleared (usually within 15 days after payment by check). This delay
can be avoided if, at the time of purchase, you provide payment by certified or
cashier's check or by wire transfer.
REDEMPTION BY MAIL
Shares may be redeemed by mail or by writing directly to the Transfer Agent. The
redemption request must be signed exactly as your name appears on the account
application, with the signature guaranteed, and must include your account
number. If Fund shares are owned by more than one person, the redemption request
must be signed by all owners exactly as the names appear on the registration
form. You should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency or savings association. A notary public is not
an acceptable guarantor.
A request for redemption will not be processed until all of the necessary
documents have been received in proper form by the Transfer Agent. If you are in
doubt as to what documents are required, you should contact the Transfer Agent
at (877) 59-FUNDS (1-877-593-8637).
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone by calling the Transfer Agent at (877)
59-FUNDS (1-877-593-8637) or the Fund at (617) 423-1901 or (800) 720-6850 on any
day the New York Stock Exchange is open for trading. An election to redeem by
telephone must be made on the account application or on other forms prescribed
by the Fund which may also be obtained by calling the Transfer Agent. This
Prospectus has a form for you to supply your own four digit identification
number which must be given upon request for redemption. The Fund will not be
liable for following instructions communicated by telephone that the Fund
reasonably believed to be genuine. If the Fund fails to employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
the Fund may be liable for any losses due to unauthorized or fraudulent
instructions. Any changes or exceptions to the original election must be made in
writing with signature guaranteed, and will be effective upon receipt by the
Transfer Agent. The Transfer Agent and the Fund reserve the right to refuse any
telephone instructions and may discontinue the aforementioned redemption option
without notice. The minimum telephone redemption is $1,000.
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<PAGE>
OTHER INFORMATION CONCERNING REDEMPTION
The Fund reserves the right to take up to seven days to make payment if, in
the judgment of the Adviser, the Fund could be adversely affected by
immediate payment. In addition, the right of redemption for the Fund may be
suspended or the date of payment postponed for (a) any period (i) during
which the New York Stock Exchange is closed other than customary weekend and
holiday closings, or (ii) during which trading on the New York Stock Exchange
is restricted; (b) any period during which an emergency exists as a result of
which (i) disposal by the Fund of securities owned by it is not reasonably
practicable, or (ii) it is not reasonably practicable for the Fund to fairly
determine the value of its net assets; or (c) for such other periods as the
SEC may by order permit for the protection of shareholders of the Fund. In
determining whether any of the conditions for suspension of redemption are in
effect, the Fund will be guided by the rules, regulations and pronouncements
of the SEC.
Due to the high cost of maintaining accounts, the Fund has the right to redeem,
upon not less than 30 days written notice, all of your shares of the Fund if,
through prior redemptions, your account has a net asset value of less than
$1,000. You will be given at least 30 days written notice prior to any
involuntary redemption and during such period will be allowed to purchase
additional shares to bring your account up to the applicable minimum before the
redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
If you who own shares of the Fund valued at $15,000 or more, you may elect to
receive a monthly or quarterly check (or direct deposit to your checking
account) in a stated amount (minimum amount is $100 per month or quarter).
Shares will be redeemed at net asset value as may be necessary to meet the
withdrawal payments. If your withdrawal payments exceed your reinvested
dividends and distributions, your shares will be reduced and eventually
depleted. A withdrawal plan may be terminated at any time by you or the Fund.
Costs associated with the withdrawal plan are borne by the Fund. Additional
information regarding the Automatic Withdrawal Plan may be obtained by calling
the Transfer Agent at (877) 59-FUNDS (1-877-593-8637) or the Fund at (617)
423-1901 or (800) 720-6850.
INVESTMENT MANAGEMENT
INVESTMENT ADVISER
The Fund's investment adviser is Venus Capital Management, Inc., an investment
management firm founded in 1994. The Adviser is registered under the Investment
Advisers Act of 1940. The Adviser has not been sponsored, recommended or
approved, nor have its abilities or qualifications been passed upon, by the SEC
or any other government agency.
As compensation for the Adviser's services to the Fund, the Fund will pay the
Adviser a performance-based management fee ranging from 0.00 - 5.00% of the
Fund's net asset value, calculated monthly by comparing the Fund's investment
performance to a target during the most recent twelve-month period. The target
for the Fund is the investment record of the IFC India Index, a stock index
compiled by the International Finance Corporation ("IFC"), a member of the World
Bank Group. The difference between the Fund's performance compared to the
performance of the IFC India Index is multiplied by a performance adjustment of
12.5% at an annual rate ("Performance Adjustment"). The Performance Adjustment
is then added or subtracted from the basic fee of 2.50%, subject to the
Adviser's minimum fee of 0.00% and maximum fee of 5.00%. For example, if the
Fund underperforms its benchmark by 20 percentage points over a 12-month period,
the minimum management fee of 0.00% will apply. Correspondingly, if the Fund
overperforms its benchmark by 20 percentage points, the maximum total management
fee of 5.00% will apply.
13
<PAGE>
The Adviser's management fees are higher than the fees charged by other
typical investment advisers, including investment advisers of funds with
similar investment objectives and strategies. The Adviser believes that each
investor can, based on the fee discussion in this Prospectus, make its own
determination as to whether the higher performance fees are reasonable in
light of the Fund's performance.
The IFC India Index is an index that is not managed or controlled by the IFC,
and is comprised of securities of approximately 150 Indian companies. The IFC
India Index assigns relative percentage values to the stocks included in the
index, weighted according to each stock's total market value relative to the
total market value of the other stocks in the index. The Adviser believes
that the IFC India Index will serve as an adequate benchmark against which to
compare the Fund's performance because: (i) the IFC India Index focuses on
the same geographical area as the Fund's investment strategy; (ii) Indian
technology companies comprise approximately 25% of the aggregate market
capitalization of the companies included in the IFC India Index; and (iii)
the IFC India Index reflects a balanced equity return. See the Statement of
Additional Information for additional information about the fee calculation.
Subject to the supervision and direction of the Board of Trustees, the Adviser
manages the Fund's portfolio in accordance with the stated policies of the Fund.
The Adviser makes investment decisions for the Fund and places the purchase and
sale orders for portfolio transactions. In addition, the Adviser or its
affiliates furnishes office facilities and administrative services necessary to
perform its duties, pays the salaries of any officers or employees who are
employed by both it and the Fund and, subject to the direction of the Board of
Trustees, is responsible for the overall management of the business affairs of
the Fund.
PORTFOLIO MANAGER
Mr. Vik Mehrotra is the person primarily responsible for the management of the
portfolio of the Fund. Mr. Mehrotra has over nine years of experience in
managing portfolios. Mr. Mehrotra is registered with the SEC as an investment
adviser and has also obtained the National Association of Securities Dealers'
series 7, 63, 3 and 65 licenses. Mr. Mehrotra received his Masters in Business
Administration degree in 1991 from the Rochester Institute of Technology,
Rochester, New York, with specialization in finance and investment management.
Since January 1994, Mr. Mehrotra has worked with VLS Finance, Ltd., an
investment bank in India, where he (i) has established its equities research
department, (ii) is responsible for recruiting analysts, traders and fund
managers for VLS Finance, and (iii) developed a 200 selection criteria
process (150 quantitative and 50 qualitative) for investing in equities in
Indian companies. Mr. Mehrotra has also managed the Iris India Fund, a
broad-based India fund, since January 1994, and the Venus Value Fund, an
off-shore broad-based U.S. and India fund since 1996. Since June 1999, Mr.
Mehrotra has worked as a broker for Wall Street Electronica. Inc. Mr.
Mehrotra's past experiences include working as a stock broker for
PaineWebber, Inc. from June 1991 to January 1994, and working as a stock
broker for Lombard Securities Inc., Baltimore, Maryland from August 1995 to
June 1999.
ADVISORY BOARD
Mr. Mehrotra will, from time to time, seek advice from an advisory board
comprised of Messrs. V. P. Shenoy (Chief Executive Officer, Euclid Network
Solutions, Inc.) and Sateesh Andra (Chief Technology Officer, Euclid Network
Solutions), who will generally assist Mr. Mehrotra in identifying technological
trends and understanding new technologies. Euclid Network Solutions is an
internet infrastructure company.
Dr. Shenoy received his M.S. and Ph.D. in Electrical Engineering from the
University of Cincinnati and also holds a B.S. from University of Mysore,
India. Before co-founding Euclid Network Solutions, Dr. Shenoy held senior
level management, strategic and product marketing and systems engineering
positions in several Silicon Valley companies such as Tsqware, VLSI
Technology, Siemens, National Semiconductors and AMD. He was a
14
<PAGE>
founding member of the Gigabit Ethernet Alliance while at VLSI Technology
and also a principal member of the ATM Forum.
Mr. Andra, has 10 years of experience in the areas of business planning,
strategy, marketing and business development. Mr. Andra has expertise in
Internet Infrastructure Technologies with a patent pending in this area. He
was responsible for technology direction and a product roadmap for LSI
Logic's Data Communication Solutions. LSI Logic's clients include premier
infrastructure companies such as Cisco, Nortel Networks, Extreme Networks and
Alteon Systems. Mr. Andra began his career at Wipro, a $20 billion dollar
Indian Information Technology Company, as a Research and Development Engineer.
It is anticipated that members of the Advisory Board may, from time to time,
purchase shares of the Fund on the same terms and conditions as that offered to
other investors of the Fund; provided, however, no such member will co-invest
with the Fund, by making a regular practice of purchasing or selling the same
securities in which the Fund invests, or engage in similar transactions with the
Fund. See "Risk Factors -- Conflicts of Interest."
DISTRIBUTIONS AND TAXES
The Fund will declare and pay, at least annually, distributions of substantially
all of its net investment income, if any, earned during the year from
investments, and will distribute net realized capital gains, if any, once each
year. All distributions will be reinvested automatically at net asset value in
additional shares of the Fund unless you elect to receive distributions in cash.
For federal income tax purposes, distributions are treated the same whether they
are received in cash or reinvested.
The Fund generally intends to operate in a manner such that it will not be
liable for federal income tax.
The Fund's distributions of net income (including short-term capital gain) are
taxable to you as ordinary income. The Fund's distributions of long-term capital
gain generally are taxable to you as long-term capital gain. The Fund's
distributions also may be subject to certain state and local taxes.
If you buy shares just before the Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Investment income received by the Fund may give rise to withholding and other
taxes imposed by foreign countries. The Fund intends, if possible, to operate so
as to meet the requirements of the Code to "pass through" to its shareholders
credits or deductions for foreign income taxes paid, but there can be no
assurance that the Fund will be able to do so. For further information, please
see the Statement of Additional Information.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of distributions paid during the year.
Consult your personal tax adviser about the tax consequences of an investment in
the Fund in your particular circumstances.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act, but
has not yet entered into any agreement with a distributor. The Fund intends to
enter into a distribution and service agreement ("Distribution and Services
Agreement") in the future. If the Fund enters into a Distribution and Services
Agreement, the fees incurred by the Fund under such agreement would be paid out
of the Fund's assets on an on-going basis. Over time, such fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
SHAREHOLDER INQUIRIES SHOULD BE DIRECTED TO THE SECRETARY OF THE
TRUST AT 31 MILK STREET, SUITE #315, BOSTON, MA 02109
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<PAGE>
THE INDIA TECHNOLOGY FUND
[LOGO]
Additional information about the Fund has been filed with the
Securities and Exchange Commission (the "Commission") in a
Statement of Additional Information dated the same date as this
Prospectus. If you would like to obtain a free copy of the
Statement of Additional Information or have any inquiries about
the Fund, please contact Mutual Shareholder Services, LLC, the
Fund's transfer agent, toll free at (877) 59-FUNDS
(1-877-593-8637). Additional information about the Fund
(including the Statement of Additional Information) can be
reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at
1-202-942-8090. Reports and other information about the Fund are
available on the EDGAR Database on the Commission's Internet
site at http://www.sec.gov. Copies of this information may be
obtained, after paying a duplicating fee, by electronic request
at the following E-mail address: [email protected], or by
writing the Commission's Public Reference Section, Washington,
D.C. 20549-0102.
PROSPECTUS
APRIL , 2000
INVESTMENT COMPANY ACT FILE NO. 811-09717
<PAGE>
VENUS SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
April 25, 2000
31 Milk Street
Suite #315
Boston, MA 02109
(617) 423-1901
The India Technology Fund (the "Fund") is a non-diversified fund having the
primary investment objective of obtaining long-term capital appreciation by
investing in securities of Indian technology companies.
This Statement of Additional Information relating to the Fund is not a
prospectus and should be read in conjunction with the Fund's prospectus. A copy
of the Fund's prospectus can be obtained from Mutual Shareholder Services, LLC
(the "Transfer Agent"), 1301 E. 9th Street, Suite 1005, Cleveland, Ohio 44114,
(877) 59-FUNDS (1-877-593-8637) or from the Fund at (617) 423-1901 or (800)
720-6850. The prospectus to which this Statement of Additional Information
relates is dated the same date as this Statement of Additional Information and
is hereby incorporated by reference.
TABLE OF CONTENTS
PAGE
Fund History.............................................................B-2
Description of the Fund, its Investments and Risks.......................B-2
Fundamental Investment Policies..........................................B-3
Management of the Fund...................................................B-4
Compensation Table.......................................................B-5
Ownership of Shares......................................................B-5
Investment Advisory Services.............................................B-5
Other Services...........................................................B-7
Portfolio Transactions...................................................B-8
Capital Stock and Other Securities.......................................B-8
Purchase, Redemption and Pricing of Securities Being Offered.............B-9
Taxation of the Fund.....................................................B-9
Financial Statements....................................................B-12
B-1
<PAGE>
FUND HISTORY
The Fund is a fund formed by Venus Series Trust (the "Trust"). The Trust is an
open-end management investment company, organized as a business trust under the
laws of the State of Delaware by Certificate of Trust, dated as of
November 8, 1999 and by the Declaration of Trust, dated as of November 8, 1999
(the "Declaration of Trust").
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
Although the Fund will primarily invest in common and preferred stock,
convertible debt and equity instruments (all of which are more fully described
in the Fund's prospectus). The Fund's portfolio will also consist of securities
traded outside of India and the U.S. represented by ADRs and other similar
receipts. The Fund may also, in furtherance of the Fund's investment objective,
invest, trade or engage in the securities or investment activities described
below.
- - MONEY-MARKET INVESTMENTS. The Fund may invest in no-load money-market
mutual funds, high-quality short-term debt securities and money-market
instruments (such as repurchase agreements, commercial paper and
certificates of deposit) (collectively, "money-market investments"), when
and to the extent deemed advisable by the Adviser. An investment by the
Fund in money-market investments may involve some duplication of advisory
fees and other expenses.
- - OPTIONS. The Fund may invest in put and call options for which the Fund
pays a premium (cost of option), and the Fund may buy or sell such options,
exercise such options, or permit such options to expire, in each case, when
and to the extent deemed advisable by the Adviser. The Fund may suffer a
total loss from its investment in options.
- - WARRANTS. When and to the extent deemed advisable by the Adviser, the Fund
may invest in warrants, which are options to purchase a specified security
at a specified price (usually representing a premium over the applicable
market value of the underlying security at the time of the warrant's
issuance) and usually during a specified period of time.
- - FUTURES CONTRACTS. The Fund may invest in futures contracts for the
purchase or sale of specific securities, stock indexes, commodities,
currencies or country indexes, when and to the extent deemed advisable by
the Adviser. A futures contract is an agreement between two parties to buy
and sell a security at a set price on a future date.
- - SHORT SALES. The Fund may engage in short sale transactions in securities
listed on one or more worldwide securities exchanges, particularly in
India, Luxembourg, London and the United States, when and to the extent
deemed advisable by the Adviser. Short selling involves the sale of
borrowed securities. At the time a short sale is effected, the Fund incurs
an obligation to replace such borrowed securities at whatever price such
securities may be at the time the Fund purchases such securities for
delivery to the lender.
Since short selling can result in profits when stock prices generally
decline, the Fund in this manner, can, to a certain extent, hedge the
market risk to the value of its other investments and protect its equity in
a declining market. However, the Fund could, at any given time, suffer both
a loss on the purchase or retention of one security if that security should
decline in value, and a loss on a short sale of another security, if the
security sold short should increase in value. When a short position is
closed out, it may result in a short-term capital gain or loss for federal
income tax purposes. Moreover, to the extent that in a generally rising
market the Fund maintains short positions in securities rising with the
market, the net asset value of the Fund would be expected to increase to a
lesser extent than the net asset value of a mutual fund that does not
engage in short sales. The Fund may make short sales "against the box",
i.e., sales made when the Fund owns securities identical to those sold
short.
B-2
<PAGE>
- - ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued
the securities.
For more information, see "Investment Objective and Principal Investment
Strategies" and "Risk Factors" in the Fund's prospectus.
FUNDAMENTAL INVESTMENT POLICIES
The following policies are fundamental investment policies. Fundamental
investment policies are those that cannot be changed without the approval of the
holders holding a majority of the Fund's outstanding shares. The phrase "a
majority of the Fund's outstanding shares," when used in this Statement of
Additional Information, means the lesser of (i) 67% or more of the voting shares
represented at a meeting at which more than 50% of the outstanding voting shares
are present in person or represented by proxy and (ii) more than 50% of the
outstanding voting shares.
- - CONCENTRATION OF INVESTMENTS. In seeking to achieve its investment
objective, the Fund will invest primarily in securities of Indian
technology companies. Investments will be concentrated in Indian software,
hardware, telecommunications, healthcare, biotechnology, media and
entertainment, internet commerce, and internet related services companies
that have, among other things, superior sales, earnings, growth, management
and industry position. The investments will not be concentrated in any
other industries.
- - LIMITATIONS OF INVESTMENTS IN A SINGLE COMPANY. The Fund may not invest
more than 25% of the value of the Fund's total assets in a single issuer
(other than cash, money-market investments or obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities).
- - RESTRICTIONS ON LENDING. The Fund may not lend money or securities;
provided that the making of interest-bearing demand deposits with banks and
the purchase of debt securities in accordance with the Fund's objective and
policies are not prohibited.
- - BORROWING. The Fund may borrow up to but not more than 50% of the Fund's
net assets from a banking institution for the purpose of making
investments.
- - RESTRICTIONS ON COMMODITIES TRADING. The Fund may not invest more than 35%
of the Fund's net assets in commodities or commodity futures contracts.
- - RESTRICTIONS ON PURCHASE AND SALE OF REAL ESTATE. The Fund may not invest
any of the Fund's net assets in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
- - RESTRICTIONS ON UNDERWRITING. The Fund may not underwrite securities issued
by others except to the extent the Fund may be deemed to be an underwriter,
under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the disposition of portfolio securities.
- - RESTRICTIONS ON ISSUANCE OF SENIOR SECURITIES. The Fund may not issue
senior securities, as such term is defined in the Securities Act.
- - MAURITIUS SPECIAL PURPOSE COMPANY. The Fund may invest in India through a
special purpose company organized under the laws of the Republic of
Mauritius, which is intended to allow the Fund to take advantage of a
favorable tax treaty between India and Mauritius.
Changes in values in any of the Fund's investments, or the assets of the Fund as
a whole, will not cause a violation of any percentage-based investment
restriction so long as such percentage restriction was observed by the Fund at
the time the Fund made such investment.
B-3
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Trust and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Trust and its beneficiaries, which include the
shareholders of the Fund.
The Board of Trustees consists of Messrs. Vikas Mehrotra, John Gutfreund, S.
Atiq Raza and Raj Singh. Messrs. Gutfreund, S. Atiq Raza and Raj Singh have no
affiliation or business connection with the Adviser or any of the Adviser's
affiliated persons. Mr. Mehrotra is the president and sole stockholder of the
Adviser.
The business and affairs of the Fund are managed under the direction of the
Board of Trustees, as required by Delaware law. The day-to-day operations of the
Fund are conducted through or under the direction of its officers. By virtue of
the responsibilities assumed by the Adviser as investment adviser, all of the
Fund's officers are officers and employees of the Adviser.
It is anticipated that members of the Board of Trustees may, from time to
time, purchase shares of the Fund on the same terms and conditions as that
offered to other investors of the Fund: provided, however, no such member
will co-invest with the Fund, by making a regular practice of purchasing or
selling the same securities in which the Fund invests, or engage in similar
transactions with the Fund. See the Prospectus, "Risk Factors -- Conflicts of
Interest."
The following table provides biographical information with respect to each
current Trustee and officer of the Trust. Each Trustee who is or may be deemed
to be an "interested person" of the Fund, as defined in the Investment Company
Act of 1940 (the "1940 Act"), is indicated by an asterisk.
<TABLE>
<CAPTION>
NAME AND ADDRESS* (AGE) POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- ----------------------- ------------------ --------------------------------------------
<S> <C> <C>
Vikas Mehrotra** (31) President and Trustee Chairman of the Trust; President and Director, Venus
Capital Management, Inc., a registered investment adviser;
VP-International Division, VLS Finance, Ltd., an investment
bank in India; Manager, Iris India Fund; Broker, Wall Street
Electronica; stock broker, PaineWebber; broker, Lombard
Securities, Baltimore, Maryland.
John Gutfreund (70) Trustee President, Gutfreund & Company, Inc., a New York based
financial consulting firm; Director of FreshPoint America,
Inc., Foamex International, Inc., Baldwin Piano and Organ
Co., LCA Vision, Inc., Command Security Corp Ascent
Assurance, Inc., and the Universal Bond Fund; Chairman and
CEO of Salomon Brothers; Vice Chairman, The New York Stock
Exchange.
S. Atiq Raza (50) Trustee President and CEO of Raza Venture Management, Inc., an
incubator management company focused on startup companies;
Managing Partner of Raza Venture Fund A, L.P., a broadband
communications and e-commerce fund; President and CEO of
Advanced Micro Devices (AMD), a microprocessor
manufacturer; President and CEO of NexGen, Inc., a
computer manufacturer.
B-4
<PAGE>
Raj Singh (54) Trustee Co-founder of Redwood Venture Partners, a high technology
investment firm; Co-founder and Chairman of Roshnee
Corporation, an optical networking company; Founder and
former CEO of: StratumOne Communica-tions, a developer of
semi-conductor technology, Fiberlane Communications
(Cerent/Siara/Cyras family), a fiber-optics
telecommunications company, and InterHDL, a microprocessor
manufacturer; Director of PulseCore, Xpedion, Webscope,
Moscape, WeByPhone, Euclid, RealChip, GeoTouch.com and
eCode.com.
</TABLE>
- ------------------
* The address of each Trustee and officer is c/o Venus Series Trust, 31 Milk
Street, Suite #315, Boston, MA 02109.
** "Interested" Trustee, as defined in the 1940 Act, by reason of his
affiliation with the Adviser.
Currently, no officer, director or employee of the Adviser receives any
compensation from the Trust for serving as an officer or Trustee of the Trust,
and it is not anticipated that any compensation will be given to such officers
or Trustees in the future; however, the Trust reserves the right to compensate
its officers and Trustees. Each Trustee who is not an officer, director or
employee of the Adviser or any affiliate will receive from the Fund a fee of
$125 for each Board or shareholders meeting attended. The estimated fees payable
to the Trustees for the current fiscal year (excluding such $125 fee), which are
the only compensation or benefits payable to Trustees, are summarized in the
following table:
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM FUND AND
NAME OF COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX
PERSON, POSITION FROM FUND FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
---------------- --------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Vikas Mehrotra (President and
Trustee) 0 0 0 0
John Gutfreund 0 0 0 0
(Trustee)
S. Atiq Raza (Trustee) 0 0 0 0
Raj Singh (Trustee) 0 0 0 0
</TABLE>
OWNERSHIP OF SHARES
As of April 25, 2000, all of the outstanding shares of the Fund were
beneficially owned by the Adviser and its affiliates. A shareholder who
beneficially owns, directly or indirectly, more than 25% of the Fund shares may
be deemed a "control person" (as defined in the 1940 Act) of the Fund. The
Adviser is controlled by Mr. Mehrotra, the Chairman and Trustee of the Fund, and
president and sole stockholder of the Adviser.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISOR
B-5
<PAGE>
The Adviser is registered as an investment adviser under the Investment Advisers
Act of 1940 (the "Advisers Act"). The Adviser has not been sponsored,
recommended or approved, nor have its abilities or qualifications been passed
upon, by the Securities and Exchange Commission (the "SEC") or any other
governmental agency. Mr. Vikas Mehrotra, the Chairman of the Trust, is the
president and sole stockholder of the Adviser.
The Adviser acts as investment adviser to the Fund pursuant to an Investment
Advisory Agreement dated March 8, 2000 (the "Advisory Agreement"). Subject to
the supervision and direction of the Board of Trustees, the Adviser manages
the Fund's portfolio in accordance with the stated policies of the Fund. The
Adviser makes investment decisions for the Fund and places the purchase and
sale orders for portfolio transactions. In addition, the Adviser furnishes
office facilities and clerical and administrative services and subject to the
direction of the Board of Trustees, is responsible for the overall management
of the business affairs of the Fund, including the provision of personnel for
record keeping, the preparation of governmental reports and responding to
shareholder communications. In addition, it is anticipated that members of
the Advisory Board may, from time to time, purchase shares of the Fund on the
same terms and conditions as that offered to other investors of the Fund
provided, however, no such member will co-invest with the Fund, by making a
regular practice of purchasing or selling the same securities in which the
Fund invests, or engage in similar transactions with the Fund. See the
Prospectus, "Risk Factors --Conflicts of Interest."
MANAGEMENT FEE
As described in the Prospectus, the Fund will pay the Adviser a
performance-based management fee calculated monthly by comparing the Fund's
investment performance to a target during the most recent twelve-month period.
The target for the Fund is the investment record of the IFC India Index ("IFC
India Index"), a stock index compiled by the International Finance Corporation
(IFC), a member of the World Bank Group. The difference between the Fund's
performance compared to the performance of the IFC India Index is multiplied by
a performance adjustment of 12.5% at an annual rate ("Performance Adjustment").
The Performance Adjustment is then added or subtracted from the basic fee of
2.50%, subject to the Adviser's minimum fee of 0.00% and maximum fee of 5.00%.
If the Fund underperforms its benchmark by 20 percentage points over a 12-month
period, the minimum management fee of 0.00% will apply. Correspondingly, if the
Fund overperforms its benchmark by 20 percentage points, the maximum total
management fee of 5.00% will apply. Therefore, investors in the Fund should pay
special attention to the choice of benchmark since it plays a critical role in
determining the total risk of the Fund as well as the management fees charged by
the Fund. The following table illustrates the fee structure:
<TABLE>
<CAPTION>
TWELVE MONTH PERFORMANCE OF THE FUND VERSUS IFC INDIA INDEX MANAGEMENT FEE
----------------------------------------------------------- --------------
<S> <C>
The Fund underperforms IFC India Index by 20% or more. 0.000%
The Fund underperforms IFC India Index by 15%. 0.625%
The Fund underperforms IFC India Index by 10%. 1.250%
The Fund underperforms IFC India Index by 5%. 1.875%
The Fund and IFC India Index perform the same. 2.500%
The Fund overperforms IFC India Index by 5%. 3.125%
The Fund overperforms IFC India Index by 10%. 3.750%
The Fund overperforms IFC India Index by 15%. 4.375%
The Fund overperforms IFC India Index by 20% or more. 5.000%
</TABLE>
CHOICE OF IFC INDIA INDEX AS BENCHMARK
The IFC India Index is an index that is not managed or controlled by the IFC,
and is comprised of securities of approximately 150 Indian companies. The IFC
India Index assigns relative percentage values to the stocks included in the
index, weighted according to each stock's total market value relative to the
total market value of the other stocks in the index. The Adviser believes that
the IFC India Index will serve as an adequate benchmark against which to compare
the Fund's performance because: (i) the IFC India Index is keyed to the same
geographical area as the Fund's investment strategy; (ii) Indian technology
companies comprise approximately 25% of the aggregate market capitalization of
the companies included in the IFC India Index; and (iii) the IFC India Index
reflects a balanced equity return.
Because the Fund is using a "fulcrum" fee formula to raise or lower the base
management fee depending on Fund performance, the choice of benchmark is a
critical factor to be considered by the investor. The total management fee paid
to the Adviser will depend on a base fee as a percentage of assets under
management as well as the Performance Adjustment that will add to or subtract
from the base management fee depending explicitly on the magnitude of positive
excess returns above the benchmark or the magnitude of negative excess returns
below the
B-6
<PAGE>
benchmark. The design of the "fulcrum" around which the incentive fees either
add to or subtract from the base management fees hinges on the choice of the
benchmark. The investor, by buying shares of the Fund, is providing incentives
to the Adviser to strive for higher excess returns and to take additional risks.
The Adviser, when taking additional risks in order to attempt to gain excess
returns above the benchmark, knows that the total management fees can rise or
fall depending on performance. To a limited extent, then, the Adviser will
benefit when the investor benefits, and the Adviser will suffer a detriment when
the investor suffers a below-benchmark performance.
The benchmark for the Fund was chosen based on a number of factors, including
the objectives of the Fund, the universe of securities and other investments
which the Adviser plans to utilize, the level of risks expected to be taken, and
the ability of the portfolio to develop strategies that attempt to out-perform
the benchmark. The Adviser believes that the overall risk profile of the IFC
India Index will be comparable to the targeted risk level of the Fund.
OTHER EXPENSES
Other expenses are borne by the Fund and include brokerage fees and commissions,
fees of Trustees not affiliated with the Adviser, expenses of registration of
the Trust and of the shares of the Fund with the SEC and the various states,
charges of the custodian, dividend and transfer agent, outside auditing and
legal expenses, liability insurance premiums on property or personnel (including
officers and trustees), maintenance of business trust existence, any taxes
payable by the Fund, interest payments relating to Fund borrowings, costs of
preparing, printing and mailing registration statements, prospectuses, periodic
reports and other documents furnished to shareholders and regulatory
authorities, costs of printing share certificates, portfolio pricing services
and Fund shareholder meetings.
APPROVAL AND TERMINATION OF ADVISORY AGREEMENT
The Advisory Agreement is subject to annual approval by (i) the Board of
Trustees or (ii) vote of a majority of the outstanding voting securities of the
Fund, provided that in either event the continuance is also approved by a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Adviser by vote cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement is terminable
without penalty, on not less than 60 days' notice, by the Board of Trustees or
by vote of the holders of a majority of the Fund's shares or, upon not less than
90 days' notice, by the Adviser. The Advisory Agreement will terminate
automatically in the event of its assignment.
OTHER SERVICES
TRANSFER AGENT
The Fund's transfer agent is Mutual Shareholder Services, LLC, a limited
liability company located at 1301 East Ninth Street, Suite 1005, Cleveland, Ohio
44114 (the "Transfer Agent"). The Fund has entered into a Transfer Agent
Agreement ("Transfer Agent Agreement") with the Transfer Agent, pursuant to
which the Transfer Agent has agreed to act as the Fund's transfer, redemption
and dividend disbursing agent. As such, the Transfer Agent maintains the Fund's
official record of shareholders and is responsible for crediting dividends to
shareholders' accounts. In consideration of such services, the Fund pays the
Transfer Agent an annual fee, paid monthly, equal to $9.75 per shareholder
account (with a monthly minimum of $775) plus $12 per month for each state in
which the Fund is registered under such state's securities laws, plus
out-of-pocket expenses. The Trust reserves the right to change its transfer,
redemption and dividend distributing agent at any time, subject to the terms of
the Transfer Agent Agreement.
CUSTODIAN
The Fund's custodian is Firstar Bank, N.A., a national banking association
having its principal office at 425 Walnut Street, Cincinnati, Ohio 45202 (the
"Custodian"). The Fund has entered into a Custodian Agreement ("Custodian
Agreement") with the Custodian, pursuant to which the Custodian will hold all
securities and cash of the Fund, deliver and receive payment for securities
sold, receive and
B-7
<PAGE>
pay for securities purchased, collect income from investments and perform other
duties, all as directed by officers of the Fund. The Custodian will not exercise
any supervisory function over the purchase and sale of securities or the payment
of distributions to shareholders. The Fund reserves the right to change its
custodian at any time, subject to the terms of the Custodian Agreement.
AUDITORS
KPMG LLP has been selected as auditors for the Fund. In such capacity, KPMG
periodically reviews the accounting and financial records of the Fund and
examines its financial statements.
COUNSEL
Duval & Stachenfeld LLP, based in New York, New York, is legal counsel to the
Fund.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by the Adviser.
Portfolio security transactions for the Fund are effected by or under the
supervision of the Adviser.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price of those securities
includes an undisclosed commission or markup. The cost of securities purchased
from underwriters includes an underwriting commission or concession, and the
prices at which securities are purchased from and sold to dealers include a
dealer's markup or markdown.
In executing portfolio transactions and selecting brokers and dealers, it is the
Fund's policy to seek the best overall terms available. The Advisory Agreement
provides that, in assessing the best overall terms available for any
transaction, the Adviser shall consider the factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, the Advisory Agreement authorizes the Adviser, in
selecting brokers or dealers to execute a particular transaction, and, in
evaluating the best overall terms available, to consider the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Fund and/or other accounts over which the
Adviser exercises investment discretion.
The Board of Trustees periodically reviews the commissions paid by the Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits inuring to the Fund. It is possible that
certain of the services received will primarily benefit one or more other
accounts for which investment discretion is exercised. Conversely, the Fund may
be the primary beneficiary of services received as a result of portfolio
transactions effected for other accounts. The Adviser's fee under the Advisory
Agreement is not reduced by reason of the Adviser's receiving such brokerage and
research services.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the kind made by the
Fund may also be made by those other accounts. When the Fund and one or more
accounts managed by the Adviser are prepared to invest in, or desire to dispose
of, the same security, available investments or opportunities for sales will be
allocated in a manner believed by the Adviser to be equitable. In some cases,
this procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained for or disposed of by the Fund.
CAPITAL STOCK AND OTHER SECURITIES
The Declaration of Trust provides for an unlimited number of authorized shares,
which may, without shareholder approval, be divided into an unlimited number of
series of such shares. There presently is only one series of shares, which are
the Fund shares. Each Fund share represents an equal proportionate interest in
the Fund with other Fund
B-8
<PAGE>
shares, and is entitled to such dividends and distributions out of the Fund's
income as are declared at the discretion of the Board of Trustees. All
consideration received by the Trust for shares of the Fund and all assets in
which such consideration is invested will belong to the Fund and will be subject
to the liabilities relating thereto.
Shareholders are entitled to one vote per share on such matters as shareholders
are entitled to vote. The laws of the State of Delaware, under which the Trust
is organized, and the Trust's bylaws provide that the Fund is not required to
hold an annual meeting of shareholders unless required to do so under the 1940
Act. Accordingly, the Fund will not hold annual shareholder meetings unless
required to do so under the 1940 Act. Shareholders holding two-thirds of the
Fund's voting shares do have the right to call a meeting of shareholders for the
purpose of voting to remove one or more Trustees. The Fund will render
assistance to shareholders in connection with their efforts to arrange a
shareholder meeting as required under Section 16(c) of the 1940 Act.
Upon issuance and sale in accordance with the terms of the Fund's prospectus,
each share will be fully paid and non-assessable. Shares of the Fund have no
preemptive, subscription or conversion rights and are redeemable as set forth in
the Fund's prospectus in the section titled "How to Sell and Redeem Shares." The
Fund will not issue share certificates evidencing shares of the Fund. Instead,
your account will be credited with the number of shares purchased, relieving you
of responsibility for safekeeping of certificates and the need to deliver them
upon redemption.
The Declaration of Trust also provides that shareholders shall not be subject to
any personal liability for the acts or obligations of the Fund and that every
agreement, obligation or instrument entered into or executed by the Fund shall
contain a provision to the effect that the shareholders are not personally
liable thereunder.
In order to provide the initial capital for the Fund, the Adviser and its
affiliates have purchased a total of 50,000 Fund shares at $10.00 per share for
an aggregate purchase price of $500,000. As long as the Adviser owns more than
25% of the Fund shares, it will be deemed to be in "control" of the Fund as that
term is defined in the 1940 Act.
PURCHASE, REDEMPTION AND
PRICING OF SECURITIES BEING OFFERED
See "How To Purchase Shares" and "How To Sell and Redeem Shares" in the Fund's
prospectus.
TAXATION OF THE FUND
The Fund will be treated as a separate entity for federal income tax purposes.
The Fund intends to qualify continually as a regulated investment company under
Subchapter M of the Code. Such qualification removes from the Fund any liability
for federal income taxes upon the portion of its income distributed to
shareholders and makes federal income tax upon such distributed income generated
by the Fund's investments the sole responsibility of the shareholders. Continued
qualification requires the Fund to distribute to its shareholders each year
substantially all of its income and capital gains. In addition, amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible four percent (4%) excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its calendar year net
ordinary income, (2) at least 98% of the excess of its capital gains over
capital losses (adjusted for certain ordinary losses) realized during the
one-year period ending October 31 (or December 31 if elected by the Fund) of
such year, and (3) 100% of any undistributed net ordinary income and net capital
gains for previous years. A distribution will be treated as paid on December 31
of the calendar year if it is declared by the Fund in October, November or
December of that year with a record date in such month and paid by the Fund
during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
The Fund will notify shareholders of the tax status of dividends and
distributions.
If the Fund does not qualify for taxation as a regulated investment company for
any taxable year, the Fund's income will be subject to corporate income taxes
imposed at the Fund level, and all distributions from earnings and profits,
B-9
<PAGE>
including distributions of net capital gain (i.e., the excess, if any, of net
long-term capital gain over net short-term capital loss), will be taxable to
shareholders as ordinary income.
The Fund's transactions in options, futures contracts, hedging transactions,
forward contracts, straddles and foreign currencies will be subject to special
tax rules (including mark-to-market, constructive sale, straddle, wash sale and
short sale rules), the effect of which may be to accelerate income to the Fund,
defer losses to the Fund, cause adjustments in the holding periods of the Fund's
securities, convert long-term capital gains into short-term capital gains and
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders of the Fund.
Distributions of the Fund's net ordinary income and distributions of any net
realized short-term capital gain will be taxable to shareholders as ordinary
income. Distributions of net capital gain are taxable as long-term capital gain,
regardless of how long a shareholder has held shares in the Fund. Distributions
are taxable in the manner discussed regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of the Fund. The
investment objective of the Fund is such that only a small portion, if any, of
the Fund's distributions is expected to qualify for the dividends-received
deduction for corporate shareholders.
Any dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the ex-dividend date by the amount of the dividend or
distribution. Therefore, a dividend or distribution paid shortly after a
purchase of shares by an investor would represent, in substance, a return of
capital to the shareholder, even though subject to income taxes. The Fund may
also, from time to time, pay dividends in excess of net income and net realized
capital gains. Any such excess dividends would constitute a non-taxable return
of capital to the shareholder.
A distribution with respect to shares of the Fund held by a tax-deferred or
qualified plan, such as an individual retirement account or corporate pension or
profit-sharing plan, generally will not be taxable to the plan. Distributions
from such plans will be taxable to individual participants under applicable tax
rules without regard to the character of the income earned by the qualified
plan.
Any gain or loss arising from a sale or redemption of Fund shares generally will
be capital gain or loss. Such gain or loss will be long-term capital gain or
loss if the shareholder has held such shares for more than one year at the time
of the sale or redemption; and otherwise short-term capital gain or loss. If a
shareholder has held shares in the Fund for six months or less and during that
period has received a distribution of net capital gain, any loss recognized by
the shareholder on the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the distribution. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange of shares of the Fund
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before the ending 30 days after the shares
are sold or exchanged. For this purpose, acquisitions made by reinvesting
distributions would constitute a replacement if made within the period. If
disallowed, the loss will be reflected in an upward adjustment to the basis of
the shares acquired.
Income received by the Fund may be subject to foreign income taxes, including
withholding taxes. If, as is contemplated, more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of stocks or
securities of foreign corporations, the Fund will be eligible and intends to
file an election with the Internal Revenue Service to pass through to its
shareholders the amount of foreign taxes paid by the Fund. However, there can be
no assurance that the Fund will be able to do so. Pursuant to this election, a
shareholder will be required to (i) include in gross income (in addition to
taxable distributions actually received) such shareholder's pro rata share of
foreign taxes paid by the Fund, (ii) treat such shareholder's pro rata share of
such foreign taxes as having been paid by such shareholder, and (iii) either
deduct such pro rata share of foreign taxes in computing such shareholder's
taxable income or treat such foreign taxes as a credit against federal income
taxes. Shareholders which are not liable for federal income taxes, such as
retirement plans qualified under section 401 of the Code, will not be affected
by any such pass through of taxes by the Fund. No deduction for foreign taxes
may be claimed by an individual shareholder who does not itemize deductions. In
addition, certain shareholders may be subject to rules which limit or reduce
their ability to fully deduct, or claim a credit for, their pro rata share of
the foreign taxes paid by the Fund. A shareholder's foreign tax credit with
respect to a distribution received from the Fund will be disallowed unless the
B-10
<PAGE>
shareholder holds shares in the Fund on the ex-dividend date and for at least 15
other days during the 30-day period beginning 15 days prior to the ex-dividend
date. Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will pass through
for that year.
In accordance with the Code, the Fund may be required to withhold a portion of
dividends or redemptions or capital gains paid to a shareholder and remit such
amount to the Internal Revenue Service if the shareholder fails to furnish the
Fund with a correct taxpayer identification number, if the shareholder fails to
supply the Fund with a tax identification number altogether, if the shareholder
fails to make a required certification that the shareholder's taxpayer
identification number is correct and that the shareholder is not subject to
backup withholding, or if the Internal Revenue Service notifies the Fund to
withhold a portion of such distributions from a shareholder's account. Backup
withholding is not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax liability or refunded.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
In addition, the foregoing discussion of tax law is based on existing provisions
of the Code, existing and proposed regulations thereunder, and current
administrative rulings and court decisions, all of which are subject to change.
Any such changes could affect the validity of this discussion. The discussion
also represents only a general summary of tax law and practice currently
applicable to the Fund and certain shareholders therein, and, as such, is
subject to change. In particular, the consequences of an investment in shares of
the Fund under the laws of any state, local or foreign taxing jurisdictions are
not discussed herein.
PROSPECTIVE INVESTORS IN SHARES OF THE FUND ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF SHARES OF THE FUND.
B-11
<PAGE>
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and
Shareholder of The India Technology Fund:
We have audited the accompanying statement of assets and liabilities of The
India Technology Fund, a portfolio of Venus Series Trust as of March 17, 2000.
This statement of assets and liabilities is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. Our procedures included confirmation of
cash in the bank by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of The India
Technology Fund as of March 17, 2000, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
March 20, 2000
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
The India Technology Fund
Statement of Assets and Liabilities
March 17, 2000
<TABLE>
<CAPTION>
The India Technology Fund
- ----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash $500,000.00
-----------
NET ASSETS $500,000.00
===========
Shares Outstanding (no par value, shares authorized is unlimited) 50,000
------
Net asset value, offering, and redemption price per share
($500,000/50,000 shares outstanding) $10.00
------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
B-13
<PAGE>
VENUS SERIES TRUST
THE INDIA TECHNOLOGY FUND
Notes to Statement of Assets and Liabilities
March 17, 2000
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(A) GENERAL: The India Technology Fund ("Fund") is a non-diversified
portfolio of Venus Series Trust ("Trust"), an open-end management
investment company registered under the Investment Company Act of 1940. The
Fund is organized as a business trust under the laws of the State of
Delaware by Declaration of Trust, dated November 8, 1999. The Trust
currently offers only one series which is the Fund. Each Fund share
represents an equal proportionate interest in the Fund with other Fu
shares, and is entitled to such dividends and distributions out of the
Fund's net investment income. As of March 17, 2000, the Fund had no
operations other than organizational matters and the issuance and sale of
initial shares to Venus Capital Management, Inc on March 17, 2000.
(B) FEDERAL TAXES: The Fund intends to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended, and
distribute all its taxable income. In addition, by distributing in each
calendar year substantially all its net investment income, capital gains
and certain other amounts, if any, the Fund will not be subject to Federal
excise tax. Therefore, no Federal income or excise tax provision will be
required.
NOTE 2 - INVESTMENT ADVISER
Venus Capital Management, Inc. (the "Adviser") serves as Investment
Adviser. The Adviser is a registered investment adviser under the
Investment Advisers Act of 1940 ("Investment Advisers Act"). As
compensation for the Adviser's services, the Fund will pay the Adviser a
performance-based management fee ranging from 0.00 - 5.00% of the Fund's
net asset value calculated monthly by comparing the Fund's investment
performance to the investment record of the IFC India Index, a stock index
compiled by the International Finance Corporation ("IFC"), during the most
recent twelve-
B-14
<PAGE>
month period. In addition, Venus Capital Management, Inc. provides fund
accounting services to the Fund.
NOTE 3 - TRANSFER AGENT, CUSTODIAN AND DISTRIBUTION AND SERVICING FEES
Mutual Shareholder Services, LLC ("MSS") acts as the Fund's transfer,
redemption and dividend disbursing agent. As such, MSS maintains the
official record of shareholders and is responsible for crediting dividends
to shareholder accounts.
The Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act,
but has not yet entered into any agreement with a distributor. The Fund
intends to enter into a distribution and service agreement in the future.
If the Fund enters into a distribution and service agreement, the fees
incurred by the Fund under such agreement would be paid out of the Fund's
assets on an on-going basis.
Firstar Bank, NA is the custodian for the Fund.
B-15
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
a. Declaration of Trust, dated as of November 8, 1999, of Venus Series Trust.*
b. By-Laws of Venus Series Trust.*
c. Reference is made to Article VII of the Declaration of Trust.
d. Investment Advisory Agreement, dated as of March 8, 2000, between Venus
Capital Management, Inc. and Venus Series Trust.*
e. None
f. None
g. Custody Agreement, dated as of April 7, 2000, between Firstar Bank, N.A.
and Venus Series Trust.**
h. Transfer Agent Agreement, dated as of January 27, 2000, between Venus
Series Trust and Mutual Shareholder Services, LLC.*
i. Opinion of Duval & Stachenfeld LLP.*
J. Consent of KPMG LLP.**
k. None
l. Subscription Agreement, dated as of November 8, 1999, between Venus Capital
Management, Inc. and Venus Series Trust.*
m. Rule 12b-1 Plan.*
n. None
o. None
- ------------------------
* PREVIOUSLY FILED.
** FILED HEREWITH.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Mr. Vikas Mehrotra, the Chairman of the Trust, is the president and sole
stockholder of the Adviser.
ITEM 25. INDEMNIFICATION.
As permitted by Sections 17(h) and (i) of the 1940 Act and pursuant to Article
IV of the Declaration of Trust (Exhibit (a) to the Registration Statement),
officers, directors, employees and agents of the Registrant will not be liable
to the Registrant, any shareholder, officer, director, employee, agent or other
person for any action or failure
C-1
<PAGE>
to act, except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, 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 a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities 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 1940 Act and
will be governed by the final adjudication of such issue.
Section 7 of the Investment Advisory Agreement (Exhibit (d) to the Registration
Statement) limits the liability of Venus Capital Management, Inc. to liabilities
arising from willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the Investment Advisory Agreement.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See the Prospectus, "Investment Management -- Portfolio Manager" and Statement
of Additional Information, "Management of the Fund."
ITEM 27. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and documents required to be maintained by the Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 thereunder are maintained at the office of the Registrant, at the
Registrant's principal offices and with the Transfer Agent at 1301 East Ninth
Street, Suite 1005, Cleveland, Ohio 44114, except that all records relating to
the activities of the Custodian are maintained and are available at the office
of the Adviser, 31 Milk Street, Suite #315, Boston, MA 02109.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Pre-Effective Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
State of Massachusetts, on the 25th day of April, 2000.
VENUS SERIES TRUST
By: /s/ Vikas Mehrotra
Vikas Mehrotra
Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 3 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Vikas Mehrotra Chairman, President and Trustee April 25, 2000
-----------------------
Vikas Mehrotra
/s/ John Gutfreund Trustee April 25, 2000
-----------------------
John Gutfreund
/s/ S. Atiq Raza Trustee April 25, 2000
-----------------------
S. Atiq Raza
/s/ Raj Singh Trustee April 25, 2000
-----------------------
Raj Singh
</TABLE>
<PAGE>
EXHIBIT 23(g)
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the 7th day of
April, 2000, by and between VENUS SERIES TRUST, A DELAWARE BUSINESS TRUST, (the
"Trust") and Firstar Bank, National Association, (the "Custodian"), a national
banking association having its principal office at 425 Walnut Street,
Cincinnati, Ohio, 45202.
WHEREAS, the Trust and the Custodian desire to enter into this
Agreement to provide for the custody and safekeeping of the assets of the Trust
as required by the Act (as hereafter defined).
THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
The following words and phrases, when used in this Agreement, unless
the context otherwise requires, shall have the following meanings:
1933 ACT - the Securities Act of 1933, as amended.
1934 ACT - the Securities and Exchange Act of 1934, as amended.
ACT - the Investment Company Act of 1940, as amended.
AUTHORIZED PERSON - any (i) Officer of the Trust or (ii) any other
person, whether or not any such person is an officer or employee of the Trust,
who is duly authorized by the Board of Trustees of the Trust to give Oral
Instructions and Written Instructions on behalf of the Trust or any Fund, and
named in Appendix A attached hereto and as amended from time to time by
resolution of the Board of Trustees, certified by an Officer, and received by
the Custodian.
BOARD OF TRUSTEES - the Trustees from time to time serving under the
Trust's Agreement and Declaration of Trust, as from time to time amended.
BOOK-ENTRY SYSTEM - a federal book-entry system as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFT Part 350, or
in such book-entry regulations of federal agencies as are substantially in the
form of Subpart O.
BUSINESS DAY - any day recognized as a settlement day by The New York
Stock Exchange, Inc. and any other day for which the Trust computes the net
asset value of Shares of any fund.
DEPOSITORY - The Depository Trust Company ("DTC"), a limited purpose
trust company, its successor(s) and its nominee(s). Depository shall include any
other clearing agency registered with the SEC under Section 17A of the 1934 Act
which acts as a system for the central handling
<PAGE>
of Securities where all Securities of any particular class or series of an
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of the
Securities provided that the Custodian shall have received a copy of a
resolution of the Board of Trustees, certified by an Officer, specifically
approving the use of such clearing agency as a depository for the Funds.
DIVIDEND AND TRANSFER AGENT - the dividend and transfer agent
appointed, from time to time, pursuant to a written agreement between the
dividend and transfer agent and the Trust.
FOREIGN SECURITIES - a) securities issued and sold primarily outside of
the United States by a foreign government, a national of any foreign country, or
a trust or other organization incorporated or organized under the laws of any
foreign country or; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or agency thereof, or
by any entity organized under the laws of the United States or of any state
thereof, which have been issued and sold primarily outside of the United States.
FUND - each series of the Trust listed in Appendix B and any additional
series added pursuant to Proper Industries. A series is individually referred to
as a "Fund" and collectively referred to as the "Funds."
MONEY MARKET SECURITY - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or their equivalent
on the same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.
NASD - the National Association of Securities Dealers, Inc.
OFFICER - the Chairman, President, Secretary, Treasurer, any Vice
President, Assistant Secretary or Assistant Treasurer of the Trust.
ORAL INSTRUCTIONS - instructions orally transmitted to and received by
the Custodian from an Authorized Person (or from a person that the Custodian
reasonably believes in good faith to be an Authorized Person) and confirmed by
Written Instructions in such a manner that such Written Instructions are
received by the Custodian on the Business Day immediately following receipt of
such Oral Instructions.
PROPER INSTRUCTIONS - Oral Instructions or Written Instructions. Proper
Instructions may be continuing Written Instructions when deemed appropriate by
both parties.
PROSPECTUS - the Trust's then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective from
time to time by the Securities and Exchange Commission.
<PAGE>
SECURITY OR SECURITIES - Money Market Securities, portfolio securities
owned by the Fund, common stock, preferred stock, options, financial futures,
bonds, notes, debentures, corporate debt securities, mortgages, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations and any certificates, receipts, warrants, or other instruments
or documents representing rights to receive, purchase, or subscribe for the same
or evidencing or representing any other rights or interest therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
SEC - the Securities and Exchange Commission of the United States of
America.
SHARES - with respect to a Fund, the units of beneficial interest
issued by the Trust on account of such Fund.
TRUST - the VENUS SERIES TRUST, a business trust organized under the
laws of the State of Delaware, which is a open-end management investment company
registered under the Act.
WRITTEN INSTRUCTIONS - communications in writing actually received by
the Custodian from an Authorized Person. A communication in writing includes a
communication by facsimile, telex or between electro-mechanical or electronic
devices (where the use of such devices have been approved by resolution of the
Trustee and the resolution is certified by an Officer and delivered to the
Custodian). All written communications shall be directed to the Custodian,
attention: Mutual Fund Custody Department.
ARTICLE II
APPOINTMENT; ACCEPTANCE; AND FURNISHING OF DOCUMENTS
A. APPOINTMENT OF CUSTODIAN. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by the Trust at any
time during the term of this Agreement.
B. ACCEPTANCE OF CUSTODIAN. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as hereinafter set
forth.
C. DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement, to the Custodian by the Trust:
1. A copy of the Certificate of Formation of the Trust
certified by the Secretary of the State of Delaware.
2. A copy of the Declaration of Trust of the Trust certified by
the Secretary.
3. A copy of the By-Laws of the Trust certified by the
Secretary.
4. A copy of the resolution of the Board of Trustees of the
Trust appointing the Custodian, certified by the Secretary.
<PAGE>
5. A copy of the then current Prospectus.
6. A Certificate of the President and Secretary of the Trust
setting forth the names and signatures of the current
Officers of the Trust and other Authorized Persons.
D. NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust
agrees to notify the Custodian in writing of the appointment, termination or
change in appointment of any Dividend and Transfer Agent. -
ARTICLE III
RECEIPT OF TRUST ASSETS
A. DELIVERY OF MONEYS. During the term of this Agreement, the Trust
will deliver or cause to be delivered to the Custodian all moneys to be held by
the Custodian for the account of any Fund. The Custodian shall be entitled to
reverse any deposits made on any Fund's behalf where such deposits have been
entered and moneys are not finally collected within 30 days of the making of
such entry.
B. DELIVERY OF SECURITIES. During the term of this Agreement, the Trust
will deliver or cause to be delivered to the Custodian all Securities to be held
by the Custodian for the account of any Fund. The Custodian will not have any
duties or responsibilities with respect to such Securities until actually
received by the Custodian.
C. PAYMENTS FOR SHARES. As and when received, the Custodian shall
deposit to the account(s) of a Fund any and all payments for Shares of that Fund
issued or sold from time to time as they are received from the Trust's
distributor or Dividend and Transfer Agent or from the Trust itself.
D. DUTIES UPON RECEIPT. The Custodian shall not be responsible for any
Securities, moneys or other assets of any Fund until actually received by it.
E. VALIDITY OF TITLE. The Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of title thereto
received or delivered by it pursuant to this Agreement.
ARTICLE IV
DISBURSEMENT OF TRUST ASSETS
A. DECLARATION OF DIVIDENDS BY TRUST. The Trust shall furnish to the
Custodian a copy of the resolution of the Board of Trustees of the Trust,
certified by the Trust's Secretary, either (i) setting forth the date of the
declaration of any dividend or distribution in respect of Shares of any Fund of
the Trust, the date of payment thereof, the record date as of which the Fund
shareholders entitled to payment shall be determined, the amount payable per
share to Fund shareholders of record as of that date, and the total amount to be
paid by the Dividend and Transfer Agent on the payment date, or (ii) authorizing
the declaration of dividends and
<PAGE>
distributions in respect of Shares of a Fund on a daily basis and authorizing
the Custodian to rely on Written Instructions setting forth the date of the
declaration of any such dividend or distribution, the date of payment thereof,
the record date as of which the Fund shareholders entitled to payment shall be
determined, the amount payable per share to Fund shareholders of record as of
that date, and the total amount to be paid by the Dividend and Transfer Agent on
the payment date.
On the payment date specified in the resolution or Written Instructions
described above, the Custodian shall segregate such amounts from moneys held for
the account of the Fund so that they are available for such payment.
B. SEGREGATION OF REDEMPTION PROCEEDS. Upon receipt of Proper
Instructions so directing it, the Custodian shall segregate amounts necessary
for the payment of redemption proceeds to be made by the Dividend and Transfer
Agent from moneys held for the account of the Fund so that they are available
for such payment.
C. DISBURSEMENTS OF CUSTODIAN. Upon receipt of a Certificate directing
payment and setting forth the name and address of the person to whom such
payment is to be made, the amount of such payment, the name of the Fund from
which payment is to be made, and the purpose for which payment is to be made,
the Custodian shall disburse amounts as and when directed from the assets of
that Fund. The Custodian is authorized to rely on such directions and shall be
under no obligation to inquire as to the propriety of such directions.
D. PAYMENT OF CUSTODIAN FEES. Upon receipt of Written Instructions
directing payment, the Custodian shall disburse moneys from the assets of the
Trust in payment of the Custodian's fees and expenses as provided in Article
VIII hereof.
ARTICLE V
CUSTODY OF TRUST ASSETS
A. SEPARATE ACCOUNTS FOR EACH FUND. As to each Fund, the Custodian
shall open and maintain a separate bank account or accounts in the United States
in the name of the Trust coupled with the name of such Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of this Agreement,
and shall hold all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and used by
the Fund in accordance with Rule 17f-3 under the Act. Moneys held by the
Custodian on behalf of a Fund may be deposited by the Custodian to its credit as
Custodian in the banking department of the Custodian. Such moneys shall be
deposited by the Custodian in its capacity as such, and shall be withdrawable by
the Custodian only in such capacity.
B. SEGREGATION OF NON-CASH ASSETS. All Securities and non-cash property
held by the Custodian for the account of a Fund (other than Securities
maintained in a Depository or Book-entry System) shall be physically segregated
from other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other Funds) and shall be
identified as subject to this Agreement.
<PAGE>
C. SECURITIES IN BEARER AND REGISTERED FORM. All Securities held which
are issued or issuable only in bearer form, shall be held by the Custodian in
that form; all other Securities held for the Fund may be registered in the name
of the Custodian, any sub-custodian appointed in accordance with this Agreement,
or the nominee of any of them. The Trust agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold, or deliver in proper
form for transfer, any Securities that it may hold for the account of any Fund
and which may, from time to time, be registered in the name of a Fund.
D. DUTIES OF CUSTODIAN AS TO SECURITIES. Unless otherwise instructed by
the Trust, with respect to all Securities held for the Trust, the Custodian
shall on a timely basis (concerning items 1 and 2 below, as defined in the
Custodian's Standards of Service Guide, as amended from time to time, annexed
hereto as Appendix D):
1. Collect all income due and payable with respect to such
Securities;
2. Present for payment and collect amounts payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
3. Surrender interim receipts or Securities in temporary form
for Securities in definitive form; and
4. Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws
or the laws or regulations of any other taxing authority,
including any foreign taxing authority, now or hereafter in
effect.
E. CERTAIN ACTIONS UPON WRITTEN INSTRUCTIONS. Upon receipt of a Written
Instructions and not otherwise, the Custodian shall:
1. Execute and deliver to such persons as may be designated in
such Written Instructions proxies, consents, authorizations,
and any other instruments whereby the authority of the Trust
as beneficial owner of any Securities may be exercised;
2. Deliver any Securities in exchange for other Securities or
cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation, or
recapitalization of any trust, or the exercise of any
conversion privilege;
3. Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with
the reorganization, refinancing, merger, consolidation,
recapitalization, or sale of assets of any trust, and
receive and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence
such delivery;
<PAGE>
4. Make such transfers or exchanges of the assets of any Fund
and take such other steps as shall be stated in the Written
Instructions to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Trust; and
5. Deliver any Securities held for any Fund to the depository
agent for tender or other similar offers.
F. CUSTODIAN TO DELIVER PROXY MATERIALS. The Custodian shall promptly
deliver to the Trust all notices, proxy material and executed but unvoted
proxies pertaining to shareholder meetings of Securities held by any Fund. The
Custodian shall not vote or authorize the voting of any Securities or give any
consent, waiver or approval with respect thereto unless so directed by Written
Instructions.
G. CUSTODIAN TO DELIVER TENDER OFFER INFORMATION. The Custodian shall
promptly deliver to the Trust all information received by the Custodian and
pertaining to Securities held by any Fund with respect to tender or exchange
offers, calls for redemption or purchase, or expiration of rights. If the Trust
desires to take action with respect to any tender offer, exchange offer or other
similar transaction, the Trust shall notify the Custodian at least five Business
Days prior to the date on which the Custodian is to take such action. The Trust
will provide or cause to be provided to the Custodian all relevant information
for any Security which has unique put/option provisions at least five Business
Days prior to the beginning date of the tender period.
ARTICLE VI
PURCHASE AND SALE OF SECURITIES
A. PURCHASE OF SECURITIES. Promptly after each purchase of Securities
by the Trust, the Trust shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each purchase of Money Market Securities,
Proper Instructions, specifying with respect to each such purchase the;
1. name of the issuer and the title of the Securities,
2. the number of shares, principal amount purchased (and
accrued interest, if any) or other units purchased,
3. date of purchase and settlement,
4. purchase price per unit,
5. total amount payable,
6. name of the person from whom, or the broker through which,
the purchase was made,
7. the name of the person to whom such amount is payable, and
<PAGE>
8. the Fund for which the purchase was made.
The Custodian shall, against receipt of Securities purchased by or for the
Trust, pay out of the moneys held for the account of such Fund the total amount
specified in the Written Instructions, or Oral Instructions, if applicable, to
the person named therein. The Custodian shall not be under any obligation to pay
out moneys to cover the cost of a purchase of Securities for a Fund, if in the
relevant Fund custody account there is insufficient cash available to the Fund
for which such purchase was made.
B. SALE OF SECURITIES. Promptly after each sale of Securities by a
Fund, the Trust shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written Instructions, and (ii)
with respect to each sale of Money Market Securities, Proper Instructions,
specifying with respect to each such sale the:
1. name of the issuer and the title of the Securities,
2. number of shares, principal amount sold (and accrued
interest, if any) or other units sold,
3. date of sale and settlement,
4. sale price per unit,
5. total amount receivable,
6. name of the person to whom, or the broker through which, the
sale was made,
7. name of the person to whom such Securities are to be
delivered, and
8. Fund for which the sale was made.
The Custodian shall deliver the Securities against receipt of the total amount
specified in the Written Instructions, or Oral Instructions, if applicable.
Notwithstanding any other provision of this Agreement, the Custodian, when
properly instructed as provided herein to deliver Securities against payment,
shall be entitled, if in accordance with generally accepted market practice, to
deliver such Securities prior to actual receipt of final payment therefor. In
any such case, the Fund for which the Securities were delivered shall bear the
risk that final payment for the Securities may not be made or that the
Securities may be returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have no liability
for any of the foregoing.
C. PAYMENT ON SETTLEMENT DATE. On contractual settlement date, the
account of the Fund will be charged for all purchased Securities settling on
that day, regardless of whether or not delivery is made. Likewise, on
contractual settlement date, proceeds from the sale of Securities settling that
day will be credited to the account of the Fund, irrespective of delivery.
<PAGE>
Any such credit shall be conditioned upon actual receipt by Custodian of final
payment and may be reversed if final payment is not actually received in full.
D. CREDIT OF MONEYS PRIOR TO RECEIPT. With respect to any credit given
prior to actual receipt of final payment, the Custodian may, in its sole
discretion and from time to time, permit a Fund to use funds so credited to its
Fund custody account in anticipation of actual receipt of final payment. Any
such funds shall be deemed a loan from the Custodian to the Trust payable on
demand and bearing interest accruing from the date such loan is made up to but
not including the date on which such loan is repaid at the rate per annum
customarily charged by the Custodian on similar loans.
E. SEGREGATED ACCOUNTS. The Custodian shall, upon receipt of Proper
Instructions so directing it, establish and maintain a segregated account or
accounts for and on behalf of a Fund. Cash and/or Securities may be transferred
into such account or accounts for specific purposes, to-wit:
1. in accordance with the provision of any agreement among the
Trust, the Custodian, and a broker-dealer registered under
the 1934 Act, and also a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of the Options
Clearing Corporation and of any registered national
securities exchange, the Commodity Futures Trading
Commission, any registered contract market, or any similar
organization or organizations requiring escrow or other
similar arrangements in connection with transactions by the
Fund;
2. for purposes of segregating cash or Securities in connection
with options purchased, sold, or written by the Fund or
commodity futures contracts or options thereon purchased or
sold by the Fund;
3. for the purpose of compliance by the Fund with the
procedures required for reverse repurchase agreements, firm
commitment agreements, standby commitment agreements, and
short sales by Act Release No. 10666, or any subsequent
release or releases or rule of the SEC relating to the
maintenance of segregated accounts by registered investment
companies;
4. for the purpose of segregating collateral for loans of
Securities made by the Fund; and
5. for other proper corporate purposes, but only upon receipt
of, in addition to Proper Instructions, a copy of a
resolution of the Board of Trustees, certified by an
Officer, setting forth the purposes of such segregated
account.
Each segregated account established hereunder shall be established and
maintained for a single Fund only. All Proper Instructions relating to a
segregated account shall specify the Fund
<PAGE>
involved.
F. ADVANCES FOR SETTLEMENT. Except as otherwise may be agreed upon by
the parties hereto, the Custodian shall not be required to comply with any
Written Instructions to settle the purchase of any Securities on behalf of a
Fund unless there is sufficient cash in the account(s) pertaining to such Fund
at the time or to settle the sale of any Securities from such an account(s)
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such Securities exceeds the amount of cash in the
account(s) at the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to settle the purchase
of such Securities. The amount of any such advance shall be deemed a loan from
the Custodian to the Trust payable on demand and bearing interest accruing from
the date such loan is made up to but not including the date such loan is repaid
at the rate per annum customarily charged by the Custodian on similar loans.
ARTICLE VII
TRUST INDEBTEDNESS
In connection with any borrowings by the Trust, the Trust will cause to
be delivered to the Custodian by a bank or broker requiring Securities as
collateral for such borrowings (including the Custodian if the borrowing is from
the Custodian), a notice or undertaking in the form currently employed by such
bank or broker setting forth the amount of collateral. The Trust shall promptly
deliver to the Custodian Written Instructions specifying with respect to each
such borrowing: (a) the name of the bank or broker, (b) the amount and terms of
the borrowing, which may be set forth by incorporating by reference an attached
promissory note duly endorsed by the Trust, or a loan agreement, (c) the date,
and time if known, on which the loan is to be entered into, (d) the date on
which the loan becomes due and payable, (e) the total amount payable to the
Trust on the borrowing date, and (f) the description of the Securities securing
the loan, including the name of the issuer, the title and the number of shares
or other units or the principal amount. The Custodian shall deliver on the
borrowing date specified in the Written Instructions the required collateral
against the lender's delivery of the total loan amount then payable, provided
that the same conforms to that which is described in the Written Instructions.
The Custodian shall deliver, in the manner directed by the Trust, such
Securities as additional collateral, as may be specified in Written
Instructions, to secure further any transaction described in this Article VII.
The Trust shall cause all Securities released from collateral status to be
returned directly to the Custodian and the Custodian shall receive from time to
time such return of collateral as may be tendered to it.
The Custodian may, at the option of the lender, keep such collateral in
its possession, subject to all rights therein given to the lender because of the
loan. The Custodian may require such reasonable conditions regarding such
collateral and its dealings with third-party lenders as it may deem appropriate.
<PAGE>
ARTICLE VIII
CONCERNING THE CUSTODIAN
A. Indemnification
1. By the Trust. The Trust shall indemnify and hold harmless
the Custodian and its directors, officers, employees and
agents from and against any loss or damage (including,
without limitation, liability arising under the 1933 Act,
the 1934 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (i)
from the fact that any of the Fund's Securities are
registered in the name of the Custodian, or (ii) from any
action or inaction by the Custodian (x) at the request or
direction of or in reliance on the advice of the Fund; (y)
upon Proper Instructions; or (z) generally, from the
performance of its obligations under this Agreement, except
such losses or damages as may arise from the negligent
action or omission, bad faith, willful misconduct or breach
of this Agreement by the Custodian or any of its directors,
officers, employees and agents. The Custodian shall be
entitled to rely on and may act upon the advice and opinion
of counsel on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such
advice or opinion of counsel. The provisions under this
paragraph shall survive the termination of this Agreement.
2. By the Custodian. The Custodian shall indemnify and hold
harmless the Trust and its trustees, officers, employees and
agents harmless from and against any loss or damage
(including, without limitation, liability arising under the
1933 Act, the 1934 Act, the Act and any state or foreign
securities and/or banking laws) arising directly or
indirectly from the negligent action or omission, bad faith,
willful misconduct or breach of this Agreement by the Trust
or any of its trustees, officers, employees and agents.
B. ACTIONS NOT REQUIRED BY CUSTODIAN. Without limiting the generality
of the foregoing, the Custodian, acting in the capacity of Custodian hereunder,
shall be under no obligation to inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased by or
for the account of any Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
2. The legality of the sale of any Securities by or for the
account of any Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Shares of any Fund,
or the sufficiency of the amount to be received therefor;
<PAGE>
4. The legality of the redemption of any Shares of any Fund, or
the propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any dividend
by the Trust in respect of Shares of any Fund;
6. The legality of any borrowing by the Trust on behalf of the
Trust or any Fund, using Securities as collateral;
7. Whether the Trust or a Fund is in compliance with the 1940
Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment
objectives and policies as then in effect.
C. NO DUTY TO COLLECT AMOUNTS DUE FROM DIVIDEND AND TRANSFER AGENT. The
Custodian shall not be under any duty or obligation to take action to effect
collection of any amount due to the Trust from any Dividend and Transfer Agent
of the Trust nor to take any action to effect payment or distribution by any
Dividend and Transfer Agent of the Trust of any amount paid by the Custodian to
any Dividend and Transfer Agent of the Trust in accordance with this Agreement.
D. NO ENFORCEMENT ACTIONS. Notwithstanding Section D of Article V, the
Custodian shall not be under any duty or obligation to take action, by legal
means or otherwise, to effect collection of any amount, if the Securities upon
which such amount is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed to take such
action by Written Instructions and (ii) it shall be assured to its satisfaction
(including prepayment thereof) of reimbursement of its costs and expenses in
connection with any such action.
E. AUTHORITY TO USE AGENTS AND SUB-CUSTODIANS. The Trust acknowledges
and hereby authorizes the Custodian to hold Securities through its various
agents described in Appendix C annexed hereto. The Trust hereby represents that
such authorization has been duly approved by the Board of Trustees of the Trust
as required by the Act.
1. Appointment of Foreign Sub-Custodians. The Trust hereby
authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets
maintained outside the United State the foreign banking
institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of Proper Instructions, together with a certified
resolution of the Board of Directors of the Trust as
required by the Act, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon
receipt of Proper Instructions, the Trust may instruct the
Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.
The Custodian shall limit the securities and other assets
maintained in the custody of the
<PAGE>
foreign sub-custodians to: (i) "foreign securities", as
defined in paragraph (c) (1) of Rule 17 f-5 under the Act,
and (ii) cash and cash equivalents in such amounts as the
Custodian or the Trust may determine to be reasonably
necessary to effect the Trust's foreign securities
transactions.
2. Foreign Securities Depositories. Except as may otherwise
agreed upon in writing by the Custodian and the Trust,
assets of the Fund shall be maintained in foreign securities
depositories only through arrangements implemented by the
foreign banking institutions serving as sub-custodians
pursuant to the terms hereof.
3. Segregation of Securities. The Custodian shall identify on
its books as belonging to the Fund, the foreign securities
of the Fund held by each foreign sub-custodian. Each
agreement pursuant to which the Custodian employs a foreign
banking institution (an "Institution") shall require that
such Institution establish a custody account for the
Custodian on behalf of the Fund and physically segregate in
that account, securities and other assets of the Fund, and,
in the event that such Institution deposits the Fund's
securities in a foreign securities depository, such
agreement shall provide that the Institution shall identify
on its books as belonging to the Custodian, as agent for the
Fund, the securities so deposited.
4. Agreements with Foreign Banking Institutions. Each agreement
with an Institution shall also provide that: (i)
indemnification or insurance arrangements (or any
combination of the foregoing) will be provided such that the
Fund will be adequately protected against the risk of loss
of assets held in accordance with such agreement; (ii) to
the Fund's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the
Institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (iii)
beneficial ownership of the Fund's assets will be freely
transferable without the payment of money or value other
than for custody or administration; (iv) adequate records
will be maintained identifying the assets as belonging to
the Fund; (v) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent
permitted under applicable law the independent public
accountants for the Fund, will be given access to the books
and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (v)
the Fund will receive periodic reports with respect to the
safekeeping of the Fund's assets notification of any
transfer to or from the Fund's account or a third party
account containing assets held for the benefit of the Fund.
5. Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund information concerning the foreign
sub-custodians employed by the Custodian. Such information
shall be similar in kind and scope to that
<PAGE>
furnished to the Fund in connection with the initial
approval of this Agreement. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian
learns of (i) any change in an arrangement with a
sub-custodian that affects compliance with Subsection 4.)
above; or (ii) a material adverse change in the financial
condition of a foreign sub-custodian.
F. NO DUTY TO SUPERVISE INVESTMENTS. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time delivered
to or held by it for the account of the Trust are such as properly may be held
by the Trust under the provisions of the Articles of Incorporation and the
Trust's By-Laws.
G. ALL RECORDS CONFIDENTIAL. The Custodian shall treat all records and
other information relating to the Trust and the assets of all Funds as
confidential and shall not disclose any such records or information to any other
person unless (i) the Trust shall have consented thereto in writing or (ii) such
disclosure is required by law.
H. COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to
receive and the Trust agrees to pay to the Custodian such compensation as shall
be determined pursuant to Appendix E attached hereto, or as shall be determined
pursuant to amendments to Appendix E. The Custodian shall be entitled to charge
against any money held by it for the account of any Fund, the amount of any of
its fees, any loss, damage, liability or expense, including counsel fees. The
expenses which the Custodian may charge against the account of a Fund include,
but are not limited to, the expenses of agents or sub-custodians incurred in
settling transactions involving the purchase and sale of Securities of the Fund.
I. RELIANCE UPON INSTRUCTIONS. The Custodian shall be entitled to rely
upon any Proper Instructions. The Trust agrees to forward to the Custodian
Written Instructions confirming Oral Instructions in such a manner so that such
Written Instructions are received by the Custodian, whether by hand delivery,
telex, facsimile or otherwise, on the same Business Day on which such Oral
Instructions were given. The Trust agrees that the failure of the Custodian to
receive such confirming instructions shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Trust. The Trust agrees that the Custodian shall incur no liability to the Trust
for acting upon Oral Instructions given to the Custodian hereunder concerning
such transactions.
J. BOOKS AND RECORDS. The Custodian will (i) set up and maintain proper
books of account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will meet the
obligations of the Fund under the Act, with particular attention to Section 31
thereof and Rules 3la-1 and 3la-2 thereunder and those records are the property
of the Trust, and (ii) preserve for the periods prescribed by applicable Federal
statute or regulation all records required to be so preserved. All such books
and records shall be the property of the Trust, and shall be available, upon
request, for inspection by duly authorized officers, employees or agents of the
Trust and employees of the SEC.
K. INTERNAL ACCOUNTING CONTROL SYSTEMS. The Custodian shall send to the
Trust any
<PAGE>
report received on the systems of internal accounting control of the Custodian,
or its agents or sub-custodians, as the Trust may reasonably request from time
to time.
L. NO MANAGEMENT OF ASSETS BY CUSTODIAN. The Custodian performs only
the services of a custodian and shall have no responsibility for the management,
investment or reinvestment of the Securities or other assets from time to time
owned by any Fund. The Custodian is not a selling agent for Shares of any Fund
and performance of its duties as custodian shall not be deemed to be a
recommendation to any Fund's depositors or others of Shares of the Fund as an
investment. The Custodian shall have no duties or obligations whatsoever except
such duties and obligations as are specifically set forth in this Agreement, and
no covenant or obligation shall be implied in this Agreement against the
Custodian.
M. VERIFICATION OF SECURITIES. The Custodian shall take all reasonable
action, that the Trust may from time to time request, to assist the Trust in
obtaining favorable opinions from the Trust's independent accountants, with
respect to the Custodian's activities hereunder, including without limitation,
verification of the Securities held by the Custodian on behalf of the Fund in
connection with the preparation of the Fund's Form N- 17f-1 or other
certificates or reports to the SEC.
N. GRANT OF SECURITY INTEREST. The Trust hereby pledges to and grants
the Custodian a security interest in the assets of any Fund to secure the
payment of any liabilities of the Trust to the Custodian, as permitted by the
Act, whether acting in its capacity as Custodian or otherwise, or on account of
money borrowed from the Custodian. This pledge is in addition to any other
pledge of collateral by the Trust to the Custodian.
ARTICLE IX
INITIAL TERM; TERMINATION
A. INITIAL TERM. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
B. TERMINATION. Either party hereto may terminate this Agreement after
the Initial Term for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety
(90) days after the date of giving of such notice. If such notice is given by
the Trust, it shall be accompanied by a copy of a resolution of the Board of
Trustees of the Trust, certified by the Secretary of the Trust, electing to
terminate this Agreement and designating a successor custodian or custodians. In
the event such notice is given by the Custodian, the Trust shall, on or before
the termination date, deliver to the Custodian a copy of a resolution of the
Board of Trustees of the Trust, certified by the Secretary, designating a
successor custodian or custodians to act on behalf of the Trust. In the absence
of such designation by the Trust, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than
$100,000,000 aggregate capital, surplus, and undivided profits. Upon the date
set forth in such notice this Agreement shall terminate, and the Custodian,
provided that it has received a notice of acceptance by the successor custodian,
shall deliver, on that date, directly to the successor custodian all Securities
and moneys then owned by the Fund and held by it as Custodian. Upon termination
of this Agreement, the Trust shall pay to
<PAGE>
the Custodian on behalf of the Trust such compensation as may be due as of the
date of such termination. The Trust agrees on behalf of the Trust that the
Custodian shall be reimbursed for its reasonable costs in connection with the
termination of this Agreement, which are mutually agreed upon.
C. FAILURE TO DESIGNATE SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Trust, or by the Custodian in accordance with the
preceding paragraph, or the designated successor cannot or will not serve, the
Trust shall, upon the delivery by the Custodian to the Trust of all Securities
(other than Securities held in the Book-Entry System which cannot be delivered
to the Trust) and moneys then owned by the Trust, be deemed to be the custodian
for the Trust, and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with respect to
Securities held in the Book-Entry System, which cannot be delivered to the
Trust, which shall be held by the Custodian in accordance with this Agreement.
ARTICLE X
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian, in the event of a failure
or delay, shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE XI
MISCELLANEOUS
A. DESIGNATION OF AUTHORIZED PERSONS. Appendix A sets forth the names
and the signatures of all Authorized Persons as of this date, as certified by
the Secretary of the Trust. The Trust agrees to furnish to the Custodian a new
Appendix A in form similar to the attached Appendix A, if any present Authorized
Person ceases to be an Authorized Person or if any other or additional
Authorized Persons are elected or appointed. Until such new Appendix A shall be
received, the Custodian shall be fully protected in acting under the provisions
of this Agreement upon Oral Instructions or signatures of the then current
Authorized Persons as set forth in the last delivered Appendix A.
B. LIMITATION OF PERSONAL LIABILITY. No recourse under any obligation
of this Agreement or for any claim based thereon shall be had against any
organizer, shareholder, officer, trustee, past, present or future as such, of
the Trust or of any predecessor or successor, either directly or through the
Trust or any such predecessor or successor, whether by virtue of any
constitution, statute or rule of law or equity, or by the enforcement of any
assessment or
<PAGE>
penalty or otherwise; it being expressly agreed and understood that this
Agreement and the obligations thereunder are enforceable solely against the
Trust, and that no such personal liability whatever shall attach to, or is or
shall be incurred by, the organizers, shareholders, officers, or trustees of the
Trust or of any predecessor or successor, or any of them as such. To the extent
that any such liability exists, it is hereby expressly waived and released by
the Custodian as a condition of, and as a consideration for, the execution of
this Agreement.
C. AUTHORIZATION BY BOARD. The obligations set forth in this Agreement
as having been made by the Trust have been made by the Board of Trustees, acting
as such Trustees for and on behalf of the Trust, pursuant to the authority
vested in them under the laws of the State of Delaware, the Declaration of Trust
and the By-Laws of the Trust. This Agreement has been executed by Officers of
the Trust as officers, and not individually, and the obligations contained
herein are not binding upon any of the Trustees, Officers, agents or holders of
shares, personally, but bind only the Trust.
D. CUSTODIAN'S CONSENT TO USE OF ITS NAME. The Trust shall review with
the Custodian all provisions of the Prospectus and any other documents
(including advertising material) specifically mentioning the Custodian (other
than merely by name and address) and shall obtain the Custodian's consent prior
to the publication and/or dissemination or distribution thereof.
E. NOTICES TO CUSTODIAN. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or delivered to it
at its offices at Firstar Bank Center, 425 Walnut Street, M. L. 6118,
Cincinnati, Ohio 45202, attention Mutual Fund Custody Department, or at such
other place as the Custodian may from time to time designate in writing.
F. NOTICES TO TRUST. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Trust shall be
sufficiently given when delivered to the Trust or on the second Business Day
following the time such notice is deposited in the U.S. mail postage prepaid and
addressed to the Trust at its office at 9802 Nicholas, Suite 250, Omaha,
Nebraska 68114 or at such other place as the Trust may from time to time
designate in writing.
G. AMENDMENTS IN WRITING. This Agreement, with the exception of the
Appendices, may not be amended or modified in any manner except by a written
agreement executed by both parties with the same formality as this Agreement,
and authorized and approved by a resolution of the Board of Trustees of the
Trust.
H. SUCCESSORS AND ASSIGNS. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the Trust or
by the Custodian, and no attempted assignment by the Trust or the Custodian
shall be effective without the written consent of the other party hereto.
I. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
<PAGE>
J. JURISDICTION. Any legal action, suit or proceeding to be instituted
by either party with respect to this Agreement shall be brought by such party
exclusively in the courts of the State of Ohio or in the courts of the United
States for the Southern District of Ohio, and each party, by its execution of
this Agreement, irrevocably (i) submits to such jurisdiction and (ii) consents
to the service of any process or pleadings by first class U.S. mail, postage
prepaid and return receipt requested, or by any other means from time to time
authorized by the laws of such jurisdiction.
K. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
L. HEADINGS. The headings of paragraphs in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.
TRUST: VENUS SERIES TRUST
By: /s/ Vikas Mehrotra
----------------------------
Vikas Mehrotra
President
CUSTODIAN: FIRSTAR BANK, N.A.
By: /s/ Marsha A. Croxton
----------------------------
Marsha A Croxton
Senior Vice President
<PAGE>
APPENDIX A
Authorized Persons Specimen Signatures
------------------ -------------------
President, Chairman
and Treasurer: Vikas Mehrotra /s/Vikas Mehrotra
-------------- -----------------
Secretary: Natasha Koprivica /s/Natasha Koprivica
----------------- --------------------
Adviser Employees: Vikas Mehrotra /s/Vikas Mehrotra
-------------- -----------------
Natasha Koprivica /s/Natasha Koprivica
----------------- --------------------
Transfer Agent Gregory Getts /s/Gregory Getts
------------- ----------------
<PAGE>
APPENDIX B
SERIES OF THE TRUST
THE INDIA TECHNOLOGY FUND
<PAGE>
APPENDIX C
AGENTS OF THE CUSTODIAN
The following agents are employed currently by Firstar Bank. N.A. for
securities processing and control:
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bank of New York
1 Wall Street
New York, NY 10286
(For Foreign Securities and certain non-DTC eligible Securities)
<PAGE>
APPENDIX D
Firstar Institutional Custody Services
425 Walnut Street, 6th Floor
M.L. 6118
Cincinnati, OH 45202
July, 1999
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
STANDARDS OF SERVICE GUIDE
Firstar Bank, N.A. is committed to providing superior quality service to
all customers and their agents at all times. We have compiled this guide as a
tool for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Firstar Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Firstar Bank will make every effort to complete all
processing on a timely basis.
Firstar Bank is a direct participant of the Depository Trust Company, a
direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers
Trust Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Firstar Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL.
For bond calls and mandatory puts, Firstar Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Firstar Bank will not notify clients of optional put opportunities.
Any securities delivered free to Firstar Bank or its agents must be
received three (3) business days prior to any payment or settlement in order for
the Firstar Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
THE INFORMATION CONTAINED IN THIS STANDARDS OF SERVICE GUIDE IS
SUBJECT TO CHANGE. SHOULD ANY CHANGES BE MADE FIRSTAR BANK WILL
PROVIDE YOU WITH AN UPDATED COPY OF ITS STANDARDS OF SERVICE GUIDE.
<PAGE>
FIRSTAR BANK SECURITY SETTLEMENT STANDARDS
<TABLE>
<CAPTION>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
<S> <C> <C>
DTC 1:30 P.M. on Settlement DTC Participant #2803
Date Agent Bank ID 27895
Institutional #_________________
For Account #_______________
Federal Reserve Book Entry 12:30 P.M. on Settlement Federal Reserve Bank of Cinti/Trust
Date for Firstar Bank, N.A. ABA# 042000013
For Account #______________
Bk of NYC/Cust
Fed Wireable FNMA & FHLMC 12:30 P.M. on Settlement ABA 021000018
Date A/C Firstar Bank # 117612
For Account #____________________
Federal Reserve Book Entry 1:00 P.M. on Settlement Federal Reserve Bank of Cinti/Spec
(Repurchase Agreement Collateral Date for Firstar Bank, N.A. ABA # 042000013
Only) For Account #_____________________
PTC Securities 12:00 P.M. on Settlement PTC For Account BYORK
(GNMA Book Entry) Date Firstar Bank / 117612
Physical Securities 9:30 A.M. EST on Bank of New York
Settlement Date One Wall Street- 3rd Floor - Window A
(for Deliveries, by 4:00 New York, NY 10286
P.M. on Settlement Date For account of Firstar Bank/Cust #117612
minus 1) Attn: Donald Hoover
CEDEL/EURO-CLEAR 11:00 A.M. on Cedel a/c 55021
Settlement Date minus 2 FFC: a/c 387000
Firstar Bank/Global Omnibus
Cash Wire Transfer 3:00 P.M. Firstar Bank, N.A. Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to _______________________
Account: #_____________________
</TABLE>
* All times listed are Eastern Standard Time.
<PAGE>
FIRSTAR BANK PAYMENT STANDARDS
<TABLE>
<CAPTION>
SECURITY TYPE INCOME PRINCIPAL
<S> <C> <C>
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
</TABLE>
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made
on the immediately following business day.
<PAGE>
FIRSTAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO FIRSTAR BANK POSTING
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days 5 business days prior to expiration Upon receipt
and Optional Mergers prior to expiration or receipt
of notice
Mandatory Puts with Later of 10 business days 5 business days prior to expiration Upon receipt
Option to Retain prior to expiration or receipt
of notice
Class Actions 10 business days prior to 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days 5 business days prior to expiration Upon receipt
Exchanges, prior to expiration or receipt
and Conversions of notice
Mandatory Puts, Defaults, At posting of funds or None Upon receipt
Liquidations, securities received
Bankruptcies, Stock
Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days None Upon receipt
prior to expiration or receipt
of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
<PAGE>
FEE SCHEDULE
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
DOMESTIC CUSTODY FEE SCHEDULE FOR INDIA TECHNOLOGY FUND
Firstar Bank, N.A. as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
(a) For cash repurchase agreement transaction $7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $9.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $25.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each covered call option/future contract written,
exercised or expired $10.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE
Based upon an annual rate of: Million
.0003 (3 Basis Points) on First $20
.0002 (2 Basis Points) on Next $30
.00015 (1.5 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND
$300.00
IV. OUT-OF-POCKET EXPENSES
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. IRA DOCUMENTS
Per Shareholder/year to hold each IRA Document $4.00
VI. EARNINGS CREDITS
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated.
<PAGE>
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
CASH MANAGEMENT FEE SCHEDULE FOR INDIA TECHNOLOGY FUND
<TABLE>
<CAPTION>
SERVICES UNIT COST ($) MONTHLY COST($)
- -------- ------------- ---------------
<S> <C> <C> <C>
D.D.A Account Maintenance 15.00
Deposits .42
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions, Changes 6.00
ACH Stop Payment 5.00
ACH Debits .12
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 115.00
Drafts Cleared .179
Lockbox Maintenance 60.00
Lockbox items Processed .34
Miscellaneous Lockbox items .12
Positive Pay .06
Issued Items .015
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 11.00
International 11.00
Wires Outgoing
Domestic International
Repetitive 14.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 10.00 Repetitive 25.00
Non-Repetitive 11.00 Non-Repetitive 25.00
Customer Initiated 9.00
</TABLE>
UNCOLLECTED CHARGE -- FIRSTAR PRIME RATE AS OF FIRST OF MONTH PLUS 4%
OTHER AVAILABLE CASH MANAGEMENT SERVICES ARE PRICED SEPARATELY.
<PAGE>
FIRSTAR INSTITUTIONAL CUSTODY SERVICES
GLOBAL CUSTODY FEE SCHEDULE
FOR
INDIA TECHNOLOGY FUND
<TABLE>
<CAPTION>
COUNTRY INSTRUMENTS SAFEKEEPING (BPS) TRANSACTION FEES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Argentina All 15 $55
Australia All 2 $45
Austria Equities/Bond 3.5 $50
Austria Depo Receipt 20 $50
Austria Non ATS All 25 $105
Bangladesh All 40 $165
Belgium All 2.5 $60
Bermuda All 15 $75
Botswana All 25 $65
Brazil All 15 $50
Bulgaria All 40 $95
Canada All 1.25 $27
Chile All 20 $75
China-Shanghai All 15 $80
China-Shenzhen All 15 $80
Colombia All 40 $115
Costa Rica All 15 $75
Croatia All 35 $80
Cyprus All 15 $60
Czech Republic All 20 $65
Denmark All 3 $65
Ecuador All 35 $80
Egypt All 40 $115
Estonia All 7 $40
Euromarkets Eurobonds only* 1.5 $25
Finland All 5 $60
France All 2.5 $60
Germany All 1 $45
Ghana All 25 $65
Greece All 20 $120
Hong Kong All 6 $75
Hungary All 35 $150
India All 65 $265
Indonesia All 12 $115
Ireland All 3 $45
Israel All 15 $60
Italy All 3 $65
Ivory Coast All 40 $170
Japan All 1.5 $30
Jamaica All 35 $65
Jordan All 40 $140
Kenya All 30 $65
Latvia Equities/Bonds 30 $90
Latvia Gov't Bonds 15 $90
Lebanon All 25 $105
<PAGE>
<CAPTION>
COUNTRY INSTRUMENTS SAFEKEEPING (BPS) TRANSACTION FEES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Lithuania All 20 $65
Luxembourg All 4 $40
Malaysia All 6 $95
Mauritius All 30 $115
Mexico All 3 $35
Morocco All 35 $115
Namibia All 30 $65
Netherlands All 3 $40
New Zealand All 3 $55
Nigeria All 30 $65
Norway All 3 $60
Pakistan All 30 $115
Peru All 45 $120
Philippines All 8 $90
Poland All 25 $65
Portugal All 15 $100
Romania All 35 $115
Russia Equities/Bonds 30 $215
Russia MINFIN 15 $65
Singapore All 3 $55
Slovak Republic All 25 $125
Slovenia All 25 $125
South Africa All 3 $30
South Korea All 10 $35
Spain All 3 $65
SriLanka All 15 $75
Swaziland All 30 $65
Sweden All 2 $60
Switzerland All 2 $65
Taiwan All 20 $140
Thailand All 6 $60
Tunisia All 40 $60
Turkey All 15 $30
U.K. All 1.5 $25
Ukraine All 30 $60
Uruguay All 50 $80
Venezuela All 40 $140
Zambia All 30 $65
Zimbabwe All 30 $65
</TABLE>
BASE FEE
A monthly base charge of $1,200.00 per account will apply.
<PAGE>
CUSTODY FEE NOTES
TRANSACTION CHARGES
A transaction is defined as a receipt or delivery versus payment, a redemption,
or a free receipt or delivery.
OUT-OF-POCKET EXPENSES
Charges incurred by Firstar Institutional Custody Services or their
sub-custodian for local taxes, stamp duties or other local duties and
assessments, stock exchange fees, postage and insurance for shipping,
telecommunication fees, or other unusual expenses which are unique to a country
in which our client is investing will be passed along to the client.
Reimbursable charges such as postage, shipping, transfer fees, etc. will be
billed as incurred.
* Any Non-Eurobond assets held in CEDEL and Euroclear will be charged at the
local market price quote.
** All fees quoted are payable monthly
FEBRUARY, 1999
<PAGE>
EXHIBIT 23(j)
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
Venus Series Trust
We consent to the use of our report on the statement of assets and liabilities
of The India Technology Fund, dated March 20, 2000, included herein and to the
reference to our firm under the caption "Independent Auditors" in the statement
of additional information.
/s/ KPMG LLP
Boston, Massachusetts
April 25, 2000
