Renaissance Capital Greenwich Funds
325 Greenwich Avenue
Greenwich, CT 06830
February 24, 1998
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Renaissance Capital Greenwich Funds - CIK No. 0001026634
Request for Withdrawal of Amendment to Registration Statement
on Form N-1A/A
Registration No. 333-21311
ICA No. 811-8049
Ladies and Gentlemen:
On January 27, 1998, Renaissance Capital Greenwich Funds (the "Registrant")
submitted a post-effective amendment pursuant to the provisions of Rule 497 (c)
under the Securities Act of 1933, filed electronically via EDGAR, accession
number 00001. This filing was inadvertently filed with the incorrect form
type/submission header of N-1A/A. We had intended the filing to be filed as form
type 497. On January 29, 1998 we filed a subsequent filing, requesting that the
previous filing be changed to form type 497 from form type N-1A/A on the EDGAR
records.
On behalf of the Registrant, we request that the January 27, 1998 filing be
withdrawn pursuant to Rule 477 (a) under the Securities Act of 1933.
Sincerely
/s/
- ----------------------
Linda R. Killian
Secretary and Vice President
PART A PROSPECTUS
THE IPO PLUS AFTERMARKET FUND
Renaissance Capital Greenwich Funds
PROSPECTUS
December 18, 1997
Investment Objective: Capital Appreciation
The IPO Plus Aftermarket Fund seeks capital appreciation by investing in the
common stocks of Initial Public Offerings ("IPOs") on the offering and in the
aftermarket.
No Front-end or Back-end Sales Load
No sales load is charged on purchases. See "Fund Expenses" for further
information on fees.
Low Minimum Initial Investment
The minimum initial investment for a regular account is $2,500. An IRA may
be initiated with a $500 minimum investment.
This Prospectus describes information about the IPO Plus Aftermarket Fund that
an investor ought to know before investing. Investors should read it and keep it
for future reference. More information about the IPO Plus Aftermarket Fund is
contained in a Statement of Additional Information ("SAI") dated December 18,
1997 which is filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. The SAI may be obtained free of
charge by calling 1-888-IPO-FUND, or by writing to the IPO Plus Aftermarket
Fund, P.O. Box 2798, Boston, MA 02208-2798. Additional information, including
this Prospectus and the SAI, may be obtained by accessing the Internet web site
maintained by the Securities and Exchange Commission (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Renaissance Capital Corporation
325 Greenwich Avenue
Greenwich, CT 06830
1-888-IPO-FUND
www.ipo-fund.com
FUND EXPENSES
The following table sets forth certain information about the costs and expenses
that a shareholder of the IPO Plus Aftermarket Fund (the "IPO Fund") will incur,
directly or indirectly, when investing in the IPO Fund.
Shareholder Transaction Expenses:
Sales Load on Purchases (a)............................................ None
Sales Load on Reinvested Dividends..................................... None
Deferred Sales Load.................................................... None
Redemption Fee on Shares Held 90 Days or Less (b)...................... 2.00%
Annual Fund Operating Expenses (as a percent of average net assets):
Management Fees (c).................................................... 1.50%
12b-1 Distribution and Shareholder Servicing Fees (d)................... .50%
Other Expenses (after reimbursement) (e)................................ .50%
Total Fund Operating Expenses (after reimbursement)(c)(e)........ 2.50%
Example: An investor in the IPO Fund would incur the following expenses on a
$1,000 investment, assuming (1) 5% annual return and (2) redemption at the end
of each period.
One Year Three Years
$25 $78
This example should not be considered a representation of past or future IPO
Fund expenses or performance. Moreover, the IPO Fund's actual expenses will vary
and may be greater or lesser than those shown.
(a) Investors may be charged a transaction fee by their broker or agent.
(b) A $10.00 fee may be charged by the Transfer Agent for redemption by wire.
(c) Renaissance Capital has voluntarily agreed to defer or waive fees or absorb
some or all of the expenses of the IPO Fund in order to limit Total Fund
Operating Expenses to 2.5%. Subject to the 2.5% limitation, such fee deferrals
and expense absorptions are subject to later reimbursement over a period of
three years. Without such deferrals, the Total Fund Operating Expenses would be
approximately 3.0%.
(d) Payments for 12b-1 distribution of IPO Fund shares will not exceed .25% of
average daily net assets. A long-term shareholder should consider that the fees
and costs incurred under the 12b-1 Distribution and Shareholder Servicing Plan
may result in the shareholder paying more over time than the equivalent of the
maximum front-end sales charges permitted by the rules and regulations of the
National Association of Securities Dealers, Inc. See "Distribution and
Shareholder Servicing Plan."
(e) The IPO Fund is newly organized and has no operating history. The
percentages set forth in the table above under the caption "Other Expenses" have
been estimated based on the expected asset levels and the amount of expenses
expected to be incurred during the current fiscal period ending September 30,
1998. Actual expenses may be higher or lower than estimated.
PROSPECTUS SUMMARY
The information about the IPO Plus Aftermarket Fund (the "IPO Fund") below is
qualified in its entirety by the detailed information appearing elsewhere in
this Prospectus and Statement of Additional Information.
THE IPO PLUS AFTERMARKET FUND The IPO Fund is a series of Renaissance Capital
Greenwich Funds("Renaissance Capital Funds"), a
Delaware trust, operating as a registered,
diversified, open-end investment company.
THE INVESTMENT OBJECTIVE The IPO Fund seeks appreciation of capital. It
pursues this objective by investing in the common
stocks of IPOs on the offering and in the
aftermarket. The IPO Fund gives individual
investors the opportunity to invest in a diverse
selection of IPOs that may not otherwise
be accessible to individuals acting alone.
MANAGEMENT OF THE IPO FUND Renaissance Capital Corporation ("Renaissance
Capital"), a registered investment adviser,
serves as the IPO Fund's investment adviser. The
principals of Renaissance Capital each have more
than 17 years of portfolio management, security
analysis and relevant corporate finance
experience. Renaissance Capital specializes in
researching IPOs and has been providing its
proprietary research to institutional investors
since 1992. This research and other statistical
information on IPOs will be used in selecting
securities for the IPO Fund. Renaissance Capital
is internationally recognized as a leading
provider of research on initial public offerings.
See "Management of the IPO Fund."
MINIMUM INITIAL INVESTMENT The minimum initial investment in the IPO Fund is
$2,500 ($500 for an IRA) and the minimum
subsequent investment is $100. See "Investing in
the IPO Fund."
RISKS Investing in IPOs entails special risks,
including limited operating history of the
companies, unseasoned trading, high portfolio
turnover and limited liquidity.
INVESTMENT OBJECTIVE
The IPO Fund seeks appreciation of capital. It pursues this objective by
investing at least 65% of its total assets in a diversified portfolio of the
common stocks of IPOs at the time of the offering and in subsequent aftermarket
trading. Aftermarket trading is the secondary trading in an IPO after the
initial issuance of shares to public shareholders. The IPO Fund will limit
aftermarket investments to those IPOs which have one or more of the following
characteristics: (i) limited research; (ii) unseasoned trading; (iii) limited
float; (iv) limited public ownership; (v) limited operating history; or (vi) are
relatively unknown in the U.S. capital markets. Each of these characteristics
distinguishes these companies from established companies that trade in the
broader stock market. Academic and financial literature consider this
aftermarket period for IPOs to be up to ten years.
Investment in the IPO Fund may be best suited to individuals who are not
concerned with or do not require current income. Any income realized by the IPO
Fund will be incidental and will not be an important criterion in the selection
of portfolio securities. There is no assurance that the IPO Fund will achieve
its investment objective.
Access to Hot Issues
Due to intense demand for a limited number of shares of certain "hot issues,"
individual investors acting alone may have difficulty obtaining shares of IPOs
at the offering price. A "hot issue" is any newly issued security which, at the
time of its offering, trades in the aftermarket at a price in excess of its
offering price. In addition, individual investors may also be limited to those
IPOs underwritten by the broker with whom the individual investor has an
account. By virtue of its size and institutional nature, the IPO Fund may have
greater access to IPOs at the offering price. However, there is no assurance
that the IPO Fund will be able to obtain allocations of "hot issues."
Independent IPO Research
The IPO Fund will have the benefit of Renaissance Capital's research and
statistical information on IPOs in selecting securities for its portfolio. This
research analyzes the business, fundamentals, financial results, management
control issues and proposed valuation of the IPO. Prior to an IPO and for a
period of time thereafter, underwriters and brokerage firms involved in the
underwriting are prohibited from providing any commentary or disseminating
research on these companies to the general public. Future research distributed
by an underwriter may not be considered to be independent due to the financial
benefits derived from the underwriting.
Renaissance Capital employs proprietary statistical information on IPO
performance trends, number of pending IPOs, industry sectors, and valuation
trends to determine the overall tone of market activity. Other information
sources used by Renaissance Capital may include the IPO's prospectus filed with
the SEC, discussions and meetings with management, periodic corporate financial
reports, press releases, general economic and industry data supplied by
government agencies and trade associations, and research reports prepared by
broker/dealers.
Special Risks of IPOs
By definition, IPOs have not traded publicly until the time of their offerings.
Special risks associated with IPOs may include a limited number of shares
available for trading, unseasoned trading, lack of investor knowledge of the
company, and limited operating history, all of which may contribute to price
volatility. The limited number of shares available for trading in some IPOs may
make it more difficult for the IPO Fund to buy or sell significant amounts of
shares without an unfavorable impact on prevailing prices. In addition, some
IPOs are involved in relatively new industries or lines of business, which may
not be widely understood by investors. Some of the companies involved in new
industries may be regarded as developmental stage companies, without revenues or
operating income, or the near-term prospects of such. Foreign initial public
offerings are subject to foreign political and currency risks. Many IPOs are
issued by undercapitalized companies of small or microcap size.
INVESTMENT POLICIES AND TECHNIQUES
Under normal market conditions, the IPO Fund will invest at least 65% of its
total assets in the common stocks of IPOs on the offering and in the
aftermarket. Investments may be in both large and small capitalization
companies. The IPO Fund may invest up to 35% of its total assets in the common
stock of issuers that are not IPOs. The IPO Fund may modify the policies and
techniques described herein without shareholder approval unless a policy is
expressly deemed to be changeable only by shareholder vote. The following
provides a brief description of some additional types of securities in which the
IPO Fund may invest including certain transactions it may enter into and
techniques it may use:
Short Term Obligations
When Renaissance Capital deems market or economic conditions to be unfavorable,
the IPO Fund may assume a defensive position by temporarily investing up to 100%
of its assets in cash or high quality money market instruments, such as
short-term U.S. government obligations, commercial paper, or repurchase
agreements, seeking to protect its assets until conditions stabilize.
Investment in Foreign Issuers
The IPO Fund may invest up to 25% of its assets, measured at the time of
investment, in securities of foreign issuers. However, investment may be made
without limitation in securities of foreign issuers that are registered with the
SEC and trade on a U.S. stock exchange. Such investments will be made either
directly in such issuers or indirectly through American Depository Receipts
("ADRs"), American Depository Shares ("ADSs") or closed-end investment
companies.
Foreign securities involve inherent risks that are different from those of
domestic issuers, including political or economic instability of the issuer or
the country of issue, changes in foreign currency and exchange rates and the
possibility of adverse changes in investment or exchange control regulations.
Currency fluctuations will affect the net asset value of the IPO Fund
irrespective of the performance of the underlying investments in foreign
issuers. Typically, there is less publicly available information about a foreign
company than about a U.S. company and foreign companies may be subject to less
stringent auditing and reporting requirements. Income from foreign securities
owned by the IPO Fund may be reduced by withholding tax at the source, which
would reduce dividend income payable to the IPO Fund shareholders. Moreover,
securities of many foreign companies may be less liquid and their prices more
volatile than those securities of comparable domestic companies. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers, and issuers, which may make it difficult to enforce contractual
obligations. In addition, with respect to certain foreign countries, there is
the possibility of expropriation, confiscation, taxation and limitations on the
removal of funds or other assets of the IPO Fund.
Put Options, Call Options and Futures Contracts
The IPO Fund may buy and sell call and put options to protect against changes in
market prices or to enhance investment performance. In addition, to remain fully
invested, the IPO Fund may enter into futures contracts, options on futures
contracts, stock index futures contracts, and options thereon.
Index Futures and Options
The IPO Fund may buy and sell index futures contracts ("index futures") and
options on index futures and on indices for hedging purposes (or may purchase
warrants whose value is based on the value from time to time of one or more
foreign securities indices). An index future is a contract to buy or sell units
of a particular bond or stock index at an agreed price on a specified future
date. Depending on the change in value of the index between the time when the
IPO Fund enters into and terminates an index futures or options transaction, the
IPO Fund realizes a gain or loss. The IPO Fund may also buy and sell index
futures and options to increase its investment return.
Illiquid Investments and Restricted Securities
The IPO Fund may invest up to 15% of its net assets in illiquid investments
(investments that cannot readily be sold within seven days) including restricted
securities which do not meet the criteria for liquidity established by the Board
of Trustees. Renaissance Capital, under the supervision of the Board of
Trustees, determines the liquidity of the IPO Fund's investments. The absence of
a trading market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses. Restricted securities are securities that cannot
be sold to the public without registration under the Securities Act of 1933.
Unless registered for sale, these securities can only be sold in privately
negotiated transactions or pursuant to an exemption from registration.
Short Selling
The IPO Fund may from time to time sell securities short. A short sale is a
transaction in which the IPO Fund sells borrowed securities in anticipation of a
decline in the market price of the securities. The IPO Fund may make a profit or
incur a loss depending on whether the market price of the security decreases or
increases between the date of the short sale and the date on which the IPO Fund
must replace the borrowed security. All short sales must be fully
collateralized, and the IPO Fund will not sell securities short if, immediately
after and as a result of the sale, the value of all securities sold short by the
IPO Fund exceeds 33 1/3% of its total assets. The IPO Fund may also engage in
atechnique known as selling short "against the box." When selling short "against
the box," the IPO Fund will own an equal amount of securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as and in an amount equal to, the securities
sold short. Gain will be recognized as a result of certain constructive sales
including short sales against the box.
Repurchase Agreements
The IPO Fund may enter into repurchase agreements. Under the terms of a
repurchase agreement, the IPO Fund acquires securities from financial
institutions or registered broker-dealers, subject to the seller's agreement to
repurchase such securities at a mutually agreed upon date and price. The seller
is required to maintain the value of collateral held pursuant to the agreement
at not less than the repurchase price (including accrued interest). If the
seller were to default on its repurchase obligation or become insolvent, the IPO
Fund would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price, or to the
extent that the disposition of such securities by the IPO Fund was delayed
pending court action. Repurchase agreements are considered to be loans by the
staff of the SEC.
Convertible Securities
The IPO Fund may invest in all types of common stocks and equivalents (such as
convertible debt securities and warrants). The IPO Fund may invest in
convertible securities which may offer higher income than the common stocks into
which they are convertible. The convertible securities in which the IPO Fund may
invest consist of bonds, notes, debentures and preferred stocks that may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock.
Securities Lending
For incremental income purposes, the IPO Fund may lend its portfolio securities
constituting up to 33 1/3% of its total assets to U.S. or foreign banks or
broker/dealers which have been rated within the two highest grades assigned by
Standard & Poor's Corporation, Moody's Investors Service, or which have been
determined by Renaissance Capital to be of equivalent quality. Renaissance
Capital is responsible for monitoring compliance with this rating standard
during the term of any securities lending agreement. With any loan of portfolio
securities, there is a risk that the borrowing institution will fail to
redeliver the securities when due. However, loans of securities by the IPO Fund
will be fully collateralized at all times by at least 100% of the current market
value of the lent securities. This policy may not be changed without shareholder
approval.
Leverage
The IPO Fund may from time to time use borrowed money to increase its portfolio
positions in an amount not to exceed 33 1/3% of its total assets. Investment
gains realized with borrowed funds that exceed the cost of such borrowings
(including interest costs) may cause the net asset value of IPO Fund shares to
increase more dramatically than would otherwise be the case. On the other hand,
leverage can cause the net asset value of the IPO Fund shares to decrease more
rapidly than normal if the securities purchased with borrowed money decline in
value or if the investment performance of such securities does not cover the
cost of borrowing.
Portfolio Turnover
The IPO Fund may make short-term investments when it is deemed desirable to do
so. The IPO Fund may, from time to time, sell a security without regard to the
length of time that it has been held to realize a profit or to avoid an
anticipated loss. Short-term transactions produce higher portfolio turnover
rates than would otherwise be the case, resulting in the likelihood of larger
expenses (including brokerage commissions) than are incurred by mutual funds
that engage primarily in long-term transactions. The IPO Fund's portfolio
turnover rate will fluctuate annually and may exceed 200% in any given year.
MANAGEMENT OF THE IPO FUND
Investment Adviser
Renaissance Capital, located at 325 Greenwich Avenue, Greenwich, CT, 06830,
serves as the investment adviser pursuant to an Investment Advisory Agreement
(the "Investment Advisory Agreement"), which provides that Renaissance Capital
will furnish continuous investment advisory services and management to the IPO
Fund, subject to the overall authority of the IPO Fund's Board of Trustees.
Renaissance Capital specializes in researching IPOs and has been providing its
proprietary research, primarily to institutional investors, since 1992.
Renaissance Capital is internationally recognized as a leading provider of
research on initial public offerings. Renaissance Capital has analyzed and built
a proprietary research database of more than 2,000 IPOs and 4,000 directly
analogous already-public companies. Renaissance Capital believes it is the
leading provider of such research to institutional investors. In addition,
Renaissance Capital makes full-length and abridged versions of its original
research available to a wide group of investors through various electronic
delivery media. This research and statistical information on IPOs is used in
selecting securities for the IPO Fund.
Renaissance Capital supervises and manages the investment portfolio of the IPO
Fund and directs the day-to-day management of the IPO Fund's investment
portfolio. Although Renaissance Capital has had much experience in advising
institutional investors, it has not previously provided investment advisory
services to registered investment companies or to individuals.
For its services, Renaissance Capital will receive an annual fee of 1.5% on the
average daily net assets of the IPO Fund. Renaissance Capital may, from time to
time, voluntarily agree to defer or waive fees or absorb some or all of the
expenses of the IPO Fund. In the event it should do so, such fee deferrals and
expense absorptions are subject to later reimbursement for a period of three
years.
Portfolio Managers
The principals of Renaissance Capital are responsible for the day-to-day
management of the IPO Fund's portfolio. Each individual has more than 17 years
of relevant portfolio management, securities analysis and corporate finance
experience prior to forming Renaissance Capital.
Linda R. Killian, C.F.A.
Founder and Principal of Renaissance Capital, her 17-year professional
experience spans investment management and equity research.
Before forming Renaissance Capital, she was a portfolio manager and
analyst with Wertheim Schroder Investment Services, where she managed
broadly diversified equity and balanced accounts for pension, high net
worth and not-for-profit organizations. Her analytic coverage included
health care, retailing, telecommunications services, consumer products
and media. Prior to Wertheim Schroder, she was a portfolio manager and
equity analyst with Citicorp Investment Management where she created,
managed and researched the Medium Capitalization Stock Fund, one of the
first investment vehicles focusing on the mid-cap sector. Over the six
years at Citicorp, she also covered a variety of industries as an
analyst, including telecommunication services, special situations,
multi-industry companies and mid-capitalization companies. Before
joining Citicorp, she was a member of the Utility Corporate Finance
Group at The First Boston Corporation, where she was involved in
numerous utility debt and equity financings and specialized in
financial issues pertaining to diversification and deregulation. As a
public utility finance professional, she appeared as an expert witness
before public utility commissions and published articles on
deregulation in industry journals.
Ms. Killian earned an M.B.A. from the Wharton School in 1979 and a
B.A. from New York University in 1972, where she was designated an
Outstanding Scholar. She is a Chartered Financial Analyst and is active
in the New York Society of Security Analysts.
Kathleen Shelton Smith
Founder and Principal of Renaissance Capital, her 17-year professional
experience consists of investment banking and equity research involving
technology and emerging growth companies. Her industry expertise is
broad including technology, communications, health care and industrial
companies.
Prior to forming Renaissance Capital in 1991, she was a director of
Merrill Lynch Capital Markets' Technology and Emerging Growth
Investment Banking Group. Her experience includes mergers and
acquisitions and numerous public equity offerings. She has been the
investment banker for many IPOs including Cabletron Systems, EMC
Corporation and United States Cellular. Over the years she has been a
keynote speaker at many highly regarded Technologic Conferences
including the conferences on Personal Computers, Communications,
Software and Semiconductors.
Ms. Smith earned an M.B.A. from the Wharton School in 1979 and a
B.A., Phi Beta Kappa, from the Pennsylvania State University in
1976. She is certified by the NASD as a general securities principal.
William K. Smith
Founder and President of Renaissance Capital, his 18-year professional
experience covers equity research, investment banking, financial
restructuring and management consulting.
Prior to forming Renaissance Capital, he was an investment banking
senior vice president at Kidder Peabody where he was a founding member
of Kidder's Financial Restructuring Group. This group was involved in
numerous significant and complex restructuring assignments. His
industry experience spans electrical equipment, retailing, steel,
energy, health care, automotive, technology, publishing, banking and
insurance. He was a vice president in the Corporate Finance Group at
Bear Stearns prior to Kidder Peabody. While at Bear Stearns, he
specialized in corporate restructurings, valuations and mergers &
acquisitions. Before that, he was a senior manager in management
consulting at the Touche Ross Financial Services Center where he
specialized in valuations and mergers & acquisitions for a broad cross
section of clients. He is the author of the book, "Strategic
Growth Through Mergers and Acquisitions," which was published by
Prentice Hall in the United States and Japan.
Mr. Smith earned an M.B.A. in finance from the Wharton School in 1978
and a B.S. in Electrical Engineering from Villanova University in
1973. He is certified by the NASD as a general securities
principal and a financial and operations principal.
Fund Administration
Under an Administration and Fund Accounting Agreement (the "Administration
Agreement"), Chase Global Funds Services Company (the "Administrator"), located
at 73 Tremont Street, Boston, Massachusetts 02108, generally supervises certain
operations of the IPO Fund, subject to the over-all authority of the Board of
Trustees.
For its services, the Administrator receives a maximum annual fee of .17%,
computed daily and payable monthly as a percent of assets under management.
Fund Brokerage and Trading
The IPO Fund may pay a portion of its total brokerage commissions to Renaissance
Capital Investments, Inc. (the "Broker/Dealer"), an affiliate of Renaissance
Capital. The Broker/Dealer will clear over-the-counter transactions
through unaffiliated broker/dealers. The IPO Fund will trade directly with
dealers making the most favorable market (both in terms of price and number of
shares) at net prices to the IPO Fund. In regard to transactions on the New
York Stock Exchange or other exchanges, the IPO Fund will select a broker
believed to have the ability to execute orders at favorable prices and at
competitive commission rates. Neither the IPO Fund nor Renaissance Capital,
which manages the IPO Fund's trading operations, are obligated to select a
certain broker solely on the basis of commission rates to be paid, but rather
seek a broker on the basis of the most favorable execution, net of commissions.
It is anticipated that the Broker/Dealer will receive commissions at
competitive rates from the IPO Fund in connection with orders executed on an
agency basis on stock exchanges. The IPO Fund may allocate certain
commissions to brokers for research and other investment services
benefiting the IPO Fund.
Renaissance Capital is authorized to place portfolio transactions with brokerage
firms participating in the distribution of shares of the IPO Fund if it
reasonably believes that the quality of the execution and the commission rates
are comparable to that available from other qualified brokerage firms.
Renaissance Capital is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms that do
not provide such services if Renaissance Capital determines that such
commissions are reasonable in relation to the overall services provided.
The IPO Fund may purchase securities from an underwriting syndicate of which
the Broker/Dealer is a member. Section 10(f) of the 1940 Act generally
prohibits an investment company from acquiring, during the existence of any
underwriting or selling syndicate, any securities the principal underwriter of
which is affiliated with the investment company's investment adviser. Rule
10f-3, however, permits an investment company to purchase such securities if
certain procedures are followed. These conditions include (i) that the
securities to be purchased are part of a registered offering or are
municipal securities; (ii) that the securities are purchased at not more than
the public offering price; (iii) that the securities are offered pursuant to
an underwriting agreement; (iv) that the commissions paid are fair and
reasonable; (v) that the securities meet certain qualifications and ratings;
(vi) that the amount of securities purchased are limited to up to 25% of the
principal amount of the offering; and (vii) that the investment company may not
purchase such securities directly or indirectly from certain affiliated persons.
The procedures must be approved and reviewed annually by the Board of Trustees
of the investment company.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Dividends and Capital Gain Distributions
The IPO Fund intends to pay dividends from net investment income and net
realized capital gains (not offset by capital loss carryovers) on an annual
basis in December. Investors may elect to reinvest all income dividends and
capital gains distributions in shares of the IPO Fund or in cash as designated
on the New Account Application. If the investor does not specify an election,
all income dividends and capital gains distributions will automatically be
reinvested in full and fractional shares of the IPO Fund will be calculated to
the nearest 1,000th of a share. Shares will be purchased at the net asset value
in effect on the business day after the dividend record date and will be
credited to the investor's account on such date. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
An investor may change his or her election at any time by sending written
notification to the IPO Fund, P.O. Box 2798, Boston, MA 02108. The election is
effective for distributions with a dividend record date on or after the date
that the Transfer Agent receives notice of the election.
Taxes
The IPO Fund intends to qualify annually for and elect tax treatment applicable
to a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1996, as amended. Because it intends to distribute substantially all of
its net investment income and capital gains to shareholders, it is not expected
that the IPO Fund will be required to pay any federal income taxes. The IPO Fund
would be subject to a 4% excise tax on the portion of its undistributed income
if it fails to meet certain annual distribution requirements. The IPO Fund
intends to make distributions in a timely manner, and accordingly, does not
expect to be subject to taxes. Shareholders will normally have to pay federal
income taxes and any state and local income taxes on the dividends and
distributions they receive from the IPO Fund. Shareholders not subject to tax on
their income will not be required to pay tax on amounts distributed to them.
At the end of each calendar year, shareholders are sent full information on
dividends and long-term capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as long-term capital gains.
Prior to purchasing shares of the IPO Fund, prospective shareholders (except for
tax qualified retirement plans) should consider the impact of dividends or
capital gains distributions which are expected to be announced, or have been
announced but not paid. Any such dividends or capital gains distributions paid
shortly after a purchase of shares by an investor prior to the record date will
have the effect of reducing the per share net asset value by the amount of the
dividends or distributions. All or a portion of such dividends or distributions,
although in effect a return of capital, is subject to taxation.
Shareholders are advised to consult their own tax advisers with respect to these
matters.
INVESTING IN THE IPO FUND
Shares of the IPO Fund may be purchased directly from Renaissance Capital Funds
or through an account maintained with a securities broker or other financial
institution. Investors may be charged a fee if they effect transactions through
a securities broker or agent.
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash will be accepted. A $15 fee may be charged against an investor's
account for any payment check returned to the Transfer Agent for insufficient
funds, stop payment, closed account or other reasons. The investor will also be
responsible for any losses suffered by the IPO Fund as a result. The IPO Fund
reserves the right to reject any purchase order for IPO Fund shares. No share
certificates will be issued.
The minimum purchase requirements, which may be altered in certain
circumstances, are $2,500 for regular accounts; and $500 for IRAs. Additional
investments are $100. Questions about the IPO Fund can be answered by calling
toll-free 1-888-IPO-FUND.
Procedure for Purchasing IPO Fund Shares
To Open an Account: To Add to an Account:
By Mail Complete and sign the Make the check
New Account Application. payable to The IPO
Make the check payable Fund and mail to the
to The IPO Fund and mail address at the left.
mail to: Put the account name,
address and IPO Fund
The IPO Fund account number on the
P.O. Box 2798 check.
Boston, MA 02208-2798
By Courier Follow instructions above Follow the
and send to: instructions above
and send to the
The IPO Fund address at the left.
c/o Chase Global Fund Services
73 Tremont Street
Boston, MA 02108-3913
By Telephone Telephone transactions Call toll free
may not be used for initial 1-888-IPO-FUND to
purchases. initiate electronic
funds transfer. ACH
bank account
information will be
required.
By Wire Call toll free 1-888-IPO-FUND Follow the
to notify us of a wire instructions at the
transfer and to verify left. Please note
instructions. You will be that wires may be
given a wire reference rejected if they do
control number. Then wire funds not contain complete
care of Chase Manhattan Bank: account information.
Credit: 021000021
Account No.: 910-2-776128
Wire Reference Control No.:____________
Further Credit: IPO Fund
Shareholder Account No.:_______________
Shareholder Name: ____________________
Include your name, address and taxpayer ID.
Purchases by Mail
The New Account Application, if properly filled out and accompanied by paymentin
the form of a check made payable to the IPO Fund, will be processed upon receipt
by the Transfer Agent. If the Transfer Agent receives your order and payment by
the close of regular trading (currently 4:00 p.m. Eastern time) on the New York
Stock Exchange, your shares will be purchased at the net asset value calculated
at the close of regular trading on that day. If received after that time, your
shares will be purchased at the net asset value determined as of the close of
regular trading on the next business day.
Purchases by Telephone
Only bank accounts held at domestic financial institutions that are Automated
Clearing House (ACH) members can be used for telephone transactions. Telephone
transactions may not be used for initial purchases. Your account must already be
established prior to initiating telephone transactions. Your shares will be
purchased at the net asset value determined as of the close of regular trading
on the date that the Transfer Agent receives payment for shares purchased by
electronic funds transfer through the ACH system. Most transfers are completed
within three business days after your call to place the order. To preserve
flexibility, the IPO Fund may revise or remove the ability to purchase shares by
phone, or may charge a fee for such service, although currently, the IPO Fund
does not expect to charge a fee.
The IPO Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include requiring
some form of personal identification prior to acting upon telephone
instructions, providing written confirmations of all such transactions, and/or
tape recording all telephone instructions. Assuming procedures such as the above
have been followed, the IPO Fund will not be liable for any loss, cost or
expense for acting upon an investor's telephone instructions or for any
unauthorized telephone redemption. As a result of this policy, the investor will
bear the risk of any loss unless the IPO Fund has failed to follow such
procedure(s).
Purchases by Wire
Before you purchase your initial shares by wire, you must prepare and file a New
Account Application with the Transfer Agent. The Transfer Agent must receive the
New Account Application before any of the shares purchased can be redeemed. You
should contact your bank (which will need to be a commercial bank that is a
member of the Federal Reserve System) for information on sending funds by wire,
including any charges that your bank may make for these services.
Purchases Through Financial Service Agents
If you are investing through a Financial Service Agent, please refer to their
program materials for any additional special provisions or fees that may be
different from those described in this Prospectus. Certain Financial Service
Agents may receive compensation from the IPO Fund. The Financial Service agent
must promise to send to the Transfer Agent immediately available funds in the
amount of the purchase price within one business day from the date of the trade.
REDEEMING IPO FUND SHARES
You may sell (redeem) your shares at any time. A fee will be charged on the
redemption of shares equal to 2% of the redemption price of shares of the IPO
Fund held 90 days or less that are being redeemed. There is no redemption fee
for the sale of shares held longer than 90 days. The redemption fee will not
apply to shares representing the reinvestment of dividends and capital gains
distributions. Reinvested distributions will be sold first without a fee. The
redemption fee will be applied on a share by share basis using the "first shares
in, first shares out" (FIFO) method. Therefore, the oldest shares are considered
to have been sold first. Redemption fee proceeds will be applied to the IPO
Fund's aggregate expenses allocable to providing custody and redemption
services, including transfer agent fees, postage, printing, telephone costs and
employment costs relating to the handling and processing of redemptions. Any
excess fee proceeds will be added to the IPO Fund's capital. Ordinarily, the IPO
Fund makes payment by check for the shares redeemed within seven days after it
receives a properly completed request. However, the right of redemption may be
suspended or payment may be postponed under unusual circumstances such as when
trading on the New York Stock Exchange is restricted. Payment of redemption
proceeds with respect to shares purchased by check will not be made until the
check or payment received for investment has cleared, which may take up to 15
calendar days from the purchase date.
Payment of the redemption proceeds for shares of the IPO Fund where an investor
requests wire payment will normally be made in federal funds on the next
business day. The Transfer Agent will wire redemption proceeds only to the bank
and account designated on the New Account Application or in written instructions
subsequently received by the Transfer Agent, and only if it is a commercial bank
and a member of the Federal Reserve System. The Transfer Agent currently charges
a $10 fee for each payment made by wire of redemption proceeds, which fee will
be deducted from the investor's proceeds.
Procedure for Requesting Redemption
You may request the sale of your shares by mail, courier or telephone as
described below:
By Mail: By Courier:
The IPO Fund The IPO Fund
P.O. Box 2798 c/o Chase Global Fund Services
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913
The selling price of each share being redeemed will be the IPO Fund's per share
net asset value next calculated after receipt of all required documents in good
order. Good order means that the request must include:
o Your IPO Fund account number
o The number of shares or dollar amount to be sold (redeemed)
o The signatures of all account owners exactly as they are registered on
the account
o Any required signature guarantees
o Any supporting legal documentation that is required in the case of
estates, trusts, corporations or partnerships
o In the case of shares being redeemed from an IRA or IRA/SEP Plan,
a statement of whether or not federal income tax should be withheld
(in the absence of any statement, federal tax will be withheld)
A signature guarantee of each owner is required to redeem shares in the
following situations (i) if you change ownership on your account; (ii) when you
want the redemption proceeds sent to a different address from that registered on
the account; (iii) if the proceeds are to be made payable to someone other than
the account's owner(s); (iv) any redemption transmitted by federal wire transfer
to your bank; and (v) if a change of address request has been received by the
Fund or the Transfer Agent within the last 15 days. In addition, signature
guarantees are required for all redemptions of $25,000 or more from any
shareholder account.
Signature guarantees are designed to protect both you and the IPO Fund from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges,
registered securities associations or clearing agencies deemed eligible by the
SEC. Notaries cannot provide signature guarantees.
By Telephone:
Shares of the IPO Fund may also be sold by calling the Transfer Agent toll free
at 1-888-IPO-FUND. To use this procedure for telephone redemption, a shareholder
must have previously elected this procedure in writing, which election will be
reflected in the records of the Transfer Agent, and the redemption proceeds must
be mailed directly to the investor or transmitted to the investor's
predesignated account at a domestic bank. To change the designated account or
address, a written request with signature(s) guaranteed must be sent to the
Transfer Agent. The IPO Fund reserves the right to limit the number of telephone
redemptions by an investor. Once made, telephone requests may not be modified or
canceled. The selling price of each share being redeemed will be the IPO Fund's
per share net asset value next calculated after receipt by the Transfer Agent of
the telephone redemption request. The IPO Fund will not be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine.
The IPO Fund reserves the right to redeem shares held in any account at its
option upon thirty days written notice if the net asset value of the account
falls below $500 for reasons other than market conditions and remains so during
the notice period.
SHAREHOLDER SERVICES
Automatic Investment Plan
The IPO Fund offers an Automatic Investment Plan whereby an investor may
automatically purchase shares of the IPO Fund on a monthly basis ($100 minimum
per transaction). Applications to establish the Automatic Investment Plan are
available from the IPO Fund.
Retirement Plans
The IPO Fund offers various tax-sheltered retirement plans that allow investors
to invest for retirement and to shelter some of their income from taxes.
Application forms, as well as descriptions of applicable service fees and
certain limitations on contributions and withdrawals, are available from the
Transfer Agent of the IPO Fund upon request. These Retirement Plans include
Individual Retirement Accounts (IRAs), Rollover IRAs, Simplified Employee
Pension Plans (SEP/IRAs), and Salary Reduction SEPs.
Distribution and Shareholder Servicing Plan
The IPO Fund has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes annual
payments by the IPO Fund as determined from time to time by the Board of
Trustees, of up to .50% of the IPO Fund's average daily net assets for
distribution and shareholder servicing.
Payments for distribution under the Plan shall be used to compensate or
reimburse the Broker/Dealer and other broker-dealers for services provided and
expenses incurred in connection with the sale of the IPO Fund's shares, and are
not tied to the amount of actual expenses incurred. Payments for distribution
may also be used to compensate broker-dealers with trail or maintenance
commissions. Total annual payments for distribution of the IPO Fund's Shares
will not exceed .25% of the average daily net asset value of shares invested in
the IPO Fund by customers of these broker-dealers.
In addition, under the Plan, payments will be made for shareholder servicing
pursuant to shareholder servicing agreements with certain shareholder
servicing agents under which the shareholder servicing agents have agreed to
provide certain support services to their customers who beneficially own shares
of the IPO Fund. These services include assisting with purchase and redemption
transactions, maintaining shareholder accounts and records, furnishing
customer statements, transmitting shareholder reports and communications to
customers and other similar shareholder liaison services. For performing these
services, each shareholder servicing agent receives an annual fee of up to 0.25%
of the average daily net assets of shares of the IPO Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their customers,
such as pre-authorized or systematic purchase and redemption plans. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the IPO Fund to do so) credit to the accounts of their customers
from whom they are already receiving other fees an amount not exceeding such
other fees or the fees for their services as shareholder servicing agents.
NET ASSET VALUE
Net asset value for the IPO Fund is determined as of the end of regular trading
hours on the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on days
that the New York Stock Exchange is open. The net asset value per share is
determined by dividing the market value of the IPO Fund's securities as of the
close of trading plus any cash or other assets (including dividends and accrued
interest) less all liabilities (including accrued expenses) by the number of the
IPO Fund's shares outstanding.
IPO FUND PERFORMANCE
From time to time, the IPO Fund may advertise its "average annual" total return
over various periods of time. This total return figure shows the average
percentage change in value of an investment in the IPO Fund from the beginning
date of the measuring period to the ending date of the measuring period. The
figure reflects changes in the price of the IPO Fund's shares and assumes that
any income dividends and/or capital gains distributions made by the IPO Fund
during the period are reinvested in shares of the IPO Fund. Figures may be given
for recent one, three, five and ten-year periods (when applicable), and may be
given for other periods (such as from commencement of the IPO Fund's operations,
or on a year-by-year basis). When considering average total return figures for
periods longer than one year, investors should note that the IPO Fund's annual
total return for any one year in the period might have been greater or less than
the average for the entire period. The IPO Fund also may use "aggregate" total
return figures for various periods, representing the cumulative change in value
of an investment in the IPO Fund for the specific period (again reflecting
changes in the IPO Fund's share price and assuming reinvestment of dividends and
distributions). Aggregate total returns may be shown by means of schedules,
charts or graphs, and may indicate subtotals of the various components of total
return (that is, the change in value of initial investment, income dividends and
capital gains distributions).
The IPO Fund may quote the IPO Fund's average annual total and/or aggregate
total return for various time periods in advertisements or communications to
shareholders. The IPO Fund may also compare its performance to that of other
mutual funds with similar investment objectives and to stock and other relevant
indices or to rankings prepared by independent services or industry
publications. For example, the IPO Fund's total return may be compared to data
prepared by Lipper Analytical Services, Inc., Morningstar, Value Line Mutual
Fund Survey and CDA Investment Technologies, Inc. as well as other providers of
mutual fund total return data. The IPO Fund's total return may also be compared
to such indices as the Dow Jones Industrial Average, the Standard & Poor's 500
Composite Index, the NASDAQ Composite OTC Index, and the Russell 2000 Index.
ADDITIONAL INFORMATION
Renaissance Capital Funds, a Delaware Trust organized on February 3, 1997, may
issue an unlimited number of shares and classes of the IPO Fund. Shares of each
class of the IPO Fund participate equally in dividends and distributions and
have equal voting, liquidation and other rights. When issued and paid for,
shares will be fully paid and nonassessable by the Renaissance Capital Funds and
will have no preference, conversion, exchange or preemptive rights. Shareholders
are entitled to one vote for each full share owned and fractional votes for
fractional shares owned. For those investors with qualified trust accounts, the
trustee will vote the shares at meetings of the IPO Fund's shareholders in
accordance with the shareholder's instructions or will vote in the same
percentage as shares that are not so held in trust. The trustee will forward to
these shareholders all communications received by the trustee, including proxy
statements and financial reports. Renaissance Capital Funds and the IPO Fund are
not required to hold annual meetings of shareholders and in ordinary
circumstances do not intend to hold such meetings. The Trustees may call special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the Declaration of Trust. Under certain circumstances, the
Trustees may be removed by action of the Trustees or by the shareholders.
Shareholders holding 10% or more of Renaissance Capital Fund's outstanding
shares may call a special meeting of shareholders for the purpose of voting upon
the question of removal of Trustees.
The Board of Trustees may authorize Renaissance Capital Funds to offer other
funds that may differ in the types of securities in which their assets may be
invested.
Renaissance Capital and the IPO Fund have adopted a Code of Ethics (the "Code")
which requires investment personnel (a) to pre-clear all personal securities
transactions, (b) to file reports regarding such transactions, and (c) to
refrain from personally engaging in (i) short-term trading of a security without
preclearance, (ii) transactions involving a security within seven days of an IPO
Fund transaction involving the same security, and (iii) transactions involving
securities being considered for investment by the IPO Fund. The Code also
prohibits investment personnel from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by Renaissance
Capital and the Board of Trustees reviews annually such reports (including
information on any substantial violations of the Code). Violations of the Code
may result in censure, monetary penalties, suspension or termination of
employment.
Counsel
Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, NY 10022-3852,
serves as counsel to Renaissance Capital Funds.
Independent Certified Public Accountants
Tait, Weller & Baker, 8 Penn Plaza, Suite 800, Philadelphia, PA 19103 serves as
independent certified public accountants of Renaissance Capital Funds.
Custodian, Transfer and Dividend Disbursing Agent
Chase Global Fund Services, which has its principal custodial address at 73
Tremont Street, Boston, MA 02108-3913, acts as custodian of the IPO Fund's
investments, and also serves a the IPO Fund's Transfer and Dividend Disbursing
Agent.
TABLE OF CONTENTS
Page
Prospectus............................................................1
Fund Expenses.........................................................2
Prospectus Summary....................................................3
Investment Objective..................................................4
Investment Policies and Techniques....................................5
Management of the IPO Fund............................................8
Dividends, Capital Gain Distributions and Taxes.......................11
Investing in the IPO Fund.............................................12
Redeeming IPO Fund Shares.............................................14
Shareholder Services..................................................16
Net Asset Value.......................................................17
IPO Fund Performance..................................................17
Additional Information................................................18
The IPO Plus Aftermarket Fund
IPO
logo
R Renaissance Capital
The IPO Experts(TM)
Renaissance Capital Corporation
325 Greenwich Avenue
Greenwich, CT 06830
Toll Free 1-888-IPO-Fund
www.ipo-fund.com
PART B STATEMENT OF ADDITIONAL INFORMATION
1
The IPO Plus Aftermarket Fund
Renaissance Capital Corporation
325 Greenwich Avenue
Greenwich, CT 06830
1-888-IPO-FUND
www.ipo-fund.com
STATEMENT OF ADDITIONAL INFORMATION
December 18, 1997
The IPO Plus Aftermarket Fund (the "IPO Fund") is a series of Renaissance
Capital Greenwich Funds ("Renaissance Capital Funds"), a Delaware Trust,
operating as a diversified, open-end investment company.
This Statement of Additional Information is not a prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus for Renaissance
Capital Greenwich Funds also dated December 18, 1997. A Prospectus may be
obtained without charge by writing the IPO Fund, P.O. Box 2798, Boston, MA
02208, or by calling toll free at 1-888-IPO FUND.
TABLE OF CONTENTS
INVESTMENT OBJECTIVE, POLICIES AND TECHNIQUES...................... 2
INVESTMENT RESTRICTIONS............................................ 7
TRUSTEES AND OFFICERS............................................. 7
INVESTMENT ADVISORY AND OTHER SERVICES............................. 9
BROKERAGE ARRANGEMENTS............................................. 10
HOW TO BUY SHARES.................................................. 11
HOW TO REDEEM SHARES.............................................. 11
VALUATION OF SECURITIES............................................ 11
SHAREHOLDER SERVICES............................................... 12
TAXES.............................................................. 12
ADDITIONAL INFORMATION............................................. 13
PERFORMANCE INFORMATION............................................ 14
FINANCIAL STATEMENT................................................ 16
INVESTMENT OBJECTIVE, POLICIES AND TECHNIQUES
The following information supplements, and should be read in conjunction with,
the sections in the Prospectus entitled "Investment Objective" and "Investment
Policies and Techniques".
Futures Contracts
The IPO Fund may enter into futures contracts, options on futures contracts and
stock index futures contracts and options thereon for the purposes of remaining
fully invested and reducing transaction costs. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount of
a specific security, class of securities, or an index at a specified future time
and at a specified price. A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of trading of the contracts and the price at
which the futures contract is originally struck. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"),
a U.S. Government agency.
Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give the IPO Fund the right (but not the obligation), for a specified price, to
sell or to purchase the underlying futures contract, upon exercise of the
option, at any time during the option period. Brokerage commissions are incurred
when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Initial margin deposits on futures contracts are customarily set at
levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The IPO Fund
expects to earn interest income while its margin deposits are held pending
performance on the futures contract.
When interest rates are expected to rise or market values of portfolio
securities are expected to fall, the IPO Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
the IPO Fund, through the purchase of such contracts, can attempt to secure
better rates or prices for the IPO Fund than might later be available in the
market when it effects anticipated purchases.
The IPO Fund's ability to effectively utilize futures trading depends on several
factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the IPO Fund could lose more than the original margin
deposit required to initiate a futures transaction.
Restrictions on the Use of Futures Contracts. The IPO Fund will only sell
futures contracts to protect securities it owns against price declines or
purchase contracts to protect against an increase in the price of securities it
intends to purchase. The IPO Fund will not enter into futures contract
transactions for purposes other than bona fide hedging purposes to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts exceeds 5% of the market value of the IPO Fund's total assets. In
addition, the IPO Fund will not enter into futures contracts to the extent that
the value of the futures contracts held would exceed 1/3 of the IPO Fund's total
assets. Futures transactions will be limited to the extent necessary to maintain
the Fund's qualification as a regulated investment company.
Renaissance Capital Funds, on behalf of the IPO Fund, has undertaken to restrict
its futures contract trading as follows: first, the IPO Fund will not engage in
transactions in futures contracts for speculative purposes; second, the IPO Fund
will not market its funds to the public as commodity pools or otherwise as
vehicles for trading in the commodities futures or commodity options markets;
third, the IPO Fund will disclose to all prospective shareholders the purpose of
and limitations on its commodity futures trading; fourth, the IPO Fund will
submit to the CFTC special calls for information. Accordingly, registration as a
commodities pool operator with the CFTC is not required.
In addition to the margin restrictions discussed above, transactions in futures
contracts may involve the segregation of funds pursuant to requirements imposed
by the Securities and Exchange Commission (the "SEC"). Under those requirements,
where the IPO Fund has a long position in a futures contract, it may be required
to establish a segregated account (not with a futures commission merchant or
broker, except as may be permitted under SEC rules) containing cash or certain
liquid assets equal to the purchase price of the contract (less any margin on
deposit). For a short position in futures or forward contracts held by the IPO
Fund, those requirements may mandate the establishment of a segregated account
(not with a futures commission merchant or broker, except as may be permitted
under SEC rules) with cash or certain liquid assets that, when added to the
amounts deposited as margin, equal the market value of the instruments
underlying the futures contracts (but are not less than the price at which the
short positions were established). However, segregation of assets is not
required if the IPO Fund "covers" a long position. For example, instead of
segregating assets, the IPO Fund, when holding a long position in a futures
contract, could purchase a put option on the same futures contract with a strike
price as high or higher than the price of the contract held by the IPO Fund. In
addition, where the IPO Fund takes short positions, or engages in sales of call
options, it need not segregate assets if it "covers" these positions. For
example, where the IPO Fund holds a short position in a futures contract, it may
cover by owning the instruments underlying the contract. The IPO Fund may also
cover such a position by holding a call option permitting it to purchase the
same futures contract at a price no higher than the price at which the short
position was established. Where the IPO Fund sells a call option on a futures
contract, it may cover either by entering into a long position in the same
contract at a price no higher than the strike price of the call option or by
owning the instruments underlying the futures contract. The IPO Fund could also
cover this position by holding a separate call option permitting it to purchase
the same futures contract at a price no higher than the strike price of the call
option sold by the IPO Fund.
Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the IPO Fund would continue to be required to make daily cash
payments to maintain the required margin. In such situations, if the IPO Fund
has insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the IPO Fund may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the ability to
effectively hedge them. The IPO Fund will minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on national futures exchanges and for which there appears to be
a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchaser or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the IPO Fund are primarily for hedging
purposes, Renaissance Capital believes that the IPO Fund is generally not
subject to risks of loss exceeding those that would be undertaken if, instead of
the futures contract, it had invested in the underlying financial instrument and
sold it after the decline.
Utilization of futures transactions by the IPO Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that the IPO Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the IPO Fund of margin deposits in the event of bankruptcy of a
broker with whom the IPO Fund has an open position in a futures contract or
related option.
Options
The IPO Fund may purchase and sell put and call options on their portfolio
securities to enhance investment performance and to protect against changes in
market prices.
Covered Call Options. The IPO Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the IPO Fund.
A call option gives the holder the right to purchase, and obligates the writer
to sell, a security at the exercise price at any time before the expiration
date. A call option is "covered" if the writer, at all times while obligated as
a writer, either owns the underlying securities (or comparable securities
satisfying the cover requirements of the securities exchanges), or has the right
to acquire such securities through immediate conversion of securities.
In return for the premium received when it writes a covered call option, the IPO
Fund gives up some or all of the opportunity to profit from an increase in the
market price of the securities covering the call option during the life of the
option. The IPO Fund retains the risk of loss should the price of such
securities decline. If the option expires unexercised, the IPO Fund realizes a
gain equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the IPO Fund realizes a gain or
loss equal to the difference between the IPO Fund's cost for the underlying
security and the proceeds of sale (exercise price minus commissions) plus the
amount of the premium.
The IPO Fund may terminate a call option that it has written before it expires
by entering into a closing purchase transaction. The IPO Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the IPO Fund.
Covered Put Options. The IPO Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
IPO Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from terminating
such options in closing purchase transactions, the IPO Fund also receives
interest on the cash and debt securities maintained to cover the exercise price
of the option. By writing a put option, the IPO Fund assumes the risk that it
may be required to purchase the underlying security for an exercise price higher
than its then current market value, resulting in a potential capital loss unless
the security later appreciates in value.
The IPO Fund may terminate a put option that it has written before it expires by
a closing purchase transaction. Any loss from this transaction may be partially
or entirely offset by the premium received on the terminated option.
Purchasing Put and Call Options. The IPO Fund may also purchase put options to
protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the IPO Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the IPO Fund must
pay. These costs will reduce any profit the IPO Fund might have realized had it
sold the underlying security instead of buying the put option.
The IPO Fund may purchase call options to hedge against an increase in the price
of securities that the IPO Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the IPO Fund, as holder of
the call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the IPO Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
The IPO Fund may also purchase put and call options to attempt to enhance its
current return.
Risks Involved in the Sale of Options. Options transactions involve certain
risks, including the risks that Renaissance Capital will not forecast interest
rate or market movements correctly, that the IPO Fund may be unable at times to
close out such positions, or that hedging transactions may not accomplish their
purpose because of imperfect market correlations. The successful use of these
strategies depends on the ability of Renaissance Capital to forecast market and
interest rate movements correctly.
An exchange-listed option may be closed out only on an exchange which provides a
secondary market for an option of the same series. There is no assurance that a
liquid secondary market on an exchange will exist for any particular option or
at any particular time. If no secondary market were to exist, it would be
impossible to enter into a closing transaction to close out an option position.
As a result, the IPO Fund may be forced to continue to hold, or to purchase at a
fixed price, a security on which it has sold an option at a time when
Renaissance Capital believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other unforeseen
events might cause The Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict the IPO Fund's
use of options. The exchanges have established limitations on the maximum number
of calls and puts of each class that may be held or written by an investor or
group of investors acting in concert. It is possible that Renaissance Capital
Funds and other clients of Renaissance Capital may be considered such a group.
These position limits may restrict the IPO Funds' ability to purchase or sell
options on particular securities. Options which are not traded on national
securities exchanges may be closed out only with the other party to the option
transaction. For that reason, it may be more difficult to close out unlisted
options than listed options. Furthermore, unlisted options are not subject to
the protection afforded purchasers of listed options by The Options Clearing
Corporation.
Short Sales
The IPO Fund may seek to hedge investments or realize additional gains through
short sales. Short sales are transactions in which the IPO Fund sells a security
it does not own, in anticipation of a decline in the market value of that
security. To complete such a transaction, the IPO Fund must borrow the security
to make delivery to the buyer. The IPO Fund then is obligated to replace the
security borrowed by purchasing it at the market price at or prior to the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the IPO Fund. Until the security is replaced, the
IPO Fund is required to repay the lender any dividends or interest that accrue
during the period of the loan. To borrow the security, the IPO Fund also may be
required to pay a premium, which would increase the cost of the security sold.
The net proceeds of the short sale will be retained by the broker (or by the IPO
Fund's custodian in a special custody account), to the extent necessary to meet
margin requirements, until the short position is closed out. The IPO Fund also
will incur transaction costs in effecting short sales. To secure its obligation
to deliver the securities sold short, the IPO Fund will deposit in escrow in a
separate account with its custodian, an equal amount of the securities sold
short or securities convertible into or exchangeable for such securities.
Securities Lending
The IPO Fund may lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. The IPO Fund must receive a minimum of
100% collateral, plus any interest due in the form of cash or U.S. Government
securities. This collateral must be valued daily and should the market value of
the loaned securities increase, the borrower must furnish additional collateral
to the IPO Fund. During the time portfolio securities are on loan, the borrower
will pay the IPO Fund any dividends or interest paid on such securities plus any
interest negotiated between the parties to the lending agreement. Loans will be
subject to termination by the IPO Fund or the borrower at any time. While the
IPO Fund will not have the right to vote securities on loan, it intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment.
Convertible Securities
The IPO Fund may be required to permit the issuer of a convertible security to
redeem the security, convert it into the underlying common stock or sell it to a
third party. Thus, the IPO Fund may not be able to control whether the issuer of
a convertible security chooses to convert that security. If the issuer chooses
to do so, this action could have an adverse effect on the IPO Fund's ability to
achieve its investment objective.
Investment Company Securities
The IPO Fund may invest up to 5% of its total assets in the securities of any
one investment company, but may not own more than 3% of the securities of any
one investment company or invest more than 10% of its total assets in the
securities of other investment companies. Because such other investment
companies employ an investment adviser, such investment by the IPO Fund will
cause shareholders to bear duplicative fees, such as management fees.
Borrowing
The IPO Fund may, from time to time, borrow money to the maximum extent
permitted by the Investment Company Act of 1940, as amended (the "1940 Act")
from banks at prevailing interest rates for temporary or emergency purposes and
investing in additional securities. The IPO Fund's borrowings are limited so
that immediately after such borrowings the value of assets (including
borrowings) less liabilities (not including borrowings) is at least three times
the amount of the borrowings. Should the IPO Fund, for any reason, have
borrowings that do not meet the above test then, within three business days, the
IPO Fund must reduce such borrowings so as to meet the necessary test. Under
such a circumstance, the IPO Fund may have to liquidate portfolio securities at
a time when it is disadvantageous to do so. Gains made with additional funds
borrowed will generally cause the net value of the IPO Fund's shares to rise
faster than could be the case without borrowings. Conversely, if investment
results fail to cover the cost of borrowings, the net asset value of the Fund
could decrease faster than if there had been no borrowings.
INVESTMENT RESTRICTIONS
The IPO Fund has adopted the following restrictions and policies relating to the
investment of the assets of the IPO Fund and its activities. These are
fundamental restrictions and may not be changed without the approval of the
holders of a majority of the outstanding voting shares of the IPO Fund which
means the lesser of (1) the holders of more than 50% of the outstanding shares
of the IPO Fund or (2) 67% of the shares present if more than 50% of the shares
are present at a meeting in person or by proxy.
The IPO Fund may not:
1. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the IPO
Fund from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).
2. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the IPO Fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business). Investments by the IPO Fund
in securities backed by mortgages on real estate or in marketable securities of
companies engaged in such activities are not hereby precluded.
3. Issue any senior security except that (a) the IPO Fund may engage in
transactions that may result in the issuance of senior securities to the extent
permitted under applicable regulations and interpretations of the 1940 Act or an
exemptive order; (b) the IPO Fund may acquire other securities, the acquisition
of which may result in the issuance of a senior security, to the extent
permitted under applicable regulations or interpretations of the 1940 Act; and
(c) subject to the restrictions set forth below, the IPO Fund may borrow money
as authorized by the 1940 Act.
4. Lend any security or make any other loan if, as a result, more than 33 1/3%
of the IPO Fund's total assets would be lent to other parties, but this
limitation does not apply to purchases of publicly issued debt securities or to
repurchase agreements.
5. Underwrite securities issued by others, except to the extent that the IPO
Fund may be considered an underwriter within the meaning of the Securities Act
of 1933 (the "1933 Act") in the disposition of restricted securities.
6. With respect to 75% of the IPO Fund's total assets, the IPO Fund may not
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities)
if, as a result (a) more than 5% of the IPO Fund's total assets would be
invested in the securities of that issuer, or (b) the IPO Fund would hold more
than 10% of the outstanding voting securities of that issuer.
7. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
or repurchase agreements secured thereby) if, as a result, more than 25% of the
IPO Fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry. In the utilities
category, the industry shall be determined according to the service provided.
For example, gas, electric, water and telephone will be considered as separate
industries.
TRUSTEES AND OFFICERS
Overall responsibility for management of the IPO Fund rests with the Trustees
who are elected by the shareholders. The Trustees, in turn, elect the officers
of the IPO Fund to actively supervise its day-to-day operations.
The Trustees and Officers of the IPO Fund and their principal occupations during
the past five years are set forth below.
Name and Address Position held with the IPO Fund Principal
- ---------------- ------------------------------- Occupations
During the
Past Five
Years
------------
William K. Smith* Chairman of the Board, Chairman of
325 Greenwich Avenue President and Trustee the Board,
Greenwich, CT 06830 President and
Director,
Renaissance
Capital
Corporation
(1991 -
present);
Senior Vice
President,
Kidder Peabody
(1989-1991);
Vice
President,
Bear Stearns
(1987-1989)
Linda R. Killian* Vice President, Secretary, Vice President
325 Greenwich Avenue co-Chief Investment Officer and Director,
Greenwich, CT 06830 and Trustee Renaissance
Capital
Corporation
(1992-
present);
Senior Vice
President,
Wertheim
Schroder (1989
-1992);
Vice President
and Portfolio
Manager,
Citicorp
Investment
Management
(1984-1989)
Kathleen Shelton Smith* Vice President, Treasurer, Vice President,
325 Greenwich Avenue co-Chief Investment Officer Treasurer,
Greenwich, CT 06830 and Trustee Secretary and
Director,
Renaissance
Capital
Corporation
(1991-present);
Director,
Merrill Lynch
Capital Markets
(1983-1991)
Martin V. Alonzo Trustee Chairman,
c/o Chase Industries Inc. President and
PO Box 152 Chief Executive
Montpelier, OH 43543 Officer, Chase
Industries Inc.
(1990-present);
Advisor to
Maxxam Group
(1987-1990);
Senior Vice
President and
President, AMAX
(1967-1987)
Warren K. Greene Trustee Senior Vice
c/o Trendlogic Associates, Inc. President,
One Fawcett Place Trendlogic
Greenwich, CT 06830 Inc., an
investment
adviser and
trading
advisor (1995
-present);
Consultant to
Mutual Funds
(1993-1994);
President,
Chief
Executive
Officer and
Investment
Officer,
American
Investor Funds
(1965-1993)
Philip D. Gunn Trustee Principal,
Growth Capital Partners, Inc. Growth Capital
520 Madison Avenue Partners, Inc.,
New York, N.Y. 10022 (1995-present);
Founder and
President,
Philip D. Gunn,
a merchant
banking firm
(1982-present)
Gerald W. Puschel Trustee President, F.
c/o F. Schumacher & Co. Schumacher &
79 Madison Avenue Co. (1989-
New York, NY 10016 present);
President,
Waverly Fabrics
(1980-1989)
*Trustees who are "interested persons" of the IPO Fund, as defined in the
1940 Act. The Trustees of the IPO Fund who are officers or employees of the
investment adviser receive no remuneration from the IPO Fund. Each of the
other Trustees has agreed to waive his fees at this time. Kathleen S. and
William K. Smith are married. The following table indicates the estimated
compensation to be paid to each Trustee from the Renaissance Capital Funds for a
12 month period ended September 30, 1997.
The following table indicates the estimated compensation to be paid to each
Trustee from the Renaissance Capital Funds for a 12 month period ended September
30, 1997.
Estimated
Pension or Retirement Annual Benefits
Benefits Accrued as Upon
Portfolio Expenses Retirement
William K. Smith, Trustee.. -0- -0-
Linda R. Killian, Trustee -0- -0-
Kathleen Shelton Smith, -0- -0-
Trustee....................
Martin V. Alonzo, Trustee -0- -0-
Warren K. Greene, Trustee -0- -0-
Philip D. Gunn, Trustee.. -0- -0-
Gerald W. Puschel, Trustee -0- -0-
Total Compensation Total Compensation
from Fund from "Fund
Complex"
William K.Smith, Trustee.. -0- -0-
Linda R. Killian, Trustee.. -0- -0-
Kathleen Shelton Smith, Trustee.. -0- -0-
(1) Currently there is only the IPO Fund in the Renaissance Capital Funds
Complex.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, Renaissance Capital is the IPO Fund's investment
adviser, providing services under the advisory and service contracts.
Renaissance Capital has been a registered investment adviser since August 1994
and it and its predecessor have been operating since September 1991.
The principal executive officers and directors of Renaissance Capital
are: William K. Smith, Chairman and President; Kathleen Shelton Smith,
Director, Vice President, Secretary and Treasurer; and Linda R. Killian,
Director and Vice President. Renaissance Capital is wholly owned by the three
principals.
The investment advisory agreement between the IPO Fund and Renaissance Capital
dated October 10, 1997 provides for an advisory fee at an annual rate of 1.50%
of the IPO Fund's average daily net assets during the year.
The investment advisory agreement provides that Renaissance Capital shall render
investment advisory and other services to the IPO Fund including, at its
expense, all administrative services, office space and the services of all
officers and employees of the IPO Fund. The IPO Fund pays all other expenses not
assumed by Renaissance Capital, including taxes, interest, brokerage
commissions, insurance premiums, fees and expenses of the custodian and
shareholder servicing agent, legal, audit and fund accounting expenses, fees and
expenses in connection with qualification under federal and state securities
laws, and costs of shareholder reports and proxy materials.
It is possible that certain of Renaissance Capital's clients may have investment
objectives similar to the IPO Fund and certain investments may be appropriate
for the IPO Fund and for other clients advised by Renaissance Capital. From time
to time, a particular security may be bought or sold for only one client's
portfolio or in different amounts and at different times for more than one but
less than all such clients. In addition, a particular security may be bought for
one or more clients when one of more clients are selling such security, or
purchases or sales of the same security may be made for two or more clients at
the same time. In such an event, such transactions, to the extent practicable,
will be averaged as to price and allocated as to amount in proportion to the
amount of each order. In some cases, this procedure could have a detrimental
effect on the price or amount of the securities purchased or sold by the IPO
Fund. In other cases, however, it is believed that the ability of the IPO Fund
to participate, to the extent permitted by law, in volume transactions will
produce less expensive brokerage costs.
The officers, directors, employees of Renaissance Capital and its affiliates may
from time to time own securities that are also held in the IPO Fund's portfolio.
Renaissance Capital has adopted a Code of Ethics which requires among other
things, duplicate confirms of security transactions for each account and
restricting trading in various types of securities to avoid possible conflicts
of interest.
Renaissance Capital may from time to time, directly or through affiliates, enter
into agreements to furnish for compensation special research or financial
services to companies, including services in connection with acquisitions,
mergers, or financings. In the event that such agreements are in effect with
respect to issuers of securities held in the portfolio of the IPO Fund, specific
reference to such agreements will be made in the "Schedule of Investments" in
shareholder reports of the IPO Fund. As of the date of this Statement of
Additional information, no such agreements exist.
BROKERAGE ARRANGEMENTS
Orders for the purchase and sale of portfolio securities are placed with brokers
and dealers who, in the judgment of Renaissance Capital, are able to execute
them as expeditiously as possible and at the best obtainable price. Purchases
and sales of securities which are not listed or traded on a securities exchange
will ordinarily be executed with primary market makers acting as principal,
except when it is determined that better prices and executions may otherwise be
obtained. Renaissance Capital is also authorized to place purchase or sale
orders with brokers or dealers who may charge a commission in excess of that
charged by other brokers or dealers if the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided. Such services may include but are not limited to information as to the
availability of securities for purchase and sale; statistical or factual
information or opinions pertaining to investments; and appraisals or evaluations
of portfolio securities. Such allocations will be in such amounts and in such
proportions as Renaissance Capital may determine. A portion of the IPO Fund's
brokerage commissions may be paid to Renaissance Capital Investments, Inc. (the
"Broker/Dealer"), an affiliate of Renaissance Capital.
Renaissance Capital undertakes that such higher commissions will not be paid by
the IPO Fund unless (1) Renaissance Capital determines in good faith that the
amount is reasonable in relation to the services in terms of the particular
transaction or in terms of Renaissance Capital's overall responsibilities to the
IPO Fund, (2) such payment is made in compliance with the provisions of Section
28 (e) of the Securities and Exchange Act of 1934 and other applicable state and
federal laws, and (3) in the opinion of Renaissance Capital the total
commissions paid by the IPO Fund are reasonable in relation to the expected
benefits to the IPO Funds over the long term. The investment advisory fees paid
by the IPO Fund under the investment advisory agreement are not reduced as a
result of the IPO Fund's receipt of research services.
Consistent with both the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such policies as the Board of Trustees may
determine, and subject to seeking best execution, Renaissance Capital may
consider sales of shares of the IPO Fund as a factor in the selection of dealers
to execute portfolio transactions for IPO Fund.
The Board of Trustees has adopted procedures incorporating the standards of Rule
17e-1 under the 1940 Act which requires that the commissions paid to the
Broker/Dealer or any other "affiliated person" be "reasonable and fair" compared
to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that Renaissance Capital furnish reports to
the Trustees with respect to the payment of commissions to affiliated brokers
and maintain records with respect thereto.
HOW TO BUY SHARES
(See also "Net Asset Value", "Investing in the IPO Fund", and "Shareholder
Services" in the IPO Fund's Prospectus)
Shares of the IPO Fund are purchased at the net asset value next calculated
after receipt of a purchase order. The IPO Fund reserves the right to reduce or
waive the minimum purchase requirements in certain cases such as pursuant to
payroll deduction plans, etc., where subsequent and continuing purchases are
contemplated. Shares of the IPO Fund may be purchased by various tax-sheltered
retirement plans. Upon request, the Broker/Dealer will provide information
regarding eligibility and permissible contributions. Because a retirement plan
is designed to provide benefits in future years, it is important that the
investment objective of the IPO Fund be consistent with the participant's
retirement objectives and time horizon. Premature withdrawals from a retirement
plan may result in adverse tax consequences. For more complete information,
contact the Broker/Dealer at 1-888-IPO-FUND during New York business hours.
HOW TO REDEEM SHARES
(See also "Redeeming IPO Fund Shares" in the IPO Fund's Prospectus)
The right of redemption may be suspended, or the date of payment postponed
beyond the normal two-day period by the IPO Fund under the following conditions
authorized by the 1940 Act: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday closures, or
(b) during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal by
the IPO Fund of securities owned by it is not reasonably practical, or (b) it is
not reasonably practical for the IPO Fund to determine the fair value of its net
assets; (3) for such other periods as the SEC may by order permit for the
protection of the IPO Fund's shareholders.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Trustees, make it undesirable for the IPO Fund to pay
for redemptions in cash. In such cases the Board may authorize payment to be
made in portfolio securities or other property of the IPO Fund. However, the IPO
Fund has obligated itself under the 1940 Act to redeem for cash all shares
presented for redemption by any one shareholder up to $250,000 (or 1% of the IPO
Fund's net assets if that is less) in any 90-day period. Securities delivered in
payment of redemptions are valued at the same value assigned to them in
computing the net asset value per share. Shareholders receiving such securities
may incur brokerage costs on their sales.
VALUATION OF SECURITIES
Portfolio securities are valued at the last sale price on the securities
exchange or national securities market on which such securities primarily are
traded. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices, except in the case of open short positions
where the asked price is used for valuation purposes. Bid price is used when no
asked price is available. Short-term investments are carried at amortized cost,
which approximates value. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined in
good faith by the IPO Fund's Board of Trustees. Expenses and fees, including the
management fee and distribution and service fees, are accrued daily and taken
into account for the purpose of determining the net asset value of the IPO
Fund's shares.
Restricted securities, as well as securities or other assets for which market
quotations are not readily available, or are not valued by a pricing service
approved by the Board of Trustees, are valued at fair value as determined in
good faith by the Board of Trustees. The Board of Trustees will review the
method of valuation on a current basis. In making their good faith valuation of
restricted securities, the Board of Trustees generally will take the following
factors into consideration: restricted securities which are, or are convertible
into, securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage discount
at which purchased. This discount will be revised periodically by the Board of
Trustees if the Trustees believe that it no longer reflects the value of the
restricted securities. Restricted securities not of the same class as securities
for which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Trustees.
SHAREHOLDER SERVICES
(See also "Distribution and Shareholder Servicing Plan" in the IPO
Fund's Prospectus)
In approving the Distribution and Shareholder Servicing Plan ("the Plan") in
accordance with the requirements of Rule 12b-1 under the 1940 Act, the
Trustees (including the Independent Trustees, being Trustees who are not
"interested persons", as defined by the 1940 Act, of the Renaissance Capital
Funds and have no direct or indirect financial interest in the operation of
the Plan or in any agreementsrelated to the Plan) considered various factors
and determined that there is a reasonable likelihood that the Plan will
benefit the IPO Fund and its shareholders. The Plan will continue in effect
from year to year if specifically approved annually (a) by the majority of
the IPO Fund's outstanding voting shares or by the Board of Trustees and (b)
by the vote of a majority of the Independent Trustees. While the Plan remains
in effect, the Principal Financial Officer shall prepare and furnish to the
Board of Trustees a written report setting forth the amounts spent by the IPO
Fund under the Plan and the purposes for which such expenditures were made. The
Plan may not be amended to increase materially the amount to be spent for
distribution without shareholder approval and all material amendments to the
Plan must be approved by the Board of Trustees and by the Independent Trustees
cast in person at a meeting called specifically for that purpose. While the
Plan is in effect, the selection and nomination of the Independent Trustees
shall be made by those Independent Trustees then in office.
TAXES
The IPO Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, the IPO Fund will not be subject to Federal income taxes to the
extent that it distributes its net investment income and realized net capital
gains.
Distributions of investment income and of the excess of net short-term capital
gain over net long-term capital loss are taxable as ordinary income (whether or
not reinvested in additional IPO Fund shares). Distributions of the excess of
net long-term capital gain over net short-term capital loss (net capital gains)
are taxable to shareholders as long-term capital gain, regardless of the length
of time the shares of the IPO Fund have been held by such shareholders and
regardless of whether the distribution is received in cash or in additional
shares of the IPO Fund. It is expected that dividends will constitute a small
portion of the IPO Fund's gross income.
The Code requires each regulated investment company to pay a nondeductible 4%
excise tax to the extent the company does not distribute, during each calendar
year, an amount equal to 98% of its ordinary income for such calendar year and
98% of its capital gain net income for the one-year period ended on October 31
of such calendar year (or, at the election of a regulated investment company
having a taxable year ending November 30 or December 31, for its taxable year).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. The IPO Fund anticipates that it will make
sufficient timely distributions to avoid imposition of the excise tax.
Options and futures contracts entered into by the IPO Fund will be subject to
special tax rules. These rules may accelerate income to the IPO Fund, defer IPO
Fund losses, cause adjustments in the holding periods of IPO Fund securities,
convert capital gains into ordinary income and convert short-term capital losses
into long-term capital losses. As a result, these rules could affect the amount,
timing and character of IPO Fund distributions.
A distribution by the IPO Fund will result in a reduction in the IPO Fund's net
asset value per share. Such a distribution is taxable to the shareholder as
ordinary income or capital gain as described above even though, from an investor
standpoint, it may constitute a return of capital. In particular, investors
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a return of capital on the distribution that
nevertheless is taxable to them. All distributions, whether received in cash or
reinvested in shares, must be reported by each shareholder on his or her federal
income tax. Under the Code, dividends declared by the IPO Fund in October,
November and December of any calendar year, and payable to shareholders of
record in such a month, shall be deemed to have been received by the shareholder
on December 31 of such calendar year if such dividend is actually paid in
January of the following calendar year. The IPO Fund intends to pay all
dividends during the month of December so that it will not be affected by this
rule.
A shareholder may realize a capital gain or capital loss on the sale or
redemption of shares of the IPO Fund. The tax consequences of a sale or
redemption depend on several factors, including the shareholder's tax basis in
the shares sold or redeemed and the length of time the shares have been held.
Basis in the shares may be the actual cost of those shares (net asset value of
the IPO Fund shares on purchase or reinvestment date). Under certain
circumstances, a loss on the sale or redemption of shares held for six months or
less may be treated as a long-term capital loss to the extent that the IPO Fund
has distributed long-term capital gain dividends on such shares. Moreover, a
loss on a sale or redemption of IPO Fund shares will be disallowed to the extent
the shareholder purchases other shares of the IPO Fund within 30 days before or
after the date the shares are sold or redeemed.
For Federal income tax purposes, distributions paid from net investment income
and from any realized net short-term capital gains are taxable to shareholders
as ordinary income, whether received in cash or in additional shares. Dividends
are taxable as ordinary income, whereas capital gain distributions are taxable
as long-term capital gains. The 70% dividends-received deduction for
corporations will apply only to the proportionate share of the dividend
attributable to dividends received by the IPO Fund from domestic corporations.
Any dividend or capital gain distribution paid shortly after a purchase of
shares of the IPO Fund will have the effect of reducing the per share net asset
value of such share by the amount of the dividend or distribution. Furthermore,
even if the net asset value of the shares of the IPO Fund immediately after a
dividend or distribution is less than the cost of such shares to the investor,
the dividend or distribution will be taxable to the investor.
The IPO Fund is required to withhold federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption and exchange
proceeds if an investor fails furnish the IPO Fund with his social security
number or other tax identification number or fails to certify under penalty of
perjury that such number is correct or that he is not subject to backup
withholding due to the underreporting of income. The certification form is
included as part of the share purchase application and should be completed when
the account is opened. Corporations, other exempt individuals or entities, and
foreign individuals who furnish the IPO Fund with proper notification of their
foreign status will not be subject to backup withholding.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on an investor. Investors
are urged to consult their respective tax advisers for a complete review of the
tax ramifications of an investment in the IPO Fund.
ADDITIONAL INFORMATION
Description of Shares
Renaissance Capital Funds is a Delaware business trust. The Delaware Trust
Instrument authorizes the Trustees to issue an unlimited number of shares, which
are units of beneficial interest, without par value. The Trust Instrument
authorizes the Trustees to divide or redivide any unissued shares of the
Renaissance Capital Funds into one or more additional series by setting or
changing in any one or more aspects their respective preferences, conversion or
other rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Trustees may grant in their discretion. When issued for
payment, as described in the Prospectus and this Statement of Additional
Information, Renaissance Capital Fund's shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of Renaissance
Capital Funds, shares of the IPO Fund are entitled to receive the assets
available for distribution belonging to the IPO Fund, and a proportionate
distribution, based upon the relative asset values of the respective funds of
the Renaissance Capital Funds, of any general assets not belonging to any
particular fund that are available for distribution.
Shares of Renaissance Capital Funds are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as shareholders are
entitled to vote. On any matter submitted to a vote of the shareholders, all
shares are voted separately by individual series (funds), and whenever the
Trustees determine that the matter affects only certain series, may be submitted
for a vote by only such series, except (1) when required by the 1940 Act, shares
are voted in the aggregate and not by individual series; and (2) when the
Trustees have determined that the matter affects the interests of more than one
series and that voting by shareholders of all series would be consistent with
the 1940 Act, then the shareholders of all such series shall be entitled to vote
thereon (either by individual series or by shares voted in the aggregate, as the
Trustees in their discretion may determine). The Trustees may also determine
that a matter affects only the interests of one or more classes of a series, in
which case (or if required under the 1940 Act) such matter shall be voted on by
such class or classes. There will normally be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of the Trustees have been elected by the shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. In addition, Trustees may be removed from office by a vote of the
holders of at least two-thirds of the outstanding shares of Renaissance Capital
Funds. A meeting shall be held for such purpose upon the written request of the
holders of not less than 10% of the outstanding shares. Upon written request by
ten or more shareholders meeting the qualifications of Section 16(c) of the 1940
Act, (i.e. persons who have been shareholders for at least six months, and who
hold shares having a net asset value of at least $25,000 or constituting 1% of
the outstanding shares) stating that such shareholders wish to communicate with
the other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Trustee, Renaissance Capital Funds
will provide a list of shareholders or disseminate appropriate materials (at the
expense of the requesting shareholders). Except as set forth above, the Trustees
shall continue to hold office and may appoint their successors.
Shareholder and Trustee Liability
The Delaware Business Trust Act provides that a shareholder of a Delaware
business trust shall be entitled to the same limitation of personal liability
extended to shareholders of Delaware corporations, and the Delaware Trust
Instrument provides that shareholders of Renaissance Capital Funds shall not be
liable for the obligations of Renaissance Capital Funds. The Delaware Trust
Instrument also provides for indemnification out of the trust property of any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. The Delaware Trust Instrument also provides that
Renaissance Capital Funds shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of Renaissance Capital
Funds, and shall satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered to be
extremely remote.
The Delaware Trust Instrument states further that no Trustee, officer, or agent
of Renaissance Capital Funds shall be personally liable in connection with the
administration or preservation of the assets of the IPO Fund or the conduct of
Renaissance Capital Funds's business; nor shall any Trustee, officer, or agent
be personally liable to any person for any action or failure to act except for
his own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his duties. The Declaration of Trust also provides that all persons having
any claim against the Trustees or Renaissance Capital Funds shall look solely to
the assets of Renaissance Capital Funds for payment.
PERFORMANCE INFORMATION
General
From time to time, quotations of the IPO Fund's performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner.
Average Annual Total Return
Average annual total return is the average annual compound rate of return for
periods of one year, five years, and ten years, all ended on the last day of a
recent calendar quarter. Average annual total return quotations reflect changes
in the price of the IPO Fund's shares and assume that all dividends and capital
gains distributions during the respective periods were reinvested in IPO Fund
shares. Average annual total return is calculated by computing the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
T = Average annual total return
P = A hypothetical initial investment of $1,000
n = Number of years
ERV = Ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000 investment made at the beginning
of the applicable period.
It should be noted that average annual total return is based on historical
earnings and based on changes in market conditions and the level of the IPO
Fund's expenses.
In connection with communicating its average annual total return to current or
prospective shareholders, the IPO Fund also may compare these figures to the
performance of other mutual funds tracked by the mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management cost.
Comparison of Portfolio Performance
Comparison of the quoted non-standardized performance of various investments is
valid only if performance is calculated in the same manner. Because there are
different methods of calculating performance, investors should consider the
effect of the methods used to calculate performance when comparing performance
of the IPO Fund with performance equated with respect to other investment
companies or types of investments.
Marketing and other IPO Fund literature may include a description of the
potential risks and rewards associated with an investment in the IPO Fund. The
description may include a "risk/return spectrum" which compares the IPO Fund to
other Funds investing in IPOs or broad categories of funds, such as money
market, bond or equity funds, in terms of potential risk and returns. Money
market funds are designed to maintain a constant $1.00 share price and have a
fluctuating yield. Share price, yield and total return of a bond fund will
fluctuate. The share price and return of an equity fund also will fluctuate.
Risk/return spectrums also may depict funds that invest in both domestic and
foreign securities or a combination of bond and equity securities.
FINANCIAL STATEMENT
THE IPO PLUS AFTERMARKET FUND
Statement of Assets and Liabilities
October 30, 1997
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Trustees
The IPO Plus Aftermarket Fund
Greenwich, Connecticut
We have audited the accompanying statement of assets and liabilities of The IPO
Plus Aftermarket Fund, as of October 30, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial 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. 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 of the statement of
assets and liabilities 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 IPO
Plus Aftermarket Fund as of October 30, 1997 in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 18, 1997
THE IPO PLUS AFTERMARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
October 30, 1997
- --------------------------------------------------------------------------------
ASSETS
Cash ........................................................... $102,000
Deferred organization expenses ................................. 115,000
---------
Total assets ................................................ $217,000
LIABILITIES
Due to Investment Adviser ...................................... $115,000
---------
NET ASSETS
(Unlimited shares of no par beneficial interest ................. $102,000
authorized; 8,160 shares outstanding) ---------
---------
Net asset value and redemption price per share
$102,000 / 8,160 shares ............................................. $ 12.50
- --------------------------------------------------------------------------------
See notes to statement of assets and liabilities
THE IPO PLUS AFTERMARKET FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
October 30, 1997
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The IPO Plus Aftermarket Fund (the "Fund"), a diversified, open-end
investment company, was organized on February 3, 1997 as a Delaware
Business Trust. The Fund has had no operations through October 30, 1997
other than those relating to organizational matters and the sale and
issuance of 8,160 shares at $12.50 per share to the pension plans of the
shareholders of the Fund's Investment Adviser.
(2) DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
Renaissance Capital Corporation (the "Adviser") has agreed to advance the
organization expenses incurred by the Fund and will be reimbursed for such
expenses after commencement of the Fund operations. The organization
expenses will be amortized over a period of five years commencing after the
effective date of the Fund's Registration Statement.
Pension plans affiliated with shareholders of the Fund's Investment Adviser
have purchased shares to provide the Fund's initial capital. Any such
shares redeemed before amortization of the Fund's organizational expenses
has been completed would be subject to a charge for a proportional share of
such unamortized expenses. To avoid imposing such charges on those shares,
the Adviser has agreed to bear, in lieu of a reduction of the redemption
proceeds, any charges assessed against the shares owned by the plans. To
avoid creating a borrowing by the Adviser from the Fund, any such payments
which may be required will be paid or offset contemporaneously with the
redemption of the shares. Investors purchasing shares of a Fund bear such
expenses only as they are amortized against the Fund's investment income.