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Registration Nos. 33-
811-
As filed with the Securities and Exchange Commission on
January 29, 1997
_______________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. / /
(Check appropriate box or boxes)
__________________________________
ORBITEX GROUP OF FUNDS
(Exact Name of Registrant as Specified in Charter)
660 Madison Avenue, New York, New York 10021
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
(212) 891-7920
______________________
James L. Nelson
660 Madison Avenue
New York, New York 10021
(Name and Address of Agent for Service)
Copies to:
Cynthia Surprise Leonard B. Mackey, Jr.
State Street Bank and Trust Company Rogers & Wells
1776 Heritage Drive, A4N 200 Park Avenue
North Quincy, Massachusetts 02171 New York, New York 10166
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
The Registrant elects to register an indefinite number or amount of its
shares of beneficial interest under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940.
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ORBITEX GROUP OF FUNDS
CROSS-REFERENCE SHEET
Form N-1A Item No. Caption in Prospectus
- ------------------ ---------------------
1. Cover Page Cover Page
2. Synopsis Cover Page; The Funds at a Glance
3. Condensed Financial Information Not Applicable
4. General Description of Registrant The Funds at a Glance; Investment
Objectives Strategies and Policies;
Description of Securities, Other
Investment Policies and Risk
Considerations
5. Management of the Fund How the Trust is Managed
6. Capital Stock and Other Securities Organization of the Trust; Dividends,
Distributions, and Taxes; How to
Purchase Shares
7. Purchase of Securities How to Purchase Shares; Shareholder
Services; How Each Fund's Net Asset
Value is Determined
8. Redemption or Repurchase Shareholder Services; How to
Redeem Shares
9. Pending Legal Proceedings Not Applicable
Caption in Statement of
Form N-1A Item No. Additional Information
- ------------------ -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Investment Restrictions; Description
Policies of Securities, Other Investment Policies
and Risk Considerations
14. Management of the Fund Management of the Trust
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Caption in Statement of
Form N-1A Item No. Additional Information
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15. Control Persons and Principal Principal Holders of Securities
Holders of Securities
16. Investment Advisory and Other Investment Management and Other
Services Services
17. Brokerage Allocation and Other Brokerage Allocation and Other
Practices Practices
18. Capital Stock and Other Organization of the Trust
Securities
19. Purchase, Redemption and Pricing Purchase and Redemption of Securities
of Securities Being Offered Being Offered; Determination of Net
Asset Value
20. Tax Status Taxes
21. Underwriters Distribution of Shares
22. Calculation of Performance Data Performance Information About the Funds
23. Financial Statements Independent Auditors
<PAGE>
PART A
ORBITEX GROUP OF FUNDS
660 Madison Avenue
New York, New York 10021
PROSPECTUS
[ , 1997]
ORBITEX GROUP OF FUNDS (the "Trust") is a mutual fund that currently
consists of five investment portfolios (each a Fund and collectively the
"Funds"). Each Fund is managed separately and has its own investment objective,
strategies and policies designed to meet different goals.
ORBITEX GLOBAL NATURAL RESOURCES FUND seeks capital growth through a
flexible policy of investing in stock and debt obligations of companies engaged
in natural resource industries and industries supportive to natural resource
industries.
ORBITEX COMMUNICATIONS & INFO-TECH FUND seeks superior long-term returns
through selective investment in telecommunication and information companies.
ORBITEX GROWTH FUND seeks long-term growth of capital through investment in
securities of companies of all sizes that offer potential for growth.
ORBITEX ASIAN HIGH YIELD FUND seeks high current income through investment
in securities of issuers based in Asia. The Fund will invest significantly in
high yield, high risk securities (commonly referred to as junk bonds).
Investments of this type are subject to greater risk of loss of principal and
interest.
ORBITEX ASIAN SELECT ADVISERS FUND seeks superior long-term capital growth
through selective investment in Asian companies.
There can be no assurance that the objective of each Fund will be realized.
For general information about the Trust, please call [telephone number].
This Prospectus sets forth concisely the information about each Fund that
you should know before investing. It should be retained for future reference. A
Statement of Additional Information ("SAI"), dated , 1997, about each Fund
has been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. You may obtain a copy of the SAI at no charge
by calling the Trust at the number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
The Funds at a Glance...................................................................................... 1
The Funds' Expenses........................................................................................ 1
Portfolio Manager Performance.............................................................................. 3
Investment Objectives, Strategies and Policies............................................................. 3
Description of Securities, Other Investment Policies and Risk Considerations............................... 6
Investment Performance..................................................................................... 15
Portfolio Turnover......................................................................................... 16
Dividends, Distributions, and Taxes........................................................................ 16
How to Purchase Shares..................................................................................... 18
Shareholder Services....................................................................................... 21
How Each Fund's Net Asset Value is Determined.............................................................. 21
How to Redeem Shares....................................................................................... 22
How the Trust is Managed................................................................................... 24
Portfolio Transactions and Brokerage Practices............................................................. 27
Organization of the Trust.................................................................................. 27
</TABLE>
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THE FUNDS AT A GLANCE
The Trust is a Delaware business trust registered with the SEC as an
open-end diversified management investment company, commonly known as a "mutual
fund." The Trust currently consists of five Funds: Orbitex Global Natural
Resources Fund, Orbitex Communications & Info-Tech Fund, Orbitex Growth Fund,
Orbitex Asian High Yield Fund and Orbitex Asian Select Advisers Fund. Each Fund
in the Trust is a separate investment portfolio and has its own investment
objective, investment programs, policies and restrictions. Each Fund is managed
by Orbitex Management, Inc. (the "Adviser"), which directs the day-to-day
operations of each Fund. However, certain of the Funds have one or more
investment sub-advisers (each a "Sub-Adviser") which selects the investments
made by that Fund, subject to oversight and direction by the Adviser. Funds
Distributor, Inc. (the "Distributor") serves as the distributor for the Trust.
State Street Bank and Trust Company ("State Street") serves as the
administrator, custodian, accounting services agent, transfer agent and dividend
disbursing agent for the Trust.
Shares of each Fund are offered at net asset value plus any applicable sales
charge (maximum is 5.75% of public offering price) and subject to a service and
distribution fee at the rate of .25% of the average daily net assets of the
Fund. The minimum initial investment is $2,500, and the minimum for subsequent
investments is $500. Shares may be redeemed at any time at the net asset value
of a Fund next determined after receipt of the redemption request. The
redemption price may be more or less than the purchase price.
THE FUNDS' EXPENSES
The Fee Table, including the Examples below, is included to assist your
understanding of the various costs and expenses to which an investment in each
Fund would be subject. Certain fees and expenses of each Fund stated below are
estimates for its first year of operations, based upon assumed average daily net
assets of $25 million. Actual fees and expenses for each Fund for the current
year may be more or less than those shown below. A more complete description of
all fees and expenses is included in this Prospectus under the section "How the
Trust is Managed."
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GLOBAL NATURAL COMMUNICATIONS ASIAN SELECT
SHAREHOLDER TRANSACTION RESOURCES & INFO-TECH GROWTH ASIAN HIGH ADVISERS
EXPENSES FUND FUND FUND YIELD FUND FUND
-------------------------------------------------- -------------- -------------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchase Price (as a
% of offering price)............................ 5.75%(1) 5.75%(1) 5.75%(1) 5.75%(1) 5.75%(1)
Maximum Sales Load Imposed on Reinvested
Dividends....................................... None None None None None
Maximum Deferred Sales Load Imposed on Redemptions
(as a % of lower of original purchase price or
redemption proceeds)............................ None(2) None(2) None(2) None(2) None(2)
Redemption Fee.................................... None None None None None
Exchange Fee...................................... None None None None None
</TABLE>
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(1) Reduced for purchases over $50,000. See "How to Purchase Shares--Initial
Sales Charge."
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(2) Purchases over $1 million are not subject to any sales load at the time of
purchases, but a 1% contingent deferred sales charge applies on amounts
redeemed within one year of purchase. See "How to Redeem Shares--Contingent
Deferred Sales Charge."
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<CAPTION>
GLOBAL NATURAL COMMUNICATIONS ASIAN SELECT
ANNUAL FUND OPERATING RESOURCES & INFO-TECH GROWTH ASIAN HIGH ADVISERS
EXPENSES FUND FUND FUND YIELD FUND FUND
- --------------------------------------------- -------------- -------------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fee (after fee
waivers)................................... [.%] [.%] [.%] [.%] [.%]
12b-1 Fees .25% .25% .25% .25% .25%
Other Expenses (estimated)................... [%] [%] [%] [%] [%]
------- -------------- ------ ---------- ------
Total Fund Operating Expenses (after fee
waivers)................................... [%] [%] [%] [%] [%]
</TABLE>
The Adviser has agreed to waive or limit its fees and to pay certain
operating expenses to the extent necessary to limit Total Fund Operating
Expenses to [ %] for the High Yield Fund and [ %] for each of the other Funds
subject to possible reimbursement by the Funds in future years if such
reimbursement can be achieved within the foregoing expense limits. Consequently,
the Investment Advisory Fees actually charged will in the future be higher than
reflected above, if consistent with the limits on the Total Fund Operating
Expenses. Absent the waiver or limitation of fees, the Investment Advisory Fees,
Other Expenses and Total Fund Operating Expenses would be [ %], [ %] and
[ %], respectively, for the High Yield Fund and [ %], [ %] and [ %],
respectively, for each of the other Funds.
EXAMPLES: An investor in each Fund would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return and (2) redemption at the end
of each future time period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS
- ----------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Global Natural Resources..................................................... $ $
Communications & Info-Tech................................................... $ $
Growth....................................................................... $ $
Asian High Yield............................................................. $ $
Asian Select Advisers........................................................ $ $
</TABLE>
The Examples above assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of shares in amounts of $50,000 or more.
Purchases in an amount of $1 million or more are made at net asset value and are
subject to a contingent deferred sales charge for one year following purchase.
As a result of 12b-1 fees, a long-term shareholder may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers, Inc. Given the maximum
front-end sales charge applicable to shares of each Fund, it is estimated that
it would require a substantial number of years to exceed the maximum permissible
front-end sales charges.
THESE EXAMPLES SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE FEES OR EXPENSES FOR EACH FUND. ACTUAL FEES AND EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN ABOVE. Similarly, the annual rate of return assumed in
the Example is not an estimate or guarantee of future investment performance,
but is included for illustrative purposes.
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PORTFOLIO MANAGER PERFORMANCE
Because the Funds did not begin operating until 1997, no past
performance information is available. However, two of the Portfolio Managers
have been managing investment funds with substantially the same investment
objectives and policies, and using substantially the same investment strategies
and techniques, as the Communications & Info-Tech Fund and the Global Natural
Resources Fund, respectively. Neither of the investment funds are registered
under the 1940 Act and therefore are not subject to certain investment
restrictions that are imposed by the 1940 Act. If they had been registered under
the 1940 Act, their performance may have been adversely affected. The
performance of the investment funds is shown below.
Ian Ainsworth has been primarily responsible for the day-to-day management
of the Orbitex Communications & Information Technology Fund since January 1993.
Average annual returns for the one-year and three-year periods ended December
31, 1996 and for the entire period during which Mr. Ainsworth has managed the
Orbitex Communications & Information Technology Fund were:
David Taylor has been primarily responsible for the day-to-day management of
the Orbitex Natural Resources Fund since March 1995. Average annual returns for
the one-year period ended December 31, 1996 and for the entire period during
which Mr. Taylor managed the Orbitex Natural Resources Fund were:
Historical performance is not indicative of future performance. The Orbitex
Communications & Information Technology Fund and the Orbitex Natural Resources
Fund are each separate funds and their historical performance is not indicative
of the potential performance of the Communications & Info-Tech Fund and the
Global Natural Resources Fund, respectively.
INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
Each Fund's objective is a fundamental policy and may not be changed without
a shareholder vote. Any investment involves risk and, therefore, there can be no
assurance that any Fund will achieve its objective. All investment policies
stated throughout this Prospectus, other than those identified as fundamental,
may be changed by the Board of Trustees of the Trust without shareholder
approval. A complete statement of each Fund's investment restrictions is
included in the SAI. Compliance with policies and limitations is determined at
the time of purchase of a security; a Fund is not required to sell an investment
because of a later change in circumstances.
ORBITEX GLOBAL NATURAL RESOURCES FUND
The objective of the Orbitex Global Natural Resources Fund (the "Global
Natural Resources Fund") is capital growth. The Fund seeks to achieve its
objective through a flexible policy of investing primarily in equity and debt
securities of United States and foreign companies engaged in natural resource
industries and industries supportive to natural resource industries.
At least 65% of the Fund's total assets will normally be invested in
securities issued by natural resource companies. The remainder of the Fund's
assets may be invested in equity and debt securities of companies outside of the
natural resource industries.
Under normal circumstances, the Adviser will invest at least 65% of the
Fund's total assets in securities of issuers located in at least three different
countries, including the United States, with emphasis
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on securities of Canadian companies. There is no limitation on the amount the
Fund may invest in any one country or currency.
A "natural resource" company is an entity in which (i) at least 50% of
either the revenues or earnings was derived from natural resource activities, or
(ii) at least 50% of the assets was devoted to such activities, based upon the
company's most recent fiscal year. Examples of natural resource companies
include those which own, explore, develop or produce: energy sources (such as
oil, gas and coal); ferrous and non-ferrous metals (such as iron, aluminum,
copper, nickel, zinc and lead); strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and newsprint);
other basic commodities (such as foodstuffs); and refined products (such as
chemicals and steel). Industries supportive to natural resources industries
include service companies that provide services to producers and refiners of
natural resources; or provide other products and services, which, in the
Adviser's opinion are significant to the ownership and development of natural
resources and other basic commodities.
Please refer to the section entitled "Description of Securities, Other
Investment Policies and Risk Considerations" below for a description of the
types of securities in which the Fund may invest and the types of practices in
which the Fund may engage.
ORBITEX COMMUNICATIONS & INFO-TECH FUND
The objective of the Orbitex Communications & Info-Tech Fund (the
"Communications & Info-Tech Fund") is above-average long-term returns. The Fund
seeks to achieve its objective through selective investment in companies engaged
in the telecommunications and information industries and the technology
associated with these industries.
It is expected that the Fund will invest in technology companies in the
United States and other leading countries, and will also invest in companies
that are well positioned to benefit from the rapid growth in the
telecommunications infrastructure in emerging economies. The Adviser's market
expectations will determine the allocation of the Fund's investments between
industries.
At least 65% of the Fund's total assets normally will be invested in equity
securities issued by telecommunications and information companies. The remainder
of the Fund's assets may be invested in debt securities issued by
telecommunications and information companies and/or equity and debt securities
of companies outside of those industries.
A "telecommunications" company is an entity in which (i) at least 50% of
either its revenues or earnings was derived from telecommunications activities,
or (ii) at least 50% of its assets was devoted to telecommunications activities,
based on the company's most recent fiscal year. An "information" company is an
entity in which (i) at least 50% of either it revenues or earnings was derived
from information activities, or (ii) at least 50% of its assets was devoted to
information activities, based on the company's most recent fiscal year. For
purposes of the Fund's policy of investing at least 65% of its total assets in
the securities of telecommunications and information companies, the companies in
which the Fund will invest are those engaged primarily in designing, developing
or providing the following products and services: communications equipment and
services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data
4
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processing systems; publishing and information systems; videotext and teletext;
and emerging technologies combining telephone, television and/or computer
systems.
Please refer to the section entitled "Description of Securities, Other
Investment Policies and Risk Considerations" below for a description of the
types of securities in which the Fund may invest and the types of practices in
which the Fund may engage.
ORBITEX GROWTH FUND
The objective of the Orbitex Growth Fund (the "Growth Fund") is long-term
growth of capital. The production of income will be incidental to this
objective. The Fund seeks to achieve its objective through investment in
securities believed by the Sub-Adviser to have significant appreciation
potential.
The Fund may invest in the securities of any issuer, including U.S. and
foreign companies, governments and government agencies. The Fund, however, will
tend to focus on the securities of both established and newer or smaller
capitalization companies. The Fund expects to invest a majority of its assets in
equity securities, but may also invest in debt securities of any quality.
Please refer to the section entitled "Description of Securities, Other
Investment Policies and Risk Considerations" below for a description of the
types of securities in which the Fund may invest and the types of practices in
which the Fund may engage.
ORBITEX ASIAN HIGH YIELD FUND
The objective of the Orbitex Asian High Yield Fund (the "Asian High Yield
Fund") is high current income. The Fund seeks to achieve this objective by
investing primarily in lower rated and unrated debt securities of companies,
financial institutions and governments based in Asia. Capital appreciation is a
secondary objective.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in debt securities whose credit quality is generally considered the
equivalent of U.S. corporate debt securities commonly known as "junk bonds."
The Sub-Adviser expects that the Fund will normally invest in at least three
different countries, although it may invest all of its assets in a single
country. The geographical diversification of the Fund's investments will vary
from time to time according to the Sub-Adviser's assessment of the instruments
available for investment, the rates of return available from them and the risks
associated with investing in each market. The instruments in which the Fund will
invest may be denominated in a number of different currencies.
The Sub-Adviser expects to focus on issuers based in Indonesia, Thailand,
the Philippines, Malaysia and Hong Kong, but may also invest in securities of
other issuers based in Asia and on the Asian side of the Pacific Ocean such as
Australia, New Zealand, India, Japan, Singapore, Taiwan, the People's Republic
of China, South Korea, Sri Lanka and Pakistan. A company is "based in" a region
if it derives more than half of its assets, revenues or profits from such
region.
The debt securities in which the Fund may invest include: bonds (including
convertible bonds); notes; commercial paper; certificates of deposit; time
deposits; obligations of foreign governments, their agencies, instrumentalities
and political subdivisions; asset-backed securities, Eurobonds; Yankee Bonds and
Global Bonds. While the Fund focuses on debt securities, it may also invest in
equity securities.
5
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Growth of capital in debt securities in which the Fund invests may arise as
a result of favorable changes in relative foreign exchange rates, in relative
interest rate levels and/or in the creditworthiness of issuers.
Please refer to the section entitled "Description of Securities, Other
Investment Policies and Risk Considerations" below for a description of the
types of securities in which the Fund may invest and the types of practices in
which the Fund may engage.
ORBITEX ASIAN SELECT ADVISERS FUND
The objective of the Orbitex Asian Select Advisers Fund (the "Asian Select
Advisers Fund") is superior long-term capital appreciation. The Fund seeks to
achieve its objective by investing at least 65% of its total assets in equity
securities of Asian companies.
The Fund expects to invest in companies domiciled in Asia, including China,
Korea, Vietnam, Hong Kong, Singapore, the Philippines, Australia, New Zealand,
Cambodia, Laos, Thailand, India, Pakistan, Sri Lanka, Malaysia, Indonesia and
Taiwan but excluding Japan. In addition, companies domiciled outside of Asia but
which derive over 50% of their gross revenues from operations or sales in Asia
may be included in the Fund.
The assets of the Fund will be managed by one or more Sub-Advisers selected
by the Adviser who have demonstrated expertise in the Asian equity markets. The
Adviser will select these Sub-Advisers on the basis of their track records, as
well as the mix of investment styles and approaches. The Adviser will seek a
combination of Sub-Advisers that will maximize returns while minimizing risk
through diversification of investment style, and a portion of the assets of the
Fund will be managed by each Sub-Adviser.
While the Fund will focus on equity securities, it may also invest in debt
securities.
Please refer to the section entitled "Description of Securities, Other
Investment Policies and Risk Considerations" below for a description of the
types of securities in which the Fund may invest and the types of practices in
which the Fund may engage.
DESCRIPTION OF SECURITIES, OTHER INVESTMENT POLICIES
AND RISK CONSIDERATIONS
In attempting to achieve its investment objective and policies, each Fund
employs a variety of instruments, strategies and techniques which are described
below and in greater detail in the SAI. Risks and restrictions associated with
these practices are also described. A Fund might not buy all of the securities
or use all of the techniques described below to the full extent permitted unless
the Adviser or Sub-Adviser believes that doing so will help the Fund achieve its
goal.
ASSET-BACKED SECURITIES. Each Fund may invest in asset-backed securities.
The High Yield Fund is more likely to do so than the other Funds. Asset-backed
securities represent fractional interest in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust. The payment obligations that may underlie
certain asset-backed securities are subject to prepayment, which may reduce the
overall return to certificate holders. Certificate holders may also experience
delays in payment on the certificates if the full amounts due on underlying
sales contracts
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or receivables are not realized by the trust because of unanticipated legal or
administrative costs of enforcing the contracts or because of depreciation or
damage to the collateral securing certain contracts, or other factors.
BANK OBLIGATIONS. Each Fund may invest in bank obligations, which include
certificates of deposit, time deposits and bankers' acceptances of U.S.
commercial banks or savings and loan institutions. The Asian High Yield Fund and
the Asian Select Advisers Fund may also invest in foreign currency-denominated
bank obligations, including Eurocurrency instruments and securities of U.S. and
foreign banks and thrifts.
BELOW-INVESTMENT-GRADE SECURITIES. Each Fund other than the Asian High
Yield Fund may invest up to 35% of its net assets in debt securities that are
rated below "investment grade" by Standard and Poor's Rating Group ("S&P") or
Moody's Investors Services, Inc. ("Moody's") or, if unrated, are deemed by the
Adviser or Sub-Adviser to be of comparable quality. The Asian High Yield Fund
will invest at least 65% of its total assets in such securities. Securities
rated less than Baa by Moody's or BBB by S&P are classified as below investment
grade securities and are commonly referred to as "junk bonds" or high yield,
high risk securities. A Fund will not invest in debt securities that are in
default in payment of principal or interest.
Debt rated BB, B, CCC, CC and C and debt rated Ba, B, Caa, Ca, C is regarded
by S&P and Moody's, respectively, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation and C the highest degree of speculation. For Moody's, Ba
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Similarly, debt rated Ba or BB and below is
regarded by the relevant rating agency as speculative. Debt rated C by Moody's
or S&P is the lowest rated debt that is not in default as to principal or
interest, and such issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Such securities are
also generally considered to be subject to greater risk than securities with
higher ratings with regard to a deterioration of general economic conditions.
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, since rating agencies may fail to
make timely changes in credit ratings in response to subsequent events, the
Adviser and Sub-Advisers continuously monitor the issuers of high yield bonds in
the portfolios of the Funds to determine if the issuers will have sufficient
cash flows and profits to meet required principal and interest payments. The
achievement of a Fund's investment objective may be more dependent on the
Adviser's or Sub-Adviser's own credit analysis than might be the case for a fund
which invests in higher quality bonds. A Fund may retain a security whose rating
has been changed. The market values of lower quality debt securities tend to
reflect individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general level
of interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service debt obligations may also be adversely affected by specific
developments affecting the issuer, such as the issuer's inability to meet
specific projected business forecasts
7
<PAGE>
or the unavailability of additional financing. Similarly, certain emerging
market governments that issue lower quality debt securities are among the
largest debtors to commercial banks, foreign governments and supranational
organizations such as the World Bank and may not be able or willing to make
principal and/ or interest repayments as they come due. The risk of loss due to
default by the issuer is significantly greater for the holders of lower quality
securities because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.
Lower quality debt securities frequently have call or buy-back features
which would permit an issuer to call or repurchase the security from a Fund. In
addition, a Fund may have difficulty disposing of lower quality securities
because they may have a thin trading market. There may be no established retail
secondary market for many of these securities, and each Fund anticipates that
such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market also may have an
adverse impact on market prices of such instruments and may make it more
difficult for a Fund to obtain accurate market quotations for purposes of
valuing the Fund's portfolios. A Fund may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect on
the market value of lower quality debt securities in which the Funds may invest,
include: (i) potential adverse publicity; (ii) heightened sensitivity to general
economic or political conditions; and (iii) the likely adverse impact of a major
economic recession.
A Fund may also incur additional expenses to the extent the Fund is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings, and the Fund may have limited legal recourse in the event of
a default. Debt securities issued by governments in emerging markets can differ
from debt obligations issued by private entities in that remedies for defaults
generally must be pursued in the courts of the defaulting government, and legal
recourse is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
The Adviser and Sub-Advisers attempt to minimize the speculative risks
associated with investments in lower quality securities through credit analysis
and by carefully monitoring current trends in interest rates, political
developments and other factors. Nonetheless, investors should carefully review
the investment objective and policies of the Fund and consider their ability to
assume the investment risks involved before making an investment.
Each Fund may also invest in unrated debt securities. Unrated debt
securities, while not necessarily of lower quality than rated securities, may
not have as broad a market. Because of the size and perceived demand for an
issue, among other factors, certain issuers may decide not to pay the cost of
obtaining a rating for their bonds. The Adviser or Sub-Adviser will analyze the
creditworthiness of the issuer of an unrated security, as well as financial
institution or other party responsible for payments on the security.
BORROWING. Each Fund may from time to time borrow money for investment
purposes (i.e., "leverage" to increase its portfolio of securities). It may
borrow only from banks and may not borrow in excess of one-third of the market
value of its assets, less liabilities other than such borrowing. Each Fund may
borrow an additional 5% of its total assets without regard to the foregoing
limitation for temporary or emergency purposes, such as the meeting of
redemption requests or the clearance of portfolio transactions.
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This limitation may be changed only by a vote of the shareholders of the Fund.
Current asset value coverage of three times any amount borrowed is required at
all times. Borrowed money creates an opportunity for greater capital
appreciation, but at the same time increases exposure to capital risk. The net
cost of any money borrowed would be an expense that otherwise would not be
incurred, and this expense could limit the Fund's net investment income in any
given period.
CONCENTRATION. Because of the focus of each of the Global Natural Resources
Fund and the Communications & Info-Tech Fund on its industries, an investment in
each Fund may be more volatile than that of other investment companies that do
not concentrate their investments in such a manner. Moreover, the value of the
shares of each Fund will be especially susceptible to factors affecting the
industries in which it focuses. Neither Fund should be considered as a complete
investment program.
SPECIAL RISKS ASSOCIATED WITH THE GLOBAL NATURAL RESOURCES FUND. In the
United States and foreign countries, natural resource industries may be subject
to greater political, environmental and other governmental regulation than many
other industries. The nature of such regulation continues to evolve in both the
United States and foreign countries, and changes in governmental policies and
the need for regulatory approvals may have a material effect on the products and
services of natural resource companies. For example, the exploration,
development and distribution of coal, oil and gas in the United States are
subject to significant federal and state regulation, which may affect rates of
return on such investments and the kinds of services that may be offered.
In addition, many natural resource companies historically have been subject
to significant costs associated with compliance with environmental and other
safety regulations and changes in the regulatory climate. Such governmental
regulations may also hamper the development of new technologies, and it is
impossible to predict the direction, type or effect of any future regulation.
Further, competition is intense for many natural resource companies. As a
result, many of these companies may be adversely affected in the future and the
value of the securities issued by such companies may be subject to increased
share price volatility.
The value of the Global Natural Resources Fund's securities will fluctuate
in response to stock market developments, as well as market conditions for the
particular natural resources with which the issuer is involved. The price of the
commodity will fluctuate due to changes in the worldwide levels of inventory,
and changes, perceived or actual, in production and consumption. The values of
natural resources may fluctuate directly with respect to various stages of the
inflationary cycle and perceived inflationary trends and are subject to numerous
factors, including national and international politics. The Global Natural
Resources Fund's investments in precious metals are subject to many risks,
including substantial price fluctuations over short periods of time. Further,
the Global Natural Resources Fund's investments in companies are expected to be
subject to irregular fluctuations in earnings, because these companies are
affected by changes in the availability of money, the level of interest rates,
and other factors.
SPECIAL RISKS ASSOCIATED WITH THE COMMUNICATIONS & INFO-TECH
FUND. Telecommunications industries may be subject to greater governmental
regulation than many other industries and changes in governmental policies and
the need for regulatory approvals may have a material effect on the products and
services of this industry. Telephone operating companies in the United States,
for example, are subject to both federal and state regulation affecting
permitted rates of return and the kinds of services that may be offered. Certain
types of companies represented in the Fund are engaged in fierce competition for
market share. In recent years, these have been companies providing goods and
services such as private and
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local area networks and telephone set equipment. In addition, the products of
the companies represented in the Fund may become obsolete quickly.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities. A
convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, a Fund seeks the
opportunity, through the conversion feature, to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning a higher fixed rate of return than is available in common stocks.
DEBT SECURITIES. Each Fund may invest in debt securities. The debt
securities in which the Funds may invest consist of corporate bonds, debentures,
notes and other similar corporate debt instruments, including convertible
securities, obligations of foreign governments and their agencies and political
instrumentalities. The market value of debt securities held by the Funds and,
consequently, the net asset value per share of the Funds, to the extent they
hold debt securities, can be expected to vary inversely to changes in prevailing
interest rates. Investors should also recognize that, in periods of declining
interest rates, the yields of the Funds with significant holdings of debt
securities will tend to be somewhat higher than prevailing market rates and, in
periods of rising interest rates, the opposite can be expected to occur. Prices
of longer-term debt securities generally increase or decrease more sharply than
those of shorter-term debt securities in response to interest rate changes.
DEFENSIVE STRATEGIES. Each Fund retains the flexibility to respond promptly
to changes in market and economic conditions. Accordingly, in the interest of
preserving shareholders' capital and consistent with each Fund's investment
objective, the Adviser or Sub-Adviser may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Under a defensive strategy, each Fund
may invest up to 100% of its total assets in cash (U.S. dollars, foreign
currencies or multinational currency units) and/or high quality debt securities
or money market instruments issued by corporations or the U.S. or a foreign
government. In addition, for temporary defensive purposes, such as during times
of international political or economic uncertainty, most or all of the
investments of the Global Natural Resources Fund, the Asian High Yield Fund or
the Asian Select Advisers Fund may be made in the United States and denominated
in U.S. dollars. To the extent any Fund adopts a temporary defensive posture, it
will not be invested so as to achieve directly its investment objective.
In addition, pending investment of proceeds from new sales of the Funds'
shares or to meet its ordinary daily cash needs, each Fund may hold cash (in
U.S. dollars, foreign currencies or multinational currency units) and may invest
in foreign or domestic high quality money market instruments. Money market
instruments in which each Fund may invest include, but are not limited to, U.S.
or foreign government securities; high-grade commercial paper; bank certificates
of deposit; bankers' acceptances; and repurchase agreements related to any of
the foregoing. High-grade commercial paper refers to commercial paper rated A-1
by S&P or P-1 by Moody's or, if not rated, determined by the Adviser or Sub-
Adviser to be of comparable quality.
DEPOSITARY RECEIPTS AND SECURITIES OF SUPRANATIONAL ENTITIES. Each Fund may
invest in securities of foreign issuers directly or in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or Global
Depositary Receipts ("GDRs") representing securities of foreign issuers. ADRs
are depositary receipts typically issued by a U.S. bank or trust company that
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign
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banks or trust companies and evidence ownership of underlying securities issued
by either a foreign or a U.S. company. Depositary receipts may not necessarily
be denominated in the same currency as the underlying securities into which they
may be converted. In addition, the issuers of the stock of unsponsored
depositary receipts are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of the depositary receipts. Generally,
depositary receipts in registered form are designed for use in the U.S.
securities markets, and depositary receipts in bearer form are designed for use
in foreign securities markets.
Each Fund may invest in equity and debt securities issued or guaranteed by
supranational entities. A supranational entity is an entity designated or
supported by the national government of one or more countries to promote
economic reconstruction or development. Examples of supranational entities
include, among others, the World Bank, the Asian Development Bank and the
European Investment Bank.
DERIVATIVES. Each Fund may buy and write covered call and put options on
securities, securities indices, and foreign currencies, and may enter into
futures contracts and use options on futures contracts. Each Fund may also enter
into currency exchange contracts and swap agreements relating to interest rates,
foreign currencies, and securities indices. All of these may be referred to as
"derivatives" transactions. The Funds may use these techniques to hedge against
changes in interest rates, foreign currency exchange rates, changes in
securities prices or other factors affecting the value of their investments.
Each Fund will maintain segregated accounts consisting of liquid assets, such as
cash, U.S. Government securities, or other securities (or, as permitted by
applicable regulations, enter into certain offsetting positions to cover its
obligations under derivatives transactions) to avoid "leveraging" the Fund
through derivatives transactions.
Gains and losses on "derivatives" transactions depend on the Adviser's or
Sub-Adviser's ability to predict correctly the direction of interest rates,
securities prices, currency exchange rates, or other factors. Risks in the use
of these derivatives include: a) the risk that interest rates, securities
prices, or currency exchange rates or other factors affecting the value of the
Fund's investments do not move in the directions being hedged against, in which
case the Fund will have incurred the cost of the derivative (either its purchase
price or, by writing an option, losing the opportunity to profit from increases
in the value of the securities covered) with no tangible benefit; b) imperfect
correlation between the prices of derivatives and the movements of the
securities prices, interest rates or currency exchange rates being hedged; c)
the possible absence of a liquid secondary market for any particular derivative
at any time; d) the potential loss if the counterparty to the transaction does
not perform as promised; and e) the possible need to defer closing out certain
positions to avoid adverse tax consequences. In particular, the risk of loss
from certain types of futures transactions is potentially unlimited. More
information on derivatives is contained in the SAI.
EQUITY SECURITIES. Each Fund may invest in equity securities. The equity
securities in which the Funds may invest consist of common stock, preferred
stock, convertible securities, rights and warrants. Common stock represents an
ownership interest in a corporation.
FOREIGN SECURITIES. Each Fund may invest in securities of foreign issuers.
Securities of foreign issuers involve different, and sometimes greater, risks
than securities of U.S. issuers. These include an increased risk of adverse
political and economic developments, and, as to certain countries, the
possibility of expropriation, nationalization or confiscatory taxation or
limitations on the removal of the funds or other assets of a Fund.
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There may be less publicly available information about foreign securities
and issuers than is available about domestic securities and issuers. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. Securities of some foreign companies are less
liquid and their prices may be more volatile than securities of comparable
domestic companies. The Funds' interest and dividends from foreign issuers may
be subject to non-U.S. withholding taxes, thereby reducing the Funds' net
investment income.
Currency exchange rates may fluctuate significantly over short periods and
can be subject to unpredictable change based on such factors as political
developments and currency controls by foreign governments. Because the Funds may
invest in securities denominated in foreign currencies, they may seek to hedge
foreign currency risks by engaging in foreign currency exchange transactions.
These may include buying or selling foreign currencies on a spot basis, entering
into foreign currency forward contracts, and buying and selling foreign currency
options, foreign currency futures, and options on foreign currency futures. Many
of these activities constitute "derivatives" transactions. See "Derivatives",
above.
Each Fund may invest in issuers domiciled in "emerging markets," those
countries determined by the Adviser or Sub-Adviser to have developing or
emerging economies and markets. Emerging market investing involves risks in
addition to those risks involved in foreign investing. For example, many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. In addition, economies in
emerging markets generally are dependent heavily upon international trade and,
accordingly, have been and continue to be affected adversely by trade barriers,
exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. The securities markets of emerging countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. In addition, brokerage
commissions, custodial services and other costs relating to investment in
foreign markets generally are more expensive than in the United States,
particularly with respect to emerging markets.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities--securities that may not be sold within seven days at
approximately the price used in determining the Fund's net asset value.
Securities may be illiquid when they are held subject to legal or contractual
restrictions on resale, usually because they have not been registered for sale
to the general public ("restricted securities"), or when there is limited market
for them. Repurchase agreements that mature in more than seven days are
considered illiquid securities.
Certain restricted securities that may be resold to institutional investors
pursuant to Rule 144A under the Securities Act of 1933 may not be considered
illiquid if a sufficient dealer or institutional trading market exists for them.
The Adviser or Sub-Adviser will determine whether such a market exists as to
Rule 144A securities, and whether such securities must be considered illiquid,
under guidelines approved by the Board of Trustees of the Trust. Institutional
trading markets for Rule 144A securities are relatively new. Liquidity of the
Fund's investments could be impaired if trading markets for these securities do
not develop further or decline.
MORTGAGE-BACKED SECURITIES. Each Fund may invest in Mortgage-Backed
Securities, which represent an interest in a pool of mortgage loans. The primary
government issuers or guarantors of Mortgage-Backed Securities are GNMA, FHMA
and FHLMC. Interest and principal payments (including prepayments) on the
mortgages underlying mortgage-backed securities are passed through to the
holders of the securities. As a result of the pass-through of prepayments of
principal on the underlying securities,
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mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund investing in such
securities would be required to reinvest the proceeds at the lower interest
rates then available. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
OTHER INVESTMENT COMPANIES. Each Fund may invest up to 10% of its total
assets in other investment companies, but only up to 5% of its assets in any one
other investment company. In addition, a Fund may not purchase more than 3% of
the securities of any one investment company. As a shareholder in an investment
company, that Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time, the
Fund would continue to pay its own management fees and other expenses.
Notwithstanding these limitations, each Fund reserves the right to convert
to a "master/feeder" structure at a future date. Under such a structure, one or
more "feeder" funds, such as the Funds, invest all of their assets in a "master"
fund, which, in turn, invests directly in a portfolio of securities. If required
by applicable law, the Funds will seek shareholder approval before converting to
a master/feeder structure. If the requisite regulatory authorities determine
that such approval is not required, shareholders will be deemed, by purchasing
shares, to have consented to such a conversion and no further shareholder
approval will be sought. Such a conversion is expressly permitted under the
investment objective and fundamental policies of each Fund.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. In a
repurchase agreement, a Fund buys a security and the seller simultaneously
agrees to repurchase the security on a specified future date at an agreed-upon
price. The repurchase price reflects an agreed-upon interest rate during the
time the Fund's money is invested in the security. Because the security
constitutes collateral for the repurchase obligation, a repurchase agreement can
be considered a collateralized loan. The Fund's risk is the ability of the
seller to pay the agreed-upon price on the delivery date. If the seller is
unable to make a timely repurchase, the Fund could experience delays in the
receipt of expected proceeds, suffer a loss in principal or current interest, or
incur costs in liquidating the collateral. The Board of Trustees of the Trust
has established criteria to evaluate the creditworthiness of parties with which
the Funds may enter into repurchase agreements.
RIGHTS AND WARRANTS. Each Fund may invest in rights and warrants. A Fund
will invest in rights or warrants only if the underlying equity securities
themselves are deemed appropriate by the Adviser or Sub-Adviser for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are similar
to warrants except that they have a substantially shorter duration. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any rights in
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although the value
of a right or warrant may decline because of a decrease in the value of the
underlying security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination thereof. If the market
price of the underlying security is below the exercise price set forth in the
warrant on the
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expiration date, the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the expiration date.
SECURITIES LENDING. Each Fund may lend its portfolio securities to
broker/dealers or to other institutional investors. The borrower must maintain
with the Fund's custodian collateral consisting of cash, U.S. government
securities or other liquid securities equal to at least the value of the
borrowed securities, plus any accrued interest. The Funds will receive any
interest paid on the loaned securities and a fee and/or a portion of the
interest earned on the collateral. Income received in connection with securities
lending may be used to offset a Fund's custody fees. Each Fund limits its loans
of portfolio securities to an aggregate of 33 1/3% of the value of its total
assets, measured at the time any such loan is made. The risks in lending
portfolio securities, as with other extensions of secured credit, consist of
possible delays in receiving additional collateral or in recovery of the
securities and possible loss of rights in the collateral should the borrower
fail financially.
SHORT SALES. Each Fund may sell securities that it does not own or have the
right to acquire. When a Fund does so, it will maintain with its custodian in a
segregated account cash or liquid securities in an amount at least equal to the
difference between the current market value of the securities sold short and any
amounts required to be deposited as collateral with the selling broker in
connection with the short sale (not including the proceeds of the short sale).
It is currently expected that a Fund will not sell securities short if, as a
result, the total amount of all "open" short positions would exceed 10% of the
value of its assets. This limitation may be changed at any time. Each Fund may
also sell securities that it owns or has the right to acquire at no additional
cost but does not intend to deliver to the buyer, a practice known as selling
short "against the box." These transactions allow a Fund to hedge against price
fluctuations by locking in a sale price for securities the Fund does not wish to
sell immediately, for example, to postpone recognition of a gain or loss for
federal income tax purposes or satisfy certain tests applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code").
SMALL COMPANIES. While each Fund's portfolio normally will include
securities of established suppliers of traditional products and services, each
Fund may invest in smaller companies which can benefit from the development of
new products and services. These smaller companies may present greater
opportunities for capital appreciation, but may also involve greater risks than
large, established issuers. Such smaller companies may have limited product
lines, markets or financial resources, and their securities may trade less
frequently and in more limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such smaller
companies may fluctuate to a greater degree than the prices of the securities of
other issuers.
STRUCTURED NOTES. Each Fund may invest in debt securities, preferred stock,
or convertible securities, the principal amount, redemption terms, or conversion
terms of which are related to a specified securities or other index, the market
prices of specified securities, commodities, or other assets, or specified
foreign currency exchange rates. These securities are sometimes referred to as
"structured notes" or "structured securities." The prices of structured
securities have historically been subject to high volatility and their interest
or dividend rates may at times be substantially below prevailing market rates.
VARIABLE RATE, FLOATING RATE, OR VARIABLE AMOUNT SECURITIES. Each Fund may
invest in variable rate, floating rate, or variable amount securities. These are
generally short-term unsecured obligations of private issuers. They are
generally interest-bearing notes on which the interest rate fluctuates on a
scheduled basis.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. Each Fund may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge
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against anticipated changes in interest rates and prices. The price, which is
generally expressed in yield terms, is fixed at the time the commitment is made,
but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Fund will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
which have been purchased on a forward commitment or when-issued basis prior to
delivery to the Fund. If the Fund disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time a Fund
enters into a transaction on a when-issued or forward commitment basis, a
segregated account consisting of cash or liquid securities equal to the value of
the when-issued or forward commitment securities will be established and
maintained with its custodian and will be marked to market daily. There is a
risk that the securities may not be delivered and that the Fund may incur loss.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. Each Fund may invest in zero-coupon
and payment-in-kind bonds. The Asian High Yield Fund is more likely to do so
than the other Funds. Zero-coupon bonds are issued at a significant discount
from their principal amount in lieu of paying interest periodically.
Payment-in-kind bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds. Because zero-coupon
bonds do not pay current interest, their value is generally subject to greater
fluctuation in response to changes in market interest rates than bonds that pay
interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer
to avoid the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current interest in cash,
a Fund is nonetheless required to accrue interest income on such investments and
to distribute such amounts at least annually to shareholders. Thus, a Fund could
be required at times to liquidate other investments in order to satisfy its
dividend requirements.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS. Some of the policies and
restrictions discussed throughout this Prospectus are fundamental, this is,
subject to change only by shareholder approval. The following paragraph restates
all those that are fundamental.
With respect to 75% of its total assets, a Fund may not purchase a security
if, as a result, more than 5% would be invested in the securities of any one
issuer and may not purchase more than 10% of the outstanding voting securities
of a single issuer. Except for the Global Natural Resources Fund and the
Communications & Info-Tech Fund, a Fund will not invest 25% or more of the value
of the Fund's total assets in the securities of issuers in any one industry.
These limitations do not apply to U.S. Government securities. Each of the Global
Natural Resources Fund and the Communications & Info-Tech Fund will invest at
least 25% of its total assets in securities of companies in the group of
industries principally engaged in the business activities identified for that
Fund. A Fund may borrow money but not in an amount exceeding 33 1/3% of its
total assets. Loans by a Fund, in the aggregate, may not exceed 33 1/3% of a
Fund's total assets.
INVESTMENT PERFORMANCE
Each Fund may illustrate in advertisements its average annual total return,
which is the rate of growth of the Fund that would be necessary to achieve the
ending value of an investment kept in the Fund for the period specified and is
based on the following assumptions: (1) all dividends and distributions by the
Fund are reinvested in shares of the Fund at net asset value, and (2) all
recurring fees are included for applicable periods.
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Each Fund may also illustrate in advertisements its cumulative total return
for several time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for each Fund will assume
the reinvestment of all income dividends and capital gains distributions for the
indicated periods and will include all recurring fees.
The Asian High Yield Fund may further illustrate in advertisements its yield
based on a recent thirty (30) day period, which reflects the income per share
earned by the Fund's portfolio investments. The yield is calculated by dividing
the Fund's net investment income per share during that period by the net asset
value on the last day of that period and annualizing the result.
Further information on each Fund's performance calculations is described in
the SAI.
PORTFOLIO TURNOVER
The rate of portfolio turnover generally will not be important in investment
decision making for any of the Funds. Decisions to buy and sell securities will
be based on the anticipated contribution of a security to achievement of a
Fund's investment objectives. Sales can result from, for example, securities
reaching a price objective, anticipated changes in interest rates, changes in
the creditworthiness of issuers, or general financial or market developments.
The Funds may sell one security and simultaneously buy another of comparable
quality and may simultaneously buy and sell the same security to take advantage
of short-term differences in bond yields. Funds may buy individual securities in
anticipation of relatively short-term price gains. A Fund's liquidity needs may
also necessitate sales. Because these factors generally are not tied to the
length of time a security has been held, a significant number of short-term
transactions may result.
Although the Funds cannot accurately predict their annual turnover rates, it
is estimated that annual turnover rates will generally be [within the following
ranges]: [ ]-[ ] for the Global Natural Resources Fund; [ ]-[ ] for the
Communications & Info-Tech Fund; [ ] for the Growth Fund; [ ] for the Asian
High Yield Fund; and 200% for the Asian Select Advisers Fund. A 100% annual
turnover rate would occur if all of a Fund's securities were replaced one time
during a one year period.
While portfolio transactions will be necessary to achieve a Fund's
investment objective, a high level of turnover entails certain costs. The higher
the turnover, the higher the overall brokerage commissions, dealer mark-ups and
mark-downs, and other direct transaction costs incurred. High turnover can also
result in acceleration of the realization of gains, which may be short-term in
nature and thus taxable to shareholders at ordinary rates.
Certain tax considerations can restrict a Fund's ability to sell securities
in some circumstances when those securities have been held for less than three
months. See the SAI.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
Each Fund intends to elect to be treated and to qualify as a "regulated
investment company" under Subchapter M of the Code, and, if it so qualifies, it
will not be subject to federal income tax on any income and net capital gains
distributed to its shareholders.
As a result, it is the policy of each Fund to declare and distribute to its
shareholders as income dividends or capital gains distributions, at least
annually, substantially all of its net investment income and net capital gains
realized from the sale of its portfolio securities, if any.
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Income dividends are derived from each Fund's net investment income,
including any net short-term capital gains and dividends received by a Fund, and
are taxable to shareholders as ordinary income. The excess of net long-term
capital gains over the net short-term capital losses realized and distributed by
a Fund as capital gains distributions are taxable to shareholders as long-term
capital gains, regardless of how long the shareholder has held the shares.
Income dividends and distributions of capital gains declared in October,
November or December of one year to shareholders of record as of a specified
date in such a month and paid in January of the following year are taxable in
the year they are declared. The Trust will mail to its shareholders a Form 1099
by the end of January of each year indicating the federal tax status of each
Fund's income dividends and capital gains distributions.
Each Fund is required by federal law to withhold 31% of reportable payments
(which may include income dividends, capital gains distributions, and share
redemption proceeds) paid to shareholders who have not complied with IRS
regulations. In order to avoid this back-up withholding requirement, a
shareholder must certify on the shareholder's Purchase Application Form
("Application"), or on a separate W-9 Form supplied by the Trust's transfer
agent, that the shareholder's Social Security or Taxpayer Identification Number
is correct (or that the shareholder has applied for such a number and is waiting
for it to be issued) and that the shareholder is not currently subject to backup
withholding, or the shareholder is exempt from backup withholding.
Unless the shareholder elects otherwise, as permitted on the Application,
income dividends and distributions of capital gains with respect to a particular
Fund will be reinvested in additional shares of that Fund and will be credited
to the shareholder's account with that Fund at the net asset value per share
next determined as of the ex-dividend date.
Under existing provisions of the Code, individuals, corporations and other
shareholders that are not U.S. Persons under the Code may be subject to federal
income tax withholding at the applicable rate on income dividends and
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
Both income dividends and distributions of capital gains are paid by the
Funds on a per share basis to the shareholders of record as of the distribution
date of that Fund, regardless of how long the shares have been held. That means
that if shareholders buy shares just before or on the record date, they will pay
the full price for the shares and then may receive a portion of the price back
as a taxable distribution. If a shareholder held shares for six months or less
and during that period received a distribution taxable to such shareholder as a
long-term capital gain, any loss realized on the sale of such shares during such
six-month period would be a long-term loss to the extent of such distribution.
Payments from a Fund to shareholders of income dividends and capital gains
distributions are taxable to shareholders of a Fund when such dividends and
distributions are paid, regardless of whether they are taken in cash or
reinvested in shares of the Fund.
Each Fund may invest in the stock of foreign investment companies that may
be treated as "passive foreign investment companies" ("PFICs") under the Code.
Certain other foreign corporations, not operated as investment companies, may
nevertheless satisfy the PFIC definition. A portion of the income and gains that
a Fund derives may be subject to a non-deductible federal income tax at the Fund
level. In some cases, a Fund may be able to avoid this tax by electing to be
taxed currently on its share of PFIC income, whether or not such income is
actually distributed by the PFIC. Each Fund will endeavor to limit its exposure
to the PFIC tax by investing in PFICs only where the election to be taxed
currently will be
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<PAGE>
made. Because it is not always possible to identify a foreign issuer as a PFIC
in advance of making the investment, a Fund may incur the PFIC tax in some
instances.
Shareholders are urged to consult their advisers concerning the effect of
Federal income taxes in their individual circumstances.
HOW TO PURCHASE SHARES
The initial minimum investment is $2,500 per Fund. Such minimum investment
amount may, in certain cases, be waived or lowered by the Trust.
OPENING AN ACCOUNT. You may make an initial purchase of shares of each Fund
through the Distributor or its selling group members or by mail or wire. Shares
of the Funds may be purchased on any day the Funds are open for business.
A COMPLETED AND SIGNED APPLICATION IS REQUIRED FOR EACH NEW ACCOUNT YOU OPEN
WITH EACH FUND REGARDLESS OF HOW YOU CHOOSE TO MAKE YOUR INITIAL PURCHASE OF
SHARES.
PURCHASES THROUGH SELLING GROUP MEMBERS. Securities dealers, banks, or
other financial service firms having Selected Dealer Agreements with the
Distributor (collectively, "Selling Group Members") are authorized to sell you
shares of the Funds. If you purchase shares through a Selling Group Member, such
member must receive your order before the close of regular trading on the New
York Stock Exchange ("Exchange"), which normally is 4:00 p.m. Eastern time, and
transmit it to the Distributor by 5:00 p.m., Eastern time, to receive that day's
share price. (See "Share Price" below.) Selling Group Members are responsible
for promptly transmitting purchase orders to the Distributor.
BY MAIL. You may purchase shares of the Funds by mailing the completed
Application, with your check made payable to Orbitex Group of Funds, to: State
Street Bank and Trust Company, Attn: Transfer Agent Operations, P.O. Box 1978,
Boston, MA 02105-1978.
BY WIRE. You may also purchase shares of each Fund by wiring funds to the
wire bank account for each Fund. Before wiring funds, please call the Trust toll
free at 1-800-[ ] to advise the Trust of your intention to invest in one
or more of the Funds and to receive instructions as to how and where to wire
your investment. Please remember to return your completed Application to the
Trust as described in the prior paragraph. Your bank may charge you a fee for
the wire.
TELEPHONE INVESTMENT PRIVILEGE. After your account with the Trust has been
opened, you may make additional investments in your account of $500 or more by
telephoning the Trust at 1-800-[ ] between 8:30 a.m. and 4:00 p.m. Eastern
time on any day the Trust is open. Telephone investment requests made after 4:00
p.m. Eastern time will be processed as of the close of business on the next
business day. In accordance with your instructions, we will electronically
transfer monies from your bank account designated on the Application to your
account with the Trust.
SUBSEQUENT INVESTMENTS. Minimum $500 per Fund, except for reinvestment of
dividends and distributions. Subsequent purchases of shares of the Funds may be
made (i) through the Distributor by mail or by wire (see instructions above),
(ii) through Selling Group Members or (iii) through means of certain services
available to shareholders of the Funds, such as the Telephone Investment
Privilege and the Exchange Privilege described below under "Shareholder
Services."
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SHARE PRICE. To make an initial purchase of Fund shares, except by wire
transfer, a completed and signed Application must first be received and
accepted. Purchases in each Fund will be effected at the public offering price
of that Fund next determined after your purchase order has been received by the
Trust in "good order." The public offering price of a Fund is the per share net
asset value of that Fund next determined after receipt of the purchase order,
plus any applicable initial sales charge.
SHARE CERTIFICATES. In the interest of economy and convenience, share
certificates will not be issued except at the written request of the
shareholder. Certificates for fractional shares, however, will not be issued.
CONDITIONS OF YOUR PURCHASE. The Trust and the Distributor each reserve the
right to reject any purchase for any reason and to cancel any purchase due to
nonpayment. Purchases are not binding on the Trust or the Distributor or
considered received until such purchase orders are received by the Trust in good
order. All purchases must be made in United States dollars and, to avoid fees
and delays, all checks must be drawn only on United States banks. No cash will
be accepted. As a condition of this offering, if your purchase is canceled due
to nonpayment or because your check does not clear, you will be responsible for
any loss the Funds incur.
INITIAL SALES CHARGE. The public offering price of shares is the next
determined net asset value of a Fund, plus any applicable sales charge, which
will vary with the size of the purchase as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BROKER REALLOWANCE
OFFERING NET INVESTMENT AS A PERCENTAGE OF
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) OFFERING PRICE
- ------------------------------------------------------------------ ----------- ------------------- ---------------------
Less than $50,000................................................. 5.75% 5.00%
$50,000 but less than $100,000.................................... 4.50% 3.75%
$100,000 but less than $250,000................................... 3.50% 2.75%
$250,000 but less than $500,000................................... 2.50% 2.00%
$500,000 but less than $1,000,000................................. 2.00% 1.75%
$1,000,000 but less than $3,000,000............................... None* None* (see below)**
$3,000,000 but less than $50,000,000.............................. None* None* (see below)**
$50,000,000 or more............................................... None* None* (see below)**
</TABLE>
- ------------------------
* No initial sales charge applies on investments of $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions
within one year of the purchase. See "How to Redeem Shares--Contingent
Deferred Sales Charge."
** The following commissions will be paid by the Distributor to dealers who
initiate and are responsible for purchases of any single purchaser of $1
million or more: 1% on purchase amounts up to $3 million, plus 0.50% on the
excess up to $50 million, plus 0.25% on the excess over $50 million.
Shares issued pursuant to the automatic reinvestment of income dividends and
capital gains distributions are not subject to any sales charges. The
Distributor's commission is the sales charge shown above less any applicable
discount "reallowed" to Selling Group Members. Normally, the Distributor will
reallow discounts to Selling Group Members in the amounts indicated above. From
time to time, however, the Distributor may elect to re-allow the entire initial
sales charge to Selling Group Members for all sales with
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<PAGE>
respect to which orders are placed with the Distributor during a particular
period. Selling Group Members to whom substantially the entire sales charge is
re-allowed may be deemed to be "underwriters" as that term is defined under the
Securities Act of 1933.
REDUCED SALES CHARGES. A reduction of sales charge rates in the tables
above may be obtained as follows:
- LETTER OF INTENT. Investors may qualify for reduced sales charges on all
investments by completing the Letter of Intent section in the Application,
expressing an intention to invest an amount within a 13-month period in a Fund
which, if made at one time, would qualify for a reduced sales charge. The
minimum initial investment under a Letter of Intent is 5% of the total Letter of
Intent amount. Shares purchased with the first 5% of such amount will be held in
escrow to secure payment of the higher sales charge applicable to the shares
actually purchased if the full amount indicated is not purchased, and such
escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. A purchase not originally made pursuant to a Letter of
Intent may be included under a subsequent Letter of Intent executed within 90
days of the purchase. For a further description of the Letter of Intent, see
"Purchase and Redemption of Securities Being Offered--Letter of Intent" in the
SAI.
- RIGHT OF ACCUMULATION. Under the Right of Accumulation, a "single
purchaser" may combine a current purchase of shares of a Fund with prior
purchases of shares of any Fund to qualify for a reduced sales charge. The term
"single purchaser" refers to: (i) an individual; (ii) an individual and spouse
purchasing shares of the Fund for their own account or for trust or custodial
accounts for their minor children; or (iii) a fiduciary purchasing for any one
trust, estate or fiduciary account, including employee benefit plans created
under Sections 401 or 457 of the Internal Revenue Code, including related plans
of the same employer. To be entitled to a reduced sales charge based upon shares
already owned, the investor must ask the Distributor for such entitlement at the
time of purchase and provide the account number(s) of the investor, the investor
and spouse, and their minor children, and the age of any such child.
- OTHER CIRCUMSTANCES. The initial sales charge will be waived on the
following types of purchases: (1) purchases by investors who have invested $1
million or more in one Fund alone or in any combination of Funds; (2) purchases
by the officers, directors/trustees, and employees of the Trust, the Adviser or
the Distributor; the immediate family members of any such Person; any trust or
individual retirement account or self-employed retirement plan for the benefit
of any such person or family members; or the estate of any such person or family
members; (3) purchases by Selling Group Members, for their own accounts, or for
retirement plans for their employees or sold to registered representatives or
full time employees (and their immediate families) that certify to the
Distributor at the time of purchase that such purchase is for their own account
(or for the benefit of their immediate families); (4) purchases by a charitable
organization (as defined in Section 501(c)(3) of the Internal Revenue Code)
investing $100,000 or more; (5) purchases by a charitable remainder trust or
life income pool established for the benefit of a charitable organization (as
defined in Section 501(c)(3) of the Internal Revenue Code); (6) purchases with
trust assets; (7) purchases in accounts as to which a Selling Group Member
charges an account management fee; (8) purchases by any state, county, or city,
or any governmental instrumentality, department, authority or agency; (9)
purchases with redemption proceeds from another mutual fund (which is not a
series of the Funds) on which the investor has paid a front-end sales charge
only; and (10) purchases by such other persons as are determined by the Board of
Trustees of the Trust (or by the Adviser pursuant to guidelines established by
such Board) to have acquired shares under circumstances not involving any sales
expenses to the Fund or the Distributor.
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<PAGE>
SHAREHOLDER SERVICES
SHAREHOLDER INQUIRIES AND SERVICES OFFERED. If you have any questions about
the Trust or the following services, please call 1-800-[ ] and ask about
the Trust or write the Trust, [address]. The Trust reserves the right to change
the shareholder services described below or to amend their terms or conditions
upon sixty (60) days notice to shareholders.
SHAREHOLDER STATEMENTS AND REPORTS. Each time you buy or sell shares or
reinvest a dividend or distribution in any Fund, you will receive an account
statement with respect to that Fund confirming such transaction and listing your
current share balance with that Fund The Trust also will send you annual and
semi-annual shareholder reports that contain certain financial information
concerning the Funds. In addition, you will receive year-end tax information
about your accounts with each Fund.
TELEPHONE PRIVILEGES. For your convenience, the Trust provides telephone
privileges that allow you by telephone authorization to (i) purchase shares in
each Fund; (ii) exchange shares from your account in one Fund for shares in the
other Fund; and (iii) redeem shares in each Fund. To utilize these telephone
privileges, you must select such services by checking the appropriate boxes on
the Application and supply us with the information required. [Or should
telephone privileges be automatic unless otherwise indicated?] Procedures have
been established by the Trust and its transfer agent that are considered to be
reasonable and are designed to confirm personal identification information prior
to acting on telephone instructions, including tape recording telephone
communication and providing written confirmation of instructions communicated by
telephone. If the Trust or the transfer agent does not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
the Trust may be liable for any losses arising out of any action on its part or
any failure or omission to act as a result of its own negligence, lack of good
faith, or willful misconduct. In light of the procedures established, neither
the Trust nor the transfer agent will be liable for following telephone
instructions that it believes to be genuine. During periods of extreme economic
conditions or market changes, requests by telephone may be difficult to make due
to heavy volume. During such times, please consider placing your order by mail.
The telephone privileges are not available with respect to redemptions for
accounts requiring supporting legal documents.
HOW EACH FUND'S NET ASSET VALUE IS DETERMINED
Each Fund calculates its net asset value as of the close of regular trading
on the NYSE (currently 4:00 p.m. Eastern time, unless weather, equipment failure
or other factors contribute to an earlier closing time), each day the Fund is
open for business. Each Fund's net asset value per share is computed by
determining the value of its total assets, subtracting all of its liabilities,
and dividing the result by the total number of shares outstanding at such time.
Equity securities are valued at the last sale price on the exchange or in
the over-the-counter market in which such securities are primarily traded, as of
the close of business on the day the securities are being valued, or, lacking
any sales, at the last available bid price. Long-term debt obligations are
valued at the mean of representative quoted bid and asked prices for such
securities or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Adviser deems it
appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity, provided such valuations
represent fair value. When market quotations for futures
21
<PAGE>
and options positions held by a Fund are readily available, those positions are
valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued as determined in good faith by or under the direction of
the Board of Trustees. Securities and other assets quoted in foreign currencies
are valued in U.S. dollars based on the prevailing exchange rates on that day.
Certain securities from time to time may be listed primarily on foreign
exchanges which trade on days when the NYSE is closed (such as a Saturday). As a
result, the net asset value of a Fund's shares may be significantly affected by
such trading on days when shareholders have no access to that Fund.
HOW TO REDEEM SHARES
Shareholders have the right to redeem (subject to the restrictions outlined
below) all or any part of their shares in the Funds at a price equal to the net
asset value of such shares next computed following receipt and acceptance of the
redemption request by the Trust. Unless you have selected the Telephone
Redemption Privilege and provided the required information, in order to redeem
shares in the Funds, a written request in "proper form" (as explained below)
must be sent directly to the Orbitex Group of Funds, State Street Bank and Trust
Company, Attn: Transfer Agent Operations, P.O. Box 1978, Boston, MA 02105-1978.
You cannot redeem shares by telephone unless you are eligible to use the
Telephone Redemption Privilege. In addition, the Trust cannot accept requests
which specify a particular date for redemption or which specify any other
special conditions.
PROPER FORM FOR ALL REDEMPTION REQUESTS. Your redemption request must be in
proper form. To be in proper form, your redemption request must include: (1) for
written redemption requests, a "letter of instruction," which is a letter
specifying the name of the Fund, the number of shares to be sold, the name(s) in
which the account is registered, and your account number. The letter of
instruction must be signed by all registered shareholders for the account using
the exact names in which the account is registered; (2) other supporting legal
documents, as may be necessary, for redemption requests by corporations, trusts,
and partnerships; and (3) any signature guarantees that are required by the
Trust where the value of the shares being redeemed is $50,000 or greater, or
where the redemption proceeds are to be sent to an address other than the
address of record or to a person other than the registered shareholder(s) for
the account. Signature guarantees are required if the amount being redeemed is
$50,000 or more but are not required for redemptions made using the Telephone
Redemption Privilege, unless redemption proceeds are to be sent to a person
other than the registered shareholders or for the account or to an address or
account other than that of record.
Signature guarantees, when required, can be obtained from any one of the
following institutions: (i) a bank; (ii) a securities broker or dealer,
including a Government or municipal securities broker or dealer, that is a
member of a clearing corporation or has net capital of at least $100,000; (iii)
a credit union having authority to issue signature guarantees; (iv) a savings
and loan association, a building and loan association, a cooperative bank, a
federal savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency. Notary publics are not
acceptable guarantors.
YOUR REQUEST FOR REDEMPTION WILL NOT BE PROCESSED IF IT IS NOT IN PROPER
FORM AND WILL BE HELD UNTIL IT IS IN PROPER FORM, AS DESCRIBED ABOVE.
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<PAGE>
RECEIVING YOUR REDEMPTION PAYMENT. Except under certain emergency
conditions, your redemption payment will be sent to you within seven days after
receipt of your telephone or written redemption request, in proper form, by the
Trust.
If your redemption request is with respect to shares purchased by a
personal, corporate, or government check within ten days of the purchase date,
the redemption payment will be held until the purchase check has cleared (which
may take up to ten days from the purchase date), although the shares redeemed
will be priced for redemption upon receipt of your redemption request. You can
avoid the inconvenience of this ten day check clearing period by purchasing
shares with a certified, treasurer's or cashier's check, or with a federal funds
or bank wire.
MINIMUM ACCOUNT SIZE. Due to the relatively high cost of maintaining
accounts, the Trust reserves the right to redeem shares in any account if, as
the result of the redemptions, the value of that account drops below $1,000. You
will be allowed at least sixty (60) days, after written notice by the Trust, to
make an additional investment to bring your account value up to at least $1,000
before the redemption is processed.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
dealers, a contingent deferred sales charge of 1% applies to certain redemptions
made within the [first year] after investing with respect to shares purchased at
net asset value without a sales charge at time of purchase due to purchases of
$1 million or more.
No charge is imposed to the extent that the net asset value of the shares
redeemed does not exceed (a) the current net asset value of shares purchased
through reinvestment of dividends or capital gain distributions plus (b) the
current net asset value of shares purchased more than one year prior to the
redemption, plus (c) increases in the net asset value of the shareholder's
shares above the purchase payments made during the preceding one year.
The contingent deferred sales charge will be waived on (1) involuntary
redemptions effected pursuant to the Trust's right to liquidate shareholder
accounts having an aggregate net asset value of less than $1,000; and (2)
redemptions the proceeds of which are reinvested in the Trust within 90 days of
the redemption.
TELEPHONE REDEMPTION PRIVILEGE. The Telephone Redemption Privilege permits
you to authorize the redemption of some ($[ ] minimum) or all shares in
your account with the Trust by telephoning the Trust at 1-800-[ ] between
8:30 a.m. and 4:00 p.m. Eastern time on any day the Trust is open. In accordance
with your telephone instructions, we will redeem your Fund shares at their net
asset value next determined after your telephone redemption request is received.
Telephone redemption requests received after 4:00 p.m. Eastern time will be
processed as of the close of business on the next business day. Redemption
proceeds will, in accordance with your prior election, be mailed to you at your
current address or electronically transmitted to your designated bank account.
EXCHANGE PRIVILEGE. The exchange privilege is a convenient way to buy
shares in each Fund in order to respond to changes in your investment goals or
in market conditions. In addition to the Telephone Exchange Privilege described
below, shareholders in each Fund may exchange their shares for shares in the
other Fund by a written request, in proper form, sent to the Trust, as described
under "Purchase By Mail" above. Such shares exchanged will be valued at their
respective net asset values next determined after the receipt of the written
exchange request. When making a written exchange request, please provide your
current Fund's name, your account name(s) and number(s), the name of the Fund
into which you wish to exchange your investment, the amount you wish to
exchange, and specify all current shareholder service
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<PAGE>
privileges you wish to continue in your new account (E.G., Telephone
Privileges). For written exchange requests, the signatures of all registered
owners are required. Signature guarantees are also required if the accounts will
not be identically registered. (See "How to Redeem Shares" concerning
requirements relating to signature guarantees.) No INITIAL sales charge,
redemption fee or penalty is imposed on exchanges. The minimum initial
investment in each Fund, whether by exchange or purchase, is $2,500. All
subsequent amounts exchanged must be $500 or more per Fund. Please note that,
for tax purposes, depending on your tax status, an exchange may involve a
taxable transaction. The exchange privilege may be modified or terminated upon
60 days' written notice to shareholders.
TELEPHONE EXCHANGE PRIVILEGE. The Telephone Exchange Privilege permits you
to exchange shares from your account in one Fund for shares in another Fund (if
the accounts in each Fund are identically registered) by telephoning the Trust
at 1-800-[ ] between 8:30 a.m. and 4:00 p.m. Eastern time on any day the
Trust is open. In establishing a new account by exchange, the shares being
exchanged must have a value of at least $2,500. All subsequent purchases by
shares exchanged must have a value of $500 or more. Shares exchanged will be
valued at their respective net asset value next determined after a telephone
exchange request is received. Telephone exchange requests made after 4:00 p.m.
Eastern time will be processed as of the close of business on the next business
day. Please notify the Trust in writing of all shareholder service privileges
you wish to continue in any new account opened by a telephone exchange request.
See "Exchange Privilege" below for further information concerning exchanges.
HOW THE TRUST IS MANAGED
BOARD OF TRUSTEES. The management of the Trust's business and affairs is
the responsibility of its Board of Trustees (the "Board"). Although the Board is
not involved in the day-to-day operations of the Funds, the Board has the
responsibility for establishing broad operating policies and supervising the
overall performance of the Funds.
ADVISER. The Trust is managed by Orbitex Management, Inc. (the "Adviser"),
660 Madison Avenue, New York, New York 10021. The Adviser was founded in 1995
and is registered with the SEC as an investment adviser. The Adviser has no
prior experience in managing registered investment companies. The Adviser,
however, is affiliated with Orbitex Management Ltd., an investment adviser which
manages Canadian unit trusts which had approximately $350 million in assets as
of December 31, 1996. The Adviser is a wholly-owned subsidiary of Orbitex, Inc.,
a business development company which is a wholly-owned subsidiary of Capital
Management Ltd., an investment management firm. Mr. Thomas Bachmann is a
controlling person of Capital Management Ltd.
Under the terms of an investment advisory agreement (the "Advisory
Agreement") with the Trust on behalf of each Fund, the Adviser is responsible
for formulating the Funds' investment programs, allocating assets among
Sub-Advisers, and monitoring and evaluating the investment programs and
performance of the Sub-Advisers. In addition, the Adviser is responsible for
making day-to-day investment decisions and engaging in portfolio transactions on
behalf of the Global Natural Resources Fund, the Communications & Info-Tech Fund
and the Growth Fund. The Adviser also furnishes corporate officers, provides
office space, services and equipment and supervises all matters relating to the
Trust's operations. The Advisory Agreement also provides that the Adviser may
retain Sub-Advisers at the Adviser's own cost and expense, for the purpose of
managing the investment of the assets of one or more Fund's of the Trust.
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<PAGE>
Courtney D. Smith [title] of Orbitex Management, Inc. is responsible for
overseeing the Sub-Advisers. Please refer to "Portfolio Managers" below.
The Trust has applied to the SEC for an exemptive order which, if granted,
will permit the Adviser to engage and terminate Sub-Advisers without shareholder
approval.
As compensation for its services under the Advisory Agreement, each of the
Funds will pay the Adviser a fee, computed daily and paid monthly, at the
annualized rate of [ %] of the average daily net assets of the High Yield
Fund and [ %] of the average daily net assets of the other Funds.
In the interest of limiting the expenses of the Funds, the Adviser has
voluntarily agreed to waive its advisory fees and reimburse certain expenses to
the extent necessary to keep total operating expenses (expressed as a percentage
of average net assets on an annual basis) of the High Yield Fund to [ %] and
of each of the other Funds to [ %]. This waiver will continue until further
notice.
Reimbursement by a Fund of the fees waived or other expenses paid by the
Adviser may be made at a later date when the Fund has reached a sufficient asset
size to permit reimbursement to be made without causing the annual expense ratio
of a Fund to exceed the amount of the relevant expense limitation. Consequently,
no reimbursement by a Fund would be made unless a Fund's actual annual operating
expense ratio were less than [ %] in the case of the High Yield Fund and
[ %] in the case of each of the other Funds and payment of such reimbursement
was approved by the Board of Trustees of the Trust on a quarterly basis. The
total amount of reimbursement to which the Adviser may be entitled in any year
will be equal to the sum of all fees waived and/or assumed by the Adviser during
any of the previous two fiscal years, less any reimbursement amount previously
paid to it.
SUB-ADVISERS. Pursuant to separate Sub-Advisory Agreements among each
Sub-Adviser, the Adviser and the Trust on behalf of the Funds, each Sub-Adviser
is responsible for the selection and management of portfolio investments for its
segment of a particular Fund in accordance with the Fund's investment objective
and policies and under the supervision of the Adviser. The following
organizations act as Sub-Advisers to the Funds:
State Street Global Advisors, Two International Place, Boston, Massachusetts
02110, the investment management area of State Street Bank and Trust Company, is
one of the Sub-Advisers for the Asian Select Advisers Fund. State Street Bank
and Trust Company, one of the largest providers of securities processing and
record-keeping services for U.S. mutual funds and pension funds, is a
wholly-owned subsidiary of State Street Boston Corporation, a publicly held bank
holding company. State Street Global Advisers, with over $220 billion under
management as of January 1997, provides complete global investment management
services from offices in the United States, London, Sydney, Hong Kong, Tokyo,
Toronto, Luxembourg, Melbourne, Montreal and Paris.
Asia Strategic Investment Management Limited ("ASIM"), Chekiang First Bank
Center, 1 Duddell Street, Hong Kong, is one of the Sub-Advisers of the Asian
Select Advisers Fund. Incorporated in Hong Kong in July 1995, ASIM is an
investment management company specializing in Asian equities. As of January
1997, ASIM had $59 million in assets under management. ASIM is an investment
adviser to two non-U.S. registered investment funds. ASIM is a wholly-owned
subsidiary of Asia Strategic Capital Limited, a holding company, which is owned
by KHWC Partners Limited, a holding company, and the Bank of East Asia Limited.
The partners of KHWC Partners are Michael Tze Hau Lee, Patrick Wai Cheong Shum,
James Kuang Kuo Cheng and Peter Kung Wah Woo.
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ImPac Asset Management (HK) Ltd. ("ImPac"), 1205 Universal Trade Centre, 3
Arbuthnot Road, Central, Hong Kong, is one of the Sub-Advisers for the Asian
High Yield Fund. ImPac was incorporated in Hong Kong in November 1990 as
AsiaInvest Consultants Limited, a limited liability company. ImPac provides a
range of investment management services to Asian and overseas clients and as of
[date] had $[ ] in assets under management. ImPac specializes in equities and
related products in the Pacific Rim.
On a monthly basis, each Sub-Adviser receives a sub-advisory fee, paid by
the Adviser, based on each Fund's average daily net assets at the annualized
rate of [ ].
PORTFOLIO MANAGERS. The investment professionals who are primarily
responsible for the day-to-day management of the Fund's portfolios are as
follows:
Global Natural Resources Fund--Ian Ainsworth joined Orbitex Management, Inc.
in 1995. Since 1993 Mr. Ainsworth has been a portfolio manager at Altamira
Management Ltd. From 1990 to 1995, he was a portfolio manager at BGH Central
Investment Management Ltd.
Communications & Info-Tech Fund--David Taylor joined Orbitex Management,
Inc. in 1995. Since 1995 Mr. Taylor has been a portfolio manager at Altamira
Management Ltd. From 1991 to 1995 he was a pension fund manager at Ontario
Teachers Pension Plan Board.
Growth Fund--Courtney D. Smith joined Orbitex Management, Inc. in 1996. He
is also President and Chief Investment Officer of Pinnacle Capital Management,
Inc.
State Street Global Advisers--Investment decisions by State Street Global
Advisers for the Asian Select Advisers Fund are made by committee, and no one
person is primarily responsible for making recommendations to that committee.
ADMINISTRATOR. State Street Bank and Trust Company ("State Street") serves
as the administrator of the Trust. State Street's principal business address is
225 Franklin Street, Boston, Massachusetts 02110.
State Street provides each Fund with administrative services pursuant to an
Administration Agreement. The services under this Agreement are subject to the
supervision of the Board and the officers of the Trust, and include the
day-to-day administration of matters necessary to each Fund's operations,
maintenance of its records and the books of the Trust, preparation of reports,
and compliance monitoring of its activities. For providing administrative
services to the Funds, State Street will receive from each Fund a monthly fee at
an annual rate of .10% of the first $100 million of each Fund's average daily
net assets, plus .08% of the next $100 million of each Fund's average daily net
assets, plus .06% of each Fund's average daily net assets in excess of $200
million (with a minimum annual fee of $75,000 for each Fund, a portion of which
will be waived for the first year of operation).
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT. State Street serves as
the Trust's custodian and holds all portfolio securities and cash assets of the
Trust. State Street is authorized to deposit securities in securities
depositories or to use the services of subcustodians. State Street also provides
accounting services including daily valuation of the shares of each Fund. State
Street also serves as the Trust's transfer agent and dividend disbursing agent
and maintains the Trust's shareholder records.
DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") serves as the
distributor of the shares of each Fund pursuant to a Distribution Agreement
between the Distributor and the Trust. The Distributor's principal business
address is 60 State Street, Boston, Massachusetts 02109. The Distributor is a
broker-dealer registered with the SEC and is a member of the National
Association of Securities Dealers, Inc.
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Pursuant to a Distribution and Service Plan Pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Distribution and Service Plan") and
Agreement Pursuant to the Rule 12b-1 Plan (the "Rule 12b-1 Agreement"), the
Funds are authorized to use a portion of their assets to finance certain
activities relating to the distribution of their shares to investors. The
Distribution and Service Plan permits payments to be made by each Fund to the
Distributor to compensate the Distributor for its activities in connection with
the distribution of shares to investors. No payments may be made under the
Distribution and Service Plan in contemplation of activities for future fiscal
years.
The Distribution and Service Plan permits payments to be made by each Fund
to the Distributor for expenditures incurred by it in connection with the
distribution of Fund shares to investors and provision of certain shareholder
services including but not limited to the payment of compensation, including
incentive compensation to Service Organizations to obtain various distribution
related services for the Fund. The Distributor is also authorized to engage in
advertising, the preparation and distribution of sales literature and other
promotional activities on behalf of the Fund. In addition, the Distribution and
Service Plan authorizes payment by the Fund of the cost of preparing, printing
and distributing Fund Prospectuses and Statements of Additional Information to
prospective investors and of implementing and operating the Distribution and
Service Plan. The Distribution and Service Plan provides for payment of a fee to
the Distributor at an annualized rate not to exceed 0.25% of each Fund's average
daily net assets. The Distributor is authorized to arrange for the Adviser to
provide certain services contemplated by the Distribution and Service Plan and
to compensate the Adviser for such services. The Distribution and Service Plan
will continue in effect, if not sooner terminated in accordance with its terms,
for successive one-year periods, provided that its continuance is specifically
approved by the vote of the Board, including a majority of the Trustees who are
not interested persons of the Trust and do not have a direct or indirect
financial interest in the Distribution and Service Plan. For further information
regarding the Distribution and Service Plan and Rule 12b-1 Agreement, see the
SAI.
EXPENSES. Each Fund pays all its expenses not assumed by the Adviser,
Distributor or other agents. In addition to the investment advisory and other
fees described previously, each Fund pays other expenses, such as brokerage,
legal, audit, transfer agency and custodial fees; proxy solicitation costs;
compensation of trustees who are not affiliated with the Adviser; fidelity bond
and other insurance premiums; organizational expenses; taxes; expenses of
reports and prospectuses sent to existing investors; and extraordinary expenses.
All general expenses of the Trust and joint expenses of the Funds are allocated
among the Funds on a basis deemed fair and equitable.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES
Allocations of portfolio transactions for the Funds, including their
frequency, to various brokers is determined by the Adviser in its best judgment
and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt and efficient execution of orders in an effective manner
at the most favorable price. The Adviser may also consider sales of the Funds'
shares as a factor in the selection of broker-dealers, subject to the policy of
obtaining best price and execution. For further information regarding the
allocation of portfolio transactions and brokerage, see the Statement of
Additional Information.
ORGANIZATION OF THE TRUST
The Trust is a Delaware business trust organized in December 1996 and
registered with the SEC under the 1940 Act as an open-end management investment
company. The Trust currently consists of five
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portfolios (I.E., the Funds), each of which represents a separate series of
beneficial interests in the Trust having different investment objectives,
investment programs, policies and restrictions. Each share of each Fund
represents an equal proportionate interest in that Fund with each other share,
and each share is entitled to such dividends and distributions of income
belonging to that Fund as are declared by the Board. In the event of the
liquidation of a Fund, each share of that Fund is entitled to a PRO RATA share
of the net assets of that Fund.
Shareholders having at least two-thirds of the outstanding shares of the
Trust may remove a Trustee from office by a vote cast in person or by proxy at a
meeting of shareholders called for that purpose at the request of holders of 10%
or more of the outstanding shares of the Trust. The Trust has an obligation to
assist in such shareholder communications. The Trust does not routinely hold
annual meetings of shareholders. Each share of the Trust is entitled to one vote
on all matters submitted to a vote of all shareholders of the Trust. Fractional
shares, when issued, have the same rights, proportionately, as full shares.
Shares of a particular Fund will be voted separately from shares of the other
Funds on matters affecting only that Fund, including approval of the Investment
Advisory Agreement, Distribution Plan and Rule 12b-1 Agreement for that Fund and
changes in the fundamental objective, policies or restrictions of that Fund. All
shares are fully paid and nonassessable when issued and have no preemptive,
conversion or cumulative voting rights. The Trustees in their discretion, may
authorize the division of shares of the Funds into different classes permitting
shares of different classes to be distributed by different methods although
shareholders of different classes would have an interest in the same portfolio
of assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution.
As of the date of this Prospectus, Orbitex Management, Inc. provided the
initial seed capital for the Trust and owned 100% of the outstanding voting
shares of each Fund. Furthermore, as ownership of more than 25% of the
outstanding voting securities of a Fund may result in a person being deemed a
controlling entity of that Fund, Orbitex Management, Inc. may be deemed a
control person of each Fund. Such control by Orbitex Management, Inc. will
dilute the effect of the votes of other shareholders.
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PART B
ORBITEX GROUP OF FUNDS
660 Madison Avenue
New York, New York 10021
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus of the Orbitex Group of Funds (the
"Trust") dated ______________, 1997, which may be obtained by telephoning
1-800-[ ] and asking about the Trust.
The date of this Statement of Additional Information is ________, 1997.
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
General Information and History 2
Investment Restrictions 2
Description of Securities, Other Investment Policies and
Risk Considerations 4
Management of the Trust 23
Principal Holders of Securities 23
Investment Management and Other Services 23
Administrator 25
Custodian 25
Transfer Agent Services 25
Distribution of Shares 25
Brokerage Allocation and Other Practices 27
Purchase and Redemption of Securities Being Offered 28
Determination of Net Asset Value 30
Taxes 30
Organization of the Trust 32
Performance Information About the Funds 32
Independent Accountants 34
Legal Matters 34
<PAGE>
GENERAL INFORMATION AND HISTORY
The Trust is a Delaware business trust registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940 (the
"1940 Act") as an open-end diversified management investment company,
commonly known as a "mutual fund."
The Trust currently consists of five portfolios, the Orbitex Global Natural
Resources Fund ("Global Natural Resources Fund"), Orbitex Communications &
Info-Tech Fund ("Communications & Info-Tech Fund"), Orbitex Growth Fund
("Growth Fund"), Orbitex Asian High Yield Fund ("Asian High Yield Fund") and
Orbitex Asian Select Advisers Fund ("Asian Select Advisers Fund")
(individually a "Fund" and collectively the "Funds"), each of which
represents a separate series of beneficial interest in the Trust having
different investment objectives, investment programs, policies and
restrictions.
Each Fund is managed by Orbitex Management, Inc. (the "Adviser"), which
directs the day-to-day operations of each Fund and directs the investment of
assets of the Global Natural Resources Fund, the Communications & Info-Tech
Fund and the Growth Fund. The investments of the Asian High Yield Fund and
the Asian Select Advisers Fund are directed by one or more sub-advisers (each
a "Sub-Adviser"). State Street Bank and Trust Company ("State Street") is the
administrator, custodian, accounting agent, transfer agent and dividend
disbursing agent for the Trust. Funds Distributor, Inc. (the "Distributor")
is the distributor for the Trust.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following FUNDAMENTAL INVESTMENT POLICIES which may
be changed only with the consent of a "majority of the outstanding voting
securities" of the particular Fund. As used in the Prospectus and in this
Statement of Additional Information, the term "majority of the outstanding
voting shares" means the lesser of (1) 67% of the shares of a Fund present at
a meeting where the holders of more than 50% of the outstanding shares of a
Fund are present in person or by proxy, or (2) more than 50% of the
outstanding shares of a Fund. Shares of each Fund will be voted separately
on matters affecting only that Fund, including approval of changes in the
fundamental objectives, policies, or restrictions of that Fund.
A Fund will not:
(1) MARGIN: Purchase securities on margin, except a Fund may make margin
deposits in connection with permissible options and futures transactions
subject to (5) below and may obtain short-term credits as may be necessary
for clearance of transactions.
(2) SENIOR SECURITIES: Issue any class of securities senior to any other
class of securities except in compliance with the 1940 Act.
(3) BORROWING: Borrow money for investment purpose in excess of one-third
of the value of its total assets, including any amount borrowed less its
liabilities not including any such borrowings. Any borrowings which come to
exceed this amount will be reduced in accordance with applicable law.
Additionally, each Fund may borrow up to 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes.
(4) REAL ESTATE: Purchase or sell real estate, or invest in real estate
limited partnerships, except each Fund may, as appropriate and consistent
with its respective investment objective, policies and other investment
restrictions, buy securities of issuers that engage in real estate operations
and securities that are secured by interests in real estate (including shares
of real estate mortgage investment conduits, mortgage pass-through
securities, mortgage-backed securities and collateralized mortgage
obligations) and may hold and sell real estate acquired as a result of
ownership of such securities.
(5) COMMODITIES: Purchase or sell physical commodities or contracts
thereon, except that each Fund may enter into futures contracts and options
thereon.
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(6) UNDERWRITING: Underwrite securities issued by other persons, except to
the extent that a Fund may be deemed to be an underwriter, within the meaning
of the Securities Act of 1933, in connection with the purchase of securities
directly from an issuer in accordance with each Fund's investment objective,
policies and restrictions.
(7) LOANS: Make loans, except that each Fund in accordance with that Fund's
investment objective, policies and restrictions may: (i) invest in a portion
of an issue of publicly issued or privately placed bonds, debentures, notes,
and other debt securities for investment purposes; (ii) purchase money market
securities and enter into repurchase agreements; and (iii) lend its portfolio
securities in an amount not exceeding one-third of the value of that Fund's
total assets.
(8) DIVERSIFICATION: Make an investment unless 75% of the value of that
Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other investment companies and "other securities."
For purposes of this restriction, the term "other securities" means
securities as to which the Fund invests no more than 5% of the value of its
total assets in any one issuer or purchases no more than 10% of the
outstanding voting securities of any one issuer. As a matter of operating
policy, each Fund will not consider repurchase agreements to be subject to
the above-stated 5% limitation if all of the collateral underlying the
repurchase agreements are U.S. Government securities and such repurchase
agreements are fully collateralized.
(9) CONCENTRATION: Invest 25% or more of the value of its total assets in
any one industry, except that each of the Global Natural Resources Fund and
the Communications & Info-Tech Fund will invest at least 25% of its total
assets in the securities of companies principally in one or more industries
engaged in the business activities identified for that Fund. This limitation
(9) does not apply to securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities or instruments secured by U.S. Government
securities, such as repurchase agreements.
The following restrictions are designated as NON-FUNDAMENTAL and may be
changed by the Board of Trustees of the Trust without the approval of
Shareholders.
A Fund may not:
(1) CONTROL OF PORTFOLIO COMPANIES: Invest in portfolio companies for the
purpose of acquiring or exercising control of such companies.
(2) INVESTMENT COMPANIES: Invest in the securities of other investment
companies except in compliance with the 1940 Act.
(3) OPTIONS, STRADDLES AND SPREADS: Invest in puts, calls, straddles,
spreads or any combination thereof, except to the extent permitted by the
Prospectus and Statement of Additional Information.
(4) RESTRICTED SECURITIES, ILLIQUID SECURITIES AND SECURITIES NOT READILY
MARKETABLE: Knowingly purchase or otherwise acquire any security or invest
in a repurchase agreement if, as a result, more than 15% of the net assets of
the Fund would be invested in securities that are illiquid or not readily
marketable, including repurchase agreements maturing in more than seven days
and non-negotiable fixed time deposits with maturities over seven days. Each
Fund may invest without limitation in restricted securities provided such
securities are considered to be liquid.
(5) MORTGAGING: Mortgage, pledge, or hypothecate in any other manner, or
transfer as security for indebtedness any security owned by a Fund, except as
may be necessary in connection with permissible borrowings and then only if
such mortgaging, pledging or hypothecating does not exceed 33 1/3% of such
Fund's total assets. Collateral arrangements with respect to margin, option
and other risk management and when-issued and forward commitment transactions
are not deemed to be pledges or other encumbrances for purposes of this
restriction.
If a percentage limitation is adhered to at the time of investment, a later
increase or decrease in that percentage amount resulting from any change in
value of the portfolio securities or a Fund's net assets will not result in a
violation of the above fundamental and non-fundamental investment
restrictions.
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DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be
made by the Funds.
UNITED STATES GOVERNMENT OBLIGATIONS: These consist of various types of
marketable securities issued by the United States Treasury, I.E., bills,
notes and bonds. Such securities are direct obligations of the United States
Government and differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable Government security, have a
maturity of up to one year and are issued on a discount basis.
UNITED STATES GOVERNMENT AGENCY SECURITIES: These consist of debt securities
issued by agencies and instrumentalities of the United States Government,
including the various types of instruments currently outstanding or which may
be offered in the future. Agencies include, among others, the Federal
Housing Administration, Government National Mortgage Association ("GNMA"),
Farmer's Home Administration, Export-Import Bank of the United States,
Maritime Administration, and General Services Administration.
Instrumentalities include, for example, each of the Federal Home Loan Banks,
the National Bank for Cooperatives, the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Farm Credit Banks, the Federal National Mortgage
Association ("FNMA"), and the United States Postal Service. These securities
are either: (i) backed by the full faith and credit of the United States
Government (E.G., United States Treasury Bills); (ii) guaranteed by the
United States Treasury (E.G., GNMA mortgage-backed securities); (iii)
supported by the issuing agency's or instrumentality's right to borrow from
the United States Treasury (E.G., FNMA Discount Notes); or (iv) supported
only by the issuing agency's or instrumentality's own credit (E.G., Tennessee
Valley Association).
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES: Each Portfolio may invest
in certificates of deposit and bankers' acceptances which are considered to
be short-term money market instruments. Certificates of deposit are receipts
issued by a depository institution in exchange for the deposit of funds. The
issuer agrees to pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements designed to
enable business to obtain funds to finance commercial transactions.
Generally, an acceptance is a time draft drawn on a bank by an exporter or an
importer to obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by a bank that, in effect, unconditionally
guarantees to pay the face value of the instrument on its maturity date. The
acceptance may then be held by the accepting bank as an earning asset or it
may be sold in the secondary market at the going rate of discount for a
specific maturity. Although maturities for acceptances can be as long as 270
days, most acceptances have maturities of six months or less.
COMMERCIAL PAPER: Each Portfolio may purchase commercial paper. Commercial
paper consists of short-term (usually from 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations.
REPURCHASE AGREEMENTS: The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as the
Fund) acquires ownership of a security (known as the "underlying security")
and the seller (I.E., a bank or primary dealer) agrees, at the time of the
sale, to repurchase the underlying security at a mutually agreed upon time
and price, thereby determining the yield during the term of the agreement.
This results in a fixed rate of return insulated from market fluctuations
during such period, unless the seller defaults on its repurchase obligations.
A Fund will only enter into repurchase agreements where (i) the underlying
securities are of the type (excluding maturity limitations) which the Fund's
investment guidelines would allow it to purchase directly, (ii) the market
value of the underlying security, including interest accrued, will be at all
times at least equal to the value of the repurchase agreement, and (iii)
payment for the underlying security is made only upon physical delivery or
evidence of book-entry transfer to the account of the Fund's custodian.
Repurchase agreements usually are for short periods, often under one week,
and will not be entered into by a Fund for a duration of more than seven days
if, as a result, more than 15% of the net asset value of the Fund would be
invested in such agreements or other securities which are not readily
marketable.
The Funds will assure that the amount of collateral with respect to any
repurchase agreement is adequate. As with a true extension of credit, however,
there is risk of delay in recovery or the possibility of inadequacy of the
collateral
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should the seller of the repurchase agreement fail financially. In addition,
a Fund could incur costs in connection with the disposition of the collateral
if the seller were to default. The Funds will enter into repurchase
agreements only with sellers deemed to be creditworthy by the Board of
Trustees of the Trust and only when the economic benefit to the Funds is
believed to justify the attendant risks. The Funds have adopted standards
for the sellers with whom they will enter into repurchase agreements. The
Board of Trustees of the Trust believe these standards are designed to
reasonably assure that such sellers present no serious risk of becoming
involved in bankruptcy proceedings within the time frame contemplated by the
repurchase agreement. The Funds may enter into repurchase agreements only
with well-established securities dealers or with member banks of the Federal
Reserve System.
ADJUSTABLE RATE SECURITIES: Adjustable rate securities (I.E., variable rate
and floating rate instruments) are securities that have interest rates that
are adjusted periodically, according to a set formula. The maturity of some
adjustable rate securities may be shortened under certain special conditions
described more fully below.
Variable rate instruments are obligations that provide for the adjustment of
their interest rates on predetermined dates or whenever a specific interest
rate changes. A variable rate instrument whose principal amount is scheduled
to be paid in 397 days or less is considered to have a maturity equal to the
period remaining until the next readjustment of the interest rate. Many
variable rate instruments are subject to demand features which entitle the
purchaser to resell such securities to the issuer or another designated
party, either (1) at any time upon notice of usually 397 days or less, or (2)
at specified intervals, not exceeding 397 days, and upon 30 days notice. A
variable rate instrument subject to a demand feature is considered to have a
maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand, if final maturity exceeds 397 days or
the shorter of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand if final maturity is within 397 days.
Floating rate instruments have interest rate reset provisions similar to
those for variable rate instruments and may be subject to demand features
like those for variable rate instruments. The interest rate is adjusted,
periodically (E.G., daily, monthly, semi-annually), to the prevailing
interest rate in the marketplace. The interest rate on floating rate
securities is ordinarily determined by reference to the 90-day U.S. Treasury
bill rate, the rate of return on commercial paper or bank certificates of
deposit or an index of short-term interest rates. The maturity of a floating
rate instrument is considered to be the period remaining until the principal
amount can be recovered through demand.
MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage
pass-through securities differ from other forms of debt securities (which
normally provide periodic payments of interest in fixed amounts and the
payment of principal in a lump sum at maturity or on specified call dates).
Instead, mortgage pass-through securities provide monthly payments consisting
of both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying residential mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Unscheduled payments of principal may be
made if the underlying mortgage loans are repaid or refinanced or the
underlying properties are foreclosed, thereby shortening the securities'
weighted average life. Some mortgage pass-through securities (such as
securities guaranteed by GNMA) are described as "modified pass-through
securities." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, on the
scheduled payment dates regardless of whether the mortgagor actually makes
the payment.
The principal governmental guarantor of mortgage pass-through securities is
GNMA. GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Treasury, the timely payment of principal and interest on securities
issued by lending institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of
mortgage loans. These mortgage loans are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A
"pool" or group of such mortgage loans is assembled and after being approved
by GNMA, is offered to investors through securities dealers.
Government-related guarantors of mortgage pass-through securities (I.E., not
backed by the full faith and credit of the U.S. Treasury) include FNMA and
FHLMC. FNMA is a Government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (I.E., not insured or
guaranteed by any Government agency) residential mortgages from a list of
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approved seller/services which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit
unions and mortgage bankers. Mortgage pass-through securities issued by FNMA
are guaranteed as to timely payment of principal and interest by FNMA but are
not backed by the full faith and credit of the U.S. Treasury.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a U.S.
Government-sponsored corporation formerly owned by the twelve Federal Home
Loan Banks and now owned entirely by private stockholders. FHLMC issues
Participation Certificates ("PCs") which represent interests in conventional
mortgages from FHLMC's national portfolio. FHLMC guarantees the timely
payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the U.S. Treasury.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers
may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage pass-through
securities. The Funds do not purchase interests in pools created by such
non-governmental issuers.
RESETS. The interest rates paid on the Adjustable Rate Mortgage Securities
("ARMs") in which a Fund may invest generally are readjusted or reset at
intervals of one year or less to an increment over some predetermined
interest rate index. There are two main categories of indices: those based
on U.S. Treasury securities and those derived from a calculated measure, such
as a cost of funds index or a moving average of mortgage rates. Commonly
utilized indices include the one-year and five-year constant maturity
Treasury Note rates, the three-month Treasury Bill rate, the 180-day Treasury
Bill rate, rates on longer-term Treasury securities, the National Median Cost
of Funds, the one-month or three-month London Interbank Offered Rate (LIBOR),
the prime rate of a specific bank, or commercial paper rates. Some indices,
such as the one-year constant maturity Treasury Note rate, closely mirror
changes in market interest rate levels. Others tend to lag changes in market
rate levels and tend to be somewhat less volatile.
CAPS AND FLOORS. The underlying mortgages which collateralize the ARMs in
which a Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may change
up or down: (1) per reset or adjustment interval and (2) over the life of the
loan. Some residential mortgage loans restrict periodic adjustments by
limiting changes in the borrower's monthly principal and interest payments
rather than limiting interest rate changes. These payment caps may result in
negative amortization.
The value of mortgage securities in which a Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable caps
or floors on the underlying residential mortgage loans. Additionally, even
though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which the Fund invests to
be shorter than the maturities stated in the underlying mortgages.
MATURITY OF DEBT SECURITIES
The maturity of debt securities may be considered long (10 or more years),
intermediate (3 to 10 years), or short-term (1 to 3 years). In general, the
principal values of longer-term securities fluctuate more widely in response
to changes in interest rates than those of shorter-term securities, providing
greater opportunity for capital gain or risk of capital loss. A decline in
interest rates usually produces an increase in the value of debt securities,
while an increase in interest rates generally reduces their value.
WHEN-ISSUED SECURITIES
Each Fund may, from time to time, purchase securities on a "when-issued" or
delayed delivery basis. The price for such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase, but may take up to three months. During the period between
purchases and
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settlement, no payment is made by a Fund to the issuer and no interest
accrues to a Fund. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value. Each Fund will
maintain, in a segregated account with the custodian, cash or appropriate
liquid securities equal in value to commitments for when-issued securities.
ILLIQUID OR RESTRICTED SECURITIES
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration
is required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in accordance with procedures prescribed
by the Board of Trustees of the Trust. If through the appreciation of
illiquid securities or the depreciation of liquid securities, the Fund should
be in a position where more than 15% of the value of its net assets are
invested in illiquid assets, including restricted securities, the Fund will
take appropriate steps to protect liquidity.
Notwithstanding the above, each Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under
the 1933 Act. This rule permits certain qualified institutional buyers to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser or Sub-Adviser under the
supervision of the Board of Trustees of the Trust, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
Fund's restriction of investing no more than 15% of its net assets in
illiquid securities. A determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this determination, the
Adviser or Sub-Adviser will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security.
In addition, the Adviser or Sub-Adviser could consider (1) the frequency of
trades and quotes, (2) the number of dealers and potential purchases, (3) any
dealer undertakings to make a market, and (4) the nature of the security and
of marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored, and if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid,
the Fund's holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that the Fund does not invest more
than 15% of its net assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
WARRANTS
Each Fund may invest in warrants. Warrants are pure speculation in that they
have no voting rights, pay no dividends and have no rights with respect to
the assets of the corporation issuing them. Warrants basically are options
to purchase equity securities at a specific price valid for a specific period
of time. They do not represent ownership of the securities, but only the
right to buy them. Warrants differ from call options in that warrants are
issued by the issuer of the security which may be purchased on their
exercise, whereas call options may be written or issued by anyone. The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities.
INVESTMENTS OF THE ASIAN HIGH YIELD FUND
The following paragraphs contain a description of the principal types of
investments in Indonesia, Thailand, the Philippines, Malaysia and Hong Kong
in which the Sub-Adviser for the Asian High Yield Fund currently expects to
invest the assets of that Fund. However, it should be appreciated that the
Sub-Adviser may in the future invest in or use other debt instruments or
strategies which may arise as the markets in those countries develop and the
Sub-Adviser reserves the right to employ such investment strategies (such as
forward currency swap contracts) as it may from time to time think necessary
in order to improve or protect the Fund's return in US dollar terms.
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Indonesia - the Sub-Adviser expects to focus primarily on corporate
commercial paper and bonds issued by governmental agencies, state-owned
entities and corporations, all of which will normally be denominated in
Indonesian rupiah. Bonds in Indonesia generally have a five year maturity
and, although some have a fixed rate of interest throughout their life, most
carry interest at a floating rate (i.e., interest is at a margin above a cost
of funds benchmark which is reassessed at regular intervals (normally
quarterly in Indonesia)). Commercial paper normally takes the form of
negotiable promissory notes which are issued at a discount, carry no right of
interest but are payable at their face value at maturity (which normally
ranges from one week to six months from the date of issue). The Sub-Adviser
may also invest part of the Fund's portfolio in negotiable certificates of
deposit and in time deposits (ranging from one month to two years) with
Indonesian banks. In 1994, the first domestic credit rating agency was
established in Indonesia and this development is expected to contribute to
greater liquidity in Indonesia's debt securities markets.
Thailand - there is at present in Thailand a number of available debt
instruments (with maturities ranging from two weeks to seven years) in which
the Fund may invest. These instruments include certificates of deposit
issued by banks which carry interest, are not issued at a discount and may be
either negotiable or non-negotiable; promissory notes issued by finance
companies which carry interest but are not negotiable; bank guaranteed bills
of exchange, which are in effect corporate commercial paper guaranteed by a
bank or finance company, normally have a maturity of up to 90 days and are
issued at a discount; Government bonds issued by the Government or certain
state enterprises, which have a maturity of up to seven years; corporate
convertible debentures listed on the Stock Exchange of Thailand; and "clean"
bills of exchange, which are non-guaranteed corporate commercial paper and
generate a higher return than bank guaranteed bills of exchange because of
the higher risk involved. In addition, the Sub-Adviser will consider making
deposits (for any period from one week to 12 months) with banks and finance
companies (which usually offer higher interest rates than banks) in Thailand.
It should be appreciated that liquidity varies between these types of
instruments (the market in Government bonds being particularly illiquid) and
this is a factor which the Sub-Adviser will take into account in selecting
instruments for the Fund. However, the establishment in 1993 of Thai Rating
and Information Service (TRIS) as Thailand's first domestic credit rating
agency is expected to contribute to greater liquidity in all debt securities
trading in Thailand. In addition, corporate bonds of Thai issuers are not
widely available and, with the rating of those bonds by TRIS, the Sub-Adviser
expects the market in Thai corporate bonds to develop and expand
significantly in the foreseeable future.
Philippines - the Philippine debt market is principally a domestic market
with limited foreign participation. The main instruments which are available
in this market are Treasury Bills issued by the Central Bank or the
Government (these are auctioned on a weekly basis and normally have a
maturity of 90, 180, or 360 days); corporate commercial paper with maturities
ranging from one month to five years; Government bonds issued to finance the
Government deficit; corporate bonds; and asset participation certificates
(which have maturities ranging from one to seven years). A market in
asset-backed securities is also developing. All these instruments may be
denominated in either US dollars or Philippine pesos.
Malaysia - when compared with Thailand, the Malaysian debt market is less
developed in terms of the number of available debt instruments but is more
developed in terms of liquidity. There is an active market in Government
bonds and a reasonably liquid money market, as a result of the Government's
designation of a number of financial institutions as market makers in the
debt market. Available debt instruments can be divided into two categories,
money market instruments (which are short-term instruments with a maturity of
less than one year) and bonds (which are medium-term corporate debentures or
Government bonds with a maturity of one to five years). The principal money
market instruments which are currently available in Malaysia are bankers
acceptances, negotiable certificates of deposit, Bank Negara Bills (bills of
exchange accepted by the Central Bank). Treasury bills and "clean" private
debt securities; the latter are acceptances of bills by corporate obligors
which can be issued only if rated by the Rating Agency of Malaysia. There is
an active market in corporate bonds listed on the Kuala Lumpur Stock
Exchange, which typically have a maturity of up to five years and earn
interest at a fixed rate. Bonds in Malaysia are frequently issued together
with equity warrants, which are detachable and, following issue, traded
separately from the bonds; the Sub-Adviser may, but does not normally expect
to, invest in such warrants. Although bonds of this type are usually listed
on the Kuala Lumpur Stock Exchange, they are normally most actively traded
over-the-counter by financial institutions. It is the intention of the
Sub-Adviser normally to invest in bonds only if they are rated BBB or above
by the Rating Agency of Malaysia.
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Hong Kong - there have been issues of certificates of deposits since the late
1970s but a more widely based HK dollar-denominated fixed income market has
been growing in Hong Kong in recent years. The principal instruments in this
market are short-term Exchange Fund Bills (with maturities of one week, one
month, three months, six months and one year) and Exchange Fund Notes (having
maturities of two, three and five years) issued by the Hong Kong Monetary
Authority. In addition, a number of bonds of corporate issuers are available
and there is a wide range of floating rate notes from which to choose. There
is no local credit rating agency in Hong Kong but most of the more
significant issuers in the Hong Kong debt market have issued US
dollar-denominated instruments which have been rated by Standard & Poor
and/or Moody's.
In addition to domestically-traded debt securities of the types described in
the paragraphs above, a wide range of bonds and other fixed income
instruments of Asian issuers are available in markets outside Asia, and the
Fund is likely to invest in those instruments. These instruments are
normally denominated in US dollars and are traded primarily in Europe
(Eurobonds, which are not offered directly in the United States) or the
United States (Yankee Bonds). Some very large issues described as Global
Bonds are structured for offering simultaneously in both the United States
and Europe and trading in those issues can take place in both markets as well
as other bond trading centres virtually on a 24-hour basis. There is a wide
range of issuers from Asia in those markets, the most active being companies
and governmental agencies from South Korea, the Philippines, Malaysia,
Indonesia and Hong Kong.
SPECIAL CONSIDERATIONS AFFECTING THE PACIFIC BASIN AND SOUTHEAST ASIA
Many Asian countries may be subject to a greater degree of social, political
and economic instability than is the case in the United States and western
Eurpoean countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic and social conditions; (iii) internal insurgencies; (iv)
hostile relations with neighboring countries; and (v) ethnic, religious, and
racial disaffection.
The economies of most of the Asian countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the
United States, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and
general declines in the international securities markets could have a
significant adverse effect upon the securities markets of the Asian countries.
The success of market reforms and a surge in infrastructure spending have
fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of
consumer spending. The increases in infrastructure and consumer spending have
made domestic demand the growth engine for these countries. Thus, their
growth now depends less upon exports to Organization for Economic Cooperation
and Development (OECD) countries. While exports may no longer be the sole
source of growth for developing economies, improved competitiveness in export
markets has contributed to growth in many of these nations. The increased
productivity in many Asian countries has enabled them to achieve, or
maintain, their status as top exporters while improving their national living
standards.
Thailand has one of the fastest growing stockmarkets in the world. The
manufacturing sector is becoming increasingly sophisticated and is benefiting
from export-oriented investing. The manufacturing and service sectors
continue to account for the bulk of Thailand's economic growth. The
agricultural sector continues to become less important. The government has
followed fairly sound fiscal and monetary policies, aided by increased tax
receipts from a fast moving economy. The government also continues to move
ahead with new projects - especially telecommunications, roads and port
facilities - needed to refurbish the country's overtaxed infrastructure.
The country enjoys an able bureaucracy that has maintained economic policy
during the country's many coups. In recent years, the risk of a coup has
diminished, but corruption remains widespread.
Hong Kong's impending return to Chinese dominion in 1997 has not initially
had a positive effect on its economic growth, which was vigorous in the
1980s. Although China has committed by treaty to preserve the economic and
social freedoms enjoyed in Hong Kong for 50 years after regaining control of
Hong Kong, the continuation of the
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current form of the economic system in Hong Kong after the reversion will
depend on the actions of the government of China. Business confidence in
Hong Kong, therefore, can be significantly affected by developments, which in
turn can affect markets and business performance. In preparation for 1997,
Hong Kong has continued to develop trade with China, where it is the largest
foreign investor, while also maintaining its long-standing export
relationship with the United States. Spending on infrastructure improvements
is a significant priority of the colonial government while the private sector
continues to diversify abroad based on its position as an established
international trade center in the Far East.
In terms of GDP, industrial standards and level of education, South Korea is
second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well developed sectors in electronics, automobiles, textiles and
shoe manufacturing, steel and shipbuilding among others. The driving force
behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society. Real GDP
grew about 8.3% in 1994. Both South Korea and North Korea joined the United
Nations separately in late 1991, creating another forum for negotiation and
joint cooperation. The reunification of North and South Korea could have a
detrimental effect on the economy of South Korea.
Indonesia is a mixed economy with many socialist institutions and central
planning but with a recent emphasis on deregulation and private enterprise.
Like Thailand, Indonesia has extensive natural wealth, yet with a large and
rapidly increasingly population, it remains a poor country. Dependent on oil
prices during the 1980s, its manufactured products now predominate,
contributing 21% of GDP. Indonesia's development is progressing smoothly,
and it has become the world's twelfth largest economy.
Malaysia has one of the fastest growing economies in the Asian-Pacific
region. Malaysia has become the world's third-largest producer of
semiconductor devices (after the United States and Japan) and the world's
largest exporter of semiconductor devices. More remarkable is the country's
ability to achieve rapid economic growth with relative price stability as the
government followed prudent fiscal and monetary policies. Malaysia's high
export dependence level leaves it vulnerable to recession in the OECD
countries or to a fall in world commodity prices.
India is one of the world's top fifteen industrial nations and has
considerable natural resources. The government exercises significant
influence over many aspects of the economy. Accordingly, future government
actions could have a significant effect on private sector companies, market
conditions, and prices and yields of securities of Indian issuers held by a
fund. Policymakers in India actively encourage foreign direct investment,
particularly in labor intensive industries. In addition, Indian stock
exchanges rely entirely on delivery of physical share certificates and have
experienced operational difficulties. These problems have included the
existence of fraudulent shares in the market, failed trades, and delays in
the settlement and registration of securities transactions. Indian stock
exchanges have in the past been forced to close for political reasons; for
example, a brokers' strike closed the exchange for ten days in December 1993,
and there is no assurance that the exchanges will not be forced to close
again.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived from
its history. During the 1970s and the early 1980s, the economy expanded
rapidly, achieving an average annual growth rate of 9%. Per capita GDP is
among the highest in Asia. Singapore holds a position as a major oil
refining and services center.
Australia has a prosperous Western-style capitalist economy, with a per
capita GDP comparable to levels in industrialized West European countries.
It is rich in natural resources and is the world's largest exporter of beef
and wool, second-largest exporter of mutton, and among the top wheat
exporters. Australia is also a major exporter of minerals, metals and fossil
fuels. Due to the nature of its exports, a downturn in world commodity
prices could have a significant negative impact on its economy.
EXPOSURE TO FOREIGN MARKETS
Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations may involve significant risks in addition to
the risks inherent in U.S. investments. The value of securities denominated in
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foreign currencies, and of dividends and interest paid with respect to such
securities will fluctuate based on the relative strength of the U.S. dollar.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments,
and may be affected by actions of foreign governments adverse to the
interests of U.S. investors. Such actions may include the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
is no assurance that the Adviser or a Sub-Adviser will be able to anticipate
these potential events or counter their effects. These risks are magnified
for investments in developing countries, which may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
Economies of particular countries or areas of the world may differ favorably
or unfavorably from the economy of the United States. Foreign markets may
offer less protection to investors than U.S. markets. It is anticipated that
in most cases the best available market for foreign securities will be on an
exchange or in over-the-counter markets located outside the United States.
Foreign stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and securities of
some foreign issuers (particularly those located in developing countries) may
be less liquid and more volatile than securities of comparable U.S. issuers.
Foreign security trading practices, including those involving securities
settlement where fund assets may be released prior to receipt of payment, may
result in increased risk in the event of a failed trade or the insolvency of
a foreign broker-dealer, and may involve substantial delays. In addition,
the costs of foreign investing, including withholding taxes, brokerage
commissions and custodial costs, are generally higher than for U.S.
investors. In general, there is less overall governmental supervision and
regulation of securities exchanges, brokers, and listed companies than in the
United States. It may also be difficult to enforce legal rights in foreign
countries. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depository Receipts (ADRs), as well as other "hybrid" forms of ADRs,
including European Depository Receipts (EDRs) and Global Depository Receipts
(GDRs), are certificates evidencing ownership of shares of a foreign issuer.
These certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares
are held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of
the underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate actions.
ADRs are alternatives to directly purchasing the underlying foreign
securities in their national markets and currencies. However, ADRs continue
to be subject to many of the risks associated with investing directly in
foreign securities. These risks include foreign exchange risk as well as the
political and economic risks of the underlying issuer's country.
SHORT SALES
The Funds may sell securities short as part of their overall portfolio
management strategies involving the use of derivative instruments and to
offset potential declines in long positions in similar securities. A short
sale is a transaction in which a Fund sells a security it does not own or
have the right to acquire (or that it owns but does not wish to deliver) in
anticipation that the market price of that security will decline.
When a Fund makes a short sale, the broker-dealer through which the short
sale is made must borrow the security sold short and deliver it to the party
purchasing the security. The Fund is required to make a margin deposit in
connection with such short sales; the Fund may have to pay a fee to borrow
particular securities and will often be obligated to pay over any dividends
and accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund covers its short position, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. The successful use of short selling may
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be adversely affected by imperfect correlation between movements in the price
of the security sold short and the securities being hedged.
To the extent a Fund sells securities short, it will provide collateral to
the broker-dealer and (except in the case of short sales "against the box")
will maintain additional asset coverage in the form of cash, U.S. Government
securities or other liquid securities with its custodian in a segregated
account in an amount at least equal to the difference between the current
market value of the securities sold short and any amounts required to be
deposited as collateral with the selling broker (not including the proceeds
of the short sale). The Funds do not intend to enter into short sales (other
than short sales "against the box") if immediately after such sales the
aggregate of the value of all collateral plus the amount in such segregated
account exceeds 10% of the value of the Fund's net assets. This percentage
may be varied by action of the Board of Trustees. A short sale is "against
the box" to the extent the Fund contemporaneously owns, or has the right to
obtain at no added cost, securities identical to those sold short.
OPTIONS
WRITING COVERED CALL OPTIONS. Each Fund may write (sell) American or
European style "covered" call options and purchase options to close out
options previously written by the Fund. In writing covered call options, the
Fund expects to generate additional premium income which should serve to
enhance the Fund's total return and reduce the effect of any price decline of
the security or currency involved in the option. Covered call options will
generally be written on securities or currencies which, in the Adviser's or a
Sub-Adviser's opinion, are not expected to have any major price increases or
moves in the near future but which, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at expiration of the
option (European style) or at any time until a certain date (the expiration
date) (American style). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at
which the writer effects a closing purchase transaction by repurchasing an
option identical to that previously sold. To secure his obligation to
deliver the underlying security or currency in the case of a call option, a
writer is required to deposit in escrow the underlying security or currency
or other assets in accordance with the rules of a clearing corporation.
Each Fund will write only covered call options. This means that the Fund
will own the security or currency subject to the option or an option to
purchase the same underlying security or currency, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other liquid
securities having a value equal to the fluctuating market value of the
optioned securities or currencies.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
the Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the Fund
will not do), but capable of enhancing the Fund's total return. When writing
a covered call option, a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, but conversely retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since it may be assigned an exercise notice at any time prior to the
expiration of its obligation as a writer. If a call option which the Fund
has written expires, the Fund will realize a gain in the amount of the
premium; however, such gain may be offset by a decline in the market value of
the underlying security or currency during the option period. If the call
option is exercised, the Fund will realize a gain or loss from the sale of
the underlying security or currency. The Fund does not consider a security
or currency covered by a call to be "pledged" as that term is used in the
Fund's policy which limits the pledging or mortgaging of its assets.
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The premium received is the market value of an option. The premium the Fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical price volatility
of the underlying security or currency, and the length of the option period.
Once the decision to write a call option has been made, the Adviser or a
Sub-Adviser, in determining whether a particular call option should be
written on a particular security or currency, will consider the
reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options. The premium received by the
Fund for writing covered call options will be recorded as a liability of the
Fund. This liability will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which the net asset
value per share of the Fund is computed (close of the New York Stock
Exchange), or, in the absence of such sale, the latest asked price. The
option will be terminated upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or, to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to
sell a particular security or currency from its portfolio on which it has
written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security
or currency. There is, of course, no assurance that the Fund will be able to
effect such closing transactions at favorable prices. If the Fund cannot
enter into such a transaction, it may be required to hold a security or
currency that it might otherwise have sold. When the Fund writes a covered
call option, it runs the risk of not being able to participate in the
appreciation of the underlying securities or currencies above the exercise
price, as well as the risk of being required to hold on to securities or
currencies that are depreciating in value. This could result in higher
transaction costs. The Fund will pay transaction costs in connection with
the writing of options to close out previously written options. Such
transaction costs are normally higher than those applicable to purchases and
sales of portfolio securities.
Call options written by a Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, a Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.
A Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from
the writing of the option. Because increases in the market price of a call
option will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund.
WRITING COVERED PUT OPTIONS. Each Fund may write American or European style
covered put options and purchase options to close out options previously
written by the Fund. A put option gives the purchaser of the option the
right to sell and the writer (seller) has the obligation to buy, the
underlying security or currency at the exercise price during the option
period (American style) or at the expiration of the option (European style).
So long as the obligation of the writer continues, he may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring him to make payment of the exercise price against delivery of the
underlying security or currency. The operation of put options in other
respects, including their related risks and rewards, is substantially
identical to that of call options.
A Fund would write put options only on a covered basis, which means that the
Fund would maintain in a segregated account cash, U.S. government securities
or other liquid appropriate securities in an amount not less than the
exercise price or the Fund will own an option to sell the underlying security
or currency subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all times while
the put option is outstanding. (The rules of a clearing corporation
currently require that such assets be deposited in escrow to secure payment
of the exercise price.) The Fund would generally write covered put options
in circumstances where
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the Adviser or a Sub-Adviser wishes to purchase the underlying security or
currency for the Fund's portfolio at a price lower than the current market
price of the security or currency. In such event the Fund would write a put
option at an exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the Fund would
also receive interest on debt securities or currencies maintained to cover
the exercise price of the option, this technique could be used to enhance
current return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received.
Such a decline could be substantial and result in a significant loss to the
Fund. In addition, the Fund, because it does not own the specific securities
or currencies which it may be required to purchase in exercise of the put,
cannot benefit from appreciation, if any, with respect to such specific
securities or currencies.
PURCHASING PUT OPTIONS. Each Fund may purchase American or European style
put options. As the holder of a put option, the Fund has the right to sell
the underlying security or currency at the exercise price at any time during
the option period (American style) or at the expiration of the option
(European style). The Fund may enter into closing sale transactions with
respect to such options, exercise them or permit them to expire. The Fund
may purchase put options for defensive purposes in order to protect against
an anticipated decline in the value of its securities or currencies. An
example of such use of put options is provided below.
Each Fund may purchase a put option on an underlying security or currency (a
"protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where the Adviser or a
Sub-Adviser deems it desirable to continue to hold the security or currency
because of tax considerations. The premium paid for the put option and any
transaction costs would reduce any capital gain otherwise available for
distribution when the security or currency is eventually sold.
Each Fund may also purchase put options at a time when the Fund does not own
the underlying security or currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is
not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Fund will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
PURCHASING CALL OPTIONS. Each Fund may purchase American or European style
call options. As the holder of a call option, the Fund has the right to
purchase the underlying security or currency at the exercise price at any
time during the option period (American style) or at the expiration of the
option (European style). The Fund may enter into closing sale transactions
with respect to such options, exercise them or permit them to expire. The
Fund may purchase call options for the purpose of increasing its current
return or avoiding tax consequences which could reduce its current return.
The Fund may also purchase call options in order to acquire the underlying
securities or currencies. Examples of such uses of call options are provided
below.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the Fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option rather than the underlying security or currency itself, the Fund
is partially protected from any unexpected decline in the market price of the
underlying security or currency and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
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DEALER (OVER-THE-COUNTER) OPTIONS. Each Fund may engage in transactions
involving dealer options. Certain risks are specific to dealer options.
While the Fund would look to a clearing corporation to exercise
exchange-traded options, if the Fund were to purchase a dealer option, it
would rely on the dealer from whom it purchased the option to perform if the
option were exercised. Failure by the dealer to do so would result in the
loss of the premium paid by the Fund as well as loss of the expected benefit
of the transaction.
Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the Fund writes
a dealer option, it generally will be able to close out the option prior to
its expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. While the Fund will
seek to enter into dealer options only with dealers who will agree to and
which are expected to be capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Until
the Fund, as a covered dealer call option writer, is able to effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) or currencies used as cover until the option expires or is exercised.
In the event of insolvency of the contra party, the Fund may be unable to
liquidate a dealer option. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in material losses
to the Fund. For example, since the Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not
sell the assets which it has segregated to secure the position while it is
obligated under the option. This requirement may impair a Fund's ability to
sell portfolio securities or currencies at a time when such sale might be
advantageous.
The Staff of the SEC has taken the position that purchased dealer options and
the assets used to secure the written dealer options are illiquid securities.
A Fund may treat the cover used for written OTC options as liquid if the
dealer agrees that the Fund may repurchase the OTC option it has written for
a maximum price to be calculated by a predetermined formula. In such cases,
the OTC option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation on unmarketable securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.
FUTURES CONTRACTS
TRANSACTIONS IN FUTURES. Each Fund may enter into futures contracts,
including stock index, interest rate and currency futures ("futures or
futures contracts").
Stock index futures contracts may be used to provide a hedge for a portion of
the Fund's portfolio, as a cash management tool, or as an efficient way for
the Adviser or Sub-Adviser to implement either an increase or decrease in
portfolio market exposure in response to changing market conditions. A Fund
may, purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the Fund must sell
futures contacts with respect to indices or subindices whose movements will
have a significant correlation with movements in the prices of the Fund's
portfolio securities.
Interest rate or currency futures contracts may be used as a hedge against
changes in prevailing levels of interest rates or currency exchange rates in
order to establish more definitely the effective return on securities or
currencies held or intended to be acquired by the Fund. In this regard, the
Fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange rates and
purchase such futures as an offset against the effect of expected declines in
interest rates or currency exchange rates.
A Fund will enter into futures contracts which are traded on national or
foreign futures exchanges, and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are traded in London at the
London International Financial Futures Exchange in Paris at the MATIF and in
Tokyo at the Tokyo Stock Exchange. Although techniques other than the sale
and purchase of
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futures contracts could be used for the above-referenced purposes, futures
contracts offer an effective and relatively low cost means of implementing
the Fund's objectives in these areas.
REGULATORY LIMITATIONS. The Fund will engage in futures contracts and
options thereon only for bona fide hedging, yield enhancement, and risk
management purposes, in each case in accordance with rules and regulations of
the CFTC.
A Fund may not purchase or sell futures contracts or related options if, with
respect to positions which do not qualify as bona fide hedging under
applicable CFTC rules, the sum of the amounts of initial margin deposits and
premiums paid on those portions would exceed 5% of the net asset value of the
Fund after taking into account unrealized profits and unrealized losses on
any such contracts it has entered into; provided, however, that in the case
of an option that is in-the money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. For purposes of
this policy options on futures contracts and foreign currency options traded
on a commodities exchange will be considered "related options". This policy
may be modified by the Board of Trustees without a shareholder vote and does
not limit the percentage of the Fund's assets at risk to 5%.
A Fund's use of futures contracts may result in leverage. Therefore, to the
extent necessary, in instances involving the purchase of futures contracts or
the writing of call or put options thereon by the Fund, an amount of cash,
U.S. government securities or other appropriate liquid securities, equal to
the market value of the futures contracts and options thereon (less any
related margin deposits), will be identified in an account with the Fund's
custodian to cover (such as owning an offsetting position) the position, or
alternative cover will be employed. Assets used as cover or held in an
identified account cannot be sold while the position in the corresponding
option or future is open, unless they are replaced with similar assets. As a
result, the commitment of a large portion of a Fund's assets to cover or
identified accounts could impede portfolio management or the Fund's ability
to meet redemption requests or other current obligations.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, each Fund would comply with such new
restrictions.
TRADING IN FUTURES CONTRACTS. A futures contract provides for the future
sale by one party and purchase by another party of a specified amount of a
specific financial instrument (e.g., units of a stock index) for a specified
price, date, time and place designated at the time the contract is made.
Brokerage fees are incurred when a futures contract is bought or sold and
margin deposits must be maintained. Entering into a contract to buy is
commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling
a contract or holding a short position.
Unlike when a Fund purchases or sells a security, no price would be paid or
received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions
in futures contracts, the Fund would be required to deposit with its
custodian or futures broker in a segregated account in the name of the
futures broker an amount of cash, U.S. government securities, suitable money
market instruments, or other liquid securities, known as "initial margin."
The margin required for a particular futures contract is set by the exchange
on which the contract is traded, and may be significantly modified from time
to time by the exchange during the term of the contract. Futures contracts
are customarily purchased and sold on margins that may range upward from less
than 5% of the value of the contract being traded.
If the price of an open futures contract changes (by increase in underlying
instrument or index in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a point at which
the margin on deposit does not satisfy margin requirements, the broker will
require an increase in the margin. However, if the value of a position
increases because of favorable price changes in the futures contract so that
the margin deposit exceeds the required margin, the broker will pay the
excess to the Fund.
These subsequent payments, called "variation margin," to and from the futures
broker, are made on a daily basis as the price of the underlying assets
fluctuate making the long and short positions in the futures contract more or
less
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valuable, a process known as "marking to the market." Each Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most
futures contracts are usually closed out before the delivery date. Closing
out an open futures contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for the same
aggregate amount of the identical underlying instrument or index and the same
delivery date. If the offsetting purchase price is less than the original
sale price, the Fund realizes a gain; if it is more, the Fund realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if it is less, the Fund realizes a
loss. The transaction costs must also be included in these calculations.
There can be no assurance, however, that the Fund will be able to enter into
an offsetting transaction with respect to a particular futures contract at a
particular time. If the Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the futures contract.
For example, one contract in the Financial Times Stock Exchange 100 Index
future is a contract to buy 25 pounds sterling multiplied by the level of the
UK Financial Times 100 Share Index on a given future date. Settlement of a
stock index futures contract may or may not be in the underlying instrument
or index. If not in the underlying instrument or index, then settlement will
be made in cash, equivalent over time to the difference between the contract
price and the actual price of the underlying asset at the time the stock
index futures contract expires.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
VOLATILITY AND LEVERAGE. The prices of futures contracts are volatile and
are influenced, among other things, by actual and anticipated changes in the
market and interest rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a price beyond
that limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation
of futures positions and subjecting some futures traders to substantial
losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, 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 purchase or sale of a futures contract may result in losses in
excess of the amount of margin deposited to maintain the futures contract.
However, a Fund would presumably have sustained comparable losses if, instead
of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline. Furthermore, in the case of a
futures contract purchase, in order to be certain that the Fund has
sufficient assets to satisfy its obligations under a futures contract, the
Fund earmarks to the futures contract money market instruments or other
liquid securities equal in value to the current value of the underlying
instrument less the margin deposit.
LIQUIDITY. A Fund may elect to close some or all of its futures positions at
any time prior to their expiration. The Fund would do so to reduce exposure
represented by long futures positions or short futures positions. The Fund
may close its positions by taking opposite positions which would operate to
terminate the Fund's position in the futures contracts. Final determinations
of variation margin would then be made, additional cash would be required to
be paid by or released to the Fund, and the Fund would realize a loss or a
gain.
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Futures contracts may be closed out only on the exchange or board of trade
where the contracts were initially traded. Although each Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular
contract at any particular time. The reasons for the absence of a liquid
secondary market on an exchange are substantially the same as those discussed
under "Special Risks of Transactions in Options on Futures Contracts." In
the event that a liquid market does not exist, it might not be possible to
close out a futures contract, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge the underlying instruments, the Fund would continue to hold the
underlying instruments subject to the hedge until the futures contracts could
be terminated. In such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses on the
futures contract. However, as described below, there is no guarantee that
the price of the underlying instruments will, in fact, correlate with the
price movements in the futures contract and thus provide an offset to losses
on a futures contract.
HEDGING RISK. A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior or market or interest rate
trends. There are several risks in connection with the use by a Fund of
futures contracts as a hedging device. One risk arises because of the
possible imperfect correlation between movements in the prices of the futures
contracts and movements in the prices of the underlying instruments which are
the subject of the hedge. The Adviser or Sub-Adviser will, however, attempt
to reduce this risk by entering into futures contracts whose movements, in
its judgment, will have a significant correlation with movements in the
prices of the Fund's underlying instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging purposes is also
subject to the Adviser's or Sub-Adviser's ability to correctly predict
movements in the direction of the market. It is possible that, when the Fund
has sold futures to hedge its portfolio against a decline in the market, the
index, indices, or instruments underlying futures might advance and the value
of the underlying instruments held in the Fund's portfolio might decline. If
this were to occur, the Fund would lose money on the futures and also would
experience a decline in value in its underlying instruments. However, while
this might occur to a certain degree, the Adviser and each Sub-Adviser
believe that over time the value of the Fund's portfolio will tend to move in
the same direction as the market indices used to hedge the portfolio. It is
also possible that if a Fund were to hedge against the possibility of a
decline in the market (adversely affecting the underlying instruments held in
its portfolio) and prices instead increased, the Fund would lose part or all
of the benefit of increased value of those underlying instruments that it has
hedged, because it would have offsetting losses in its futures positions. In
addition, in such situations, if the Fund had insufficient cash, it might
have to sell underlying instruments to meet daily variation margin
requirements. Such sales of underlying instruments might be, but would not
necessarily be, at increased prices (which would reflect the rising market).
The Fund might have to sell underlying instruments at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation,
or no correlation at all, between price movements in the futures contracts
and the portion of the portfolio being hedged, the price movements of futures
contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions, which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements in the
securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and also because of the imperfect correlation between price movements in the
underlying instruments and movements in the prices of futures contracts, even
a correct forecast of general market trends by the Adviser or Sub-Adviser
might not result in a successful hedging transaction over a very short time
period.
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OPTIONS ON FUTURES CONTRACTS. Each Fund may purchase and sell options on the
same types of futures in which it may invest.
Options on futures are similar to options on underlying instruments except
that options on futures give the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put), rather
than to purchase or sell the futures contract, at a specified exercise price
at any time during the period of the option. Upon exercise of the option,
the delivery of the futures position by the writer of the option to the
holder of the option will be accompanied by the delivery of the accumulated
balance in the writer's futures margin account which represents the amount by
which the market price of the futures contract, at exercise, exceeds (in the
case of a call) or is less than (in the case of a put) the exercise price of
the option on the futures contract. Purchasers of options who fail to
exercise their options prior to the exercise date suffer a loss of the
premium paid.
As an alternative to writing or purchasing call and put options on stock
index futures, each Fund may write or purchase call and put options on stock
indices. Such options would be used in a manner similar to the use of options
on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS. The risks
described under "Special Risks of Transactions on Futures Contracts" are
substantially the same as the risks of using options on futures. In
addition, where a Fund seeks to close out an option position by writing or
buying an offsetting option covering the same underlying instrument, index or
contract and having the same exercise price and expiration date, its ability
to establish and close out positions on such options will be subject to the
maintenance of a liquid secondary market. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may
be insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of options, or underlying
instruments; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options)
would cease to exist, although outstanding options on the exchange that had
been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms. There is no
assurance that higher than anticipated trading activity or other unforeseen
events might not, at times, render certain of the facilities of any of the
clearing corporations inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution
of customers' orders.
ADDITIONAL FUTURES AND OPTIONS CONTRACTS. Although the Funds have no current
intention of engaging in futures or options transactions other than those
described above, they reserve the right to do so. Such futures and options
trading might involve risks which differ from those involved in the futures
and options described above.
FOREIGN FUTURES AND OPTIONS
Participation in foreign futures and foreign options transactions involves
the execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the National Futures Association nor any domestic
exchange regulates activities of any foreign boards of trade, including the
execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable
foreign law. This is true even if the exchange is formally linked to a
domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, customers who trade foreign
futures or foreign options contracts may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC's
regulations and the rules of the National Futures Association and any
domestic exchange, including the right to use reparations proceedings before
the Commission and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from a Fund for foreign futures or foreign options transactions may not be
provided the
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same protections as funds received in respect of transactions on United
States futures exchanges. In addition, the price of any foreign futures or
foreign options contract and, therefore, the potential profit and loss
thereon may be affected by any variance in the foreign exchange rate between
the time the Fund's order is placed and the time it is liquidated, offset or
exercised.
FOREIGN CURRENCY TRANSACTIONS
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are principally
traded in the interbank market conducted directly between currency traders
(usually large, commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades.
Each Fund may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. The Fund's use of such contracts would include, but not be
limited to, the following:
First, when the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars of the amount of foreign
currency involved in the underlying security transactions, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.
Second, when the Adviser or Sub-Adviser believes that one currency may
experience a substantial movement against another currency, including the
U.S. dollar, it may enter into a forward contract to sell or buy the amount
of the former foreign currency, approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency.
Alternatively, where appropriate, a Fund may hedge all or part of its foreign
currency exposure through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an effective proxy for
other currencies. In such a case, the Fund may enter into a forward contract
where the amount of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Fund. The precise matching of
the forward contract amounts and the value of the securities involved will
not generally be possible since the future value of such securities in
foreign currencies will change as a consequence of market movements in the
value of those securities between the date the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the longer term investment decisions made with regard to overall
diversification strategies. However, each of the Adviser and Sub-Advisers
believe that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of a Fund will
be served.
Each Fund may enter into forward contacts for any other purpose consistent
with the Fund's investment objective and program. However, the Fund will not
enter into a forward contract, or maintain exposure to any such contract(s),
if the amount of foreign currency required to be delivered thereunder would
exceed the Fund's holdings of liquid securities and currency available for
cover of the forward contract(s). In determining the amount to be delivered
under a contract, the Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in
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an offsetting transaction, it may subsequently enter into a new forward
contract to sell the foreign currency. Should forward prices decline during
the period between the Fund's entering into a forward contract for the sale
of a foreign currency and the date it enters into an offsetting contract for
the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Each Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, each Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency denominated securities and will not do so unless deemed appropriate
by the Adviser or a Sub-Adviser. It also should be realized that this method
of hedging against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time, they tend to limit any potential gain
which might result from an increase in the value of that currency.
Although each Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis. It will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND FORWARD FOREIGN
EXCHANGE CONTRACTS
Each Fund may enter into certain option, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will
be treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be considered
to have been closed at the end of the Fund's fiscal year and any gains or
losses will be recognized for tax purposes at that time. Such gains or
losses from the normal closing or settlement of such transactions will be
characterized as 60% long-term capital gain or loss and 40% short-term
capital gain or loss regardless of the holding period of the instrument. The
Fund will be required to distribute net gains on such transactions to
shareholders even though it may not have closed the transaction and received
cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options
and futures on currencies, which offset a security or currency position may
be considered straddles for tax purposes, in which case a loss on any
position in a straddle will be subject to deferral to the extent of
unrealized gain in an offsetting position. The holding period of the
securities or currencies comprising the straddle may be deemed not to begin
until the straddle is terminated. For securities offsetting a purchased put,
this adjustment of the holding period may increase the gain from sales of
securities held less than three months. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an equity
security will not include the period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options on equity securities, may be
long-term capital loss, if the security covering the option was held for more
than twelve months prior to the writing of the option.
In order for each Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. In addition, gains realized on the sale or other
disposition of securities, including option, futures or forward contracts on
securities or securities indexes and, in some cases, currencies, held for
less than three months, must be limited to less than 30% of the Fund's annual
gross income. In order to avoid realizing excessive gains on securities or
currencies held less
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<PAGE>
than three months, the Fund may be required to defer the closing out of
option, futures or foreign forward exchange contracts beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on Section 1256 option, futures and foreign forward exchange contracts,
which have been open for less than three months as of the end of the Fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test.
SWAP AGREEMENTS
Each of the Funds may enter into interest rate, index and currency exchange
rate swap agreements in attempts to obtain a particular desired return at a
lower cost to the Fund than if the Fund has invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of returns) earned or realized on particular predetermined investments
or instruments. The gross returns to be exchanged or "swapped" between the
parties are calculated with respect to a "notional amount," I.E., the return
on or increase in value of a particular dollar amount invested at a
particular interest rate, in a particular foreign currency, or in a "basket"
of securities representing a particular index. The "notional amount" of the
swap agreement is only a fictive basis on which to calculate the obligations
the parties to a swap agreement have agreed to exchange. A Fund's
obligations (or rights) under a swap agreement will generally be equal only
to the amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's obligations under a swap agreement will be accrued
daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or other liquid securities, to avoid leveraging of the Fund's
portfolio. A Fund will not enter into a swap agreement with any single party
if the net amount owed or to be received under existing contracts with that
party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements enhance the Fund's total return will
depend on the Adviser's or Sub-Adviser's ability correctly to predict whether
certain types of investments are likely to produce greater returns than other
investments. Because they are two-party contracts and may have terms of
greater than seven days, swap agreements may be considered to be illiquid.
Moreover, a Fund bears the risk of loss of the amount expected to be received
under a swap agreement in the event of the default or bankruptcy of a swap
agreement counterparty. The Adviser or Sub-Adviser will cause a Fund to
enter into swap agreements only with courterparties that would be eligible
for consideration as repurchase agreement counterparties under the Funds'
repurchase agreement guidelines. Certain restrictions imposed on the Funds
by the Internal Revenue Code may limit the Funds' ability to use swap
agreements. The swap market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or
commodity option transactions under the CEA, pursuant to regulations of the
CFTC. To qualify for this exemption, a swap agreement must be entered into
by "eligible participants," which include the following, provided the
participants' total assets exceed established levels: a bank or trust
company, savings association or credit union, insurance company, investment
company subject to regulation under the Investment Company Act of 1940,
commodity pool, corporation, partnership, proprietorship, organization, trust
or other entity, employee benefit plan, governmental entity, broker-dealer,
futures commission merchant, natural person. or regulated foreign person. To
be eligible, natural persons and most other entities must have total assets
exceeding $10 million; commodity pools and employees benefit plans must have
assets exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a
fungible class of agreements that are standardized as to their material
economic terms. Second, the creditworthiness of parties with actual or
potential obligations under the swap agreement must be a material
consideration in entering into or determining the terms of the swap
agreement, including pricing, cost or credit enhancement terms. Third, swap
agreements may not be entered into and traded on or through a multilateral
transaction execution facility.
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<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the last five years, are shown below.
Each Trustee who is considered an "interested person" of the Trust (as defined
in Section 2(a)(19) of the 1940 Act) is indicated by an asterisk next to his
name.
<TABLE>
<CAPTION>
Position with the Trust and
Name, Age and Principal Occupation within
Business Address the Past Five Years
- ----------------- -----------------------------
<S> <C>
*Otto J. Felber, 64 Trustee of the Trust. President and Vice-Chairman, Altamira
250 Bloor Street East Management Ltd. (investment management) (1987 - present).
Suite 300
Toronto, Ontario
Canada M4W 1E6
*James L. Nelson, 47 Trustee, President, Assistant Treasurer and Assistant Secretary of
660 Madison Avenue the Trust. Director and Chief Executive Officer, Orbitex
New York, NY 10021 Management, Inc., Chief Executive Officer and President, Orbitex, Inc.
(business development) (1995 - present); President, AVIC Group
International (communications) (1993 - 1995); President, Eaglescliff
Corporation (consulting) (1986 - present).
Mark Breault, 30 Treasurer and Secretary of the Trust. Vice President - Operations, Orbitex
660 Madison Avenue Management, Inc. (November 1996 - present); Vice President, State
New York, NY 10021 Street Bank and Trust Company (1991 - 1996).
</TABLE>
Each Trustee of the Trust who is not an interested person of the Trust or
Adviser or Sub-Adviser receives an annual fee of $5,000 plus a fee of $500
for each meeting of the Board of Trustees attended. The Trust also
reimburses each such Trustee for travel and other expenses incurred in
attending such meetings.
Trustees and officers of the Trust, as a group, owned less than 1% of each
Fund's outstanding voting securities as of the date of this Statement of
Additional Information.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of this Statement of Additional Information, Orbitex
Management, Inc. held 100% of the outstanding voting shares of each Fund.
INVESTMENT MANAGEMENT AND OTHER SERVICES
ADVISER
Orbitex Management, Inc., 660 Madison Avenue, New York, NY 10021, serves as
the Adviser of each Fund pursuant to an Investment Advisory Agreement that
has been approved by the Board, including a majority of the independent
Trustees. The initial term of the Investment Advisory Agreement is one year.
However, the Investment Advisory Agreement may continue in effect from year
to year if approved at least annually by a vote of a majority of the Board
(including a majority of the Trustees who are not parties to the Investment
Advisory Agreement or interested persons of any such parties) cast in person
at a meeting called for the purpose of voting on such renewal, or by the vote
of a majority of the outstanding shares of the particular Fund.
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<PAGE>
The directors and the principal executive officers of the Adviser are: Otto
J. Felber, Director and James L. Nelson, Director and Chief Executive
Officer. The Adviser is a subsidiary of Orbitex, Inc., a business
development firm.
In addition to the duties set forth in the Prospectus under "How the Trust is
Managed - Adviser", the Adviser, in furtherance of such duties and
responsibilities, is authorized in its discretion to engage in the following
activities or to cause or permit the Sub-Advisers to engage in the following
activities on behalf of the Trust: (i) develop a continuing program for the
management of the assets of each Fund; (ii) buy, sell, exchange, convert,
lend, or otherwise trade in portfolio securities and other assets; (iii)
place orders and negotiate the commissions for the execution of transactions
in securities with or through broker-dealers, underwriters, or issuers; (iv)
prepare and supervise the preparation of shareholder reports and other
shareholder communications; and (v) obtain and evaluate business and
financial information in connection with the exercise of its duties.
Subject to policies established by the Board of Trustees of the Trust, which
has overall responsibility for the business and affairs of each Fund, the
Adviser manages the operations of the Funds. In addition to providing
advisory services, the Adviser furnishes the Funds with office space and
certain facilities and personnel required for conducting the business of the
Funds and pays the compensation of the Fund's officers, trustees and
employees affiliated with the Adviser or its affiliates.
The Trust has agreed that the word "Orbitex" in its name is derived from the
name of the Adviser; that such name is the property of the Adviser for
copyrights and/or other purposes; and that therefore, such name may freely be
used by the Adviser for other investment companies, entities or products.
The Trust has further agreed that in the event that for any reason, the
Adviser ceases to be its investment adviser, the Trust will, unless the
Adviser otherwise consents, promptly take all steps necessary to change its
name to one which does not include "Orbitex."
SUB-ADVISERS
Each of the Sub-Advisers described in the Prospectus serves as sub-adviser to
one or more of the Funds pursuant to separate Sub-Advisory Agreements by and
among the Trust on behalf of the applicable Fund, the Adviser and the
Sub-Adviser.
In addition to the duties set forth in the Prospectus, each Sub-Adviser, in
furtherance of such duties and responsibilities, is authorized and has agreed
to provide or perform the following functions with respect to its segment of
a particular Fund: (1) formulate and implement a continuing investment
program for use in managing the assets and resources of each Fund in a manner
consistent with each Fund's investment objective, policies, and restrictions,
which program may be amended and updated from time to time to reflect changes
in financial and economic conditions; (2) make all determinations with
respect to the investment of each Fund's assets in accordance with (a)
applicable law, (b) each Fund's investment objective, policies, and
restrictions as provided in the Trust's Prospectus and Statement of
Additional Information, as amended from time to time, (c) provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies, and (d) such other limitations as the Board of Trustees
of the Trust may impose by written notice; (3) make all determinations as to
the purchase or sale of portfolio securities, including advising the Board of
Trustees of the Trust as to certain matters involving each Fund's portfolio
securities that are not in the nature of investment decisions; (4) buy, sell,
exchange, convert for each Fund's use, and otherwise trade in portfolio
securities and other assets; (5) furnish to the Board of Trustees of the
Trust periodic reports concerning the Sub-Adviser's economic outlook and
investment strategy, as well as information concerning each Fund's portfolio
activity and investment performance; (6) place orders for the execution of
portfolio transactions with such broker-dealers, underwriters or issuers, and
negotiate the commissions (if any) for the execution of transactions in
securities with or through such broker-dealers, underwriters or issuers
selected by the Sub-Adviser; (7) obtain and evaluate business and financial
information in connection with the exercise of its duties; (8) determine the
creditworthiness of the issuers, obligors, or guarantors of portfolio
securities; and (9) evaluate the creditworthiness of any entities with which
the Funds propose to engage in repurchase transactions.
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<PAGE>
ADMINISTRATOR
State Street is the administrator of the Trust. State Street is a
Massachusetts trust company with a principal office at 225 Franklin Street,
Boston, Massachusetts 02111. State Street serves as administrator of other
mutual funds.
Pursuant to the Administration Agreement with the Trust, State Street
provides all administrative services reasonably necessary for the Trust,
other than those provided by the Adviser, subject to the supervision of the
Board of Trustees of the Trust.
Under the Administration Agreement with the Trust, State Street provides
administrative services including, without limitation: (i) services of
personnel competent to perform such administrative and clerical functions as
are necessary to provide effective administration of the Trust; (ii)
maintaining the Trust's books and records (other than financial and
accounting books and records and records maintained by the Trust's custodian
or transfer agent); (iii) overseeing the Trust's insurance relationships;
(iv) preparing or assisting in the preparation of all required tax returns,
proxy statements and reports to the Trust's shareholders and Trustees and
reports to and filings with the SEC and any other governmental agency; (v)
preparing or assisting in the preparation of such notices and reports as may
be necessary to offer and sell the Trust's shares under applicable state
securities laws; (vi) preparing or assisting in the preparation of, and
coordinating the distribution of all materials for meetings of the Board of
Trustees of the Trust; (vii) monitoring daily and periodic compliance with
respect to all requirements and restrictions of the 1940 Act, the Internal
Revenue Code and the Prospectus; (viii) monitoring the calculation of all
income and expense accruals, sales and redemptions of capital shares
outstanding by the Trust's custodian; (ix) evaluating expenses, projecting
futures expenses, and processing payments of expenses; and (x) monitoring and
evaluating performance of accounting and related services by the accounting
agent for the Trust.
The Agreement is terminable at any time by the Trust or State Street on sixty
days' written notice. If the Trust terminates the Agreement within three
years of its effective date, the Fund must reimburse State Street for any
fees waived by State Street.
CUSTODIAN
State Street serves as the custodian of the Trust's assets pursuant to a
Custodian Contract by and between State Street and the Trust. State Street's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments. Pursuant to the Custodian
Contract, State Street also provides certain accounting and pricing services
to the Trust, including calculating the daily net asset value per share for
each Fund; maintaining original entry documents and books of record and
general ledgers; posting cash receipts and disbursements; reconciling bank
account balances monthly; recording purchase and sales based upon
communications from the Adviser and Sub-Advisers; and preparing monthly and
annual summaries to assist in the preparation of financial statements of, and
regulatory reports for, the Trust. The Trust may employ foreign
sub-custodians that are approved by the Board of Trustees to hold foreign
assets.
TRANSFER AGENT SERVICES
State Street provides transfer agent and dividend disbursing services to each
Fund pursuant to the terms of a Transfer Agency and Service Agreement by and
between State Street and the Trust.
DISTRIBUTION OF SHARES
Funds Distributor, Inc. (the "Distributor") serves as the distributor of the
shares of each Fund pursuant to a Distribution Agreement between the
Distributor and the Trust. The Distributor's principal business address is
60 State Street, Boston, Massachusetts 02108. The Distributor receives
front-end or contingent deferred sales commissions or sales loads for
providing such services to the Trust under the Distribution Agreement. In
addition, pursuant to a written Distribution and Service Plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Distribution and
Service Plan") and Agreement pursuant to the Rule 12b-1 Plan (the "Rule 12b-1
Agreement"), the Funds are
25
<PAGE>
authorized to use a portion of their assets to finance certain activities
relating to the distribution of their shares to investors.
The Distribution and Service Plan authorizes payments to the Distributor
pursuant to the Rule 12b-1 Agreement with the Trust, as compensation for
services, costs and expenses in connection with the distribution of the
Trust's shares. In addition, the Distribution and Service Plan authorizes
the Distributor to make payments to certain securities dealers or brokers,
administrators and others ("Recipients") that have rendered assistance in the
distribution of the Trust's shares (either direct, administrative or both, in
the distribution of shares of the Trust or has provided support services).
The Trust will pay the Distributor quarterly at a rate equal to an annualized
rate of .25% of the average daily net assets of each Fund during that quarter
and the Distributor, in turn, will pay Recipients based on the average daily
net asset value of shares of each Fund owned by that Recipient or its
customers during that quarter. Each Fund will bear its own costs of
distribution.
No such payment will be made by the Distributor to any Recipient in any
quarter if the aggregate net asset value of each Fund's shares held by the
Recipient or its customers at the end of such quarter, taken without regard
to the minimum holding period, does not exceed a minimum amount. The minimum
holding period and the minimum level of holdings, if any, will be determined
from time to time by a majority of the Trustees who are not "interested
persons" of the Trust and do not have a direct or indirect financial interest
in the Distribution and Service Plan ("Rule 12b-1 Trustees"). The services
to be provided by Recipients may include, but are not limited to, the
following: distributing sales literature and prospectuses (other than those
furnished to current shareholders); answering routine inquiries concerning a
Fund; assisting in the establishment and maintenance of accounts or
sub-accounts in a Fund and in processing purchase and redemption
transactions; making a Fund's investment plans and shareholder services
available; and providing such other information and services in connection
with the distribution of shares of a Fund as the Distributor or the Trust, on
behalf of a Fund, may reasonably request.
In addition to being compensated by the Trust for any payments to Recipients,
the Distributor may also be compensated for its activities in distributing
the shares of each Fund, including the preparation and distribution of sales
literature, advertising and the cost of distributing prospectuses (other than
those furnished to potential investors). For any quarter, the Distributor's
compensation for all purposes, including payments made to Recipients, may not
exceed .25% of the aggregate net asset value of a Fund at the end of that
quarter.
In the event that either the Distributor or the Board of Trustees of the
Trust has reason to believe that a Recipient may not be rendering appropriate
distribution assistance or administrative support services in connection with
the sale of shares of the Trust, then the Distributor, at the request of the
Board, will require the Recipient to provide a written report or other
information to verify that said Recipient is providing appropriate
distribution services to the Funds.
The Distributor is required to provide a written report, at least quarterly
to the Board of Trustees of the Trust, which the Trustees will review,
specifying in reasonable detail the amounts expended pursuant to the
Distribution and Service Plan and the purposes for which such expenditures
were made. Further, the Distributor will inform the Board of any Rule 12b-1
fees to be paid by the Distributor to Recipients and others.
The initial term of the Distribution and Service Plan is one year and it will
continue in effect from year to year thereafter, provided such continuance is
specifically approved at least annually by a majority of the Board of
Trustees of the Trust and a majority of the Rule 12b-1 Trustees by votes cast
in person at a meeting called for the purpose of voting on the Distribution
and Service Plan. The Distribution and Service Plan may be terminated at any
time by vote of a majority of the Rule 12b-1 Trustees or by vote of a
majority of the outstanding voting securities of the Trust. The Distribution
and Service Plan will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The Distribution and Service Plan may not be amended to increase materially
the amount of the Distributor's compensation, unless such amendment is
approved by the vote of a majority of the outstanding voting securities of
the Trust (as defined in the 1940 Act). All material amendments must be
approved by a majority of the Board of Trustees of the Trust and a majority
of the Rule 12b-1 Trustees by votes cast in person at a meeting called for
the purpose of voting on the Distribution and Service Plan. During the term
of the Distribution and Service Plan, the selection and
26
<PAGE>
nomination of non-interested Trustees of the Trust will be committed to the
discretion of current non-interested Trustees. The Distributor will preserve
copies of the Distribution and Service Plan, any related agreements, and all
reports, for a period of not less than six years from the date of such
document and for at least the first two years in an easily accessible place.
Any agreement related to the Distribution and Service Plan will be in writing
and provide that: (a) it may be terminated at any time upon sixty days'
written notice, without the payment of any penalty, by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Trust; (b) it will automatically terminate in the event of
its assignment (as defined in the 1940 Act); and (c) it will continue in
effect for a period of more than one year from the date of its execution or
adoption only so long as such continuance is specifically approved at least
annually by a majority of the Board and a majority of the Rule 12b-1 Trustees
by votes cast in person at a meeting called for the purpose of voting on such
agreement.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board of Trustees of the Trust, the
Adviser and Sub-Advisers are responsible for making decisions with respect to
the purchase and sale of portfolio securities on behalf of the Funds. The
Adviser and Sub-Advisers are also responsible for the implementation of those
decisions, including the selection of broker-dealers to effect portfolio
transactions, the negotiation of commissions, and the allocation of principal
business and portfolio brokerage.
In purchasing and selling each Fund's portfolio securities, it is the
Adviser's and each Sub-Adviser's policy to obtain quality execution at the
most favorable prices through responsible broker-dealers and, in the case of
agency transactions, at competitive commission rates where such rates are
negotiable. However, under certain conditions, a Fund may pay higher
brokerage commissions in return for brokerage and research services. In
selecting broker-dealers to execute a Fund's portfolio transactions,
considerations is given to such factors as the price of the security, the
rate of the commission, the size and difficulty of the order, the
reliability, integrity, financial condition, general execution and
operational capabilities of competing brokers and dealers, their expertise in
particular markets and the brokerage and research services they provide to
the Adviser or a Sub-Adviser or the Funds. It is not the policy of the
Adviser or Sub-Advisers to seek the lowest available commission rate where it
is believed that a broker or dealer charging a higher commission rate would
offer greater reliability or provide better price or execution.
Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions
are negotiated. Traditionally, commission rates have generally not been
negotiated on stock markets outside the United States. In recent years,
however, an increasing number of overseas stock markets have adopted a system
of negotiated rates, although a number of markets continue to be subject to
an established schedule of minimum commission rates. It is expected that
equity securities will ordinarily be purchased in the primary markets,
whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if such market is deemed the primary
market. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price usually includes an
undisclosed commission or markup. In underwritten offerings, the price
includes a disclosed, fixed commission or discount.
For fixed income securities, it is expected that purchases and sales will
ordinarily be transacted with the issuer, the issuer's underwriter, or with a
primary market maker acting as principal on a net basis, with no brokerage
commission being paid by the Fund. However, the price of the securities
generally includes compensation which is not disclosed separately.
Transactions placed through dealers who are serving as primary market makers
reflect the spread between the bid and asked prices.
With respect to equity and fixed income securities, the Adviser and
Sub-Advisers may effect principal transactions on behalf of the Funds with a
broker or dealer who furnishes brokerage and/or research services, designate
any such broker or dealer to receive selling concessions, discounts or other
allowances or otherwise deal with any such broker or dealer in connection
with the acquisition of securities in underwritings. The prices the Funds
pay to underwriters of newly-issued securities usually include a concession
paid by the issuer to the underwriter. The Adviser and Sub-Advisers may
receive research services in connection with brokerage transactions,
including designations in fixed price offerings.
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<PAGE>
The Adviser and Sub-Advisers receive a wide range of research services from
brokers and dealers covering investment opportunities throughout the world,
including information on the economies, industries, groups of securities,
individual companies, statistics, political developments, technical market
action, pricing and appraisal services, and performance analyses of all the
countries in which a Fund's portfolio is likely to be invested. The Adviser
and Sub-Advisers cannot readily determine the extent to which commissions
charged by brokers reflect the value of their research services, but brokers
occasionally suggest a level of business they would like to receive in return
for the brokerage and research services they provide. To the extent that
research services of value are provided by brokers, the Adviser and
Sub-Advisers may be relieved of expenses which they might otherwise bear. In
some cases, research services are generated by third parties but are provided
to the Adviser and Sub-Advisers by or through brokers.
Certain broker-dealers which provide quality execution services also furnish
research services to the Adviser and Sub-Advisers. The Adviser and
Sub-Advisers have adopted a brokerage allocation po licy embodying the
concepts of Section 28(e) of the Securities Exchange Act of 1934, which
permits an investment adviser to cause its clients to pay a broker which
furnishes brokerage or research services a higher commission than that which
might be charged by another broker which does not furnish brokerage or
research services, or which furnishes brokerage or research services deemed
to be of lesser value, if such commission is deemed reasonable in relation to
the brokerage and research services provided by the broker, viewed in terms
of either that particular transaction or the overall responsibilities of the
adviser with respect to the accounts as to which it exercises investment
discretion. Accordingly, the Adviser and Sub-Advisers may assess the
reasonableness of commissions in light of the total brokerage and research
services provided by each particular broker.
Under no circumstances will the Funds deal with the Distributor or its
affiliates in any transaction in which the Distributor or its affiliates act
as a principal. Brokerage transactions will not be placed with the Adviser
or Sub-Adviser or their affiliates, nor will the Funds deal with the Adviser
or Sub-Adviser or their affiliates in any transaction in which the Adviser or
Sub-Adviser or their affiliates act as a principal.
The Sub-Advisers currently provide investment advice to private advisory
accounts that have investment objectives and programs similar to the Trust.
Accordingly, occasions may arise when a Sub-Adviser may engage in
simultaneous purchase and sale transactions of securities that are consistent
with the investment objectives and programs of the Trust, and other accounts.
On those occasions when such simultaneous investment decisions are made, the
Sub-Adviser will allocate purchase and sale transactions in an equitable
manner according to written procedures approved by the Board of Trustees of
the Trust. Specifically, such written procedures provide that, in allocating
purchase and sale transactions made on a combined basis, the Sub-Adviser will
seek to achieve the same average unit price of securities for each entity and
will seek to allocate, as nearly as practicable, such transactions on a
pro-rata basis substantially in proportion to the amounts ordered to be
purchased or sold by each entity. Such procedures may, in certain instances,
be either advantageous or disadvantageous to the Trust.
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
LETTER OF INTENT. In submitting a Letter of Intent to purchase shares of the
Funds at a reduced sales charge, the investor agrees to the terms of the
Prospectus, the Applications used to buy such shares, and the language in
this Statement of Additional Information as to Letters of Intent, as they may
be amended from time to time by the Trust. Such amendments will apply
automatically to existing Letters of Intent.
A Letter of Intent ("Letter") is the investor's statement of intention to
purchase shares of one or more of the Funds during the 13-month period from
the investor's first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up to
90 days prior to the date of the Letter. The investor states the intention
to make the aggregate amount of purchases (excluding any reinvestment of
dividends or distributions or purchases made at net asset value without sales
charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the date
of the Letter) will equal or exceed the amount specified in the Letter to
obtain the reduced sales charge rate (as set forth in "How To Purchase
Shares" in
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<PAGE>
the Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares in
the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of
such Fund shares on the last day of that period, do not equal or exceed the
intended amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow,"
below, as those terms may be amended from time to time. The investor agrees
that shares equal in value to 5% of the intended amount will be held in
escrow by the Trust's transfer agent subject to the Terms of Escrow.
If the total eligible purchases made during the Letter or Intent period do
not equal or exceed the intended amount, the commissions previously paid to
the dealer of record for the account and the amount of sales charge retained
by the Distributor will be adjusted to the rates applicable to actual total
purchases. If total eligible purchases during the Letter of Intent period
exceed the intended amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when
the dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to
the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record
and/or the investor to refer to the Letter in placing any purchase orders for
the investor during the Letter of Intent period. All of such purchases must
be made through the Distributor.
TERMS OF ESCROW
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the Fund's
transfer agent. For example, if the intended amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of $2,500
(computed at the public offering price adjusted for a $50,000 purchase). Any
dividends and capital gains distributions on the escrowed shares will be
credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually
paid and the amount of sales charges which would have been paid if the total
amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days
after a request from the Distributor or the dealer, the Distributor will,
within sixty days of the expiration of the Letter, redeem the number of
escrowed shares necessary to realize such difference in sales charges. Full
and fractional shares remaining after such redemption will be released from
escrow. If a request is received to redeem escrowed shares prior to the
payment of such additional sales charge, the sales charge will be withheld
from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the transfer agent of the Trust as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. Shares held in escrow hereunder will automatically be exchanged for
shares of another Fund to which an exchange is requested, and the escrow will
be transferred to that other Fund.
29
<PAGE>
Each Fund intends to pay all redemptions of its shares in cash. However,
each Fund may make full or partial payment of any redemption request by the
payment to shareholders of portfolio securities of the applicable Fund (I.E.,
by redemption-in-kind), at the value of such securities used in determining
the redemption price. The Funds, nevertheless, pursuant to Rule 18f-1 under
the 1940 Act, have filed a notification of election under which each Fund is
committed to pay in cash to any shareholder of record, all such shareholder's
requests for redemption made during any 90-day period, up to the lesser of
$250,000 or 1% of the applicable Fund's net asset value at the beginning of
such period. The securities to be paid in-kind to any shareholders will be
readily marketable securities selected in such manner as the Board of
Trustees of the Trust deems fair and equitable. If shareholders were to
receive redemptions-in-kind, they would incur brokerage costs should they
wish to liquidate the portfolio securities received in such payment of their
redemption request. The Trust does not anticipate making redemptions-in-kind.
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (1) for any period
during which trading on the New York Stock Exchange ("Exchange") is
restricted or such Exchange is closed, other than customary weekend and
holiday closings, (2) for any period during which an emergency exists as a
result of which disposal of securities or determination of the net asset
value of the Fund is not reasonably practicable, or (3) for such other
periods as the SEC may by order permit for protection of shareholders of the
Funds.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of each Fund is normally calculated as of the
close of trading on the Exchange on every day the Exchange is open for
trading. The Exchange is open Monday through Friday except on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Short-term debt instruments with a remaining maturity of more than 60 days,
intermediate and long-term bonds, convertible bonds, and other debt
securities are generally valued at prices obtained from an independent
pricing service. Where such prices are not available, valuations will be
obtained from brokers who are market makers for such securities. However, in
circumstances where the Adviser or a Sub-Adviser deems it appropriate to do
so, the mean of the bid and asked prices for over-the-counter securities or
the last available sale price for exchange-traded debt securities may be
used. Where no last sale price for exchange traded debt securities is
available, the mean of the bid and asked prices may be used.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above, are
valued in good faith by the Board of Trustees of the Trust using its best
judgment.
Trading in securities on Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the New York
Stock Exchange is open). In addition, Far Eastern securities trading
generally or in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in Japanese
markets on certain Saturdays in various foreign markets on days which are not
business days in New York and on which a Fund's net asset value is not
calculated. Each Fund calculates net asset value per share, and therefore
effects sales, redemptions and repurchases of its shares, as of the close of
regular trading on the New York Stock Exchange once on each day on which the
New York Stock Exchange is open. Such calculation may not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially
affecting the value of such securities occur between the time when their
price is determined and the time when the Fund's net asset value is
calculated, such securities will be valued at fair value as determined in
good faith by the Board of Directors.
TAXES
Each Fund intends to qualify as a "regulated investment company" ("RIC")
under Subchapter M of the Code. In general, to qualify as a RIC: (a) at
least 90% of the gross income of a Fund for the taxable year must be derived
from dividends, interest, payments with respect to loans of securities, gains
from the sale or other disposition of securities, or other income derived
with respect to its business of investing in securities; (b) less than 30% of
a Fund's gross income for the taxable year can be attributable to gains
(without deductions for losses) from the sale or other disposition of
30
<PAGE>
securities held for less than three months; (c) a Fund must distribute to its
shareholders 90% of its ordinary income and net short-term capital gains.
Moreover, undistributed net income may be subject to tax at the RIC level;
and (d) a Fund must diversity its assets so that, at the close of each
quarter of its taxable year, (i) at least 50% of the fair market value of its
total (gross) assets is comprised of cash, cash items, U.S. Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to no more than 5% of the
fair market value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer and (ii) no more than 25% of the fair market
value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities and securities of other regulated
investment companies) or of two or more issuers controlled by the Fund and
engaged in the same, similar, or related trades or businesses.
In addition, each Fund must declare and distribute dividends equal to at
least 98% of its ordinary income (as of the twelve months ended December 31)
and distributions of at least 98% of its net capital gains (as of the twelve
months ended October 31), in order to avoid a federal excise tax. Each Fund
intends to make the required distributions, but they cannot guarantee that
they will do so. Dividends attributable to a Fund's ordinary income and
capital gains distributions are taxable as such to shareholders in the year
in which they are received except dividends declared in December and paid in
January.
A corporate shareholder may be entitled to take a deduction for income
dividends received by it that are attributable to dividends received from a
domestic corporation, provided that both the corporate shareholder retains
its shares in the applicable Fund for more than 45 days and the Fund retains
its shares in the issuer from whom it received the income dividends for more
than 45 days. A distribution of net capital gains reflects a Fund's excess
of net long-term gains over its net short-term losses. Each Fund must
designate income dividends and distributions of net capital gains and must
notify shareholders of these designations within sixty days after the close
of the Trust's taxable year. A corporate shareholder of a Fund cannot use a
dividends-received deduction for distributions of net capital gains.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate
fluctuations are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by the Fund will be increased; if
the result is a loss, the income dividend paid by the Fund will be decreased.
Adjustments, to reflect these gains and losses will be made at the end of
each Fund's taxable year.
At the time of purchase, each Fund's net asset value may reflect
undistributed income or net capital gains. A subsequent distribution to
shareholders of such amounts, although constituting a return of their
investment, would be taxable either as dividends or capital gain
distributions. For federal income tax purposes, each Fund is permitted to
carry forward its net realized capital losses, if any, for eight years, and
realize net capital gains up to the amount of such losses without being
required to pay taxes on, or distribute such gains.
Income received by each Fund from sources within various foreign countries
may be subject to foreign income taxes withheld at the source. Under the
Code, if more than 50% of the value of a Fund's total assets at the close of
its taxable year comprise securities issued by foreign corporations, the Fund
may file an election with the Internal Revenue Service to "pass through" to
the Fund's shareholders the amount of any foreign income taxes paid by the
Fund. Pursuant to this election, shareholders will be required to: (i)
include in gross income, even though not actually received, their respective
pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata
share of foreign taxes as paid by them; and (iii) either deduct their pro
rata share of foreign taxes in computing their taxable income, or use it as a
foreign tax credit against U.S. income taxes (but not both). No deduction
for foreign taxes may be claimed by a shareholder who does not itemize
deductions.
The Global Natural Resources Fund, the Asian High Yield Fund and the Asian
Select Advisers Fund intend to meet the requirements of the Code to "pass
through" to its shareholders foreign income taxes paid, but there can be no
assurance that a Fund will be able to do so. Each shareholder will be
notified within 60 days after the close of each taxable year of a Fund, if
that Fund will "pass through" foreign taxes paid for that year, and, if so,
the amount of each shareholder's pro rata share (by country) of (i) the
foreign taxes paid, and (ii) the Fund's gross income from foreign sources.
Of course, shareholders who are not liable for federal income taxes, such as
retirement plans qualified under Section 401 of the Code, will not be
affected by any such "pass through" of foreign tax credits.
31
<PAGE>
If, in any taxable year, a Fund should not qualify as a RIC under the Code:
(1) that Fund would be taxed at normal corporate rates on the entire amount
of its taxable income without deduction for dividends or other distributions
to its shareholders, and (2) that Fund's distributions to the extent made out
of that Fund's current or accumulated earnings and profits would be taxable
to its shareholders (other than shareholders in tax deferred accounts) as
ordinary dividends (regardless of whether they would otherwise have been
considered capital gains dividends), and may qualify for the deduction for
dividends received by corporations.
ORGANIZATION OF THE TRUST
As a Delaware business trust entity, the Trust need not hold regular annual
shareholder meetings and, in the normal course, does not expect to hold such
meetings. The Trust, however, must hold shareholder meetings for such
purposes as, for example: (1) approving certain agreements as required by
the 1940 Act; (2) changing fundamental investment objectives, policies, and
restrictions of the Funds; and (3) filling vacancies on the Board of Trustees
of the Trust in the event that less than a majority of the Trustees were
elected by shareholders. The Trust expects that there will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees holding office have been elected by
shareholders. At such time, the Trustees then in office will call a
shareholders meeting for the election of Trustees. In addition, holders of
record of not less than two-thirds of the outstanding shares of the Trust may
remove a Trustee from office by a vote cast in person or by proxy at a
shareholder meeting called for that purpose at the request of holders of 10%
or more of the outstanding shares of the Trust. The Funds have the
obligation to assist in such shareholder communications. Except as set forth
above, Trustees will continue in office and may appoint successor Trustees.
PERFORMANCE INFORMATION ABOUT THE FUNDS
TOTAL RETURN CALCULATIONS
Each Fund may provide average annual total return information calculated
according to a formula prescribed by the SEC. According to that formula,
average annual total return figures represent the average annual compounded
rate of return for the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account
in the Fund and the ending value of that account measured by then current net
asset value of that Fund assuming that all dividends and capital gains
distributions during the stated period were reinvested in shares of the Fund
when paid. Total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment that would equate the
initial amount invested to the ending redeemable value of such investment,
according to the following formula:
T = (ERV/P)1/n - 1
where T equals average annual total return; where ERV, the ending redeemable
value, is the value at the end of the applicable period of a hypothetical
$1,000 payment made at the beginning of the applicable period; where P equals
a hypothetical initial payment of $1,000; and where n equals the number of
years.
Each Fund, from time to time, also may advertise its cumulative total return
figures. Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period
were reinvested in shares of that Fund. Cumulative total return is
calculated by finding the compound rates of a hypothetical investment over
such period, according to the following formula (cumulative total return is
then expressed as a percentage):
32
<PAGE>
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
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.
YIELD CALCULATION.
In addition to providing cumulative total return information, the Asian High
Yield Fund may also illustrate its performance by providing information
concerning its yield.
The Fund's yield is based on a specified 30-day (or one month) period and is
computed by dividing the net investment income per share earned during the
specified period by the maximum offering price (I.E., net asset value) per
share on the last day of the specified period, and annualizing the net
results according to the following formula:
YIELD = 2[(a-b + 1)(6) - 1]
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Yield fluctuations may reflect changes in the Fund's net income, and
portfolio changes resulting from net purchases or net redemptions of the
Fund's shares may affect its yield. Accordingly, the Fund's yield may vary
from day to day, and the yield stated for a particular past period is not
necessarily representative of the Fund's future yield. The Fund's yield is
not guaranteed, and its principal is not insured.
From time to time, in reports and promotional literature, each Fund's
performance may be compared to: (1) other groups of mutual funds tracked by:
(A) Lipper Analytical Services, a widely-used independent research firm which
ranks mutual funds by overall performance, investment objectives, and asset
size; (B) Forbes Magazine's Annual Mutual Funds Survey and Mutual Fund Honor
Roll; or (C) other financial or business publications, such as Business Week,
Money Magazine, and Barron's, which provide similar information; (2) the
Consumer Price Index (measure for inflation), which may be used to assess the
real rate of return from an investment in each Fund; (3) other Government
statistics such as GNP, and net import and export figures derived from
Governmental publications, E.G., The Survey of Current Business, which may be
used to illustrate investment attributes of each Fund or the general
economic, business, investment, or financial environment in which each Fund
operates; (4) Alexander Steele's Mutual Fund Expert, a tracking service which
ranks various mutual funds according to their performance; and (5)
Morningstar, Inc. which ranks mutual funds on the basis of historical risk
and total return. Morningstar's rankings are calculated using the mutual
fund's average annual returns for a certain period and a risk factor that
reflects the mutual fund's performance relative to three-month Treasury bill
monthly returns. Morningstar's rankings range from five star (highest) to
one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of a mutual fund as a weighted average for 3, 5,
and 10-year periods. In each category, Morningstar limits its five star
rankings to 10% of the funds it follows and its four star rankings to 22.5%
of the funds it follows. Rankings are not absolute or necessarily predictive
of future performance.
33
<PAGE>
In addition, the performance of the Funds may be compared to indices of broad
groups of similar but unmanaged securities or other benchmarks considered to
be representative of the Fund's holdings such as: [PLEASE PROVIDE.]
The performance of the indices that may be used as benchmarks for each Fund's
performance, unlike the returns of the Funds, do not include the effect of
paying brokerage costs (for equity securities) and other transaction costs
that investors normally incur when investing directly in the securities in
those indices.
The Trust may also illustrate a particular Fund's investment returns or
returns in general by graphs and charts, that compare, at various points in
time, the return from an investment in the particular Fund (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the same return on a
taxable basis.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP whose address is 160 Federal Street, Boston,
Massachusetts 02110 serves as the Trust's Independent Accountants providing
services including (1) audit of annual financial statements, (2) assistance
and consultation in connection with SEC filings and (3) review of the annual
federal income tax returns filed on behalf of the Funds.
LEGAL MATTERS
Legal advice regarding certain matters relating to the federal securities
laws applicable to the Trust and the offer and sale of its shares has been
provided by Rogers & Wells, 200 Park Avenue, New York, New York 10166, which
serves as Counsel to the Trust.
34
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements included in Prospectus: None
Financial Statements included in the Statement of Additional
Information:
1. Report of Independent Auditor*
2. Statement of Assets and Liabilities*
3. Notes to Financial Statements*
4. Consent of Independent Auditors*
(b) Exhibits:
1. Declaration of Trust of Orbitex Group of Funds
(the "Trust").
2. Form of By-Laws of the Trust.
3. Not applicable.
5(a). Form of Investment Advisory Agreement by and
between the Trust on behalf of each Fund and
Orbitex Management, Inc.*
5(b). Form of Sub-Advisory Agreement among the
Trust, on behalf of the Asian High Yield Fund,
Orbitex Management, Inc. and ______________.*
5(c) Form of Sub-Advisory Agreement among the Trust,
on behalf of the Asian Select Advisers Fund,
Orbitex Management, Inc. and ______________.*
6(a). Form of Distribution Agreement between the
Trust and Funds Distributor, Inc.
6(b). Form of Selected Dealers Agreement.
7. Not applicable.
8. Form of Custodian Contract by and between the
Trust and State Street Bank and Trust Company.
9(a). Form of Transfer Agency and Service Agent
Agreement by and between the Trust and State
Street Bank and Trust Company.
9(b) Form of Administration Agreement by and between
the Trust and State Street Bank and Trust Company.
10. Opinion and Consent of Rogers & Wells regarding
the legality of the securities being registered.*
11. Consent of Independent Auditors.*
____________________________
* To be filed by amendment.
C-1
<PAGE>
12. Not applicable.
13. Form of Share Subscription Agreement by and
between Orbitex Management, Inc. and the Trust on
behalf of each Fund.*
14. Not applicable.
15(a). Form of Distribution and Service Plan
Pursuant to Rule 12b-1 under the Investment
Company Act of 1940.*
15(b). Form of Agreement Pursuant to the Rule
12b-1 Plan.*
16. Schedule for Computation of Performance
Quotation.*
17. Not applicable.
18. Not applicable.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
Item 26. NUMBER OF HOLDERS OF SECURITIES, AS OF THE EFFECTIVE DATE OF
THIS REGISTRATION STATEMENT.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Orbitex Global Natural Resources Fund 1
Orbitex Communications & Info-Tech Fund 1
Orbitex Growth Fund 1
Orbitex Asian High Yield Fund 1
Orbitex Asian Select Advisers Fund 1
Item 27. INDEMNIFICATION
Reference is made to Article VI of the Registrant's Declaration of
Trust filed herein as Exhibit 1 to this Registration Statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to
Trustees, officers, controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
______________________________
* To be filed by amendment.
C-2
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF THE ADVISER AND THE SUB-ADVISERS.
(a) Certain information pertaining to business and other
connections of the Registrant's Adviser, Orbitex Management, Inc.
is hereby incorporated herein by reference to the section of the
Prospectus captioned "How the Trust is Managed" and to the section
of the Statement of Additional Information captioned "Investment
Management and Other Services." The information required by this
Item 28 with respect to each director, officer or partner of
Orbitex Management, Inc. is incorporated by reference to Form ADV
filed by Orbitex Management, Inc. with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940, as
amended (File No. 801-52312).
(b) Certain information pertaining to business and other
connections of State Street Global Advisers, the investment
management area of State Street Bank and Trust Company, one of the
Registrant's Sub-Advisers, is hereby incorporated herein by
reference to the section of the Prospectus captioned "How the
Trust is Managed" and to the section of the Statement of
Additional Information captioned "Investment Management and Other
Services." Set forth below is a list of each director and officer
of State Street Global Advisers indicating each business,
profession, vocation, or employment of a substantial nature in
which each such person has been, at any time during the past two
fiscal years, engaged for his own account or in the capacity of
director, officer, partner, or trustee. The principal business
address of each individual listed in the table below, unless
otherwise indicated, is 225 Franklin Street, Boston, Massachusetts.
BUSINESS AND OTHER
POSITION POSITIONS WITHIN
NAME WITH ADVISER LAST TWO YEARS
---- ------------ ------------------
Tenley E. Albright, MD Director Chairman, Vital Sciences, Inc.
Joseph A. Baute Director Former Chairman and CEO,
Markem Corporation
I. MacAlister Booth Director Chairman, President and CEO,
Polaroid Corporation
Marshall N. Carter Chairman and CEO State Street Bank and Trust
Company
James I. Cash, Jr. Director The James E. Robison Professor of
Business Administration, Harvard
Business School
Truman S. Casner Director Partner, Ropes & Gray
Nader F. Darehshori Director Chairman, President and CEO,
Houghton Mifflin Company
Lois D. Jubiler Director Chief Technological Officer,
Colgate-Palmolive Company
C-3
<PAGE>
BUSINESS AND OTHER
POSITION POSITIONS WITHIN
NAME WITH ADVISER LAST TWO YEARS
---- ------------ ------------------
Charles F. Kaye Director President, Transportation
Investments, Inc.
George H. Kidder Director Senior Partner, Hemenway & Barnes
John M. Kucharski Director Chairman, President and CEO,
EG&G, Inc.
David B. Perini Director Chairman and President, Perini
Corporation
Dennis J. Picard Director Chairman and CEO, Raytheon Company
Bernard W. Reznicek Director Chairman, President and CEO, Boston
Edison Company
David A. Spina Vice Chairman State Street Bank and Trust Company
Robert E. Weissman Director President and COO, The Dun &
Bradstreet Corp.
(c) Certain information pertaining to business and other
connections of Asia Strategic Investment Management Limited, one
of the Registrant's Sub-Advisers, is hereby incorporated herein by
reference to the section of the Prospectus captioned "How the
Trust is Managed" and to the section of the Statement of
Additional Information captioned "Investment Management and Other
Services." Set forth below is a list of each director and officer
of Asia Strategic Investment Management Limited indicating each
business, profession, vocation, or employment of a substantial
nature in which each such person has been, at any time during the
past two fiscal years, engaged for his own account or in the
capacity of director, officer, partner, or trustee. The principal
business address of each individual listed in the table below,
unless otherwise indicated, is Chekiang First Bank Center, 1
Duddell Street, Hong Kong.
POSITION WITH ASIAN STRATEGIC INVESTMENT
MANAGEMENT LIMITED ("ASIM") AND
NAME OTHER POSITIONS WITHIN LAST TWO YEARS
---- ----------------------------------------
Michael Tze Han Lee Managing Director, ASIM, 1995 - present;
Director/Equity Partner, Lloyd George
Management (Hong Kong) Ltd., 1992 - 1995.
Patrick Wai Cheong Shun Chief Investment Officer, ASIM, 1995 -
present; Director/Senior Fund Manager,
Barclays de Zoete Wedd Investment Management
(Hong Kong) Limited, 1990 - 1995.
C-4
<PAGE>
POSITION WITH ASIAN STRATEGIC INVESTMENT
MANAGEMENT LIMITED ("ASIM") AND
NAME OTHER POSITIONS WITHIN LAST TWO YEARS
---- ----------------------------------------
James Kuang Kno Cheng Research Director, ASIM, April 1996 -
present; Executive Director/Senior Fund
Manager, Morgan Stanley Asset Management
(Singapore) Ltd., 1988 - 1996.
Peter King Wah Woo Director, ASIM, 1995 - present; Director/
Associate Director, Kim Eng Securities
(Hong Kong) Ltd. (investment management
firm), 1993 - 1995.
Dr. The Honourable Non-executive director, ASIM; Deputy
David K.P. Li Chairman and Chief Executive of the Bank of
East Asia, Limited.
Li Kai Cheong Samson Non-executive director, ASIM; Deputy General
Manager of the Bank of East Asia, Limited.
(d) Certain information pertaining to business and other
connections of ImPac Asset Management (HK) Ltd., one of the
Registrant's Sub-Advisers, is hereby incorporated herein by reference
to the section of the Prospectus captioned "How the Trust is Managed"
and to the section of the Statement of Additional Information
captioned "Investment Management and Other Services." Set forth below
is a list of each director and officer of ImPac Asset Management (HK)
Ltd. indicating each business, profession, vocation, or employment of
a substantial nature in which each such person has been, at any time
during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, partner, or trustee. The principal
business address of each individual listed in the table below, unless
otherwise indicated, is 1205 Universal Trade Center, 3 Arbuthnot Road,
Central, Hong Kong.
POSITION WITH IMPAC ASSET
MANAGEMENT LIMITED (HK) LTD. AND
BUSINESS AND OTHER POSITIONS
NAME WITHIN LAST TWO YEARS
---- --------------------------------
Virginia Wong Devereux Director
Joseph Ho Managing Director
Alfred Lo Director
Gary Ting Director
Walter Wu Director
Valerie Chou Director
C-5
<PAGE>
Item 29. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. (the "Funds Distributor") acts as
principal underwriter for the following investment companies.
BJB Investment Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
The JPM Advisor Funds
The JPM Institutional Funds
The JPM Pierpont Funds
The JPM Series Trust
LKCM Fund
The Munder Funds Trust
The Munder Funds, Inc.
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
St. Clair Money Market Fund
The Skyline Funds
Waterhouse Investors Cash Management Fund, Inc.
Funds Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Funds Distributor is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The information required by this Item 29(b) with respect to each
director, officer, or partner of Funds Distributor is incorporated by
reference to Schedule A of Form BD filed by Funds Distributor with the
Securities and Exchange Commission pursuant to the Securities Act of
1934 (File No. 8-20518).
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
The following entities prepare, maintain and preserve the
records required by Section 31(a) of the 1940 Act for the Registrant.
These services are provided to the Registrant through written
agreements between the parties to the effect that such services will
be provided to the Registrant for such periods prescribed by the rules
and regulations of the Securities and Exchange Commission under the
1940 Act and such records are the property of the entity required to
maintain and preserve such records and will be surrendered promptly on
request.
State Street Bank and Trust Company ("State Street")
provides custodian and accounting services pursuant to a Custodian
Contract between State Street and the Trust and provides transfer
agent and dividend disbursing services pursuant to a Transfer Agency
and Service Agreement between State Street and the Trust. In such
capacities, State Street provides pricing for each Fund's portfolio
securities, keeps records regarding securities and other assets in
custody and in transfer, bank statements, canceled checks, financial
books and records, and keeps records of each shareholder's account
and all disbursements made to shareholders. Orbitex Management, Inc.,
pursuant to its
C-6
<PAGE>
Investment Advisory Agreement with respect to each Fund, maintains
all records required pursuant to such agreement. Each
Sub-Adviser, pursuant to its Sub-Advisory Agreement with Orbitex
Management, Inc. and the Trust with regard to each Fund, maintains
all records required pursuant to such agreement. State Street,
pursuant to its Administration Agreement with the Trust, maintains
all records required pursuant to such agreement. Funds
Distributor, Inc., as principal underwriter for the Trust,
maintains all records required to be kept pursuant to the
Distribution Agreement with the Trust, and such other records as
must be maintained pursuant to the Trust's Distribution and
Service Plan and Rule 12b-1 Agreement adopted pursuant to Rule
12b-1 under the 1940 Act.
Item 31. MANAGEMENT SERVICES.
Not applicable.
Item 32. UNDERTAKINGS.
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment,
using financial statements which need not by certified, within
four to six months after the commencement of operations of each
Fund.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge, beginning with the
fiscal year ending October 31, 1997.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly authorized
in the City of New York, and the State of New York on the 29th day of January
1997.
ORBITEX GROUP OF FUNDS
By: /s/ James L. Nelson
-------------------------
James L. Nelson
Trustee and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Otto J. Felber Trustee January 29, 1997
- ---------------------
Otto J. Felber
/s/ James L. Nelson Trustee, President , Assistant January 29, 1997
- --------------------- Treasurer & Assistant Secretary
James L. Nelson
/s/ Mark Breault Treasurer and Secretary January 29, 1997
- ---------------------
Mark Breault
<PAGE>
EXHIBIT LIST
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1 Declaration of Trust of Orbitex Group of Funds (the "Trust")
2 Form of By-laws of the Trust
6(a) Form of Distribution Agreement between the Trust and Funds
Distributor, Inc.
6(b) Form of Selected Dealers Agreement
8 Form of Custodian Contract between the Trust and State Street
Bank and Trust Company ("State Street")
9(a) Form of Transfer Agency and Service Agreement between the Trust
and State Street
9(b) Form of Administration Agreement between the Trust and State
Street
<PAGE>
Exhibit 1
Declaration of Trust of Orbitex Group of Funds
<PAGE>
ORBITEX GROUP OF FUNDS
AGREEMENT AND DECLARATION OF TRUST
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name and Principal Office . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) "Act" . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) "By-laws" . . . . . . . . . . . . . . . . . . . . . . 1
(c) "Class" . . . . . . . . . . . . . . . . . . . . . . . 1
(d) "Commission". . . . . . . . . . . . . . . . . . . . . 1
(e) "Declaration of Trust". . . . . . . . . . . . . . . . 1
(f) "Fundamental Policies". . . . . . . . . . . . . . . . 2
(g) "Majority of the Outstanding Voting Shares" . . . . . 2
(h) "1940 Act". . . . . . . . . . . . . . . . . . . . . . 2
(i) "Person". . . . . . . . . . . . . . . . . . . . . . . 2
(j) "Prospectus". . . . . . . . . . . . . . . . . . . . . 2
(k) "Shareholder" . . . . . . . . . . . . . . . . . . . . 2
(l) "Shares". . . . . . . . . . . . . . . . . . . . . . . 2
(m) "Sub-Trust" or "Series" . . . . . . . . . . . . . . . 2
(n) "Trust" . . . . . . . . . . . . . . . . . . . . . . . 2
(o) "Trustees". . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. PURPOSE OF TRUST. . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III. THE TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1 Number, Designation, Election, Term, etc. . . . . . . . . . . . 3
(a) Trustees. . . . . . . . . . . . . . . . . . . . . . . 3
(b) Number. . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Election and Term . . . . . . . . . . . . . . . . . . 4
(d) Resignation and Retirement. . . . . . . . . . . . . . 4
(e) Removal . . . . . . . . . . . . . . . . . . . . . . . 4
(f) Vacancies . . . . . . . . . . . . . . . . . . . . . . 4
(g) Effect of Death, Resignation, etc . . . . . . . . . . 4
(h) No Accounting . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Powers of Trustees. . . . . . . . . . . . . . . . . . . . . . . 4
(a) Investments . . . . . . . . . . . . . . . . . . . . . 6
(b) Disposition of Assets . . . . . . . . . . . . . . . . 6
(c) Ownership Powers. . . . . . . . . . . . . . . . . . . 6
(d) Subscription. . . . . . . . . . . . . . . . . . . . . 6
(e) Form of Holding . . . . . . . . . . . . . . . . . . . 6
(f) Reorganization, etc . . . . . . . . . . . . . . . . . 6
(g) Voting Trusts, etc. . . . . . . . . . . . . . . . . . 6
(h) Compromise. . . . . . . . . . . . . . . . . . . . . . 6
(i) Partnerships, etc . . . . . . . . . . . . . . . . . . 6
(j) Borrowing and Security. . . . . . . . . . . . . . . . 6
(k) Guarantees, etc . . . . . . . . . . . . . . . . . . . 6
(l) Insurance . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
(m) Pensions, etc . . . . . . . . . . . . . . . . . . . . 7
(n) Distribution Plans. . . . . . . . . . . . . . . . . . 7
(o) Indemnification . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Management. . . . . . . . . . . . . . . . . . . . . . 7
(b) Advisory. . . . . . . . . . . . . . . . . . . . . . . 7
(c) Administration. . . . . . . . . . . . . . . . . . . . 8
(d) Distribution. . . . . . . . . . . . . . . . . . . . . 8
(e) Custodian and Depository. . . . . . . . . . . . . . . 8
(f) Transfer and Dividend Disbursing Agency . . . . . . . 8
(g) Shareholder Servicing . . . . . . . . . . . . . . . . 8
(h) Accounting. . . . . . . . . . . . . . . . . . . . . . 8
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. . . . . 9
Section 3.5 Ownership of Assets of the Trust. . . . . . . . . . . . . . . . 9
Section 3.6 Action by Trustees. . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE IV. SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 4.1 Description of Shares . . . . . . . . . . . . . . . . . . . . .10
Section 4.2 Establishment and Designation of Sub-Trusts and Classes . . . .11
(a) Assets Belonging to Sub-Trusts. . . . . . . . . . . .12
(b) Liabilities Belonging to Sub-Trusts . . . . . . . . .12
(c) Dividends . . . . . . . . . . . . . . . . . . . . . .13
(d) Liquidation . . . . . . . . . . . . . . . . . . . . .13
(e) Voting. . . . . . . . . . . . . . . . . . . . . . . .13
(f) Redemption by Shareholder . . . . . . . . . . . . . .14
(g) Redemption of Trust . . . . . . . . . . . . . . . . .14
(h) Net Asset Value . . . . . . . . . . . . . . . . . . .14
(i) Transfer. . . . . . . . . . . . . . . . . . . . . . .15
(j) Equality. . . . . . . . . . . . . . . . . . . . . . .15
(k) Fractions . . . . . . . . . . . . . . . . . . . . . .15
(l) Conversion or Exchange Rights. . . . . . . . . . . .15
(m) Class Differences . . . . . . . . . . . . . . . . . .15
Section 4.3 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . .15
Section 4.4 Investments in the Trust. . . . . . . . . . . . . . . . . . . .15
Section 4.5 No Pre-emptive Rights . . . . . . . . . . . . . . . . . . . . .16
Section 4.6 Status of Shares and Limitation of Personal Liability . . . . .16
Section 4.7 No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS. . . . . . . . . . . .16
<PAGE>
Section 5.1 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 5.3 Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 5.4 Quorum and Required Vote. . . . . . . . . . . . . . . . . . . .17
Section 5.5 Action by Written Consent . . . . . . . . . . . . . . . . . . .17
Section 5.6 Inspection of Records . . . . . . . . . . . . . . . . . . . . .18
Section 5.7 Additional Provisions . . . . . . . . . . . . . . . . . . . . .18
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION . . . . . . . . . . . . .18
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice. . .18
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety .18
Section 6.3 Indemnification of Shareholders . . . . . . . . . . . . . . . .19
Section 6.4 Indemnification of Trustees, Officers, etc. . . . . . . . . . .19
Section 6.5 Compromise Payment. . . . . . . . . . . . . . . . . . . . . . .20
Section 6.6 Indemnification Not Exclusive, etc. . . . . . . . . . . . . . .20
Section 6.7 Liability of Third Persons Dealing with Trustees. . . . . . . .20
Section 6.8 Discretion. . . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 7.1 Duration and Termination of Trust . . . . . . . . . . . . . . .21
Section 7.2 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . .21
Section 7.3 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 7.4 Filing of Copies; References; Headings. . . . . . . . . . . . .22
Section 7.5 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . .22
Section 7.6 Registered Agent. . . . . . . . . . . . . . . . . . . . . . . .23
Section 7.7 Integration . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made this 13th day of December 1996, by
the Trustees hereunder, and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an investment
company; and
WHEREAS this Trust is authorized to issue its shares of beneficial interest in
separate series, each separate series to be a Sub-Trust hereunder, and to issue
classes of Shares of any Sub-Trust or divide Shares of any Sub-Trust into two or
more classes, all in accordance with the provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into their hands
as trustees of a Delaware business trust in accordance with the provisions of
the Delaware Business Trust Act (12 Del. C. Section 3801, et seq.), as from time
to time amended and including any successor statute of similar import (the
"Act"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities, and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust and the Sub-Trusts created
hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as
"ORBITEX GROUP OF FUNDS" and the Trustees shall conduct the business of the
Trust under that name or any other name or names as they may from time to time
determine. The principal office of the Trust shall be located at such location
as the Trustees may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Act" shall have the meaning given to it in the recitals of this
Declaration of Trust;
(b) "By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time;
(c) "class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV;
(d) "Commission" shall have the meaning given it in the 1940 Act;
(e) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
<PAGE>
(f) "Fundamental Policies" shall mean the investment objectives, policies
and restrictions set forth in the Prospectus or Statement of Additional
Information and designated therein as policies or restrictions that may be
changed only upon a vote of the Shareholders;
(g) "Majority of the Outstanding Voting Shares" of the Trust or Sub-Trust
shall mean the vote, at the annual or a special meeting of Shareholders duly
called, (A) of 67 per centum or more of the Shares of the Trust or Sub-Trust
present at such meeting, if holders of more than 50 per centum of the
outstanding Shares of the Trust or Sub-Trust are present or represented by
proxy; or (B) of more than 50 per centum of the outstanding voting Shares of the
Trust or Sub-Trust, whichever is the less.
(h) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(i) "person" means a natural person, corporation, limited liability
company, trust, association, partnership (whether general, limited, or
otherwise), joint venture, or any other entity;
(j) "Prospectus" and "Statement of Additional Information" shall mean, from
time to time, the then currently effective Prospectus and Statement of
Additional Information of the Trust under the Securities Act of 1933, as
amended;
(k) "Shareholder" means a beneficial owner of record of Shares;
(l) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Sub-Trust (as the context may require) shall be divided from time
to time;
(m) "Sub-Trust" or "Series" refers to a series of Shares established and
designated under or in accordance with the provisions of Article IV;
(n) "Trust" refers to the Delaware business trust established by this
Declaration of Trust, inclusive of each and every Sub-Trust established
hereunder; and
(o) "Trustees" refers to the trustees of the Trust, and of each Sub-Trust
hereunder, named herein or elected in accordance with Article III.
ARTICLE II
PURPOSE OF TRUST
This Trust is formed for the following purpose or purposes:
(a) to conduct, operate and carry on the business of an investment
company;
(b) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, lend, write options on, exchange,
distribute or otherwise dispose of and deal in and with securities of every
nature, kind, character, type and form, including, without limitation of the
generality of the foregoing, all types of stocks, shares, futures contracts,
bonds, debentures, notes, bills and other negotiable or non-negotiable
instruments, obligations, evidences or interest, certificates of interest,
2
<PAGE>
certificates of participation, certificates, interests, evidences of
ownership, guarantees, warrants, options or evidences of indebtedness issued
or created by or guaranteed as to principal and interest by any state of
local government or any agency or instrumentality thereof, by the United
States Government or any agency, instrumentality, territory, district or
possession thereof, by any foreign government or any agency, instrumentality,
territory, district or possession thereof, by any corporation organized under
the laws of any state, the United States or any territory or possession
thereof or under the laws of any state, the United States or any territory or
possession thereof or under the laws of any foreign country, bank
certificates of deposit, bank time deposits, bankers' acceptances and
commercial paper; to pay for the same in cash or by the issue of stock,
including treasury stock, bonds or notes of the Trust or otherwise; and to
exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers and
privileges in respect of any said instruments;
(c) to borrow money or otherwise obtain credit and to secure the same
by mortgaging, pledging or otherwise subjecting as security the assets of the
Trust;
(d) to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in, Shares, including Shares
in fractional denominations, and to apply to any such repurchase, redemption,
retirement, cancellation or acquisition or Shares any funds or other assets
of the appropriate series or class of Shares, whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of the
State of Delaware;
(e) to conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within
and without the State of Delaware, in any and all States of the United States
of America, in the District of Columbia, and in any other parts of the world;
(f) to do all and everything necessary, suitable, convenient, or proper
for the conduct, promotion, and attainment of any of the businesses and
purposes herein specified or which at any time may be incidental thereto or
may appear conducive to or expedient for the accomplishment of any of such
businesses and purposes and which might be engaged in or carried on by a
Trust organized under the Act, and to have and exercise all of the powers
conferred by the laws of the State of Delaware upon a Delaware business trust.
The foregoing provisions of this Article II shall be construed both as
purposes and powers and each as an independent purpose and power.
ARTICLE III
THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) TRUSTEES. The number of Trustees shall initially be two, who shall
be Otto J. Felber and James L. Nelson.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease the number of Trustees
to a number other than the number theretofore determined. No decrease in the
number of Trustees shall have the effect of removing any Trustee from
3
<PAGE>
office prior to the expiration of his term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee pursuant to subsection
(e) of this Section 3.1.
(c) ELECTION AND TERM. Each Trustee shall be a natural person and may,
but need not, be a Shareholder, a citizen of the United States, or a resident
of the State of Delaware. Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee of the Trust and of each
Sub-Trust hereunder during the lifetime of this Trust and until its
termination as hereinafter provided except as such Trustee sooner dies,
resigns, retires, or is removed or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the
election and qualification of his successor. The Shareholders may fix the
number of Trustees and elect Trustees at any meeting of Shareholders called
by the Trustees for that purpose and to the extent required by applicable
law, including paragraphs (a) and (b) of Section 16 of the 1940 Act. Subject
to Section 16(a) of the 1940 Act, the Trustees may elect successors and may,
pursuant to Section 3.1(f) hereof, appoint Trustees to fill vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or
retire as a trustee of the Trust, by written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to
the Trust and each Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (1) by written instrument, signed by at least two-thirds of the number
of Trustees in office immediately prior to such removal, specifying the date
upon which such removal shall become effective; or (2) by vote of
Shareholders holding not less than two-thirds of the Shares then outstanding,
cast in person or by proxy at any meeting duly called for the purpose. Any
such removal shall be effective as to the Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase
in the number of Trustees by the other Trustees may (but so long as there are
at least two remaining Trustees, need not unless required by the 1940 Act) be
filled by a majority of the remaining Trustees, subject to the provisions of
Section 16(a) of the 1940 Act, through the appointment of such other person
as such remaining Trustees in their discretion shall determine. Such
appointment shall be evidenced by a written instrument signed by a majority
of the Trustees then in office, or by a recording in the records of the
Trust, and shall be effective upon such signing or recording and the
acceptance of the person named therein to serve as a trustee of the Trust and
agreement by such person to be bound by the provisions of this Declaration of
Trust. Any such appointment in anticipation of a vacancy to occur by reason
of retirement, resignation or increase in number of Trustees to be effective
at a later date shall be deemed effective upon the effective date of said
retirement, resignation or increase in number of Trustees.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal or incapacity of any Trustee shall cause the Trustee to
cease to be a trustee of the Trust but shall not operate to annul or
terminate the Trust or any Sub-Trust hereunder or to revoke or terminate any
existing agency or contract created or entered into pursuant to the terms of
this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no person
ceasing to be a trustee of the Trust as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall
be required to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
4
<PAGE>
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all
instances shall act as principals, and are and shall be free from the control
of the Shareholders. The Trustees shall have full power and authority to do
any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in connection
with the management of the Trust. The Trustees shall not be bound or limited
by present or future laws or customs with regard to investment by trustees or
fiduciaries, but shall have full authority and absolute power and control
over the assets of the Trust and the business of the Trust to the same extent
as if the Trustees were the sole owners of the assets of the Trust and the
business in their own right, including such authority, power and control to
do all acts and things as they, in their sole discretion, shall deem proper
to accomplish the purposes of this Trust. Without limiting the foregoing, the
Trustees may adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business and affairs of the Trust and may
amend and repeal them to the extent that such By-Laws do not reserve that
right to the Shareholders; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish Sub-Trusts, each such Sub-Trust to
operate as a separate and distinct investment medium and with separately
defined investment objectives and policies and distinct investment purposes;
they may from time to time in accordance with the provisions of Section 4.1
hereof establish Series or establish classes of Shares of any Series or
Sub-Trust or divide the Shares of any Series or Sub-Trust into classes; they
may as they consider appropriate designate employees and agents who may be
denominated as officers with titles, including, but not limited to,
"president", "vice-president", "treasurer", "secretary", "assistant
treasurer", "assistant secretary", "managing director", "chairman of the
board" and "vice chairman of the board" and who in such capacity may act for
and on behalf of the Trust, as and to the extent authorized by the Trustees,
and appoint and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a Trustee, and may
provide for the compensation of all of the foregoing; they may appoint from
their own number, and terminate, any one or more committees consisting of two
or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as
the Trustees may determine; in accordance with Section 3.3 they may employ
one or more advisers, administrators, depositories and custodians and may
authorize any depository or custodian to employ subcustodians or agents and
to deposit all or any part of such assets in a system or systems for the
central handling of securities and debt instruments, retain transfer,
dividend, accounting or Shareholder servicing agents or any of the foregoing,
provide for the distribution of Shares by the Trust through one or more
distributors, principal underwriters, or otherwise, and subject to Section
5.3 set record dates or times for the determination of Shareholders or
various of them with respect to various matters; they may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the
Trust or the Trustees on such terms as they deem appropriate; and in general
they may delegate to any officer of the Trust, to any committee of the
Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and duties
as they consider desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation the power and
authority to act in the name of the Trust and any Sub-Trust and of the
Trustees, to sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder consistent with the Fundamental Policies:
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(a) INVESTMENTS. To invest and reinvest cash and other property, and
to hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation, or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase, or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depositary, voting trustee, or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary, or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships, limited liability companies, and any other combinations or
associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment
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thereof; and to mortgage and pledge the Trust property or any part thereof to
secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees, and agents of the Trust; and
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any Sub-Trust,
including with respect to any class thereof, a plan of distribution and related
agreements thereto pursuant to the terms of Rule 12b-1 of the 1940 Act and to
make payments from the assets of the Trust or the relevant Sub-Trust or
Sub-Trusts pursuant to said Rule 12b-1 Plan; and
(o) INDEMNIFICATION. To the extent permitted by law, to indemnify, any
person with whom the Trust has dealings, including the Trust's investment
adviser, administrator, placement agent, Shareholders, Trustees, officers,
employees, agents or independent contractors, to such extent as the Trustees
shall determine.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, limited liability companies, other type of
organizations, or individuals (a "Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties, and
responsibilities to, for, or on behalf of the Trust and/or any Sub-Trust, and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties, and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) MANAGEMENT. Subject to the general supervision of the Trustees and in
conformity with any policies of the Trustees with respect to the management of
the Trust and each Sub-Trust (including each class thereof), to manage all or
any part of the operations of the Trust and each Sub-Trust;
(b) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with any policies of the Trustees with respect to the investments of
the Trust or of the assets belonging to any Sub-Trust of the Trust (as that
phrase is defined in subsection (a) of Section 4.2), to manage such
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investments and assets, make investment decisions with respect thereto, and
to place purchase and sale orders for portfolio transactions relating to such
investments and assets;
(c) ADMINISTRATION. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust (including each class thereof), to
supervise all or any part of the operations of the Trust and each Sub-Trust, and
to provide all or any part of the administrative and clerical personnel, office
space, and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(d) DISTRIBUTION. To distribute the Shares of the Trust and each
Sub-Trust (including any classes thereof), to be principal underwriter of such
Shares, and/or to act as agent of the Trust and each Sub-Trust in the sale of
Shares and the acceptance or rejection of orders for the purchase of Shares;
(e) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
(f) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain record of the
ownership of outstanding Shares, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(g) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(h) ACCOUNTING. To handle all or any part of the accounting
responsibilities for the Trust, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the service,
duties, and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties, and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent, or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (h) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor, or agent of or for any Contracting Party,
or of or for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships, limited liability companies,
or other organizations, or have other business or interests,
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shall not affect the validity of any contract for the performance and
assumption of services, duties, and responsibilities to, for or of the Trust
or any Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee
or officer of the Trust from voting upon or executing the same or create any
liability or accountability to the Trust, any Sub-Trust, or its Shareholders,
provided that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee or officer of the Trust
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by a majority of
such Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved
in good faith by vote of a Majority of the Outstanding Voting Shares of the
Trust, or (z) the specific contract involved is fair to the Trust as of the
time it is authorized, approved, or ratified by the Trustees or by the
Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES.
The Trustees are authorized to pay or to cause to be paid out of the
principal or income of the Trust or any Sub-Trust, or partly out of principal
and partly out of income, and to charge or allocate the same to, between, or
among such one or more of the Sub-Trusts and/or one or more classes of Shares
thereof that may be established and designated pursuant to Article IV, as the
Trustees deem fair, all expenses, fees, charges, taxes, and liabilities
incurred or arising in connection with the Trust, any Sub-Trust and/or any
class of Shares thereof, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses
and charges for the services of the Trust's officers, employees, investment
adviser, administrator, distributor, underwriter, auditor, counsel,
depository, custodian, transfer agent, dividend disbursing agent, accounting
agent, Shareholder servicing agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as the Trustees
may deem necessary or proper to incur. Without limiting the generality of
any other provision hereof, the Trustees shall be entitled to reasonable
compensation from the Trust for their services as trustees of the Trust and
may fix the amount of such compensation. Nothing herein shall in any way
prevent the employment of any Trustee for special services, including legal,
accounting, advisory, management or other services and payment for the same
by the Trust. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee resigning and no Trustee removed shall have any
right to any compensation for any period following his resignation or
removal, or any right to damages on account of such removal.
The Trustees shall have the power, as frequently as they may determine,
to cause each Shareholder, or each Shareholder of any particular Sub-Trust,
to pay directly, in advance or arrears, for charges of the Trust's custodian
or transfer, Shareholder servicing or similar agent, an amount fixed from
time to time by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such Shareholder and/or
by reducing the number of Shares in the account of such Shareholder by that
number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust and of each Sub-Trust shall at all times be considered as
vested in the Trust except that the Trustees shall have power to cause legal
title to any Trust assets to be held in the name of one or more of the Trustees,
or in the name of the Trust, or in the name of any other Person as nominee, on
such terms as the Trustees may determine. The right, title and interest of the
Trustees in such assets shall vest automatically in each person who may
hereafter become a Trustee, and upon any Trustees' death, resignation or
removal, such
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Trustee shall automatically cease to have any right, title or interest in
such assets. Vesting and cessation of title as set forth in this Section 3.5
shall be effective notwithstanding the absence of execution and delivery of
any conveyancing documents.
Section 3.6 ACTION BY TRUSTEES. Except as otherwise provided by the
1940 Act or other applicable law, this Declaration of Trust or the By-Laws,
any action to be taken by the Trustees on behalf of or with respect to the
Trust or any Sub-Trust or class thereof may be taken by a majority of the
Trustees present at a meeting of Trustees (a quorum, consisting of at least
one-third of the Trustees then in office, being present), within or without
Delaware, including any meeting held by means of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other at the same time, and participation by such
means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office (or such larger or
different number as may be required by the 1940 Act or other applicable law).
ARTICLE IV
SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the
Trust shall be divided into Shares, all without par value, but the Trustees
shall have the authority from time to time to issue Shares in one or more
Series (each of which Series of Shares shall represent the beneficial
interest in a separate and distinct Sub-Trust of the Trust, including without
limitation each Sub-Trust specifically established and designated in Section
4.2), as they deem necessary or desirable. For all purposes under this
Declaration of Trust or otherwise, including, without implied limitation, (i)
with respect to the rights of creditors and (ii) for purposes of interpreting
the relevant rights of each Sub-Trust and the Shareholders of each Sub-Trust,
each Sub-Trust established hereunder shall be deemed to be a separate trust.
Notice of the limitation of liabilities of a Sub-Trust shall be set forth in
the certificate of trust of the Trust, and debts, liabilities, obligations
and expenses incurred, contracted for or otherwise existing with respect to a
particular Sub-Trust shall be enforceable against the assets of such
Sub-Trust only, and not against the assets of the Trust generally.
Notwithstanding any other provisions of this Declaration of Trust and
without limiting the power of the Trustees to amend the Declaration of Trust
as provided elsewhere herein, the Trustees shall have the power to amend this
Declaration of Trust, at any time and from time to time, in such manner as
the Trustees may determine in their sole discretion, without the need for
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust for
the purpose of responding to or complying with any regulations, orders,
rulings or interpretations of any governmental agency or any laws, now or
hereafter applicable to the Trust. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate
such separate and distinct Sub-Trusts, and to fix and determine the relative
rights and preferences as between the shares of the separate Sub-Trusts as to
right of redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Sub-Trusts shall have separate voting
rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any Sub-Trust into classes, each class having such
different dividend, liquidation, voting and other rights as the Trustees may
determine in their sole discretion, and may establish and designate the specific
classes of Shares of each
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Sub-Trust. The fact that a Sub-Trust shall have initially been established
and designated without any specific establishment or designation of classes
(i.e., that all Shares of such Sub-Trust are initially of a single class), or
that a Sub-Trust shall have more than one established and designated class,
shall not limit the authority of the Trustees to establish and designate
separate classes, or one or more further classes, of said Sub-Trust without
approval of the holders of the initial class thereof, or previously
established and designated class or classes thereof, provided that the
establishment and designation of such further separate classes would not
adversely affect the rights of the holders of the initial or previously
established and designated class or classes.
The number of authorized Shares and the number of Shares of each
Sub-Trust or class thereof that may be issued is unlimited, and the Trustees
may issue Shares of any Sub-Trust or class thereof for such consideration and
on such terms as they may determine (or for no consideration if pursuant to a
Share dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Shares or
any Shares previously issued and reacquired of any Sub-Trusts or class
thereof into one or more Sub-Trust or classes thereof that may be established
and designated from time to time. The Trustees may hold as treasury Shares,
reissue for such consideration and on such terms as they may determine, or
cancel, at their discretion from time to time, any Shares of any Sub-Trust or
class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and
designation of the relative rights and preferences of the Shares of such
Sub-Trust or class, (ii) upon the execution of an instrument in writing by an
officer of the Trust pursuant to the vote of a majority of the Trustees, or
(iii) as otherwise provided in either such instrument. At any time that
there are no Shares outstanding of any particular Sub-Trust or class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number (or by an instrument executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees)
abolish that Sub-Trust or class and the establishment and designation
thereof. Each instrument establishing and designating any Sub-Trust shall
have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the
same extent as if such person were not a Trustee, officer or other agent of
the Trust; and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares of any Sub-Trust (including any classes thereof) from
any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Sub-Trust (including any classes thereof)
generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate four Sub-Trusts: "Orbitex Natural Resources Fund", "Orbitex
Communications & Information Technology Fund", "Orbitex Asian Income Fund"
and "Orbitex Asian
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[Best of the Best Fund]" which shall consist of a single class of Shares.
The Shares of each such Sub-Trust and any Shares of any further Sub-Trust or
class thereof that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to some
further Sub-Trust at the time of establishing and designating the same) have
the following relative rights and preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust or any class
thereof, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Sub-Trust or class thereof and shall
irrevocably belong to that Sub-Trust (and be allocable to the relevant class
thereof) for all purposes, and shall be so recorded upon the books of account
of the Trust. Separate and distinct records shall be maintained for each
Sub-Trust and the assets associated with a Sub-Trust shall be held and
accounted for separately from the other assets of the Trust, or any other
Sub-Trust. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together
with any General Items (as hereinafter defined) allocated to that Sub-Trust
as provided in the following sentence, are herein referred to as "assets
belonging to" that Sub-Trust (and allocable to any classes thereof). In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging
to any particular Sub-Trust (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one or more of the
Sub-Trusts established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable; and
any General Items so allocated to a particular Sub-Trust shall belong to that
Sub-Trust (and be allocable to any classes thereof). Each such allocation by
the Trustees shall be conclusive and binding upon the holders of all Shares
of all Sub-Trusts (including any classes thereof) for all purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of that
Sub-Trust and with all expenses, costs, charges, and reserves belonging to
that Sub-Trust, and any general liabilities, expenses, costs, charges, or
reserves of the Trust which are not readily identifiable as belonging to any
particular Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the Sub-Trusts established and designated from time
to time in such manner and on such basis as the Trustees in their sole
discretion shall determine. In addition, the liabilities in respect of a
particular class of Shares of a particular Sub-Trust and all expenses, costs,
charges, and reserves belonging to that class of Shares shall be charged to
that class, and any general liabilities, expenses, costs, charges or reserves
of that particular Sub-Trust which are not readily identifiable as belonging
to any particular class of Shares of that Sub-Trust shall be allocated and
charged by the Trustees to and among any one or more of the classes of Shares
of that Sub-Trust established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion shall determine.
The liabilities, expenses, costs, charges, and reserves belonging to or
allocated and so charged to a Sub-Trust or class thereof are herein referred
to as "liabilities belonging to" that Sub-Trust or class thereof. Each
allocation of liabilities, expenses, costs, charges, and reserves by the
Trustees shall be conclusive and binding upon the Shareholders, creditors and
any other persons dealing with the Trust or any Sub-Trust (including any
classes thereof) for all purposes. Any creditor of any Sub-Trust may look
only to the assets belonging to that Sub-Trust to satisfy such creditor's
debt.
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(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency
as the Trustees may determine, to the holders of Shares of that Sub-Trust or
class, from such of the income and capital gains, accrued or realized, from
the assets belonging to that Sub-Trust, or in the case of a class, belonging
to that Sub-Trust and allocable to that class, as the Trustees may determine,
after providing for actual and accrued liabilities belonging to that
Sub-Trust or class. All dividends and distributions on Shares of a
particular Sub-Trust or class thereof shall be distributed pro rata to the
holders of Shares of that Sub-Trust or class in proportion to the number of
Shares of that Sub-Trust or class held by such holders at the date and time
of record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution shall
be payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the
Trustees under such program or procedure. Such dividends and distributions
may be made in cash or Shares of that Sub-Trust or class or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder
of the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with subsection (h)
of this Section 4.2.
The Trustees shall have full discretion to determine which items shall
be treated as income and which items as capital; and each such determination
and allocation shall be conclusive and binding upon the Shareholders.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books of the Trust,
the Trustees shall have the power in their discretion to distribute for any
fiscal year as ordinary dividends and as capital gains distributions,
respectively, such amounts as are sufficient to enable the Trust to avoid or
reduce liability for taxes.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust, subject to Section 7.1 hereof, the holders of Shares of each Sub-Trust
or any class thereof that has been established and designated shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Sub-Trust, or in the case of a class, belonging to
that Sub-Trust and allocable to that class, over the liabilities belonging to
that Sub-Trust or class. The assets so distributable to the holders of
Shares of any particular Sub-Trust or class thereof shall be distributed
among such holders in proportion to the number of Shares of that Sub-Trust or
class thereof held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust or class thereof may be authorized at
any time by vote of a majority of the Trustees then in office.
(e) VOTING. On each matter submitted to a vote of the Shareholders,
each holder of a Share shall be entitled to one vote for each whole Share
standing in his name on the books of the Trust irrespective of the Series
thereof or class thereof and all Shares of all Series and classes thereof
shall vote together as a single class; provided, however, that as to any
matter (i) with respect to which a separate vote of one or more Series or
classes thereof is required by the 1940 Act or the provisions of the writing
establishing and designating the Sub-Trust or class, such requirements as to
a separate vote by such Series or class thereof shall apply in lieu of all
Shares of all Series and classes thereof voting together; and (ii) as to any
matter which affects the interests of one or more particular Series or
classes thereof, only the holders of Shares of the one or more affected
Series or classes shall be entitled to vote, and each such Series or class
shall vote as a separate class.
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(f) REDEMPTION BY SHAREHOLDER. Each Shareholder of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part a of
his Shares of that Sub-Trust or class thereof at a redemption price equal to
the net asset value per Share of that Sub-Trust or class thereof next
determined in accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption, subject to any contingent
deferred sales charge, redemption charge or other charge in effect at the
time of redemption. Payment of the redemption price shall be in cash;
provided, however, that if the Trustees determine, which determination shall
be conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may, subject to the requirements of the 1940 Act,
make payment wholly or partly in securities or other assets belonging to the
Sub-Trust of which the Shares being redeemed are part at the value of such
securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class thereof
that has been established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if such Share was
then being redeemed by the Shareholder pursuant to subsection (f) of this
Section 4.2: (i) at any time, in the sole discretion of the Trustees, or (ii)
upon such other conditions as may from time to time be determined by the
Trustees and set forth in the Prospectus or Statement of Additional
Information of the Trust. Upon such redemption, the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust
shall be (i) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets of
that Sub-Trust (being the value of the assets belonging to that Sub-Trust
less the liabilities belonging to that Sub-Trust) by the total number of
Shares of that Sub-Trust outstanding, and (ii) in the case of a class of
Shares of a Sub-Trust whose Shares are divided into classes, the quotient
obtained by dividing the value of the net assets of that Sub-Trust allocable
to such class (being the value of the assets belonging to that Sub-Trust
allocable to such class less the liabilities belonging to such class) by the
total number of Shares of such class outstanding; all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of
any Sub-Trust at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declarations of income attributable to that Sub-Trust as dividends
payable in additional shares of the Sub-Trust at the designated constant
dollar amount and for the handling of any losses attributable to that
Sub-Trust. Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the capital of the Trust
attributable to that Sub-Trust his pro rata portion of the total number of
Shares required to be canceled in order to permit the net asset value per
Share of that Sub-Trust to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have agreed, by his investment in any Sub-Trust with respect to
which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
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(i) TRANSFER. All Shares of each particular Sub-Trust or class
thereof shall be transferable, but transfers of Shares of a particular
Sub-Trust or class thereof will be recorded on the Share transfer records of
the Trust applicable to that Sub-Trust or class only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
that Sub-Trust or class and at such other times as may be permitted by the
Trustees.
(j) EQUALITY. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares
of each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the
case of a class, belonging to that Sub-Trust and allocable to that class,
subject to the liabilities belonging to that Sub-Trust or class and each
share of any particular Sub-Trust or class shall be equal to each other Share
of that Sub-Trust or class; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (c) of this Section
4.2 that may exist with respect to dividends and distributions on Shares of
the same Sub-Trust or class. The Trustees may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater or
lesser number of Shares of that Sub-Trust or class without thereby changing
the proportionate beneficial interest in the assets belonging to that
Sub-Trust or class or in any way affecting the rights of Shares of any other
Sub-Trust or class.
(k) FRACTIONS. Any fractional Share of any Sub-Trust or class, if any
such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Sub-Trust or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(l) CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Sub-Trust or class thereof shall have
the right to convert or exchange said Shares into Shares of one or more other
Sub-Trust or class thereof in accordance with such requirements and
procedures as may be established by the Trustees.
(m) CLASS DIFFERENCES. Subject to Section 4.1, the relative rights and
preferences of the classes of any Sub-Trust may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing
and designating such classes and executed by a majority of the Trustees (or
by an instrument executed by an officer of the Trust pursuant to a vote of a
majority of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Sub-Trust and each class thereof that has been established and designated.
No certificates certifying the ownership of Shares need be issued except as
the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signature, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who
are the Shareholders and as to the number of Shares of each Sub-Trust and
class thereof held from time to time by each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or other person to
accept orders for the
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purchase of Shares that conform to such authorized terms and to reject any
purchase orders for Shares whether or not conforming to such authorized terms.
Section 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no
pre-emptive or other rights to subscribe to any additional Shares or other
securities issued by the Trust or any Sub-Trust, except as the Trustees in
their sole discretion shall have determined by resolution.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights
provided in this Declaration of Trust. Every Shareholder by virtue of
acquiring Shares shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death, incapacity,
dissolution, termination, or bankruptcy of a Shareholder during the
continuance of the Trust shall not operate to dissolve or terminate the Trust
or any Sub-Trust thereof nor entitle the representative of such Shareholder
to an accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but only to the rights of such Shareholder under this
Declaration of Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust property or right to
call for a partition or division of the same or for an accounting, nor shall
the ownership of Shares constitute the Shareholders partners. Neither the
Trust nor the Trustees nor any officer, employee or agent of the Trust shall
have any power to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay. The Shareholders shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
Section 4.7 NO APPRAISAL RIGHTS. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which
would give rise to appraisal or dissenters' rights by a shareholder of a
corporation organized under the General Corporation Law of the State of
Delaware, or otherwise.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust to the
extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in
Section 7.3, and (v) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, this Declaration of Trust, the
By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. Proxies may be given orally or in
writing or pursuant to any electronic, computerized or mechanical data
gathering process specifically approved by the Trustees. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. At any time when
no Shares of a Series are outstanding, the Trustees may exercise all rights
of Shareholders
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of that Series with respect to matters affecting that Series and may take any
action required by law, this Declaration of Trust, or the By-Laws to be taken
by Shareholders.
Section 5.2 MEETINGS. No annual or regular meeting of Shareholders
is required. Special meetings of Shareholders may be called by the Trustees
from time to time for the purpose of electing Trustees as herein provided and
for such other purposes as may be prescribed by law, this Declaration of
Trust or the By-Laws, or for taking action upon any other matter deemed by
the Trustees to be necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time, place, and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the record of the Trust. Whenever
notice of a meeting is required to be given to a Shareholder under the
Declaration of Trust or the By-Laws, a written waiver thereof, executed
before or after the meeting by such Shareholder or his attorney thereunto
authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to participate in any dividend or
distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days
(except at or in connection with the termination of the Trust), as the
Trustees may determine; or without closing the transfer books the Trustees
may fix a date and time not more than 90 days prior to the date of any
meeting of Shareholders or other action as the date and time of record for
the determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes
of such other action, and any Shareholder who was a Shareholder at the date
and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action, even though he has since that date and time disposed of
his Shares, and no Shareholder becoming such after that date and time shall
be so entitled to vote at such meeting or any adjournment thereof or to be
treated as a Shareholder of record for purposes of such other action. Nothing
in this section shall be construed as precluding the Trustees from setting
different record dates for different Sub-Trusts.
Section 5.4 QUORUM AND REQUIRED VOTE. Except as otherwise provided
by the 1940 Act or other applicable law, thirty percent of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting. Any meeting of shareholders, whether or not a quorum
is present, may be adjourned from time to time by the majority of the Shares
represented at the meeting, either in person or by proxy. Any adjourned
session or sessions may be held, within a reasonable time after the date set
for the original meeting without the necessity of notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken, unless
the Trustees fix a new record date for the adjourned meeting. A majority of
the Shares voted, at a meeting of which a quorum is present, shall decide any
questions and a plurality shall elect a Trustee, except when a different vote
is required or permitted by any provision of the 1940 Act or other applicable
law or by this Declaration of Trust or the By-Laws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may
be taken without a meeting if a majority of Shareholders entitled to vote on
the matter (or such larger proportion thereof as shall be required by the
1940 Act or by any express provision of this Declaration of Trust or the
By-Laws) consent to the action in writing and such written consents are filed
with the record of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
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Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Delaware corporation under the General Corporation Law of
the State of Delaware.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE;
NOTICE. All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Sub-Trust with which
such person dealt for payment under such credit, contract or claim; and
neither the Shareholders of any Sub-Trust nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, nor
any other Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate, or undertaking and every act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of
them in connection with the Trust shall be conclusively deemed to have been
executed or done only by or for the Trust (or the Sub-Trust) or the Trustees
and not personally. The Trustees and the Trust's officers, employees and
agents shall not be liable to the Trust or the Shareholders; provided
however, that nothing in this Declaration of Trust shall protect any Trustee
or officer, employee or agent against any liability to the Trust or the
Shareholders to which such Trustee or officer, employee or agent would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer, employee or agent.
Every note, bond, contract, instrument, certificate, or undertaking made
or issued by the Trustees or by any officers or officer shall give notice
that the same was executed or made by or on behalf of the Trust or by them as
Trustees or Trustee or as officers or officer and not individually and that
the obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property
of the Trust, or the particular Sub-Trust in question, as the case may be,
but the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually or otherwise
invalidate any such note, bond, contract, instrument, certificate, or
undertaking.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; ACCEPT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion
hereunder shall be binding upon everyone interested. A Trustee shall be
liable to the Trust and the Shareholders for his own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be
liable for errors of judgment or mistakes of fact or law. Subject to the
foregoing, (a) the Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor, underwriter, custodian or transfer,
dividend disbursing, Shareholder servicing or accounting agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission
in accordance with such advice or for failing to follow such advice; and (c)
in discharging their duties, the Trustees, when acting in good faith, shall
be entitled to rely upon the books of account of the Trust and upon written
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reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner, or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section 3.3. The
Trustees as such shall not be required to give any bond or surety or any
other security for the performance of their duties. To the extent that, at
law or in equity, a Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to a shareholder, any such
Trustee acting under this Declaration of Trust shall not be liable to the
Trust or to any such Shareholder for the Trustee's good faith reliance on the
provisions of this Declaration of Trust. The provisions of this Declaration
of Trust, to the extent that they restrict the duties and liabilities of a
Trustee otherwise existing at law or in equity, are agreed by the
Shareholders to replace such other duties and liabilities of such Trustee.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or
held to be personally liable for any obligation or liability of the Trust
solely by reason of being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other reason, the Trust on
behalf of said Sub-Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment
thereon, and, to the fullest extent permitted by law, the Shareholder or
former Shareholder (or his heirs, executors, administrators, or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets of
said Sub-Trust estate to be held harmless from and indemnified against all
loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. To the
fullest extent permitted by law, the Trust shall indemnify (from the assets
of the Trust or Sub-Trust or Sub-Trusts in question, as the case may be) each
of its Trustees and officers (including persons who serve at the Trust's
request as directors, officers, or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person")) against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or settlement or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition or settlement of any action, suit,
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter by reason of
any alleged act or omission as a Trustee or officer or, by reason of being or
having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling Conduct").
A determination that the Covered Person is entitled to indemnification may be
made by (i) a final decision on the merits by a court or other body before
whom the proceeding was brought that the person to be indemnified was not
liable by reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, that the Covered Person was not liable by reason
of Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who
are neither "interested persons" of the Trust as defined in section 2(a)(19)
of the 1940 Act nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise, or as fines or penalties), may be
paid from time to time from funds attributable to the Sub-Trust in question
in advance of the final disposition of any such action, suit, or proceeding,
provided that the Covered Person shall have undertaken to repay the amounts
so paid to
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the Sub-Trust in question if it is ultimately determined that indemnification
of such expenses is not authorized under this Article VI and (i) the Covered
Person shall have provided security for such undertaking, (ii) the Trust
shall be insured against losses arising by person of any lawful advances, or
(iii) a majority of a quorum of the disinterested Trustees who are not a
party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Covered Person ultimately will be found entitled to indemnification.
Section 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise or settlement payment by any such Covered Person referred to in
Section 6.4, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses shall be
provided unless such indemnification shall be approved as not involving
Disabling Conduct (a) by a majority of the disinterested Trustees who are not
parties to the proceeding or (b) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (a) or by independent
legal counsel pursuant to clause (b) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
any of such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to have been liable to the
Trust or its Shareholders by reason of the Covered Person's willful
misfeasance, bad faith, gross negligence, or reckless disregard of his duties.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall include such person's heirs,
executors, and administrators; an "interested Covered Person" is one against
whom the action, suits, or other proceeding in question or another action,
suit, or other proceeding on the same or similar grounds is then or has been
pending or threatened; and a "disinterested" person is a person against whom
none of such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been pending
or threatened. Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance
on behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES.
No person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees
or to see to the application of any payments made or property transferred to
the Trust or upon its order.
Section 6.8 DISCRETION. Whenever in this Declaration of Trust
the Trustees are permitted or required to make a decision (a) in their "sole
discretion," "sole and absolute discretion," "full discretion," or
"discretion," or under a similar grant of authority or latitude, the Trustees
shall be entitled to consider only such interests and factors as they desire,
whether reasonable or unreasonable, and may consider their own interests, and
shall have no duty or obligation to give any consideration to any interests
of or factors affecting the Trust or the Shareholders, or (b) in their "good
faith" or under another express standard, the Trustees shall act under such
express standard and shall not be subject to any other or different standards
imposed by this Declaration of Trust or by law or any other agreement
contemplated herein. Each Shareholder and Trustee hereby agrees that any
standard of care or duty imposed in this Declaration of Trust or any other
agreement contemplated herein or under the Act or any other applicable law,
rule or regulation shall be modified, waived, or limited in each case as
required to permit the
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Trustees to act under this Declaration of Trust or any other agreement
contemplated herein and to make any decision pursuant to the authority
prescribed in this Declaration of Trust.
ARTICLE VII
MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST AND SUB-TRUSTS.
Unless terminated as provided herein, the Trust and each Sub-Trust shall
continue without limitation of time and, without limiting the generality of
the foregoing, no change, alteration or modification with respect to any
Sub-Trust or class thereof shall operate to terminate the Trust or such
Sub-Trust. The Trust or any Sub-Trust may be terminated at any time by a
Majority of the Outstanding Voting Shares of the Trust or such Sub-Trust, as
the case may be, or by the Trustees by written notice to the Shareholders of
the Trust or such Sub-Trust, as the case may be.
Upon termination of the Trust or Sub-Trust, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due, to accrue or anticipated as may be determined by the Trustees, the Trust
shall in accordance with such procedures as the Trustees consider appropriate
reduce the remaining assets of the Trust or such Sub-Trust, as the case may
be, to distributable form in cash, securities or other property, or any
combination thereof, and distribute the proceeds to the Shareholders, in
conformity with the provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trustees may sell, convey, merge,
and transfer the assets of the Trust, or the assets belonging to any one or
more Sub-Trusts, to another trust, partnership, limited liability company,
association, corporation or other entity organized under the laws of any
state of the United States, or to the Trust to be held as assets belonging to
another Sub-Trust of the Trust in exchange for cash, shares or other
securities (including, in the case of a transfer to another Sub-Trust of the
Trust, Shares of such other Sub-Trust or any class thereof) with such
transfer either (1) being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Sub-Trust the assets of
which are so transferred, or (2) not being made subject to, or not with the
assumption of, such liabilities; provided, however, that no assets belonging
to any particular Sub-Trust shall be so transferred unless the terms of such
transfer shall have first been approved at a meeting called for the purpose
by the affirmative vote of the holders of a Majority of the Outstanding
Voting Shares of that Sub-Trust. Following such transfer, the Trustees shall
distribute such cash, shares, or other securities among the Shareholders of
the Sub-Trust (taking into account the differences among the classes of
Shares thereof, if any) the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, limited liability companies, associations, corporations or
other entities organized under the laws of the State of Delaware or any other
state of the United States, to form a new consolidated trust, partnership,
association, corporation, or other entity under the laws of which any one of
the constituent entities is organized, or (2) merge into one or more other
trusts, partnerships, associations, corporations, or other entities organized
under the laws of the State of Delaware or any other state of the United
States, or have one or more such trusts, partnerships, associations,
corporations, or other entities merged into or transfer a substantial portion
of its assets to it, any such consolidation, merger or transfer to be upon
such terms and conditions as are specified in an agreement and plan of
reorganization entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. Any such consolidation, merger or
transfer shall require the affirmative
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<PAGE>
vote of the holders of a Majority of the Outstanding Voting Shares of the
Trust (or each Sub-Trust affected thereby, as the case may be), except that
such affirmative vote of the holders of Shares shall not be required if the
Trust (or Sub-Trust affected thereby, as the case may be) shall be the
survivor of such consolidation or merger or transferee of such assets.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right
to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or Trustee
involved. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Shareholders) may be amended
at any time, so long as such amendment does not adversely affect the rights
of any Shareholder with respect to which such amendment is or purports to be
applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument in writing signed by
a majority of the then Trustees (or by an officer of the Trust pursuant to
the vote of a majority of such Trustees). Any amendment to this Declaration
of Trust that adversely affects the rights of Shareholders may be adopted at
any time by an instrument in writing signed by a majority of the then
Trustees (or by an officer of the Trust pursuant to a vote of a majority of
such Trustees) when authorized to do so by the vote in accordance with
subsection (e) of Section 4.2 of Shareholders holding a majority of the
Shares entitled to vote. Without limiting the generality of the foregoing,
amendments having the purposes of changing the name of the Trust or any
Sub-Trust or of supplying any omission, curing, correcting or supplementing
any defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote. Subject to the provisions of this Section
7.3, any amendment shall be effective as provided in the instrument
containing the terms of such amendment or, if there is no provision therein
with respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
Section 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or
a copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust
as to whether or not any such amendment has been made, as to the identities
of the Trustees and officers, and as to any matters in connection with the
Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendment. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof", and "hereunder" shall be deemed to refer to this instrument as a
whole as the same may be amended or affected by any such amendments. The
masculine gender shall include the feminine and neuter genders. Headings are
placed herein for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction, or effect of this
instrument. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is created
under and is to be governed by and construed and administered according to
the laws of the State of Delaware, and the rights of all parties and the
validity and construction of every provision hereof shall be subject to the
Delaware Business Trust Act and the laws of the State of Delaware (unless and
to the extent otherwise provided for and/or preempted by the 1940 Act or
other applicable federal securities laws); provided, however, that there
shall not be applicable to the Trust, the Trustees or this Declaration (a)
the provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or
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<PAGE>
common) of the State of Delaware (other than the Delaware Business Trust Act)
pertaining to trusts which are inconsistent with the rights, duties, powers,
limitations or liabilities of the Trustees set forth or referenced in this
Declaration of Trust. The Trust shall be of the type referred to in Section
3801 of the Delaware Business Trust Act and of the type commonly called a
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 7.6 REGISTERED AGENT. The Corporation Trust Company is
hereby designated as the initial registered agent for service of process on
the Trust in Delaware. The address of the registered office of the Trust in
the State of Delaware is 1209 Orange Street, City of Wilmington, New Castle
County, 19801.
Section 7.7 INTEGRATION. This Declaration of Trust constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
IN WITNESS WHEREOF, the undersigned hereunto set their hand and seal for
themselves and their assigns, as of the day and year first above written.
_____________________________
_____________________________
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<PAGE>
Exhibit 2
Form of By-Laws of Orbitex Group of Funds
<PAGE>
BY-LAWS
OF
ORBITEX GROUP OF FUNDS
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST
AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect
("Declaration of Trust"), of Orbitex Group of Funds, the Delaware business
trust established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust
shall be located in New York, New York.
ARTICLE 2
MEETING OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places either within or without the State of
Delaware and at such times as the Trustees may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
Secretary or an Assistant Secretary or by the officer or the Trustees calling
the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before or after the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
2.4 QUORUM; ADJOURNMENT: VOTE REQUIRED FOR ACTION. At any meeting of the
Trustees at least one-third of the Trustees then in office shall constitute a
quorum. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of Trustees, if any action
taken is approved by a majority of the required quorum for such meeting. Any
meeting may be adjourned from time to time by a majority of the votes cast
upon the question, whether or not a quorum is present, and the meeting may be
held as adjourned without further notice. At the adjourned meeting, the
Trustees may transact any business which might have been transacted at the
original meeting. Except
<PAGE>
in cases where the Declaration of Trust or these By-Laws otherwise provide,
the vote of a majority of the Trustees present at a meeting at which a quorum
is present shall be the act of the Trustees.
2.5 ACTION BY WRITING. Except as required by law, any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a majority of the Trustees (or such larger proportion thereof as
shall be required by any express provision of the Declaration of Trust or
these By-Laws) consent to the action in writing and such written consents are
filed with the records of the meeting of Trustees. Such consent shall be
treated for all purposes as a vote taken at a meeting of Trustees.
2.6 PARTICIPATION BY COMMUNICATIONS EQUIPMENT. One or more of the
Trustees or of any committee of the Trustees may participate in a meeting
thereof by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the
same time. Participation by such means shall constitute presence in person at
a meeting.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of
the Board shall be a Trustee and may, but need not be, a beneficial owner of
the Trust (a "Shareholder"); and any other officer may be but none need be a
Trustee or Shareholder. Any two or more offices may be held by the same person.
3.2 ELECTION; TENURE. The Chairman of the Board, the President, the
Treasurer, the Secretary and such other officers as the Trustees may in their
discretion from time to time elect shall hold office until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed or becomes disqualified. Each officer shall hold
office and each agent shall retain authority at the pleasure of the Trustees.
3.3 POWERS. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to the office occupied by him or her as if the Trust were organized
as a Delaware business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.4 CHAIRMAN. Unless the Trustees otherwise provide, the Chairman of the
Board, shall preside at all meetings of Trustees and exercise and perform such
other powers and duties as may be from time to time assigned to him or her by
the Trustees.
3.5 PRESIDENT. Unless otherwise provided by the Trustees, the President
shall be the Chief Executive Officer of the Trust and shall, subject to the
control of the Board of Trustees, have general supervision, direction and
control of the business of the Trust. The President shall preside at all
meetings of Shareholders and in the absence of the Chairman of the Board at
all meetings of the Board of Trustees.
3.6 VICE PRESIDENT. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his or her inability or
refusal to
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act, perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. The
Vice Presidents shall perform such other duties and have such other powers as
the Trustees may from time to time prescribe.
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration
of Trust and to any arrangement made by the Trustees with a custodian,
investment adviser or manager, or transfer, shareholder servicing or similar
agent, be in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the
Trustees (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Board of Trustees may from time to time prescribe.
3.9 SECRETARY. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the
absence of the Secretary from any meeting of the Shareholders or Trustees, an
assistant secretary, or if there be none or if he or she is absent, a
temporary secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books. The Secretary shall have such other duties and
powers as the Trustees may from time to time prescribe.
3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees
(or if there be no determination, then in the order of their election), shall,
in the absence of the Secretary or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.11 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the Vice Chairman, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected
by them with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on
account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee, Compensation
Committee, Audit Committee and Nomination Committee each of which shall
consist of two or more of the Trustee of the Trust which committee shall have
and may exercise some or all of the powers and authority of the Board with
respect to all matters except those which by law, by the Declaration of Trust,
or by these By-Laws may not be delegated.
4.2 OTHER COMMITTEES OF THE BOARD. The Board of Trustees may from time to
time, by resolution adopted by a majority of the whole Board, designate one or
more other committees of the
3
<PAGE>
Board, each such committee to consist of two or more Trustees and to have such
powers and duties as the Board of Trustees may, by resolution, prescribe.
4.3 LIMITATION OF COMMITTEE POWERS. No committee of the Board shall have
power or authority to:
(a) recommend to shareholders any action requiring authorization of
shareholders pursuant to statute or the Agreement and Declaration of Trust;
(b) approve or terminate any contract with an investment adviser or
principal underwriter, as such terms are defined in the 1940 Act, or take any
other action required to be taken by the Board of Trustees by the 1940 Act;
(c) amend or repeal these By-laws or adopt new By-laws;
(d) declare dividends or other distributions or issue capital stock
of the Trust; and
(e) approve any merger or share exchange which does not require
shareholder approval.
4.4 GENERAL. One-third, but not less than two members, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The
Board may designate a chairman of any committee and such chairman or any two
members of any committee may fix the time and place of its meetings unless the
Board shall otherwise provide. In the absence or disqualification of any
member or any committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or she or they constitute
a quorum, may unanimously appoint another member of the Board of Trustees to
act at the meeting in the place of any such absent or disqualified member. The
Board shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members, to replace
any absent or disqualified member, or to dissolve any such committee.
All committees shall keep written minutes of their proceedings and
shall report such minutes to the Board. All such proceedings shall be subject
to revision or alteration by the Board; provided, however, that third parties
shall not be prejudiced by such revision or alteration.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
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<PAGE>
ARTICLE 7
SEAL
7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with
the word "Delaware", together with the name of the Trust and the year of its
organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President or by the Treasurer or such other officers
or agents as shall be designated for that purpose by a vote of the Trustees.
ARTICLE 9
ISSUANCE OF SHARES CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares of the
Trust, the Trustees or the transfer agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record holders of
such shares, who shall in either case be deemed, for all purposes hereunder,
to be the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all Shareholders. In that event, a
Shareholder may receive a certificate stating the number of shares owned by
him or her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the president or a vice
president and by the treasurer or assistant treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued,
it may be issued by the Trust with the same effect as if he or she were such
officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees shall prescribe. The Trust
may require the owner of the lost, destroyed or mutilated share certificate,
or his or her legal representative, to give the Trust a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, destruction or mutilation of any such certificate or the
issuance of such new certificate.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares transferred
as collateral security shall be entitled to a new certificate if the instrument
of transfer substantially describes the debt
5
<PAGE>
or duty that is intended to be secured thereby. Such new certificate shall
express on its face that it is held as collateral security, and the name of
the pledgor shall be stated thereon, who alone shall be liable as a
Shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trusses may at any
time discontinue the issuance of share certificates and may, by written notice
to each Shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he or
she were not a Trustee, officer or agent; and the Trustees may accept
subscriptions to shares or repurchase shares from any firm or company in which
any Trustee, officer or other agent of the Trust may have an interest.
ARTICLE 11
AMENDMENTS TO THE BY-LAWS
11.1 GENERAL. These By-Laws may be amended or repealed, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such a majority.
6
<PAGE>
Exhibit 6(a)
Form of Distribution Agreement between Orbitex Group of Funds and
Funds Distributor, Inc.
<PAGE>
DISTRIBUTION AGREEMENT
[ORBITEX FUND]
[ADDRESS]
____________, 1997
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of (a) shares of
each Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series are set forth
on such Exhibit, shares of the Fund. For purposes of this agreement the term
"Shares" shall mean the authorized shares of each of the relevant Series, if
any, and otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and
in accordance with, the Fund's registration statement and prospectus then in
effect under the Securities Act of 1933, as amended, and will transmit promptly
any orders received by you for purchase or redemption of Shares to the Transfer
and Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing from time to time.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the National
Association of Securities Dealers, Inc.'s (the "NASD") Rules of Fair Practice,
Constitution and By-Laws. You represent and warrant that you are a broker-dealer
registered with the Securities and Exchange Commission and that you are
registered with the relevant securities regulatory agencies in all fifty states,
the District of Columbia and Puerto Rico. You also represent and warrant that
you are a member in good standing of the NASD and that you will maintain
registration and membership for the life of the agreement.
1
<PAGE>
1.4 You shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and/or state securities administrators.
1.5 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by either of the parties hereto to render sales of a Fund's Shares not in
the best interest of the Fund, either of the parties hereto may decline to
accept any orders for, or make any sales of, any Shares until such time as those
parties deem it advisable to accept such orders and to make such sales and the
party making such determination shall advise promptly the other party of any
such determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided however, that
the Fund shall not pay any of the costs of advertising or promotion for the sale
of Shares.
1.7 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all reasonable expenses
which may be incurred in connection with such qualification. You shall pay all
expenses connected with your own qualification as a dealer under state or
Federal laws and, except as otherwise specifically provided in this agreement,
all other expenses incurred by you in connection with the sale of Shares as
contemplated in this agreement.
1.8 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you upon request with: (a) semi-annual reports and annual audited reports of
the Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
each Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.9 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares and the Fund have been carefully
prepared in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder. As used
2
<PAGE>
in this agreement the terms "registration statement" and "prospectus" shall
mean any registration statement and prospectus, including the statement of
additional information incorporated by reference therein, filed with the
Securities and Exchange Commission and any amendments and supplements thereto
which at any time shall have been filed with said Commission. The Fund
represents and warrants to you that any registration statement and
prospectus, when such registration statement becomes effective, will contain
all statements required to be stated therein in conformity with said Acts and
the rules and regulations of said Commission; that all statements of fact
contained in any such registration statement and prospectus will be true and
correct when such registration statement becomes effective; and that neither
any registration statement nor any prospectus when such registration
statement becomes effective will include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Fund may, but
shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements
to any prospectus as, in the light of future developments, may, in the
opinion of the Fund's counsel, be necessary or advisable. If the Fund shall
not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Fund of a written request from you
to do so, you may, at your option, terminate this agreement or decline to
make offers of the Fund's securities until such amendments are made. The
Fund shall not file any amendment to any registration statement or supplement
to any prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall in any way
limit the Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus, of whatever
character, as the Fund may deem advisable, such right being in all respects
absolute and unconditional.
1.10 The Fund authorizes you and any dealers with whom you have
entered into dealer agreements to use any prospectus in the form furnished by
the Fund in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of the Securities
Act of 1933, as amended, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the reasonable cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which you, your
officers and directors, or any such controlling persons, may incur under the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, or common law or otherwise, arising out of or on the basis of any
untrue statement, or alleged untrue statement, of a material fact required to
be stated in either any registration statement or any prospectus or any
statement of additional information, or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated
in any registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any of them not
misleading, except that the Fund's agreement to indemnify you, your officers
or directors, and any such controlling person will not be deemed to cover any
such claim, demand, liability or expense to the extent that it arises out of
or is based upon any such untrue statement, alleged untrue statement,
omission or alleged omission made in any registration statement, any
prospectus or any statement of additional information in reliance upon
information furnished by you, your officers, directors or any such
controlling person to the Fund or its representatives for use in the
preparation thereof, and except that the Fund's agreement to indemnify you
and the Fund's representations and warranties set out in paragraph 1.9 of
this Agreement will not be
3
<PAGE>
deemed to cover any liability to the Funds or their shareholders to which
you would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of your duties, or by reason of your
reckless disregard of your obligations and duties under this Agreement
("Disqualifying Conduct"). The Fund's agreement to indemnify you, your officers
and directors, and any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action brought against you,
your officers or directors, or any such controlling person, such notification to
be given by letter, by facsimile or by telegram addressed to the Fund at its
address set forth above within a reasonable period of time after the summons or
other first legal process shall have been served. The failure soto notify the
Fund of any such action shall not relieve the Fund from any liability which the
Fund may have to the person against whom such action is brought by reason of any
such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of the Fund's indemnity agreement contained in this
paragraph 1.10. The Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Fund and
approved by you. In the event the Fund elects to assume the defense of any such
suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not elect to assume
the defense of any such suit, the Fund will reimburse you, your officers and
directors, or the controlling person or persons named as defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
you or them. The Fund's indemnification agreement contained in this paragraph
1.10 and the Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of you, your officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to your benefit, to the benefit of your several
officers and directors, and their respective estates, and to the benefit of any
controlling persons and their successors. The Fund agrees promptly to notify
you of the commencement of any litigation or proceedings against the Fund or any
of its officers or Board members in connection with the issue and sale of
Shares.
1.11 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the reasonable cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which the Fund, its officers or Board members, or any such
controlling person, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such claims
or demands, (a) shall arise out of or be based upon any unauthorized sales
literature, advertisements, information, statements or representations or any
Disqualifying Conduct in connection with the offering and sale of any Shares, or
(b) shall arise out of or be based upon any untrue, or alleged untrue, statement
of a material fact contained in information furnished in writing by you to the
Fund specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such
4
<PAGE>
information furnished in writing by you to the Fund and required to be stated
in such answers or necessary to make such information not misleading. Your
agreement to indemnify the Fund, its officers and Board members, and any such
controlling person, as aforesaid, is expressly conditioned upon your being
notified of any action brought against the Fund, its officers or Board
members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set
forth above within a reasonable period of time after the summons or other
first legal process shall have been served. The failure so to notify you of
any such action shall not relieve you from any liability which you may have
to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of your indemnity agreement contained in this
paragraph 1.11. You will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by you and
approved by the Fund. In the event you elect to assume the defense of any
such suit and retain counsel of good standing approved by the Fund, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in the case you do not elect
to assume the defense of any such suit, you will reimburse the Fund, the
Fund's officers and directors, or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees and expenses of
any counsel retained by the Fund or them. Your indemnification agreement
contained in this paragraph 1.11 and your representations and warranties in
this agreement shall remain operative and in full force and effect regardless
of any investigation made by you or on behalf of you, your officers and
directors, or any controlling person, and shall survive the delivery of any
Shares. This agreement of indemnity will inure exclusively to the Fund's
benefit, to the benefit of the Fund's officers and Board members, and their
respective estates, and to the benefit of any controlling persons and their
successors. You agree promptly to notify the Fund of the commencement of any
litigation or proceedings against you or any of your officers or directors in
connection with the issue and sale of Shares.
1.12 No Shares shall be offered by either you or the Fund under any of
the provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.12 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
5
<PAGE>
1.13 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you shall be offered
at a price per share (the "offering price") approximately equal to (a) the net
asset value (determined in the manner set forth in the Fund's charter documents)
plus (b) a sales charge, if any and except to those persons set forth in the
then-current prospectus, which shall be the percentage of the offering price of
such Shares as set forth in the Fund's then-current prospectus. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. In addition, Shares of any class of the Fund offered for sale by you may
be subject to a contingent deferred sales charge as set forth in the Fund's
then-current prospectus. You shall be entitled to receive any sales charge or
contingent deferred sales charge in respect of the Shares. Any payments to
dealers shall be governed by a separate agreement between you and such dealer
and the Fund's then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial two-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to the Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Trustees, by vote of a majority
of the outstanding voting securities of such Fund, or by you. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the Investment Company Act of 1940, as amended). You agree
to notify the Fund immediately upon the event of your
6
<PAGE>
expulsion or suspension by the NASD. This Agreement will automatically and
immediately terminate in the event of your expulsion or suspension by the
NASD.
4. Miscellaneous
4.1 The Fund recognizes that, except to the extent otherwise agreed to
by the parties hereto, your directors, officers and employees may from time to
time serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
4.3 This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
4.4 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
7
<PAGE>
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding Agreement between us.
Very truly yours,
[ORBITEX FUND]
By: ____________________________
Name: ___________________________
Title: __________________________
Accepted:
FUNDS DISTRIBUTOR, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
8
<PAGE>
EXHIBIT A
SERIES OF FUNDS
[ORBITEX FUND]
9
<PAGE>
Exhibit 6(b)
Form of Selected Dealers Agreement
<PAGE>
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed, advised or administered
by Orbitex Management, Inc. shares of which companies are distributed by us at
their respective net asset values plus sales charges as applicable, pursuant
to our Distribution Agreements with such companies (the "Funds"), we invite
you to participate as a non-exclusive agent in the distribution of shares of
any and all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the public offering prices
that shall be currently in effect, in accordance with the terms of the then
current prospectuses and statements of additional information of the Funds
subject in each case to the delivery prior to or at the time of such sales
of the then current prospectus. You agree to act only as agent in such
transactions and nothing in this Agreement shall constitute either of us
the agent of the other or shall constitute you or the Fund the agent of the
other. In all transactions in these shares between you and us, we are
acting as agent for the Fund and not as principal. All orders are subject
to acceptance by us and become effective only upon confirmation by us. We
reserve the right in our sole discretion to reject any order. The minimum
dollar purchase of shares of the Funds shall be the applicable minimum
amounts described in the then current prospectuses and statements of
additional information and no order for less than such amounts will be
accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each Fund's then
current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective Prospectus shall
be considered an individual transaction for the purpose of determining the
concession from the public offering price to which you are entitled as set
forth in paragraph 2 hereof.
4. As an authorized agent to sell shares of the Fund, you agree to purchase
shares of the Funds only through us or from your customers. Purchases
through us shall be made only for your own investment purposes or for the
purpose of covering purchase orders already received from your customers,
and we agree that we will not place orders for the purchase of shares from
a Fund except to cover purchase orders already received by us. Purchases
from your
1
<PAGE>
customers shall be at a price not less than the net asset value quoted
by each such Fund at the time of such purchase. Nothing herein contained
shall prevent you from selling any shares of a Fund for the account of
a record holder to us or to such Fund at the net asset value quoted by us
and charging your customer a fair commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the Funds
or to each such Fund itself at the redemption price, as described in each
Fund's then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or at
our option to resell the shares to the applicable Fund, at the then
prevailing net asset value in which latter case you agree to be responsible
for any loss resulting to such Fund or to us from your failure to make
payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are repurchased
by a Fund or by us as agent, or purchased for the account of that Fund or
tendered to that Fund for purchase at liquidating value under the terms of
the Declaration of Trust or other document governing such Fund within seven
(7) business days after the date of confirmation to you of your original
purchase order therefor, you agree to pay forthwith to us the full amount
of the concession allowed to you on the original sale and we agree to
retain such amount or to pay such amount to the Fund or the customer, as
applicable, when received by us. We shall notify you of such repurchase
within ten (10) days of the effective date of such repurchase.
9. All sales will be subject to receipt of shares by us from the Funds. We
reserve the right in our discretion, without notice to you, to suspend
sales or withdraw the offering of shares entirely, or to modify or cancel
this Agreement.
10. No person is authorized to make any representations concerning the Funds or
shares of the Funds except those contained in each Fund's then current
effective Prospectus or Statement of Additional Information and any such
information as may be released by a Fund as information supplemental to
such Prospectus or Statement of Additional Information. In purchasing
shares through us you shall rely solely on the representations contained in
each Fund's then current effective Prospectus or Statement of Additional
Information and above-mentioned supplemental information.
11. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of
2
<PAGE>
Additional Information will be supplied by us to you and your selling
agents in reasonable quantities upon request.
12. With respect to Funds offering shares subject to a front-end sales charge,
shares subject to a contingent deferred sales charge, and/or institutional
class shares not subject to a sales charge, you shall conform to such
written compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable for any losses,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal
to execute such instructions for any reason.
14. All notices or other communications hereunder to either party shall be in
writing and shall be deemed sufficient if mailed to such party at the
address of such party set forth on page 4 of this Agreement or at such
other address as such party may designate by written notice to the other,
or by telex, telecopier, telegram or similar means of same day delivery
(with a confirming copy by mail as provided herein).
15. This Agreement may be terminated upon written notice by either party at any
time, and shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National
Association of Securities Dealers, Inc., and you agree that you will
maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this
Agreement. You further agree to comply with all applicable Federal laws,
the laws of the states or other jurisdictions concerned, and the rules and
regulations promulgated thereunder and with the Constitution, By-Laws and
Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and that you will not offer or sell shares of the Funds in any state
or jurisdiction where they may not lawfully be offered and/or sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United
States and are not otherwise required to be registered, qualified, or a
member of the National Association of Securities Dealers, Inc., as set
forth above, you nevertheless agree to observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, to comply with the
full disclosure requirements of the Securities Act of 1933 and the
regulations promulgated thereunder, to conduct your business in accordance
with the spirit of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. You agree to indemnify and hold the Funds,
their investment advisor, and us harmless from loss or damage resulting
from any failure on your part to comply with applicable laws.
3
<PAGE>
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
18. This Agreement and all amendments to this Agreement shall take effect with
respect to and on the date of any orders placed by you after the date set
forth below or, as applicable, after the date of the notice of amendment
sent to you by the undersigned.
19. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and shall be binding upon both parties hereto
when signed and accepted by you in the space provided below.
FOR FUNDS DISTRIBUTOR, INC.
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
_______________________________________________________________________________
By: Date
FOR:____________________________________________________________________________
________________________________________________________________________________
Address of Principal Office
________________________________________________________________________________
City State Zip Code
BY:_____________________________ ITS:_____________________________ ___________
Authorized Signature Title Date
________________________________
Print Name
4
<PAGE>
Exhibit 8
Form of Custodian Contract between Orbitex Group of Funds and
State Street Bank and Trust Company
<PAGE>
CUSTODIAN CONTRACT
Between
Orbitex Group of Funds
and
STATE STREET BANK AND TRUST COMPANY
Global/Series/Trust
21E593
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held By
It. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States. . . . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds. . . . . . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Appointment of Agents. . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in U.S. Securities System . . . . . . . . . 7
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Ownership Certificates for Tax Purposes. . . . . . . . . . . . . .10
2.14 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.15 Communications Relating to Portfolio
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States. . . . . . . . . . . . . . . .11
3.1 Appointment of Foreign Sub-Custodians. . . . . . . . . . . . . . .11
3.2 Assets to be Held. . . . . . . . . . . . . . . . . . . . . . . . .11
3.3 Foreign Securities Systems . . . . . . . . . . . . . . . . . . . .11
3.4 Holding Securities . . . . . . . . . . . . . . . . . . . . . . . .11
3.5 Agreements with Foreign Banking Institutions . . . . . . . . . . .12
3.6 Access of Independent Accountants of the Fund. . . . . . . . . . .12
3.7 Reports by Custodian . . . . . . . . . . . . . . . . . . . . . . .12
3.8 Transactions in Foreign Custody Account. . . . . . . . . . . . . .12
3.9 Liability of Foreign Sub-Custodians. . . . . . . . . . . . . . . .13
3.10 Liability of Custodian . . . . . . . . . . . . . . . . . . . . . .13
3.11 Reimbursement for Advances . . . . . . . . . . . . . . . . . . . .13
3.12 Monitoring Responsibilities. . . . . . . . . . . . . . . . . . . .14
3.13 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . . . . .14
3.14 Tax Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
<PAGE>
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . .15
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . .15
6. Actions Permitted Without Express Authority . . . . . . . . . . . . . . .15
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . . .16
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . . . . . . . .16
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
10. Opinion of Fund's Independent Accountants . . . . . . . . . . . . . . . .17
11. Reports to Fund by Independent Public Accountants . . . . . . . . . . . .17
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . . .17
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . . .17
14. Effective Period, Termination and Amendment . . . . . . . . . . . . . . .19
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . .20
16. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . . .20
17. Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
18. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . . .21
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
20. Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . .21
21. Shareholder Communications Election . . . . . . . . . . . . . . . . . . .21
<PAGE>
CUSTODIAN CONTRACT
This Contract between Orbitex Group of Funds, a business trust organized
and existing under the laws of Delaware , having its principal place of business
at 660 Madison Avenue, New York, New York hereinafter called the "Fund", and
State Street Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in series, the
(such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
<PAGE>
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
(each, a U.S. Securities System") and (b) commercial paper of an issuer for
which State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian (the "Direct Paper System") pursuant to Section
2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee
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name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new securities are to
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, BUT ONLY against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
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securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
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2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; PROVIDED, however, that
every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Trustees of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2(10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
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1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase involving the
Direct Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the Fund whether or
not such expenses are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
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7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the U.S. Securities System
which shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
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3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
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1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the U.S. Securities System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of
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segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, BUT ONLY, in the
case of clause (iv), upon receipt of, in addition to Proper Instructions
from the Fund on behalf of the applicable Portfolio, a certified copy of
a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
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3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Trustees, the Custodian and the
Fund may agree to amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign securities depositories
to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
the United States (each a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a Foreign Sub-
custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify by
book-entry those securities and other non-cash property belonging to the
Fund and (ii) the Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be held separately from
any assets of the foreign sub-custodian or of others.
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3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership for the assets of each Portfolio
will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable Portfolio; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to the
books and records of the foreign banking institution relating to its
actions under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained by
a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7
of this Contract shall apply, MUTATIS mutandis to the foreign securities of
the Fund held outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
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(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio including
the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security therefor and should
the Fund fail to repay the Custodian promptly, the Custodian shall be
13
<PAGE>
entitled to utilize available cash and to dispose of such Portfolio's
assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the case
of any foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the direction
of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
14
<PAGE>
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
15
<PAGE>
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
16
<PAGE>
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto
17
<PAGE>
received by it or delivered by it pursuant to this Contract and shall be held
harmless in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options agreement. The
Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall
be without liability to the Fund for any action taken or omitted by it in
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including non-
receipt of bonus, dividends and rights and other accretions or benefits; (vi)
delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to sub-
custodians generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
18
<PAGE>
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio ; PROVIDED FURTHER, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
19
<PAGE>
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
20
<PAGE>
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to with respect to which it desires
to have the Custodian render services as custodian under the terms hereof, it
shall so notify the Custodian in writing, and if the Custodian agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. REPRODUCTION OF DOCUMENTS
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
21. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and
21
<PAGE>
address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
22
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of , 1996.
ATTEST
____________________ By ________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
____________________ By ________________________________
Executive Vice President
23
<PAGE>
SCHEDULE A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of for
use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
_________________________
Fund's Authorized Officer
Date: ___________________
24
<PAGE>
Exhibit 9(a)
Form of Transfer Agency and Service Agreement between Orbitex Group of Funds
and State Street Bank and Trust Company
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
Orbitex Group of Funds
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Terms of Appointment; Duties of the Bank . . . . . . . . . . . . . . 1
2. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties of the Bank . . . . . . . . . . . . . 4
4. Representations and Warranties of the Fund . . . . . . . . . . . . . 4
5. Data Access and Proprietary Information. . . . . . . . . . . . . . . 5
6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8. Covenants of the Fund and the Bank . . . . . . . . . . . . . . . . . 8
9. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . 9
10. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . .10
14. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
15. Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . .10
16. Merger of Agreement. . . . . . . . . . . . . . . . . . . . . . . . .10
17. Limitations of Liability of the Trustees
or Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . .10
18. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1996 , by and between
Orbitex Group of Funds, business trust, having its principal office and place
of business at 660 Madison Avenue, New York, New York 10021 (the "Fund"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in series, the
(NAME EACH PORTFOLIO) (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as
its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and
the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock, $ par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund on behalf of the applicable Portfolio, including without
limitation any periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of
<PAGE>
the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to
the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the Bank
of indemnification satisfactory to the Bank and protecting the
Bank and the Fund, and the Bank at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of shares
of the Fund which are authorized, based upon data provided to
it by the Fund, and issued and outstanding. The Bank shall
also provide the Fund on a regular basis with the total number
of shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of
shares, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the
Fund.
2
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses
to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements
of account to Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to the Bank in writing those
transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only a
portion of these services and the Fund or its agent may perform these
services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund agrees
on behalf of each of the Portfolios to pay the Bank an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
3
<PAGE>
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, tabulating proxies, records
storage, or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the
Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of .
4.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
4
<PAGE>
4.3 All corporate proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other location,
except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
agreed upon by the parties;
5
<PAGE>
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under other
federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the Bank or its agents or
6
<PAGE>
subcontractors, and (ii) have been prepared, maintained or performed
by the Fund or any other person or firm on behalf of the Fund
including but not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
such Shares in such state.
(f) The negotiation and processing by the Bank of checks not made payable
to the order of the Bank, the Fund, the Fund's management company,
transfer agent or distributor or the retirement account custodian or
trustee for a plan account investing in Shares, which checks are
tendered to the Bank for the purchase of Shares (i.e., checks made
payable to prospective or existing Shareholders, such checks are
commonly known as "third party checks").
6.2 At any time the Bank may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper
or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in
no case confess any claim or
7
<PAGE>
make any compromise in any case in which the Fund may be required to
indemnify the Bank except with the Fund's prior written consent.
7. STANDARD OF CARE
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
8. COVENANTS OF THE FUND AND THE BANK
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms
and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right,
8
<PAGE>
however, to exhibit the Shareholder records to any person whenever it is
advised by its counsel that it may be held liable for the failure to
exhibit the Shareholder records to such person.
9. TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the
Fund on behalf of the applicable Portfolio(s). Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated
with such termination and/or a charge equivalent to the average of three
(3) months' fees.
10. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to (LIST FUNDS) with respect to which it desires to have the
Bank render services as transfer agent under the terms hereof, it shall so
notify the Bank in writing, and if the Bank agrees in writing to provide
such services, such series of Shares shall become a Portfolio hereunder.
11. ASSIGNMENT
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc., a
Massachusetts corporation ("BFDS") which is duly registered as a transfer
agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(2) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible
to the Fund for the acts and omissions of any subcontractor as it is for
its own acts and omissions.
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<PAGE>
12. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
13. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
14. FORCE MAJEURE
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform
or otherwise from such causes.
15. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
16. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
17. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
18. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
BY:__________________________________
ATTEST:
__________________________________
STATE STREET BANK AND TRUST COMPANY
BY:__________________________________
Executive Vice President
ATTEST:
__________________________________
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
<PAGE>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms.
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
BY:__________________________________
ATTEST:
__________________________________
STATE STREET BANK AND TRUST COMPANY
BY:__________________________________
Executive Vice President
ATTEST:
__________________________________
<PAGE>
Exhibit 9(b)
Form of Administration Agreement between Orbitex Group of Funds and
State Street Bank and Trust Company
<PAGE>
ADMINISTRATION AGREEMENT
Agreement dated as of , 1996 by and between State Street
Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and
Orbitex Group of Funds (the "Fund").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain the Administrator to furnish
certain administrative services to the Fund, and the Administrator is willing to
furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints the Administrator to act as administrator
with respect to the Fund for purposes of providing certain administrative
services for the period and on the terms set forth in this Agreement. The
Administrator accepts such appointment and agrees to render the services stated
herein.
The Fund will initially consist of the portfolio(s) and/or class(es)
of shares (each an "Investment Fund") listed in Schedule A to this Agreement.
In the event that the Fund establishes one or more additional Investment Funds
with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Fund shall notify the Administrator in writing.
Upon written acceptance by the Administrator, such Investment Fund shall become
subject to the provisions of this Agreement to the same extent as the existing
Investment Funds, except to the extent that such provisions (including those
relating to the compensation and expenses payable by the Fund and its Investment
Funds) may be modified with respect to each additional Investment Fund in
writing by the Fund and the Administrator at the time of the addition of the
Investment Fund.
2. DELIVERY OF DOCUMENTS
To the extent not prepared by the Administrator for the Fund, the Fund
will promptly deliver to the Administrator copies of each of the following
documents and all future amendments and supplements, if any:
a. The Fund's charter document and by-laws;
b. The Fund's currently effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940
Act and the Fund's Prospectus(es) and Statement(s) of Additional
Information relating to all
<PAGE>
Investment Funds and all amendments and supplements thereto as
in effect from time to time;
c. Certified copies of the resolutions of the Board of Trustees of
the Fund (the "Board") authorizing (1) the Fund to enter into
this Agreement and (2) certain individuals on behalf of the Fund
to (a) give instructions to the Administrator pursuant to this
Agreement and (b) sign checks and pay expenses;
d. A copy of the investment advisory agreement between the Fund and
its investment adviser; and
e. Such other certificates, documents or opinions which the
Administrator may, in its reasonable discretion, deem necessary
or appropriate in the proper performance of its duties.
3. REPRESENTATION AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Fund that:
a. It is a Massachusetts trust company, duly organized, existing and
in good standing under the laws of The Commonwealth of
Massachusetts;
b. It has the corporate power and authority to carry on its business
in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or
threatened which would impair the Administrator's ability to
perform its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligation of the Administrator or any law or regulation
applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Administrator that:
a. It is a business trust, duly organized and existing and in good
standing under the laws of Delaware;
b. It has the corporate power and authority under applicable laws
and by its charter and by-laws to enter into and perform this
Agreement;
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<PAGE>
c. All requisite proceedings have been taken to authorize it to
enter into and perform this Agreement;
d. It is an investment company properly registered under the 1940
Act;
e. Subject to Administrator performing under Section 5 (k), a
registration statement under the 1933 Act and the 1940 Act has
been filed and will be effective and remain effective during the
term of this Agreement. The Fund also warrants to the
Administrator that as of the effective date of this Agreement,
all necessary filings under the securities laws of the states in
which the Fund offers or sells its shares have been made;
f. No legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its
duties and obligations under this Agreement;
g. Its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it;
and
h. As of the close of business on the date of this Agreement, the
Fund is authorized to issue an unlimited amount of shares of
beneficial interest.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Fund and the review and
comment by the Fund's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Fund and the
Administrator:
a. Oversee the determination and publication of the Fund's net asset
value in accordance with the Fund's policy as adopted from time
to time by the Board;
b. Oversee the maintenance by the Fund's custodian of certain books
and records of the Fund as required under Rule 31a-1(b) of the
1940 Act;
c. Prepare the Fund's federal, state and local income tax returns
for review by the Fund's independent accountants and filing by
the Fund's treasurer;
d. Review calculation, submit for approval by officers of the Fund
and arrange for payment of the Fund's expenses;
e. Prepare for review and approval by officers of the Fund financial
information for the Fund's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be
sent to Fund shareholders, and
3
<PAGE>
arrange for the printing and dissemination of such reports and
communications to shareholders;
f. Prepare for review by an officer of and legal counsel for the
Fund the Fund's periodic financial reports required to be filed
with the Securities and Exchange Commission ("SEC") on Form N-SAR
and financial information required by Form [N-1A/N-2] and such
other reports, forms or filings as may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the Fund
as may be mutually agreed upon and not otherwise prepared by the
Fund's investment adviser, custodian, legal counsel or
independent accountants;
h. Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may
reasonably request;
i. Make such reports and recommendations to the Board concerning the
performance and fees of the Fund's custodian and transfer and
dividend disbursing agent ("Transfer Agent") as the Board may
reasonably request or deems appropriate;
j. Oversee and review calculations of fees paid to the Fund's
investment adviser, custodian and Transfer Agent;
k. Consult with the Fund's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the
accounting policies of the Fund;
l. Review implementation of any dividend reinvestment programs
authorized by the Board;
m. Respond to, or refer to the Fund's officers or Transfer Agent,
shareholder inquiries relating to the Fund;
n. Provide periodic testing of portfolios to assist the Fund's
investment adviser in complying with Internal Revenue Code
mandatory qualification requirements, the requirements of the
1940 Act and Fund prospectus limitations as may be mutually
agreed upon;
o. Review and provide assistance on shareholder communications;
p. Maintain general corporate calendar;
q. Maintain copies of the Fund's charter and by-laws;
4
<PAGE>
r. File annual and semi-annual shareholder reports with the
appropriate regulatory agencies; review text of "President's
letters" to shareholders and "Management's Discussion of Fund
Performance" (which shall also be subject to review by the Fund's
legal counsel);
s. Organize, attend and prepare minutes of shareholder meetings;
t. Provide consultation on regulatory matters relating to portfolio
management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure; act as
liaison to legal counsel to the Fund and, where applicable, to
legal counsel to the Fund's independent Board members;
u. Maintain continuing awareness of significant emerging regulatory
and legislative developments which may affect the Fund, update
the Board and the investment adviser on those developments and
provide related planning assistance where requested or
appropriate;
v. Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
w. Counsel and assist the Fund in the handling of routine regulatory
examinations and work closely with the Fund's legal counsel in
response to any non-routine regulatory matters;
Subject to review and comment by the Fund's legal counsel:
x. Prepare and file with the SEC Fund's registration statement and
amendments thereto, including updating the Prospectus and
Statement of Additional Information, where applicable;
y. Prepare and file with the SEC proxy statements; provide
consultation on proxy solicitation matters;
z. Prepare agenda and background materials for Board meetings, make
presentations where appropriate, prepare minutes and follow-up on
matters raised at Board meetings;
aa. Prepare and file with the SEC Rule 24f-2 notices; and
bb. Prepare and file necessary documentation to allow the Fund to
offer and sell its shares in various states pursuant to the
specific instructions of the Fund and as detailed in Schedule C
to this Agreement.
The Administrator shall provide the office facilities and the personnel required
by it to perform the services contemplated herein.
5
<PAGE>
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Fund such compensation for
the Administrator's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties
and initially set forth in Schedule B to this Agreement. The fees are accrued
daily and billed monthly and shall be due and payable upon receipt of the
invoice. Upon the termination of this Agreement before the end of any month,
the fee for the part of the month before such termination shall be prorated
according to the proportion which such part bears to the full monthly period and
shall be payable upon the date of termination of this Agreement. In addition,
the Fund shall reimburse the Administrator for its reasonable out-of-pocket
costs incurred in connection with this Agreement.
The Fund agrees promptly to reimburse the Administrator for any
equipment and supplies specially ordered by or for the Fund through the
Administrator and for any other expenses not contemplated by this Agreement that
the Administrator may incur on the Fund's behalf at the Fund's request or with
the Fund's consent.
The Fund will bear all expenses that are incurred in its operation and
not specifically assumed by the Administrator. Expenses to be borne by the
Fund, include, but are not limited to: organizational expenses; cost of
services of independent accountants and outside legal and tax counsel (including
such counsel's review of the Fund's registration statement, proxy materials,
federal and state tax qualification as a regulated investment company and other
reports and materials prepared by the Administrator under this Agreement); cost
of any services contracted for by the Fund directly from parties other than the
Administrator; cost of trading operations and brokerage fees, commissions and
transfer taxes in connection with the purchase and sale of securities for the
Fund; investment advisory fees; taxes, insurance premiums and other fees and
expenses applicable to its operation; costs incidental to any meetings of
shareholders including, but not limited to, legal and accounting fees, proxy
filing fees and the costs of preparation, printing and mailing of any proxy
materials; costs incidental to Board meetings, including fees and expenses of
Board members; the salary and expenses of any officer, director\trustee or
employee of the Fund; costs incidental to the preparation, printing and
distribution of the Fund's registration statements and any amendments thereto
and shareholder reports; cost of typesetting and printing of prospectuses; cost
of preparation and filing of the Fund's tax returns, Form N-1A or N-2 and Form
N-SAR, and all notices, registrations and amendments associated with applicable
federal and state tax and securities laws; all applicable registration fees and
filing fees required under federal and state securities laws; fidelity bond and
directors' and officers' liability insurance; and cost of independent pricing
services used in computing the Fund's net asset value.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Fund for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
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7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the Fund
for instructions and may consult with its own legal counsel or outside counsel
for the Fund or the independent accountants for the Fund at the expense of the
Fund, with respect to any matter arising in connection with the services to be
performed by the Administrator under this Agreement. The Administrator shall
not be liable, and shall be indemnified by the Fund, for any action taken or
omitted by it in good faith in reliance upon any such instructions or advice or
upon any paper or document believed by it to be genuine and to have been signed
by the proper person or persons. The Administrator shall not be held to have
notice of any change of authority of any person until receipt of written notice
thereof from the Fund. Nothing in this paragraph shall be construed as imposing
upon the Administrator any obligation to seek such instructions or advice, or to
act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only
such duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall
have no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless solely caused by or resulting from the gross negligence or willful
misconduct of the Administrator, its officers or employees. The Administrator
shall not be liable for any special, indirect, incidental, or consequential
damages of any kind whatsoever (including, without limitation, attorneys' fees)
under any provision of this Agreement or for any such damages arising out of any
act or failure to act hereunder. In any event, the Administrator's liability
under this Agreement shall be limited to its total annual compensation earned
and fees paid hereunder during the preceding twelve months for any liability or
loss suffered by the Fund including, but not limited to, any liability relating
to qualification of the Fund as a regulated investment company or any liability
relating to the Fund's compliance with any federal or state tax or securities
statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action or communication
disruption, nor shall any such failure or delay give the Fund the right to
terminate this Agreement.
The Fund shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by it in the performance of its duties hereunder, or as a
result of acting upon any instructions reasonably believed by it to have been
duly authorized by the Fund, provided that this indemnification shall not apply
to actions or omissions of the Administrator, its officers or employees in cases
of its or their own gross negligence or willful misconduct.
The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification
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provided above. In the event the Fund elects to assume the defense of any
such suit and retain counsel, the Administrator or any of its affiliated
persons, named as defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel unless (i) the
Fund shall have specifically authorized the retaining of such counsel or (ii)
the Administrator shall have determined in good faith that the retention of
such counsel is required as a result of a conflict of interest.
The indemnification contained herein shall survive the termination of
this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or
in connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
written consent of the Fund.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Without derogating from obligations of the Administrator hereunder,
the Fund assumes full responsibility for complying with all securities, tax,
commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator agrees that all records which it maintains for the Fund shall
at all times remain the property of the Fund, shall be readily accessible during
normal business hours, and shall be promptly surrendered upon the termination of
the Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Fund pursuant to Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under
the 1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Fund are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Fund from
time to time, have no authority to act or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall be effective as of the date first written above
and shall remain in effect until terminated in writing by either party on sixty
(60) days' prior written notice given by either party to the other party;
provided, however, that without limitation of any other remedy available at law
or in equity, upon termination of this Agreement by the Fund prior to three
years from the effective date of this Agreement, the Fund shall pay to the
Administrator an amount equal to fees waived by the Administrator under this
Agreement. Termination of this Agreement with respect to any given Investment
Fund shall in no way affect the continued validity of this Agreement with
respect to any other Investment
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Fund. Upon termination of this Agreement, the Fund shall pay to the
Administrator such compensation and any reimbursable expenses as may be due
under the terms hereof as of the date of such termination, including
reasonable out-of-pocket expenses associated with such termination. This
Agreement may be modified or amended from time to time by mutual written
agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Fund:_________________________, Attn:__________________, fax:__________________;
if to the Administrator: State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171, Attn: Sharon B. Morin, Vice
President and Counsel, fax: (617) 985-2497.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without
the prior consent in writing of the other party, except that the Administrator
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver nor shall it
deprive such party of the right thereafter to insist upon strict adherence to
that term or any term of this Agreement. Any waiver must be in writing signed
by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the
balance of the Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance it shall nevertheless remain
applicable to all other persons and circumstances.
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19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
ORBITEX GROUP OF FUNDS
By:________________________________
Name:______________________________
Title:_____________________________
STATE STREET BANK AND TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
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ADMINISTRATION AGREEMENT
ORBITEX GROUP OF FUNDS
SCHEDULE A
LISTING OF INVESTMENT FUNDS
Orbitex Global Natural Resources Fund
Orbitex Info-Tech Fund
Orbitex Global Growth Fund
Orbitex Asian High Yield Fund
Orbitex Asian Select Advisers Fund
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ADMINISTRATION AGREEMENT
ORBITEX GROUP OF FUNDS
SCHEDULE B
FEES AND EXPENSES
12
<PAGE>
ADMINISTRATION AGREEMENT
ORBITEX GROUP OF FUNDS
SCHEDULE C
REGISTRATION OF FUND SHARES
WITH STATE SECURITIES ADMINISTRATORS
AT THE SPECIFIC DIRECTION OF THE FUND, THE ADMINISTRATOR WILL PREPARE REQUIRED
DOCUMENTATION AND REGISTER FUND SHARES IN ACCORDANCE WITH THE SECURITIES LAWS OF
EACH JURISDICTION IN WHICH FUND SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO
INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE FUND.
THE FUND SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (I) OF THOSE
JURISDICTIONS IN WHICH FUND SHARES ARE TO BE REGISTERED AND (II) THE NUMBER OF
FUND SHARES TO BE REGISTERED IN EACH SUCH JURISDICTION. IN THE EVENT THAT THE
ADMINISTRATOR BECOMES AWARE OF (A) THE SALE OF FUND SHARES IN A JURISDICTION IN
WHICH FUND SHARES ARE NOT REGISTERED FOR OFFER AND SALE OR (B) THE SALE OF FUND
SHARES IN EXCESS OF THE NUMBER OF FUND SHARES REGISTERED IN SUCH JURISDICTION,
THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE FUND, AND IT SHALL BE THE
FUND'S RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE ACTION AND INSTRUCT
THE ADMINISTRATOR WITH RESPECT THERETO.
The registration services shall consist of the following:
1. Filing of Fund's Application to Register Securities and
amendments, if directed by the Fund;
2. Filing of amendments to the Fund's registration statement;
3. Filing Fund sales reports and advertising literature where
required;
4. Payment at the expense of the Fund of all Fund state registration
and filing fees;
5. Filing the Prospectuses and Statements of Additional Information
and any amendments or supplements thereto;
6. Filing of annual reports and proxy statements where required; and
7. The performance of such additional services as the Administrator
and the Fund may agree upon in writing.
Unless otherwise specified in writing by the Administrator, registration
services by the Administrator shall not include determining the availability of
exemptions under a jurisdiction's blue sky law. Any such determination shall be
made by the Fund or its legal counsel. In connection with the services
described herein, the Fund shall issue in favor of the Administrator a power of
attorney to register Fund shares on behalf of the Fund, which power of attorney
shall be substantially in the form of Exhibit I attached hereto.
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EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of __________________, 1997 that the
undersigned Orbitex Group of Funds with principal offices at 660 Madison Avenue,
New York, NY (the "Fund") makes, constitutes, and appoints STATE STREET BANK AND
TRUST COMPANY (the "Administrator") with principal offices at 225 Franklin
Street, Boston, Massachusetts its lawful attorney-in-fact for it to do as if it
were itself acting, the following:
1. REGISTRATION OF FUND SHARES. The power to register shares of the Fund in
each jurisdiction in which Fund shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Fund applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgment of the Administrator in connection with the
registration of Fund shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals
holding the titles of Officer, Blue Sky Manager, or Senior Blue Sky
Administrator at the Administrator shall have authority to act on
behalf of the Fund with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, director or employee of the Fund.
IN WITNESS WHEREOF, the Fund has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
ORBITEX GROUP OF FUNDS
By:_______________________
Name:_____________________
Title:____________________
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