<PAGE>
As filed with the Securities and Exchange Commission on October 26, 1999
File Nos. 33-20635 and 811-8037
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 7
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 9
ORBITEX GROUP OF FUNDS
410 Park Avenue, 18th Floor
New York, New York 10022
(212) 891-7900
James L. Nelson
410 Park Avenue, 18th Floor,
New York, New York 10022
Copies to:
M. Fyzul Khan, Legal Counsel Leonard B. Mackey, Jr., Esq.
Orbitex Management, Inc. Rogers & Wells
410 Park Avenue, 18th Floor 200 Park Avenue
New York, New York 10022 New York, New York 10166
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on March 1, 1999 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(i)
[ ] on _____ pursuant to Rule 485, paragraph (a)(i)
[x] 75 days after filing pursuant to Rule 485, paragraph(a)(ii)
[ ] on _____ pursuant to Rule 485, paragraph (a)(ii)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Orbitex Financial Services Fund, Orbitex
Growth Fund, Orbitex Info-Tech & Communications Fund, Orbitex Strategic Natural
Resources Fund, Orbitex Focus 30 Fund, Orbitex Health & Biotechnology Fund,
Orbitex Utilities Fund.
<PAGE>
Prospectus January 1, 2000
The
Orbitex
Group of Funds
Orbitex Financial Services Fund
Orbitex Growth Fund
Orbitex Info-Tech & Communications Fund
Orbitex Strategic Natural Resources Fund
Orbitex Focus 30 Fund
Orbitex Health & Biotechnology Fund
Orbitex Utilities Fund
<PAGE>
TABLE OF CONTENTS
FUNDS AT A GLANCE........................................................ 1
Key Investment Concepts......................................... 1
Orbitex Financial Services Fund................................. 2
Orbitex Growth Fund............................................. 6
Orbitex Info-Tech & Communications Fund......................... 11
Orbitex Strategic Natural Resources Fund........................ 15
Orbitex Focus 30 Fund........................................... 19
Orbitex Health & Biotechnology Fund............................. 25
Orbitex Utilities Fund.......................................... 30
FUND DETAILS............................................................. 34
Orbitex Financial Services Fund................................. 34
Orbitex Growth Fund............................................. 35
Orbitex Info-Tech & Communications Fund......................... 36
Orbitex Strategic Natural Resources Fund........................ 37
Orbitex Focus 30 Fund........................................... 39
Orbitex Health & Biotechnology Fund............................. 40
Orbitex Utilities Fund.......................................... 42
MORE INFORMATION ABOUT RISKS............................................. 43
YOUR ACCOUNT............................................................. 46
Types of Accounts............................................... 46
Choosing a Class................................................ 46
Classes in Detail............................................... 48
Rule 12b-1 Plans in Detail...................................... 51
Purchasing Shares............................................... 51
Redeeming Shares................................................ 55
Exchanging Shares............................................... 57
PRICING OF FUND SHARES................................................... 59
DISTRIBUTIONS............................................................ 59
FEDERAL TAX CONSIDERATIONS............................................... 60
Taxes on Distributions.......................................... 60
Taxes on Sales or Exchanges..................................... 60
"Buying a Dividend"............................................. 60
Tax Withholding................................................. 60
MANAGEMENT............................................................... 61
Investment Adviser.............................................. 61
Other Service Providers......................................... 61
FINANCIAL HIGHLIGHTS..................................................... 63
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
FUNDS AT A GLANCE - KEY INVESTMENT CONCEPTS
This Prospectus describes each funds' investment objectives, principal
investment strategies, principal investments and risks. You may find the
following definitions of these terms useful as you read the description of the
Orbitex Group of Funds.
[LOGO]
INVESTMENT OBJECTIVE
A fund's investment objective is its ultimate, overriding goal. It is the way in
which the fund defines itself amongst all other mutual funds. There is a wide
range of different potential investment objectives. There can be no assurance
that any given fund will attain its investment objective. You should think
carefully about whether a fund's investment objective is consistent with your
own objective for the money that you are contemplating investing in that fund.
If not, you should consider another fund.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
A fund's principal investment strategies are the primary means by which the
investment adviser for the fund (the "Adviser") seeks to attain its investment
objective. A strategy may, among other things, take the form of an intention on
the part of the Adviser to invest primarily in certain types of securities such
as stocks, bonds, or money market instruments, or to concentrate investments in
a particular industry (e.g. technology, healthcare, energy) or group of
industries. Your financial consultant can assist you in understanding these
strategies.
[LOGO]
PRINCIPAL INVESTMENTS
In order to implement its investment strategies, a fund will invest principally
in certain types of securities. These securities may include equity securities,
such as common stocks, preferred stocks, convertible securities and warrants, or
debt securities, such as corporate bonds, government securities and mortgage and
other asset-backed securities.
[LOGO]
PRINCIPAL RISKS
The principal risks of a fund are those potential occurrences that, in the
judgement of the Adviser, have the greatest likelihood of disrupting,
interfering with, or preventing a fund from attaining its investment objective.
Your financial consultant can assist you in understanding these risks.
1
<PAGE>
FUNDS AT A GLANCE - ORBITEX FINANCIAL SERVICES FUND
This section briefly describes the Orbitex Financial Services Fund's goals,
principal investment strategies, risks, expenses and performance. For further
information on how this Fund is managed, please read the section entitled "Fund
Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Financial Services Fund is long-term growth through
selective investment in companies that provide financial services to consumers
and industry. These companies include commercial and investment banks, thrifts,
finance companies, brokerage and advisory firms, real estate related firms,
insurance companies, and service providers to these companies whose revenue is
primarily derived from the financial services sector.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- Investing at least 65% of its total assets in U.S. and foreign
securities issued by financial service companies (see description of
financial service companies in "Fund Details" section on page 40). As
a matter of fundamental policy, the Fund will concentrate (invest at
least 25% of its total assets) in securities issued by companies in
the financial services industries.
- Investing primarily in common stocks.
- Investing in companies regardless of their stock market value (or
"market capitalization").
- Investing up to 25% of its total assets in foreign companies.
- The Fund may sell those holdings that it has identified as having
exceeded their fair market value and may also sell the securities of a
company that has experienced a fundamental shift in its core business
processes and objectives.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political
or market conditions, as well as company-specific factors (see
"Issuer-Specific Risks" below). Consequently, the value of your investment
in the Fund will go up and down, which means that you could lose money.
- - RISKS OF FINANCIAL SERVICES SECTOR: Because of its specific focus, the
Fund's performance is closely tied to and affected by events occurring in
the financial service industry. Companies in the same industry often face
similar obstacles, issues and regulatory burdens. As a result, the
securities owned by the Fund may react similarly to and move in unison with
one another. Financial services companies are subject to extensive
government regulation which tends to limit both the amount and types of
loans and other financial commitments the company can make, and the
interest rates and fees it can charge. These limitations can have a
significant impact on the profitability of a financial services company
since profitability is impacted by the company's ability to make financial
commitments such as loans. Insurance companies in which the Fund invests
may also have an impact on the Fund's performance as insurers may be
subject to severe price competition, claims activity, marketing competition
and general
2
<PAGE>
economic conditions. Certain lines of insurance can be significantly
influenced by specific events. For example, property and casualty insurer
profits may be affected by certain weather catastrophes and other
disasters; and life and health insurer profits may be affected by mortality
risks and morbidity rates. Pending legislation, if enacted, will also
likely have an impact on the profitability of financial services companies
and on the performance of the Fund. It would reduce the separation between
commercial and investment banking businesses and permit banks to expand
their services. This expansion could expose banks to increased competition
from well-established competitors. The financial services industry is
currently undergoing a number of changes such as continuing consolidations,
development of new products and structures and changes to its regulatory
framework. These changes are likely to have a significant impact on the
financial services industry and the Fund.
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular
type of security can be more volatile than the market as a whole and can
fluctuate differently than the value of the market as a whole. An
individual issuer's securities can rise or fall dramatically with little or
no warning based upon such things as a better (or worse) than expected
earnings report, news about the development of a promising product or
service, or the loss of key management personnel. There is also a risk that
the price of a security may never reach the level that the Adviser believes
is representative of its full value or that it may even go down in price.
- - RISKS OF INVESTING IN FOREIGN SECURITIES: Foreign securities may be riskier
than U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign controls
on investment and currency exchange, withholding taxes, a lack of adequate
company information, less liquid and more volatile markets, and a lack of
governmental regulation. Consequently, there is a risk that a foreign
security may never reach the price that the Adviser believes is
representative of its full value or that it may even go down in price.
- - RISKS OF NON-DIVERSIFICATION: Because the Orbitex Financial Services Fund
is non-diversified, it may have greater exposure to volatility than other
funds. Because a non-diversified fund may invest a larger percentage of its
assets in the securities of a single company than diversified funds, the
performance of that company can have a substantial impact on the fund's
share price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX FINANCIAL SERVICES FUND?
We designed the ORBITEX FINANCIAL SERVICES FUND for investors who want to
capitalize on potential opportunities in the financial service industries and
who seek one or more of the following:
- high long-term growth
- a stock fund that invests in companies that are involved in the
financial services industry
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in domestic and foreign companies
3
<PAGE>
FUNDS AT A GLANCE - ORBITEX FINANCIAL SERVICES FUND
PERFORMANCE AND VOLATILITY
As of December XX, 1999, the Orbitex Financial Services Fund had not commenced
operations.
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B, or Class C Shares of the Orbitex Financial Services Fund.
Please note that the following information does not include fees that other
financial institutions may charge you for their services.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a% of offering price) 5.75%(1) None 1.00%
Maximum Deferred Sales Charge (Load) (as a % of lower of original purchase None(2) 5.00%(3) 1.00%(4)
price or redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses% x.xx%(6) x.xx%(6) x.xx%(6)
-------- -------- --------
Total Annual Operating Expenses x.xx% x.xx% x.xx%
Fee Waiver and Expense Reimbursement x.xx%(7) x.xx%(7) x.xx%(7)
-------- -------- --------
Net Expenses 2.00% 2.60% x.xx%
----- ----- -----
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary or non-recurring
expenses, so that the expense ratio of Class A Shares does not exceed 2.00%
and the expense ratios of Class B and Class C Shares do not exceed 2.60%.
This arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
4
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Financial Services Fund with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your Investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 766 763
- --------------------------------------------------------------------------------
3 1,166 1,108
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 766 263
- --------------------------------------------------------------------------------
3 1,166 808
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
FUNDS AT A GLANCE - ORBITEX GROWTH FUND
This section briefly describes the Orbitex Growth Fund's goals, principal
investment strategies, risks, expenses and performance. For further information
on how this Fund is managed, please read the section entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Growth Fund is to provide long-term growth of
capital through selective investment in securities of companies of all sizes
that offer potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Composing a portfolio based upon a "bottom-up" growth-oriented strategy for
selecting investments with a secondary focus on value stocks. The Adviser
seeks to identify companies that are undervalued by the stock market and
less expensive than comparable companies. To do so, the Adviser employs
measures of intrinsic value, such as the company's price-to-earnings ratio
(the price of a stock divided by its earnings per share), historical stock
prices and cash flows (earnings before depreciation and non-cash charges).
The Adviser also employs criteria to identify companies it believes will
experience earnings growth. Finally, the Adviser attempts to identify
investment and economic themes that can drive profits. Finally, the Fund
may sell those holdings that the Adviser has identified as having exceeded
their fair market value and may also sell the securities of a company that
has experienced a fundamental shift in its core business processes and
objectives. The Fund may also sell the securities of a company when the
industry in which the company operates has undergone a shift in focus or
industry dynamics.
- - Investing in equity securities of domestic and foreign issuers.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political
or market conditions, as well as company-specific factors (see
"Issuer-Specific Risk" below). Consequently, the value of your investment
in the Fund will go up and down, which means that you could lose money.
- - ISSUER-SPECIFIC RISK: The price of an individual security or particular
type of security can be more volatile than the market as a whole and can
fluctuate differently than the market as a whole. An individual issuer's
securities can rise or fall dramatically with little or no warning based
upon such things as a better (or worse) than expected earnings report, news
about the development of a promising product, or the loss of key management
personnel. There is also a risk that the price of a security may never
reach a level that the Adviser believes is representative of its full value
or that it may even go down in price.
- - RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be riskier
than U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign controls
on investment and currency exchange, withholding taxes, a lack of adequate
company information, less liquid and more volatile markets, and a lack of
governmental
6
<PAGE>
regulation. Consequently, there is a risk that a foreign security may never
reach the price that the Adviser believes is representative of its full
value or that it may even go down in price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX GROWTH FUND?
We designed the ORBITEX GROWTH FUND for investors who seek one or more of the
following:
- high long-term growth
- a stock fund to serve as a core holding in an investor's portfolio
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses a blend of value and growth investment styles
- a stock fund that invests in domestic and foreign companies
7
<PAGE>
FUNDS AT A GLANCE - ORBITEX GROWTH FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of Class A Shares of the
Orbitex Growth Fund during the last year. The information in the table gives
some indication of the risks of an investment in the Fund by comparing the
Fund's performance with a broad measure of market performance. Past performance
does not necessarily indicate how the Fund will perform in the future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ORBITEX GROWTH FUND -- CLASS A SHARES
<TABLE>
<S> <C>
Total Return for the year ended December 31, 1998 7.55%
</TABLE>
The year-to-date return of Class A Shares for the period ended April 30, 1999,
was 8.30%. During the period shown in the bar chart, the highest return for a
quarter was 5.66% (quarter ended 12-31-98) and the lowest return for a quarter
was (16.96)% (quarter ended 9-30-98).
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1998)
The returns in the following table include the effect of Class A Shares maximum
applicable front-end sales charge and Class B Shares maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Past 1 Year Life of Fund
----------------------------------------------------------------------------
<S> <C> <C>
Orbitex Growth Fund Class A* 7.55% 11.12%
----------------------------------------------------------------------------
Orbitex Growth Fund Class B** 8.20% 12.75%
----------------------------------------------------------------------------
S&P 500-Registered Trademark- Index*** 28.58% 23.59%
----------------------------------------------------------------------------
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 22, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 16, 1998. CLASS B'S RETURNS
PRIOR TO SEPTEMBER 16, 1998 THROUGH OCTOBER 22, 1997 ARE THOSE OF CLASS A, WHICH
REFLECT A 12b-1 FEE OF 0.40%. IF CLASS B'S 12b-1 FEE HAD BEEN REFLECTED, TOTAL
RETURNS PRIOR TO SEPTEMBER 16, 1998 WOULD HAVE BEEN LOWER.
*** THE S&P 500-Registered Trademark- INDEX IS AN UNMANAGED INDEX. INDEX
RETURNS ASSUME REINVESTMENT OF DIVIDENDS; UNLIKE THE FUND'S RETURNS, HOWEVER,
THEY DO NOT REFLECT ANY FEES OR EXPENSES.
8
<PAGE>
FUNDS AT A GLANCE - ORBITEX GROWTH FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B or Class C Shares of the Orbitex Growth Fund. Please note that
the following information does not include fees that other financial
institutions may charge you for their services.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a% of offering price) 5.75%(1) None 1.00%
Maximum Deferred Sales Charge (Load) (as a% of lower of original None(2) 5.00%(3) 1.00%(4)
purchase price or redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends Distributions None None None
Redemption Fee (as a%of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management Fees 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses 16.88% 16.88% xx.xx%
------ ------ -----
Total Annual Operating Expenses 18.03% 18.63% xx.xx%(6)
Fee Waiver and Reimbursement 16.03%(7) 16.03%(7) xx.xx%(7)
------ ------ ------
Net Expenses 2.00% 2.60% xx.xx%
----- ----- ------
----- ----- ------
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of Class A Shares does not exceed 2.00% and the
expense ratios of Class B and Class C Shares do not exceed 2.60%. This
arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
9
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Growth Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your investment
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
1 $766 $763
- ---------------------------------------------------------------------------
3 $1,166 $1,108
- ---------------------------------------------------------------------------
5 $1,591 $1,580
- ---------------------------------------------------------------------------
10 $2,768 $2,644
- ---------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
1 $766 $263
- ---------------------------------------------------------------------------
3 $1,166 $808
- ---------------------------------------------------------------------------
5 $1,591 $1,380
- ---------------------------------------------------------------------------
10 $2,768 $2,644
- ---------------------------------------------------------------------------
</TABLE>
10
<PAGE>
FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
This section briefly describes the Orbitex Info-Tech & Communications Fund's
goals, principal investment strategies, risks, expenses and performance. For
further information on how this Fund is managed, please read the section
entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Info-Tech & Communications Fund is long-term
growth of capital through selective investment in the securities of
communications, information and related technology companies.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Investing at least 65% of its total assets in equity securities issued by
communications, information and related technology companies (see
description of communications and information companies in "Fund Details"
section on page 42).
- - The Adviser will attempt to modify portfolio composition to benefit from
changing relative performance among various sub-sectors of the
communications, information and related technology industries. The Fund may
sell those holdings that the Adviser has identified as having exceeded
their fair market value and may also sell the securities of a company that
has experienced a fundamental shift in its core business processes and
objectives. The Fund may also sell the securities of a company when the
industry in which the company operates has undergone a shift in focus or
industry dynamics.
- - Investing primarily in common stocks.
- - Investing in equity securities of both domestic and foreign issuers.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political
or market conditions, as well as company-specific factors (see
"Issuer-Specific Risk" below). Consequently, the value of your investment
in the Fund will go up and down, which means that you could lose money.
- - RISKS OF INFORMATION AND COMMUNICATIONS SECTOR: Because of its specific
focus, the Fund's performance is closely tied to, and affected by, events
occurring in the information, communications, and related technology
industries. Companies in the same industry often face similar obstacles,
issues and regulatory burdens. As a result, the securities owned by the
Fund may react similarly to and move in unison with one another. Because
technology continues to advance at an accelerated rate, and the number of
companies and product offerings continues to expand, these companies could
become increasingly sensitive to short product cycles, aggressive pricing
and intense competition. Many technology companies sell stock before they
have a commercially viable product, and may be acutely susceptible to
problems relating to bringing their products to market. Additionally, many
technology
11
<PAGE>
companies have very high price/earnings ratios, high price volatility, and
high personnel turnover due to severe labor shortages for skilled
technology professionals.
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular
type of security can be more volatile than the market as a whole and can
fluctuate differently than the market as a whole. An individual issuer's
securities can rise or fall dramatically with little or no warning based
upon such things as a better (or worse) than expected earnings report, news
about the development of a promising product, or the loss of key management
personnel. There is also a risk that the price of a security may never
reach a level that the Adviser believes is representative of its full value
or that it may even go down in price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
- - RISKS OF FOREIGN SECURITIES: Foreign securities may be riskier than U.S.
investments because of factors such as unstable international political and
economic conditions, currency fluctuations, foreign controls on investment
and currency exchange, withholding taxes, a lack of adequate company
information, less liquid and more volatile markets, and a lack of
governmental regulation. Consequently, there is a risk that a foreign
security may never reach the price that the Adviser believes is
representative of its full value or that it may even go down in price.
WHO MAY WANT TO INVEST IN THE ORBITEX INFO-TECH & COMMUNICATIONS FUND?
We designed the ORBITEX INFO-TECH & COMMUNICATIONS FUND for investors who want
to capitalize on potential opportunities in telecommunications and information
industries and who seek one or more of the following:
- high long-term growth
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in foreign and domestic companies
FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of the Class A Shares of the
Orbitex Info-Tech & Communications Fund during the last year. The information in
the table gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance.
Past performance does not necessarily indicate how the Fund will perform in the
future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
[EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC]
ORBITEX INFO-TECH & COMMUNICATIONS
FUND -- CLASS A SHARES
12
<PAGE>
<TABLE>
<S> <C>
Total Return for the year ended December 31, 1998 43.43%
</TABLE>
The year-to-date return of Class A Shares for the period ended April 30, 1999,
was 43.96%. During the period shown in the bar chart, the highest return for a
quarter was 22.33% (quarter ended 3-31-98) and the lowest return for a quarter
was (19.17)% (quarter ended 9-30-98).
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1998)
The returns in the following table include the effect of Class A Shares maximum
applicable front-end sales charge and Class B Shares maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 1 Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Orbitex Info-Tech & Communications Fund Class A* 43.43% 28.38%
- --------------------------------------------------------------------------------
Orbitex Info-Tech & Communications Fund Class B** 43.84% 29.73
- --------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index*** 28.58% 23.59%
- --------------------------------------------------------------------------------
Lipper Science and Technology Index**** 46.94% 21.14%
- --------------------------------------------------------------------------------
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 22, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 16, 1998. CLASS B'S
RETURNS PRIOR TO SEPTEMBER 16, 1998 THROUGH OCTOBER 22, 1997 ARE THOSE OF
CLASS A, WHICH REFLECT A 12b-1 FEE OF 0.40%. IF CLASS B'S 12b-1 FEE HAD
BEEN REFLECTED, TOTAL RETURNS PRIOR TO SEPTEMBER 16, 1998 WOULD HAVE BEEN
LOWER.
*** THE S&P 500-REGISTERED TRADEMARK- INDEX IS AN UNMANAGED INDEX. INDEX
RETURNS ASSUME REINVESTMENT OF DIVIDENDS; UNLIKE THE FUND'S RETURNS,
HOWEVER, THEY DO NOT REFLECT ANY FEES OR EXPENSES.
**** THE LIPPER SCIENCE AND TECHNOLOGY FUNDS INDEX IS AN EQUAL-WEIGHTED
PERFORMANCE INDEX, ADJUSTED FOR CAPITAL-GAIN DISTRIBUTIONS AND INCOME
DIVIDENDS, OF THE LARGEST QUALIFYING FUNDS IN THIS INVESTMENT OBJECTIVE,
AND IS COMPILED BY LIPPER, INC.
FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B, or Class C Shares of the Orbitex Info-Tech & Communications
Fund. Please note that the following information does not include fees that
other financial institutions may charge you for their services.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a % of offering price) 5.75%(1) None 1.00
Maximum Deferred Sales Charge (Load) (as a% of lower of original purchase None(2) 5.00%(3) 1.00%(4)
price or redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends Distributions None None None
Redemption Fee (as a% of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
13
<PAGE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-----------------------------
<S> <C> <C> <C>
Other Expenses 2.63% 2.63% x.xx%(6)
----- ----- -----
Total Annual Operating Expenses 4.28%(7) 4.88%(7) 4.88%(7)
Fee Waiver and Expense Reimbursement 2.28% 2.28% 2.28%
----- ----- -----
Net Expenses 2.00% 2.60% 2.60%
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of Class A Shares does not exceed 2.00% and the
expense ratios of Class B and Class C Shares do not exceed 2.60%. This
arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Info-Tech & Communications Fund with the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 $766 $763
- --------------------------------------------------------------------------------
3 $1,166 $1,108
- --------------------------------------------------------------------------------
5 $1,591 $1,580
- --------------------------------------------------------------------------------
10 $2,768 $2,644
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 $766 $263
- --------------------------------------------------------------------------------
3 $1,166 $808
- --------------------------------------------------------------------------------
5 $1,591 $1,380
- --------------------------------------------------------------------------------
14
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
10 $2,768 $2,644
- --------------------------------------------------------------------------------
</TABLE>
FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
This section describes the Orbitex Strategic Natural Resources Fund's goals,
principal investment strategies, risks, expenses and performance. For further
information on how this Fund is managed, please read the section entitled "Fund
Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Strategic Natural Resources Fund is long-term
growth of capital through selective investment in the securities of companies
engaged in natural resources industries and industries supportive to natural
resources industries.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in securities of companies that the Adviser believes are
positioned to benefit from increasing worldwide demand for natural resources.
The Fund may sell those holdings that it has identified as having exceeded their
fair market value and may also sell the securities of a company that has
experienced a fundamental shift in its core business processes and objectives.
The Fund may also sell the securities of a company when the industry in which
the company operates has undergone a shift in focus or industry dynamics.
The Fund's principal investment strategies include:
- - Investing at least 65% of its total assets in equity securities issued by
natural resources companies (see description of natural resources companies
in "Fund Details" section on page 43).
- - Investing primarily in common stocks.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
- - Investing up to 15% of total assets in securities of foreign companies
(with no limit on the percentage the Fund may invest in Canadian issuers).
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- STOCK MARKET RISK: Stock markets are volatile and there is a risk that
the price of a security will rise or fall due to changing economic,
political or market conditions, as well as company-specific factors
(see "Issuer-Specific Risks" below). Consequently, the value of your
investment in the Fund will go up and down, which means that you could
lose money.
- RISKS OF NATURAL RESOURCES SECTOR: Because of its specific focus, the
Fund's performance is closely tied to and affected by events occurring
in the natural resources industries. Companies in the same industry
often face similar obstacles, issues and regulatory burdens. As a
result, the securities owned by the Fund may react similarly to and
move in unison with one another. Companies in the natural resources
sector are subject to swift fluctuations in supply and demand. These
fluctuations may be caused by events relating to international
political and economic developments, energy conservation, the success
of exploration projects, and tax and other
15
<PAGE>
governmental regulatory policies. Consequently, the Fund's performance
may sometimes be significantly better or worse than that of other
types of funds.
- ISSUER-SPECIFIC RISKS: The price of an individual security or
particular type of security can be more volatile than the market as a
whole and can fluctuate differently than the value of the market as a
whole. An individual issuer's securities can rise or fall dramatically
with little or no warning based upon such things as a better (or
worse) than expected earnings report, news about the development of a
promising product, or the loss of key management personnel. There is
also a risk that the price of a security may never reach the level
that the Adviser believes is representative of its full value or that
it may even go down in price.
- RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be
riskier than U.S. investments because of factors such as unstable
international political and economic conditions, currency
fluctuations, foreign controls on investment and currency exchange,
withholding taxes, a lack of adequate company information, less liquid
and more volatile markets, and a lack of governmental regulation.
Consequently, there is a risk that a foreign security may never reach
the price that the Adviser believes is representative of its full
value or that it may even go down in price.
WHO MAY WANT TO INVEST IN THE ORBITEX STRATEGIC NATURAL RESOURCES FUND?
We designed the ORBITEX STRATEGIC NATURAL RESOURCES FUND for investors who see
strong economic trends as an indicator of future natural resource demand and who
seek one or more of the following:
- high long-term growth
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in foreign and domestic companies
FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of the Class A Shares of the
Orbitex Natural Resources Fund during the last year. The information in the
table gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance.
Past performance does not necessarily indicate how the Fund will perform in the
future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
[EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC]
ORBITEX STRATEGIC NATURAL RESOURCES FUND -- CLASS A SHARES
<TABLE>
<S> <C>
Total Return for the year ended December 31, 1998 (23.90)%
</TABLE>
The year-to-date return of Class A Shares for the period ended April 30, 1999,
was 29.51%. During the period shown in the bar chart, the highest return for a
quarter was
16
<PAGE>
3.65% (quarter ended 3-31-98) and the lowest return for a quarter was (21.77)%
(quarter ended 9-30-98).
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1998)
The returns in the following table include the effect of Class A Shares maximum
applicable front-end sales charge and Class B Shares maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
PAST 1 LIFE OF
YEAR FUND
<S> <C> <C>
Orbitex Natural Resources Fund Class A* (23.90)% (21.41)%
Orbitex Natural Resources Fund Class B** (23.36)% (19.91)%
S&P 500-Registered Trademark- Index*** 28.58% 23.59%
Lipper Natural Resources Funds Index**** (23.12)% (26.30)%
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 23, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 21, 1998. CLASS B'S RETURNS
PRIOR TO SEPTEMBER 21, 1998, THROUGH OCTOBER 23, 199,7 ARE THOSE OF CLASS A,
WHICH REFLECT A 12b-1 FEE OF 0.40%. IF CLASS B'S 12b-1 FEE HAD BEEN REFLECTED,
TOTAL RETURNS PRIOR TO SEPTEMBER 16, 1998 WOULD HAVE BEEN LOWER.
*** THE S&P 500-Registered Trademark- INDEX IS AN UNMANAGED INDEX. INDEX RETURNS
ASSUME REINVESTMENT OF DIVIDENDS; UNLIKE THE FUND'S RETURNS, HOWEVER, THEY DO
NOT REFLECT ANY FEES OR EXPENSES.
****THE LIPPER NATURAL RESOURCES FUNDS INDEX IS AN EQUAL-WEIGHTED PERFORMANCE
INDEX, ADJUSTED FOR CAPITAL-GAIN DISTRIBUTIONS AND INCOME DIVIDENDS, OF THE
LARGEST QUALIFYING FUNDS IN THIS INVESTMENT OBJECTIVE, AND IS COMPILED BY
LIPPER, INC.
FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B, or Class C Shares of the Orbitex Natural Resources Fund.
Please note that the following information does not include fees that other
financial institutions may charge you for their services.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as a % of lower of original purchase price or None(2) 5.00%(3) 1.00%(4)
redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses 5.53% 5.53% 5.53%(6)
----- ----- -----
Total Annual Operating Expenses 7.18% 7.78% 7.78%
Fee Waiver and Expense Reimbursement 5.18%(7) 5.18%(7) 5.18%(7)
----- ----- -----
17
<PAGE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
Net Expenses 2.00% 2.60% 2.60%
----- ----- -----
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of Class A Shares does not exceed 2.00% and the
expense ratios of Class B and Class C Shares do not exceed 2.60%. This
arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Strategic Natural Resources Fund with the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 $766 $763
- --------------------------------------------------------------------------------
3 $1,166 $1,108
- --------------------------------------------------------------------------------
5 $1,591 $1,580
- --------------------------------------------------------------------------------
10 $2,768 $2,644
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 $766 $263
- --------------------------------------------------------------------------------
3 $1,166 $808
- --------------------------------------------------------------------------------
5 $1,591 $1,380
- --------------------------------------------------------------------------------
10 $2,768 $2,644
- --------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
This section describes the Orbitex Focus 30 Fund's goals, principal investment
strategies, risks, expenses and performance. For further information on how this
Fund is managed, please read the section entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
- The objective of the Orbitex Focus 30 Fund is long-term growth of capital
and current income through focused investment in the securities of some or
all of the 30 companies listed on the New York Stock Exchange that make up
the Dow Jones Industrial Average. The Fund is not an index fund.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- Investing at least 90% of its total assets in the common stock of some
or all of the 30 companies that make up the Dow Jones Industrial
Average ("DJIA").* The stocks of these widely known companies are all
listed on the New York Stock Exchange and represent major American
corporations engaged in a variety of industries. The Adviser will
weight the Fund's investments toward the DJIA companies that its
believes will perform better than other DJIA companies.
- Investing up to 10% of its assets in common stocks of companies
included in the S&P 500-Registered Trademark- Index.**
- The Fund may sell those holdings that the Adviser has identified as
having exceeded their fair market value and may also sell the
securities of a company that has experienced a fundamental shift in
its core business processes and objectives. The Fund may also sell the
securities of a company when the industry in which it operates has
undergone a shift in focus or industry dynamics.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- STOCK MARKET RISK: Stock markets are volatile and there is a risk that
the price of a security will rise or fall due to changing economic,
political or market conditions, as well as company-specific factors
(see "Issuer-Specific Risks" below). Consequently, the value of your
investment in the Fund will go up and down, which means that you could
lose money.
- ISSUER-SPECIFIC RISKS: The price of an individual security or
particular type of security can be more volatile than the market as a
whole and can fluctuate differently than the value of the market as a
whole. An individual issuer's securities can rise or fall dramatically
with little or no warning
- ---------------
* "Dow Jones Industrial Average" and "DJIA" are the property of Dow Jones &
Company. The Orbitex Focus 30 Fund is neither affiliated with, nor endorsed by,
Dow Jones & Company.
** "S&P 500 Index" is a registered trademark of McGraw-Hill Co., Inc. The
Orbitex Focus 30 Fund is neither affiliated with, nor endorsed by, McGraw- Hill
Co., Inc.
19
<PAGE>
based upon such things as a better (or worse) than expected earnings
report, news about the development of a promising product, or the loss
of key management personnel. There is also a risk that the price of a
security may never reach the level that the Adviser believes is
representative of its full value or that it may even go down in price.
- INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX FOCUS 30 FUND?
We designed the ORBITEX FOCUS 30 FUND for investors who seek one or more of the
following:
- high long-term growth
- a stock fund that focuses its investments in the 30 companies included
in the Dow Jones Industrial Average
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses primarily a blend of value and growth oriented
investment strategies
20
<PAGE>
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
PERFORMANCE AND VOLATILITY
Before July 8, 1999, the Fund operated as a separate fund called the ASM Index
30 Fund ("ASM Fund"). On or about July 12, 1999, the Fund was reorganized as a
new Fund of the Orbitex Group of Funds. In connection with this reorganization,
Class A Shares and Class B Shares were added to the Fund, while existing
shareholders of the ASM Fund received Class D Shares in exchange for their ASM
Fund shares. Upon the effectiveness of the reorganization, the investment policy
of the Fund changed from the "passive" investment in an equal number of shares
of each of the companies in the DJIA to the "active" investment in some or all
of those companies based on the Adviser's assessment of the prospects for those
companies. In addition, the Fund may now invest up to 10% of its assets in other
companies included in the S&P 500-Registered Trademark- Index. Moreover, the ASM
Fund was subject to a different level of fees than will be applied to the Fund.
The bar chart and table below show the performance of Class D Shares of the
Orbitex Focus 30 Fund during the last year when it operated as the ASM Fund. The
information gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance.
Past performance does not necessarily indicate how the Fund will perform in the
future. Furthermore, because of the change in investment policy and a different
fee level, the performance shown below, which reflects the Fund's previous
"passive" investment policy, should not be considered indicative of the
performance of the Fund as an actively managed Fund. In addition, the
performance of the ASM Fund would have been lower had it been subject to the
higher level of expenses expected for the Fund.
[EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
ORBITEX FOCUS 30 FUND -- CLASS D SHARES
Total Return for the years ended December 31
<S> <C>
1992 5.70%
1993 13.33%
1994 1.04%
1995 29.05%
1996 24.78%
1997 24.51%
1998 16.78%
</TABLE>
The year-to-date return of the ASM Index 30 Fund for the period ended April 30,
1999 was 17.64%. During the period shown in the bar chart, the highest return
for a quarter was 17.08% (quarter ended 3-31-97) and the lowest return for a
quarter was (11.72%) (quarter ended 9-30-98).
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LIFE OF
PAST 1 YEAR PAST 5 YEARS FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Orbitex Focus 30 Fund Class A* N/A% N/A% N/A%
- --------------------------------------------------------------------------------
Orbitex Focus 30 Fund Class B** N/A% N/A% N/A%
- --------------------------------------------------------------------------------
Orbitex Focus 30 Fund Class D*** 16.78% 18.79% 12.88%
- --------------------------------------------------------------------------------
Dow Jones Industrial Average**** 18.00% 22.06% 17.94%
- --------------------------------------------------------------------------------
</TABLE>
* AS OF DECEMBER 31, 1998, CLASS A SHARES HAD NOT COMMENCED OPERATIONS.
** AS OF DECEMBER 31, 1998, CLASS B SHARES HAD NOT COMMENCED OPERATIONS.
21
<PAGE>
*** CLASS D RETURNS ARE THOSE OF THE ASM FUND.
**** THE DOW JONES INDUSTRIAL AVERAGE IS AN UNMANAGED INDEX. THEIINDEX RETURNS
ASSUME REINVESTMENT OF DIVIDENDS; UNLIKE THE FUND'S RETURNS, HOWEVER, THEY DO
NOT REFLECT ANY FEES OR EXPENSES.
22
<PAGE>
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B, or Class D Shares of the Orbitex Focus 30 Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a % of 5.75%(1) None None
offering price)
Maximum Deferred Sales Charge (Load) (as a % of lower of None(2) 5.00%(3) None
original purchase price or redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/ None None None
Distributions
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND
ASSETS)
Management Fees 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(4) 0.00%
Other Expenses 0.85%(5) 0.85%(5) 0.85%(5)
----- ----- -----
Total Annual Operating Expenses 2.00%(6) 2.60%(6) 1.60%(6)
Fee Waiver and Expense Reimbursement 0.85% 0.85% 0.85%
----- ----- -----
Net Expenses 1.15% 1.75% 0.75%
----- ----- -----
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) Includes a 0.25% shareholder servicing fee.
(5) Other Expenses are estimated.
(6) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the Class A Shares' and Class B Shares' total operation expenses do not
exceed 1.15% and 1.75%, respectively, of average daily net assets. The
Adviser has also agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of the Class D Shares does not exceed 0.75% until July
1, 2000.
23
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Focus 30 Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your investment
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 $670 $663 $69
- --------------------------------------------------------------------------------
3 $844 $805 $417
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 $670 $170 $69
- --------------------------------------------------------------------------------
3 $844 $544 $417
- --------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
FUNDS AT A GLANCE - ORBITEX HEALTH & BIOTECHNOLOGY FUND
This section briefly describes the Orbitex Health & Biotechnology Fund's goals,
principal investment strategies, risks, expenses and performance. For further
information on how this Fund is managed, please read the section entitled "Fund
Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Health & Biotechnology Fund is long-term growth of
capital through selective investment in the securities of companies engaged in
the healthcare, health products, pharmaceuticals, medical research and
biotechnology research development and implementation and other areas related to
the health industry.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- Investing at least 65% of its total assets in equity securities issued
by healthcare companies and biotechnology companies (see description
of healthcare companies and biotechnology companies in "Fund Details"
section on page 45). As a matter of fundamental policy, the Fund will
concentrate (invest at least 25% of its total assets) in securities
issued by companies in the health and biotechnology industries.
- Composing a portfolio based upon a "bottom-up" blending of value and
growth criteria as well as identifying investment and economic themes
that can drive profits.
- Investing primarily in common stocks.
- Investing in companies regardless of their stock market value (or
"market capitalization").
- Investing up to 25% of its total assets in foreign companies.
- The Fund may sell those holdings that it has identified as having
exceeded their fair market value and may also sell the securities of a
company that has experienced a fundamental shift in its core business
processes and objectives. The Fund may also sell the securities of a
company when the industry in which the company operates has undergone
a shift in focus or industry dynamics.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- STOCK MARKET RISK: Stock markets are volatile and there is a risk that
the price of a security will rise or fall due to changing economic,
political or market conditions, as well as company-specific factors
(see "Issuer-Specific Risks" below). Consequently, the value of your
investment in the Fund will go up and down, which means that you could
lose money.
- RISKS OF HEALTHCARE AND BIOTECHNOLOGY SECTOR: Because of its specific
focus, the Fund's performance is closely tied to and affected by
events occurring in the healthcare and
25
<PAGE>
biotechnology industries. Companies in the same industry often face
similar obstacles, issues and regulatory burdens. As a result, the
securities owned by the Fund may react similarly to and move in unison
with one another. Healthcare companies are subject to government
regulation and approval of their products and services, which can have
a significant effect on their market price. Furthermore, the types of
products or services produced or provided by these companies may
quickly become obsolete. Moreover, liability for products that are
later alleged to be harmful or unsafe may be substantial, and may have
a significant impact on a healthcare company's market value and/or
share price. Biotechnology companies are affected by patent
considerations, intense competition, rapid technology change and
obsolescence, and regulatory requirements of various federal and state
agencies. In addition, many of these companies are relatively small
and have thinly traded securities, may not yet offer products or offer
a single product, and may have persistent losses during a new
product's transition from development to production or erratic revenue
patterns. Moreover, stock prices of biotechnology companies are very
volatile, particularly when their products are up for regulatory
approval and/or under regulatory scrutiny. Consequently, the Fund's
performance may sometimes be significantly better or worse than that
of other types of funds.
- ISSUER-SPECIFIC RISKS: The price of an individual security or
particular type of security can be more volatile than the market as a
whole and can fluctuate differently than the value of the market as a
whole. An individual issuer's securities can rise or fall dramatically
with little or no warning based upon such things as a better (or
worse) than expected earnings report, news about the development of a
promising product, or the loss of key management personnel. There is
also a risk that the price of a security may never reach the level
that the Adviser believes is representative of its full value or that
it may even go down in price.
- RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be
riskier than U.S. investments because of factors such as unstable
international political and economic conditions, currency
fluctuations, foreign controls on investment and currency exchange,
withholding taxes, a lack of adequate company information, less liquid
and more volatile markets, and a lack of governmental regulation.
Consequently, there is a risk that a foreign security may never reach
the price that the Adviser believes is representative of its full
value or that it may even go down in price.
- RISKS OF NON-DIVERSIFICATION: Because the Orbitex Health &
Biotechnology Fund is non-diversified, it may have greater exposure to
volatility than other funds. Because a non-diversified fund may invest
a larger percentage of its assets in the securities of a single
company than diversified funds, the performance of that company can
have a substantial impact on the fund's share price.
- INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX HEALTH & BIOTECHNOLOGY FUND?
We designed the ORBITEX HEALTH & BIOTECHNOLOGY FUND for investors who want to
capitalize on potential opportunities in the health and biotechnology industries
and who seek one or more of the following:
- high long-term growth
- a stock fund that invests in companies that are involved in the
healthcare and biotechnology industries
- a stock fund to complement a portfolio of more conservative
investments
- a stock fund that uses primarily a growth-oriented investment strategy
26
<PAGE>
- a stock fund that invests in domestic and foreign companies
27
<PAGE>
FUNDS AT A GLANCE - ORBITEX HEALTH & BIOTECHNOLOGY FUND
PERFORMANCE AND VOLATILITY
As of July 12, 1999, the Orbitex Health & Biotechnology Fund had not commenced
operations.
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares or Class B Shares or Class C Shares of the Orbitex Health &
Biotechnology Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a % of offering price) 5.75%(1) None 1.00%
Maximum Deferred Sales Charge (Load) (as a % of lower of original purchase price or None(2) 5.00%(3) 1.00%(4)
redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses 1.61% 1.61% x.xx%(6)
----- ----- -----
Total Annual Operating Expenses 3.26% 3.86% x.xx%
Fee Waiver and Reimbursement 1.26%(7) 1.26%(7) x.xx%(7)
----- ----- -----
Net Expenses 2.00% 2.60% 2.60%
----- ----- -----
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of Class A Shares does not exceed 2.00% and the
expense ratios of Class B and Class C Shares do not exceed 2.60%. This
arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Health & Biotechnology Fund with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The
28
<PAGE>
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating
expenses remain the same. Although your actual costs and the return on your
investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 $766 $763
- --------------------------------------------------------------------------------
3 $1,166 $1,108
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 $766 $263
- --------------------------------------------------------------------------------
3 $1,166 $808
- --------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
FUNDS AT A GLANCE - ORBITEX UTILITIES FUND
This section briefly describes the Orbitex Utilities Fund's goals, principal
investment strategies, risks, expenses and performance. For further information
on how this Fund is managed, please read the section entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Utilities Fund is to seek long term growth and
current income through selective investment in securities of companies engaged
in providing electricity, natural gas, water and communications services to the
public and companies that provide services to public utilities companies.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- Investing at least 65% of its total assets in U.S. and foreign
securities issued by utilities companies (see description of utility
companies in "Fund Details" section on page 47). As a matter of
fundamental policy, the Fund will concentrate (invest at least 25% of
its total assets) in securities issued by companies in the utility
service industry.
- Investing primarily in common stocks.
- Investing in companies regardless of their stock market value (or
"market capitalization").
- Investing up to 25% of its total assets in foreign companies.
- The Fund will sell those holdings that it has identified as having
exceeded their fair market value and may also sell the securities of a
company that has experienced a fundamental shift in its core business
processes and objectives.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- STOCK MARKET RISK: Stock markets are volatile and there is a risk that
the price of a security will rise or fall due to changing economic,
political or market conditions, as well as company-specific factors
(see "Issuer-Specific Risk" below). Consequently, the value of your
investment in the Fund will go up and down, which means that you could
lose money.
- RISKS OF UTILITIES SECTOR: Because of its specific focus, the Fund's
performance is closely tied to, and affected by, events occurring in
the utilities industries. Companies in the same industry, especially
electric and gas and other energy related utility companies, often
face similar obstacles, issues and regulatory burdens. As a result,
the securities owned by the Fund may react similarly to and move in
unison with one another. These price movements may have a larger
30
<PAGE>
impact on the Fund than on a Fund with a more broadly diversified
portfolio. In the past, utility company securities have been
particularly sensitive to interest rate movements: when interest rates
rise, the stock prices of these companies have tended to fall.
On-going regulatory changes have led to greater competition in the
industry and the emergence of non-regulated providers as a significant
part of the industry, which may make some companies less profitable.
In addition, the industry is subject to risks associated with the
difficulty of obtaining adequate returns on invested capital in spite
of frequent rate increases and of financing large construction
programs during inflationary periods; restrictions on operations and
increased costs due to environmental and safety regulations;
difficulties of the capital markets in absorbing utility debt and
equity securities; difficulties in obtaining fuel for electric
generation at reasonable prices; risks associated with the operation
of nuclear power plants; and the effects of energy conservation and
other factors affecting the level of demand for services. Furthermore,
there are uncertainties resulting from certain telecommunications
companies' diversification into new domestic and international
businesses, as well as agreements by many such companies linking
future rate increases to inflation or other factors not directly
related to the active operating profits of the enterprise. The value
of utility company securities may decline because governmental
regulation controlling the utilities industry can change. This
regulation may prevent or delay the utility company from passing along
cost increases to its customers. Furthermore, regulatory authorities
may not grant future rate increases. Any increase granted may not be
adequate to permit the payment of dividends on common stocks.
- ISSUER-SPECIFIC RISKS: The price of an individual security or
particular type of security can be more volatile than the market as a
whole and can fluctuate differently than the market as a whole. An
individual issuer's securities can rise or fall dramatically with
little or no warning based upon such things as a better (or worse)
than expected earnings report, news about the development of a
promising product or service, or the loss of key management personnel.
There is also a risk that the price of a security may never reach a
level that the Adviser believes is representative of its full value or
that it may even go down in price.
- RISKS OF FOREIGN SECURITIES: Foreign securities may be riskier than
U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign
controls on investment and currency exchange, withholding taxes, a
lack of adequate company information, less liquid and more volatile
markets, and a lack of governmental regulation. Consequently, there is
a risk that a foreign security may never reach the price that the
Adviser believes is representative of its full value or that it may
even go down in price.
- RISKS OF NON-DIVERSIFICATION: Because the Orbitex Health &
Biotechnology Fund is non-diversified, it may have greater exposure to
volatility than other funds. Because a non-diversified fund may invest
a larger percentage of its assets
31
<PAGE>
in the securities of a single company than diversified funds, the
performance of that company can have a substantial impact on the
fund's share price.
- INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX UTILITIES FUND?
We designed the ORBITEX UTILITIES FUND for investors who want to capitalize on
potential opportunities in the securities of public utilities companies and who
seek one or more of the following:
- high long-term growth and income
- a stock fund to complement a portfolio of equity and fixed income
investments
- a stock fund that uses primarily a growth & income oriented investment
strategy
- a stock fund that invests in foreign and domestic companies
FUNDS AT A GLANCE - ORBITEX UTILITIES FUND
PERFORMANCE AND VOLATILITY
As of January XX, 2000, the Orbitex Utilities Fund had not commenced operations.
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares, Class B Shares or Class C Shares of the Orbitex Utilities Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a % of offering price) 5.75%(1) None 1.00%
Maximum Deferred Sales Charge (Load) (as a % of lower of original purchase price or None(2) 5.00%(3) 1.00%(4)
redemption proceeds)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses% 6.09% 6.09% x.xx%(6)
----- ----- -----
Total Annual Operating Expenses 7.73% 8.33% x.xx%
Fee Waiver and Expense Reimbursement 5.73%(7) 5.73%(7) x.xx(7)
----- ----- -----
Net Expenses 2.00% 2.60% 2.60%
----- ----- -----
----- ----- -----
</TABLE>
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
32
<PAGE>
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1.00%
contingent deferred sales charge ("CDSC") applies on amounts redeemed within
one year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B shares declines over time.
(4) The CDSC applies to redemptions of Class C shares within eighteen months
of purchase.
(5) Includes a 0.25% shareholder servicing fee.
(6) Total Annual Operating Expenses are estimated.
(7) The Adviser has agreed contractually to waive its management fee and to
reimburse expenses, other than extraordinary or non-recurring expenses, so
that the expense ratio of Class A Shares does not exceed 2.00% and the
expense ratios of Class B and Class C Shares do not exceed 2.60%. This
arrangement will remain in effect until at least April 30, 2000. The
information contained in the table above and the example below reflects the
expenses of each class of the Fund taking into account any applicable fee
waivers and or reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Utilities Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your Investment
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 766 763
- --------------------------------------------------------------------------------
3 1,166 1,108
- --------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1 766 263
- --------------------------------------------------------------------------------
3 1,166 808
- --------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
FUND DETAILS - ORBITEX FINANCIAL SERVICES FUND
INVESTMENT DETAILS OF THE ORBITEX
FINANCIAL SERVICES FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Financial Services Fund seeks long-term growth through selective
investment in companies that provide financial services to consumers and
industry.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to capitalize on
emerging changes in the global financial service industries.
The Fund defines a Financial Service Company as an entity in which:
- at least 50% of the company's revenues or earnings were derived from
financial services; or
- at least 50% of the company's assets were devoted to such activities,
based upon the company's most recent fiscal year.
Financial Service companies provide financial services to consumers and
industry. Examples of companies in the financial services sector include
commercial banks, investment banks, savings and loan associations, thrifts,
finance companies, brokerage and advisory firms, insurance companies, real
estate and leasing companies, and companies that span across these segments, and
service providers whose revenue is primarily derived from the financial services
sector. Under SEC regulations, the Fund may not invest more than 5% of its total
assets in the equity securities of any company that derives more than 15% of its
revenues from brokerage or investment management activities.
In buying and selling securities for the Fund, the Adviser relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position and economic and market conditions.
Factors considered include growth potential, earnings estimates and management.
However, if the Adviser's strategies do not work as intended, the Fund may not
achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in U.S.
and foreign financial services companies, including commercial and financial
banks, thrifts, finance companies, brokerage and advisory firms, real
estate-related firms and insurance companies. The Fund expects to invest
primarily in U.S. and foreign common stocks but may also invest in other types
of equity securities, investment grade debt securities and in securities of
companies outside the financial services industries.
PORTFOLIO MANAGER
[TO BE DETERMINED]
34
<PAGE>
FUND DETAILS - ORBITEX GROWTH FUND
INVESTMENT DETAILS OF THE ORBITEX GROWTH FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Growth Fund seeks to provide long-term growth of capital through
selective investment in securities of companies of all sizes that offer
potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund strives to provide a high return through a unique multi-factor
selection process. The Adviser generally screens first for "value stocks." These
stocks tend to trade at below market price/earnings, price/cash flow, and
price/book value ratios. The Adviser looks for stocks that are at the low end of
their historical range within those same categories.
Next, the Adviser screens for stocks with strong cash flow or earnings momentum.
In particular, the Adviser seeks out stocks that it expects to grow cash flow or
earnings by at least 20% per year over the next several years.
Finally, the Adviser screens stocks that show positive price momentum. In other
words, the Adviser seeks stocks that it believes have a strong fundamental case
for purchase but generally defers purchasing those stocks until the market
begins to perceive the positive fundamentals.
The Adviser believes that this combination of searching for stocks having the
attributes of value, growth, and price momentum will provide superior
performance. However, if the Adviser's strategies do not work as intended, the
Fund may not achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund may invest in the securities of any issuer, including U.S. and foreign
companies, governments and government agencies. The Fund expects to invest
primarily in U.S. common stocks, but may also invest in other types of equity
securities and debt securities of any quality.
PORTFOLIO MANAGER
Richard A. Begun is the portfolio manager for the Growth Fund. Mr. Begun joined
Orbitex in 1999 and brings with him 11 years of investment management
experience. Formerly, he was with the Bank of New York from 1995 to 1999 where
he co-managed the bank's institutional small cap growth fund and its
institutional large cap growth fund. Prior to joining the Bank, Mr. Begun was an
Investment Management Consultant at Evaluation Associates, Inc. from 1993 to
1995.
FUND DETAILS - ORBITEX INFO-TECH & COMMUNICATIONS FUND
INVESTMENT DETAILS OF THE ORBITEX
INFO-TECH & COMMUNICATIONS FUND
[LOGO]
35
<PAGE>
INVESTMENT OBJECTIVE
The Orbitex Info-Tech & Communications Fund seeks long-term growth of capital
through selective investment in the securities of communications, information
and related technology companies.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to capitalize on
emerging changes in the global communications and information technology
industries.
The Fund defines a "communications company" as an entity in which:
- at least 50% of the company's revenues or earnings were derived from
communications activities; or
- at least 50% of the company's assets were devoted to such activities,
based upon the company's most recent fiscal year.
The Fund defines an "information company" as an entity in which:
- at least 50% of the company's revenues or earnings were derived from
information activities; or
- at least 50% of the company's assets were devoted to such activities,
based upon the company's most recent fiscal year.
Communications, information and related technology companies may include, among
others, those engaged primarily in designing, developing or providing the
following products and services: communications, electronic components and
equipment, broadcasting, computer software and hardware, semiconductors,
internet and network equipment and services.
In buying and selling securities for the Fund, the Adviser relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position and economic and market conditions.
Factors considered include growth potential, earnings estimates and management.
However, if the Adviser's strategies do not work as intended, the Fund may not
achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in equity
securities issued by communications, information and related technology
companies. The Fund expects to invest primarily in U.S. and foreign common
stocks but may also invest in other types of equity securities, investment grade
debt securities and in securities of companies outside the communications,
information and technology industries.
PORTFOLIO MANAGER
Craig W. Ellis is the portfolio manager for the Info-Tech & Communications Fund.
Mr. Ellis joined Orbitex Management, Inc. in 1998. Formerly he was with Alliance
Capital Management Corporation where he was a senior vice president from 1997 to
1998. At Alliance, Mr. Ellis was responsible for the firm's investments in the
global communications technology area. Prior to joining Alliance, Mr. Ellis was
a managing director at Wheat First Union where he served as a telecommunications
services analyst from 1992 to 1997.
36
<PAGE>
FUND DETAILS - ORBITEX STRATEGIC NATURAL RESOURCES FUND
INVESTMENT DETAILS OF THE ORBITEX
STRATEGIC NATURAL RESOURCES FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Strategic Natural Resources Fund seeks to provide long-term growth
of capital through selective investment in the securities of companies engaged
in natural resources industries and industries supportive to natural resources
industries.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in securities of companies that the Adviser believes are
positioned to benefit from increasing worldwide demand for natural resources.
There is no guarantee, however, that the Adviser's strategies will work as
intended.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in equity
securities issued by natural resources companies. The Fund expects to invest
primarily in U.S. common stocks but may also invest in other types of equity
securities, debt securities of any quality and in securities of companies
outside of the natural resources industries.
The Fund defines a "natural resources company" as an entity in which:
- at least 50% of the company's revenues or earnings were derived from
natural resource activities; or
- at least 50% of the company's assets were devoted to such activities,
based upon the company's most recent fiscal year.
Natural resources companies include service companies that provide services to
producers and refiners of natural resources or provide other products and
services, which the Adviser believes are significant to the ownership and
development of natural resources and companies that develop energy efficient
technologies, such as systems for energy conversion, conservation, and pollution
control. Natural resource companies also include companies that own, explore,
develop or produce:
- precious metals (e.g., gold, platinum and silver),
- ferrous and non-ferrous metals (e.g., iron, aluminum and copper),
- strategic metals (e.g., uranium and titanium),
- hydrocarbons (e.g., coal, oil and natural gases),
- forest products,
- other basic commodities (such as foodstuffs),
- refined products (such as chemicals and steel)
PORTFOLIO MANAGER
37
<PAGE>
Konrad Krill is the portfolio manager for the Strategic Natural Resources Fund.
Mr. Krill joined Orbitex Management, Inc. in 1997. From 1986 to 1997, he was
Vice President and portfolio manager at Morgan Stanley Dean Witter, where he
managed over $500 million in mutual fund and high net worth individual pension
assets.
38
<PAGE>
FUND DETAILS - ORBITEX FOCUS 30 FUND
INVESTMENT DETAILS OF THE ORBITEX
FOCUS 30 FUND
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Focus 30 Fund is long-term growth of capital and
current income through focused investment in the securities of some or all of
the 30 companies listed on the New York Stock Exchange that make up the Dow
Jones Industrial Average.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Orbitex Focus 30 Fund seeks to achieve its investment objective principally
by investing in companies with large market capitalization's and
well-established earnings and dividend histories. The market capitalization of a
company is the company's stock price multiplied by the total number of shares of
its stock outstanding; in other words, the value placed on the company by the
stock markets. The companies in which the Fund invests represent dominant, key
firms in their respective industries, and almost all of the equity securities
held by the Fund trade on the New York Stock Exchange.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund invests at least 90% of its assets in the common stock of some or all
of the 30 companies that make up the Dow Jones Industrial Average ("DJIA"). The
Adviser will weight the Fund's investments toward the DJIA companies that its
believes will perform better than other DJIA companies.
The Fund also invests up to 10% of its assets in common stocks of "large
capitalization" companies included in the S&P 500-Registered Trademark- Index.
PORTFOLIO MANAGER
Richard A. Begun is the portfolio manager for the Focus 30 Fund. Mr. Begun
joined Orbitex in 1999 and brings with him 11 years of investment management
experience. Formerly, he was with the Bank of New York from 1995 to 1999 where
he co-managed the bank's institutional small cap growth fund and its
institutional large cap growth fund. Prior to joining the Bank, Mr. Begun was an
Investment Management Consultant at Evaluation Associates, Inc. from 1993 to
1995.
39
<PAGE>
FUND DETAILS - ORBITEX HEALTH & BIOTECHNOLOGY FUND
INVESTMENT DETAILS OF THE ORBITEX
HEALTH & BIOTECHNOLOGY FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Health & Biotechnology Fund seeks to provide long-term growth of
capital through selective investment in securities of healthcare and
biotechnology companies of all sizes that offer potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to capitalize on
emerging changes in the healthcare and biotechnology industries.
The Fund defines a "healthcare company" as an entity that is principally engaged
in:
- the design, manufacture or sale of products or services used for or in
connection with health care, medicine, personal care or cosmetics.
- research and development of pharmaceutical products and services.
- the operation of healthcare facilities.
- design, manufacture, or sale of healthcare-related products and services.
The Fund defines a "biotechnology company" as an entity that is principally
engaged in:
- research, development, manufacture or distribution of products and
services relating to human health care, pharmaceuticals, agricultural and
veterinary applications, and the environment.
- manufacturing and/or distributing biotechnological and biomedical
products, including devices, instruments and/or drug delivery systems.
The Fund also defines a "healthcare or biotechnology company" as an entity that
is principally engaged in providing materials, products or services to a
healthcare or biotechnology company.
The Fund considers a company to be "principally engaged" in one of the above
activities if at least 50% of its revenues or profits come from those
activities.
[LOGO]
PRINCIPAL INVESTMENTS
Under normal market conditions, the Fund intends to invest at least 65% of its
total assets in equity, equity-related or debt securities of healthcare and
biotechnology companies.
The Fund expects to invest primarily in U.S. common stocks, but may also invest
in other types of equity securities and investment grade debt securities. The
Fund may invest up to 25% of its assets in the securities of foreign issuers,
however.
40
<PAGE>
PORTFOLIO MANAGER
Timothy F. Bepler, CFA is the portfolio manager for the Health & Biotechnology
Fund. Mr. Bepler joined Orbitex in 1999 and brings with him eight years of
investment analysis and management experience in the Healthcare industry.
Formerly, he was a vice president at Merrill Lynch Asset Management from 1996 to
1999 where he was a Healthcare analyst for a Growth and Income fund. Prior to
joining Merrill Lynch, he was the sole Healthcare analyst for a division of
Credit Suisse from 1995 to 1996 and he was a senior analyst at Value Line, Inc.
from 1994-1995.
41
<PAGE>
FUND DETAILS - ORBITEX UTILITIES FUND
INVESTMENT DETAILS OF THE ORBITEX UTILITIES FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Utilities Fund seeks to provide long-term growth of capital and
current income through selective investment in securities of utility companies
of all sizes that offer potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to capitalize on
emerging changes in the utility industries.
The Fund defines a utility company as an entity that:
- at least 50% of its revenues or earnings were derived from utility
services; or
- at least 50% of its assets were devoted to such activities, based upon the
company's most recent fiscal year.
The Fund defines "utility services" as companies that manufacture, produce,
sell, or transmit gas or electric energy; water supply, waste disposal and
sewerage, sanitary service companies; and companies involved in telephone,
satellite, and other communication fields.
In buying and selling securities for the Fund, the Adviser relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position and economic and market conditions.
Factors considered include growth potential, earnings estimates and management.
However, if the Adviser's strategies do not work as intended, the Fund may not
achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in equity
securities issued by utility companies. The Fund expects to invest primarily
in U.S. and foreign common stocks, but may also invest in other types of
equity securities and investment grade debt securities.
PORTFOLIO MANAGER
[TO BE DETERMINED]
42
<PAGE>
MORE INFORMATION ABOUT RISKS
[LOGO]
Many factors affect the Funds' performance. The Funds' share prices change daily
based on changes in market conditions in response to economic, political and
financial developments. The direction and extent of those price changes will be
affected by the financial condition, industry and economic sector, and
geographic location of the companies in which the Funds invest, and the Funds'
level of investment in the securities of those companies. WHEN YOU REDEEM YOUR
SHARES OF THE FUNDS, THEY COULD BE WORTH MORE OR LESS THAN WHAT YOU PAID FOR
THEM.
The Orbitex Group of Funds' Statement of Additional Information includes
additional information regarding the risks associated with the Funds'
investments.
The following factors may significantly affect each Fund's performance. Stock
market volatility is a principal risk for each Fund, as are the risks of foreign
securities for all Funds within the Orbitex Group of Funds, except for the Focus
30 Fund. The other factors set forth below are not considered principal risks
for any of the Funds.
STOCK MARKET VOLATILITY: The value of equity securities fluctuates in response
to issuer, political, market and economic developments. Equity prices can
fluctuate dramatically in response to these developments. Different parts of the
market can react differently to these developments. For example, large cap
stocks can react differently than small cap stocks, and "growth" stocks can
react differently than "value" stocks. Political or economic developments can
affect a single issuer, issuers within an industry or economic sector or
geographic region, or the market as a whole. All Funds within the Orbitex Group
of Funds are subject to stock market volatility.
INTEREST RATE CHANGES: Debt securities have varying levels of sensitivity to
changes in interest rates. In general, the price of a debt security may fall
when interest rates rise and may rise when interest rates fall. Securities with
longer maturities may be more sensitive to interest rate changes. All Funds
within the Orbitex Group of Funds are subject to interest rate changes.
DEFENSIVE STRATEGIES: In response to market, economic, political or other
conditions, the Adviser may temporarily use a different investment strategy for
a Fund for defensive purposes. Such a strategy could include investing up to
100% of the Fund's assets in cash or cash equivalent securities. If the Adviser
does so, it could affect a Fund's performance and the Fund might not achieve its
investment objective. All Funds within the Orbitex Group of Funds except, for
the Focus 30 Fund, expect to employ defensive strategies.
RISKS OF FOREIGN SECURITIES: Foreign securities may be riskier than U.S.
investments because of factors such as unstable international political and
economic conditions, currency fluctuations, foreign controls on investment and
currency exchange, withholding taxes, a lack of adequate company information,
less liquid and more volatile markets, and a lack of governmental regulation.
All Funds within the Orbitex Group of Funds, except for the Focus 30 Fund, are
subject to risks of foreign securities.
LOWER-QUALITY DEBT SECURITIES: The Orbitex Financial Services Fund, Orbitex
Growth Fund, Orbitex Info-Tech & Communications Fund, Orbitex Strategic Natural
Resources Fund, the Orbitex Health & Biotechnology Fund and Orbitex Utilities
Fund may each invest up to 35% of their assets in lower-quality debt securities,
otherwise known as "junk bonds." Junk bonds are debt securities that are rated
below investment-grade (investment grade securities are rated BBB or better by
Standard & Poor's Rating Service or Baa or better by Moody's Investors Service)
by Standard & Poor's Rating Service or Moody's Investors Service, Inc. These
securities are generally considered to be speculative and involve greater risk
of loss or price changes due to changes in the issuer's capacity to pay.
DERIVATIVES AND OTHER STRATEGIES: The Funds may invest in options, futures,
foreign securities, foreign currencies, and other derivatives (collectively,
"Derivative Transactions"), and may enter into certain types of short sales.
43
<PAGE>
If these practices are used by the Funds, the intent would be primarily to hedge
the Funds' portfolios. For example, a Fund may purchase or sell options
contracts on equity securities to hedge against the risk of fluctuations in the
prices of securities held by the Fund. Or, a Fund may purchase or sell stock
index futures contracts and would purchase put options or write call options on
such futures contracts to protect against a general stock market decline or
decline in a specific market sector that could adversely affect the Fund's
holdings.
Investing for hedging purposes may result in certain transaction costs, which
may reduce a Fund's performance. In addition, no assurances can be given that
hedging will be implemented or that each derivative position will achieve a
perfect correlation with the security or currency being hedged against. All
Funds within the Orbitex Group of Funds are subject to risks from Derivative
Transactions.
PORTFOLIO TURNOVER RATES. The portfolio turnover rates for the fiscal year ended
April 30, 1999, of the Growth Fund, the Info-Tech & Communications Fund and the
Strategic Natural Resources Fund were 957%, 360% and 921%, respectively. These
turnover rates are higher than the average of many mutual funds, and are the
result of and are the result of the focused and specialized nature of the Funds
and the resulting need for the Funds to seek out investment opportunities to
achieve each Fund's investment objectives. Controlling risk in each of the funds
is critical. The Growth Fund experienced high turnover as a result of the sharp
drop in the market for this sector which required that positions be reduced to
protect client assets. In addition, there was a period of extreme sector
rotation in early 1999, which led to, higher than normal turnover. The turnover
was higher as a result of protective measures taken during each of these
periods. The turnover rate for the Strategic Natural Resources Fund was impacted
by the overall size of the Fund and the Fund's need for liquidity. In addition,
natural resources securities have been trading in a narrow range without
direction. As a result, the manager of the Fund traded positions in the Fund to
capture investment profit. The Info-Tech and Communications Fund's turnover rate
was primarily driven by the introduction and heightened market interest in the
internet sector; and the Fund's turnover is consistent with the trading market
for this sector.
High portfolio turnover (i.e., 100% or greater) involves additional brokerage
expense and may increase realized capital gains distributions, with adverse tax
consequences for the Fund's shareholders. See "Taxation of the Fund" on page 65.
YEAR 2000: The Funds' operations depend on the seamless functioning of computer
systems in the financial service industry, including those of the Adviser,
Administrator, Sub-Administrator, Custodian, Distributor and the Transfer Agent.
Many computer software systems in use today cannot properly process date-related
information after December 31, 1999. The "Year 2000" issue stems from the use of
a two-digit format to define the year in certain date-sensitive application
systems rather than the use of a four-digit format. As a result, date-sensitive
software programs could recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in major systems or process failures or the
generation of erroneous data, which would lead to disruptions in the Funds'
business operations.
The Adviser has made compliance with the Year 2000 issue a high priority and is
taking steps to address the issue with respect to its computer systems. The
Funds' major service providers have informed the Adviser that they are taking
comparable steps. The Adviser does not currently believe that the Year 2000
issue will have a material impact on its ability to continue to fulfill its
duties as investment adviser. In addition, the issuers of securities the Funds
own could have Year 2000 computer problems. These problems could negatively
affect the value of their securities, which, in turn, could impact the Funds'
performance. An issuer's Year 2000 readiness is only one of many factors the
Adviser may consider when making investment decisions, and other factors may
receive greater weight.
LITIGATION THAT MAY AFFECT THE FOCUS 30 FUND: On February 8 and June 2, 1999,
suits were filed against a former director and officer of the ASM Index 30 Fund
(the "ASM Fund"), the former investment adviser Vector Investment Advisors, Inc.
(Vector) of the ASM Fund, and the ASM Fund itself alleging that the former
officer of the ASM failed to invest in the ASM Fund amounts purportedly paid by
the plaintiffs to the ASM Fund's investment adviser. One suit also alleged
improper and unauthorized redemptions of ASM
44
<PAGE>
Fund Shares owned by the plaintiffs. The relief sought in one suit is the
recovery of the investment amounts and interest thereon, additional general,
consequential and incidental damages, legal costs and disbursements, and
declaratory and injunctive relief to preclude the ASM Index 30 Fund from
transferring or permitting the dissipation of its assets. The relief sought in
the other suit is recovery of the investment amounts and amounts derived from
the alleged improper redemptions. With the possible exception of Steven H.
Adler, a former officer and director of the ASM Index 30 Fund, that fund had no
knowledge that the amounts purportedly paid by the plaintiffs to the former
investment adviser were, as the plaintiffs have alleged to be invested in the
fund. Upon consummation of the reorganization of the ASM Index 30 Fund into the
Orbitex Focus 30 Fund, the Orbitex Focus 30 Fund will succeed to the
obligations, if any, of the ASM Fund with respect to these suits including
obligations of the ASM Fund to indemnify its officers and directors. At the
present time, the liability of the Orbitex Focus 30 Fund, if any, is not readily
determinable.
45
<PAGE>
YOUR ACCOUNT
[LOGO] This section describes the services that are available to shareholders.
TYPES OF ACCOUNTS
If you are making an initial investment in the Funds, you will need to open an
account. You may establish the following types of accounts:
INDIVIDUAL OR JOINT OWNERSHIP. One person owns an individual account while two
or more people own a joint account. We will treat each individual owner of a
joint account as authorized to give instructions on purchases, sales and
exchanges of shares without notice to the other owners. However, we will require
each owner's signature guarantee for any transaction requiring a signature
guarantee.
GIFT OR TRANSFER TO MINORS. A Custodian maintains a Uniform Gifts to Minors Act
(UGMA) or Uniform Transfers to Minors Act (UTMA) account for the benefit of a
minor. To open an UGMA or UTMA account, you must include the minor's social
security number on the application.
TRUST. A trust can open an account. You must include the name of each trustee,
the name of the trust and the date of the trust agreement on the application.
CORPORATIONS, PARTNERSHIPS AND OTHER LEGAL ENTITIES. Corporations, partnerships
and other legal entities may also open an account. A general partner of the
partnership or an authorized officer of the corporation or other legal entity
must sign the application and resolution form.
RETIREMENT. If you are eligible, you may set up your account under a
tax-sheltered retirement plan, such as an Individual Retirement Account. Your
financial consultant can help you determine if you are eligible.
CHOOSING A CLASS
After deciding which type of account to open, you must select a class of shares.
All the Funds offer three classes of shares (Class A, Class B and Class C). The
Focus 30 Fund also offers a fourth class of shares (Class D). Class D Shares are
only available to (1) shareholders who previously were shareholders of the ASM
Index 30 Fund at the time of the reorganization, (2) employees, and certain
related accounts of employees, of Orbitex Financial Services Group, Inc.
("OFSG") and its affiliates; and (3) certain institutional investors.
Each share class has its own sales charge and expense structure, including
different 12b-1 fees (see "Classes in Detail" below and "Rule 12b-1 Plans in
Detail" on page 57 for additional information). The Class A Shares have an
initial sales charge while the Class B Shares have a contingent deferred sales
charge if you redeem shares held for six years or less. Class C Shares have
initial and deferred sales charges that are lower than Class A or Class B, but
higher 12b-1 fees than Class A. There are no sales charges, 12b-1 fees or
shareholder services fees for Class D Shares.
Each class represents an interest in the same portfolio of securities and each
has the same rights with one exception. Pursuant to the Investment Company Act
of 1940, you will have exclusive voting rights with respect to the Distribution
Plan and Agreement pursuant to Rule 12b-1, if any, for the class you choose.
46
<PAGE>
We offer these classes to allow you to choose the class that will be most
beneficial to you. Your decision should depend upon a number of factors
including the amount you purchase and the length of time you plan to hold the
shares. For example, if you are investing a large amount of money and plan to
hold your shares for a long period of time, the Class A Shares may make the most
sense for you. However, if you plan to invest less money and are investing for
at least six years, Class B Shares might make better sense. Your financial
consultant can assist you in determining which class is best for you. Because
all future investments in your account will be made in the share class you
designate when opening the account, you should make your decision carefully.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COMPARISON OF CLASSES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A--INITIAL SALES CLASS B--CONTINGENT CLASS C--LEVEL LOAD CLASS D--NO SALES CHARGE
CHARGE DEFERRED SALES CHARGE (FOCUS 30 FUND ONLY)
Note: Class D Shares
are only available to
shareholders who were
shareholders of the ASM
Index 30 Fund, certain
Institutional
Investors, and
individuals specified
on page __.
- -------------------------------------------------------------------------------------------------------------
Initial sales charge of No initial sales charge. Initial sales charge No initial or contingent
5.75% or less (see chart on This allows 100% of your of 1.00% deferred sales charge.
page 53). purchase price to be
invested in the Fund.
- -------------------------------------------------------------------------------------------------------------
Lower sales charges for Deferred sales charge of Deferred sales charge
larger investments (see 5.00% or less on shares of 1.00% paid only on
page 53) you redeem within six shares redeemed within
years (see chart on page 18 months of purchase.
55).
- -------------------------------------------------------------------------------------------------------------
Lower annual expenses than An annual fee of 1.00% An annual fee of 1.00% No annual marketing and
Class B Shares due to lower under each Fund's rule under each Fund's rule service (12b-1) fee.
marketing and service 12b-1 plan, 0.75% of 12b-1 plan which may
(12b-1) fee of 0.40%. which is for marketing be used to compensate
and 0.25% of which is for brokers or other
shareholder services. financial institutions
This will result in a through whom you
lower total return than purchase your shares.
comparable Class A Shares. This will result in a
lower total return
than comparable Class
A Shares.
- -------------------------------------------------------------------------------------------------------------
Automatic conversion to Class C Shares do not Lower annual expenses
Class A Shares after six convert to another than Class A, Class B or
years, thereby reducing class. Class C.
future annual expenses.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
CLASSES IN DETAIL
CLASS A--INITIAL SALES CHARGE
The sales charge for Class A Shares of all Funds is 5.75% of the offering price.
However, the Adviser may reduce or waive this sales charge as described in
"Reduced Sales Charge."
REDUCED SALES CHARGE
You can qualify for a reduction or waiver of this sales charge by investing one
lump sum in a particular class of a Fund. You can also qualify for a sales
charge reduction or waiver through a right of accumulation or a letter of intent
if you are a United States resident. See the discussions of "Right of
Accumulation" and "Letter of Intent" on page 54."
If you are a United States resident and are investing more than $50,000, the
Adviser will reduce the sales charge you pay. The chart at the bottom of this
page shows the sales charge you will pay based on the amount of your purchase.
You can purchase Class A Shares without any initial sales charge if you are a
United States resident and invest $1 million or more in Class A shares. However,
if you redeem those shares within one year of the purchase, you must pay a
contingent deferred sales charge of 1%. We will waive the contingent deferred
sales charge only in the following situations: - If the Fund involuntarily
redeems your shares; or
- - If you reinvest the proceeds from your redemption in the Funds within 90 days
of your redemption.
REDUCED SALES CHARGES FOR U.S. RESIDENTS
<TABLE>
<CAPTION>
Broker
Sales charge as a Sales charge as a reallowance as
Amount of purchase percentage of offering percentage of net a percentage
price investment (net asset value) of offering
price(1)
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50% 4.71% 3.75%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None (See below)(2) None (See below)(2) (See below)(2)
</TABLE>
(1) At the discretion of the Orbitex Group of Funds, however, the entire sales
charge may at times be reallowed to dealers. The Staff of the Securities and
Exchange Commission has indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
(2) The distributor will pay certain commissions to Selling Group Members (See
page 58) who initiate and are responsible for purchases by any single purchaser
who is a resident of the United States. For purchases of $1 million to $3
million, the Distributor will pay 1%, plus 0.50% on any amounts over $3 million
up to $50 million, and 0.25% on any amounts over $50 million.
RIGHT OF ACCUMULATION
For the purposes of determining the sales charge, the right of accumulation
allows you to include prior purchases of Class A Shares of any Orbitex Fund as
part of your current investment. To qualify for this option, you must be either:
- an individual;
48
<PAGE>
- an individual and spouse purchasing shares for your own account or trust
or custodial accounts for your minor children; or
- 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.
If you plan to rely on this right of accumulation, you must notify the
Distributor at the time of your purchase. You will need to give the Distributor
your account numbers. If applicable, you will need to provide the account
numbers of your spouse and your minor children as well as the ages of your minor
children.
LETTER OF INTENT
The letter of intent allows you to count all investments within a 13-month
period in a Fund as if you were making them all at once for the purposes of
calculating the sales charges. The minimum initial investment under a letter of
intent is 5% of the total letter of intent amount. You may include a purchase
not originally made pursuant to a letter of intent under a letter of intent
entered into within 90 days of the original purchase.
EXCHANGES OF CLASS D SHARES OF THE ORBITEX FOCUS 30 FUND
INTO CLASS A SHARES OF OTHER ORBITEX FUNDS
You may exchange your Class D Shares for Class A Shares of another Orbitex Fund
without paying any sales charge. If you close your Class D account in the Focus
30 Fund (either by redeeming or by exchanging all of your Class D Shares),
however, you may not later reopen your account with Class D Shares of the Focus
30 Fund.
OTHER CIRCUMSTANCES
We also offer Class A Shares with low or no sales charges through various other
special arrangements. Your financial consultant can help you determine if any of
these programs is appropriate for you.
Class A Shares issued pursuant to the automatic reinvestment of income dividends
and capital gains distributions are not subject to any sales charges.
CLASS B--CONTINGENT DEFERRED SALES CHARGE
You will not pay an initial sales charge if you choose to invest in Class B
Shares. However, if you redeem your shares within six years, you will pay a
contingent deferred sales charge as described in the table below. The amount of
this charge is based on your original purchase price, or the current net asset
value of the shares you redeem, whichever is less.
We will waive the contingent deferred sales charge under the following
circumstances:
- redemptions made within one year after the death of a shareholder or
registered joint owner;
- redemptions made to facilitate minimum required distributions made from an
IRA or other retirement plan account after age 70 1/2; and
- involuntary redemptions made by a Fund. Class B Shares issued pursuant to
the automatic reinvestment of income dividends and capital gains
distributions are not subject to any contingent deferred or other sales
charges.
- --------------------------------------------------------------------------------
49
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
- --------------------------------------------------------------------------------
YEARS AFTER PURCHASE THAT AMOUNT OF
YOU REDEEM YOUR SHARES SALES CHARGE(1)
- --------------------------------------------------------------------------------
<S> <C>
Year 1 5.00%
- --------------------------------------------------------------------------------
Year 2 4.00%
- --------------------------------------------------------------------------------
Year 3 3.00%
- --------------------------------------------------------------------------------
Year 4 3.00%
- --------------------------------------------------------------------------------
Year 5 2.00%
- --------------------------------------------------------------------------------
Year 6 1.00%
- --------------------------------------------------------------------------------
After Year 6 None(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The contingent deferred sales charge will be the lesser of (1) the original
purchase price or (2) the net asset value of the shares being redeemed.
(2) Class B Shares will automatically convert to Class A Shares after six years
after you purchase them. This conversion relieves Class B shareholders who have
held their shares for more than six years of the higher asset-based distribution
charge that applies to Class B Shares under the 12b-1 Plan described in the
section entitled "Rule 12b-1 Plans in Detail."
CLASS C--LEVEL LOAD
The initial sales charge for Class A Shares of all Funds is 1.00% of the
offering price.
In addition, if you redeem your shares within eighteen months of the date of
purchase, you will pay a 1.00% deferred sales charge. The amount of this charge
is based on your original purchase price, or the current net asset value of the
shares you redeem, whichever is less.
CLASS D
Class D Shares are offered without any sale charges, and are not subject to any
12b-1 or shareholder servicing fees.
CLASS D SHARES ARE ONLY AVAILABLE TO SHAREHOLDERS WHO HELD SHARES OF THE ASM
INDEX 30 FUND ON THE DATE THE ASM FUND WAS REORGANIZED AS THE ORBITEX FOCUS 30
FUND, TO EMPLOYEES OF THE OFSG OR ITS AFFILIATES (AND CERTAIN RELATED ACCOUNTS)
AND TO CERTAIN INSTITUTIONAL INVESTORS.
If you held shares of the ASM Index 30 Fund, you may purchase additional Class D
Shares of the Orbitex Focus 30 Fund for the account that was established when
your received shares of the Focus 30 Fund in exchange for your ASM Fund Shares.
In addition, if you held shares of the ASM Fund on the date of reorganization,
or if you are an employee of OFSG, or one of its affiliated companies, you may
purchase Class D Shares of the Orbitex Focus 30 Fund for a new account
established for:
- you
- one of your immediate family members
- a trust or individual retirement account or self-employed retirement plan
for the benefit of you or any of your immediate family members
- your or an immediate family member's estate.
50
<PAGE>
RULE 12b-1 PLANS IN DETAIL
The Board of Trustees of the Orbitex Group of Funds has adopted for Class A
Shares, Class B Shares, and Class C Shares separate Distribution Plans and
Agreements pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Plans").
CLASS A. The Plan adopted for Class A Shares allows each Fund to use part of its
assets for the sale and distribution of its Class A Shares, including
advertising, marketing and other promotional activities. Under this Plan, each
Fund pays AmeriMutual Funds Distributor, Inc. (the "Distributor"), an amount
equal to 0.40% of average net assets attributable to Class A Shares of that Fund
on an annualized basis.
CLASS B AND CLASS C. The Plans adopted for Class B and Class C Shares also allow
each Fund to use part of its assets for the sale and distribution of these
Shares, including advertising, marketing and other promotional activities. For
these services, under each Plan, each Fund pays AmeriMutual Funds Distributor,
Inc., the Distributor, an amount equal to 0.75% of average net assets
attributable to Class B or Class C Shares, as applicable, of that Fund on an
annualized basis. The Class B and Class C Plans also allow each Fund to pay the
Distributor for certain shareholder services provided to Class B and Class C
shareholders or other service providers that have entered into agreements with
the Distributor to provide these services. For these services, each Fund pays a
shareholder service fee equal to 0.25% of average net assets attributable to
Class B or Class C Shares, as applicable, of that Fund on an annualized basis.
BECAUSE THESE DISTRIBUTION AND SHAREHOLDER SERVICE FEES ARE PAID OUT OF A FUND'S
ASSETS ON AN ONGOING BASIS, THE FEES MAY, OVER TIME, INCREASE THE COST OF
INVESTING IN A FUND AND COST INVESTORS MORE THAN OTHER TYPES OF SALES LOADS.
PURCHASING SHARES
Once you have chosen the type of account and a class of shares, you are ready to
establish an account. Class A, Class B and Class C Shares of each Fund are
available to investors making a minimum initial investment of $2,500 per Fund
for regular accounts and $2,000 for individual retirement accounts. The minimum
for subsequent investments is $250.
Class D shares of the Focus 30 Fund are available only to (1) shareholders who
previously were shareholders of the ASM Index 30 Fund at the time of the
reorganization, (2) employees of Orbitex Investment Management, Inc., its
affiliates and certain related accounts, and (3) certain institutional
investors. The minimum for subsequent investments in Class D Shares of the Focus
30 Fund by individual investors is $100.
The Trust or Adviser may waive or lower these minimums in certain cases. YOU
MUST COMPLETE AND SIGN AN APPLICATION FOR EACH ACCOUNT YOU OPEN WITH EACH FUND.
The price for Fund shares is the Fund's net asset value per share (NAV) plus any
applicable sales charge. We determine the NAV as of the close of trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern time) every day that the
Exchange is open. We will price your order at the next NAV calculated after the
Fund receives your order. For more information on how we price shares, see
"Pricing of Fund Shares" on page 64.
The Funds and the Distributor each reserve the right to reject any purchase for
any reason and to cancel any purchase due to non-payment. You must make all
purchases in United States dollars and draw all checks on
51
<PAGE>
United States banks. If we cancel your purchase due to non-payment, you will be
responsible for any loss the Funds incur. We will not accept cash or third-party
checks for the purchase of shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
METHOD OF PURCHASE PROCEDURES
PURCHASE
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C>
THROUGH A Contact your financial consultant.
FINANCIAL
PROFESSIONAL
[LOGO]
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
THROUGH The Distributor authorizes certain
securities dealers, banks or other
SELLING financial service firms (collectively,
GROUP "Selling Group Members") to purchase your
shares. To receive that day's share price:
MEMBERS
[LOGO] - you must place your order with the Selling
Group Member before the close of regular
trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time); and
- the Selling Group Member must transmit the
order to the Funds before 5:00 p.m. Eastern
time on that same day.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
BY MAIL To purchase Shares of the ORBITEX GROWTH FUND,
ORBITEX INFO-TECH & COMMUNICATIONS FUND, or ORBITEX
STRATEGIC NATURAL RESOURCES FUND, send your
[LOGO] completed application to:
Orbitex Group of Funds
P.O. Box 8069
Boston, Massachusetts 02266-8069
To purchase Shares of the ORBITEX FINANCIAL SERVICES
FUND, ORBITEX FOCUS 30 FUND, ORBITEX HEALTH &
BIOTECHNOLOGY FUND, or the ORBITEX UTILITIES FUND,
send your completed application to:
Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
Include with your application your check, payable to
"Orbitex Group of Funds - (Name of Fund)." If you
are purchasing Shares of more than one Orbitex Fund,
you must include a separate application and a
separate check for each Fund.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
METHOD OF PURCHASE PROCEDURES
PURCHASE
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C>
BY WIRE INITIAL PURCHASE: For the ORBITEX GROWTH FUND,
ORBITEX INFO-TECH & COMMUNICATIONS FUND or ORBITEX
[LOGO] STRATEGIC NATURAL RESOURCES FUND, call us at
1-888-ORBITEX for instructions and to receive an
account number. You will need to instruct a Federal
Reserve System member bank to wire Funds to: State
Street Bank and Trust Company, ABA No. 011000028,
Attn.: Custody & Shareholder Services, Credit: Name
of Fund, DDA No. 9905-295-3, FBO: Shareholder Name,
Name of Fund, Shareholder Account Number. You must
also complete and mail an application to the
address shown above under "By Mail."
INITIAL PURCHASE: For the ORBITEX FINANCIAL
SERVICES FUND, ORBITEX FOCUS 30 FUND, ORBITEX
HEALTH & BIOTECHNOLOGY FUND or the ORBITEX
UTILITIES FUND, call us at 1-888-ORBITEX for
instructions and to receive an account number. You
will need to instruct a Federal Reserve System
member bank to wire Funds to: State Street Bank and
Trust Company, ABA No. 011000028, Attn.: Custody,
Credit: Name of Fund, DDA No. 51815926, FBO:
Shareholder Name, Name of Fund, Shareholder Account
Number. You must also complete and mail an
application to the address shown above under "By
Mail."
SUBSEQUENT PURCHASE: Wire funds to the designated
bank account for each Fund. You may wire funds
between 8:00 a.m. and 4:00 p.m. Eastern time. To
make a same-day wire investment, please call
1-888-ORBITEX by 12:00 noon to notify us of your
intention to wire Funds, and make sure your wire
arrives by 4:00 p.m. Eastern time. Please note that
your bank may charge a fee for the wire. WIRE
TRANSACTIONS ARE NOT AVAILABLE FOR RETIREMENT
ACCOUNTS.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
BY EXCHANGE You may exchange your shares for the same class of
shares of another Fund by written request sent to
[LOGO] the Funds at:
Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
BY TELEPHONE You may make subsequent purchases in your account
by telephoning 1-888-ORBITEX between 8:30 a.m. and
[LOGO] 4:00 p.m. Eastern time on any day the Funds are
open. We will electronically transfer money from
the bank account you designate on your Application
to our account with the Trust. This investment
option is only available if you have not declined,
or cancelled your telephone investment privilege.
See the discussion of "Telephone Redemptions" on
page 61.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SUBSEQUENT The minimum subsequent purchase is $250 per Fund,
PURCHASES except for reinvestment of dividends and
distributions and Class D purchases with minimum
[LOGO] amount of $100.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
METHOD OF PURCHASE PROCEDURES
PURCHASE
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C>
IMPORTANT NOTES Once you have requested a telephone transaction,
and a confirmation number has been assigned, the
transaction cannot be revoked. We reserve the right
to refuse any purchase request. You can redeem
shares that you purchased by check. However, while
we will process your redemption request at the
next-determined net asset value after we receive
it, your redemption proceeds will be not available
until your check clears. This could take up to ten
calendar days.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
REDEEMING SHARES
You have the right to sell ("redeem") all or any part of your shares subject
to certain restrictions. Selling your shares in a Fund is referred to as a
"redemption" because the Fund buys back its shares. We will redeem your
shares at the net asset value next computed following receipt of your
redemption request in good order. See "Redemption Procedures - Request in
"Good Order"' on page 62.
We will mail your redemption proceeds to your current address or transmit them
electronically to your designated bank account. Except under certain emergency
conditions, we will send your redemption to you within seven days after we
receive your redemption request.
The Funds cannot accept requests that specify a certain date for redemption or
which specify any other special conditions. Please call 1-888-ORBITEX for
further information. WE WILL NOT PROCESS YOUR REDEMPTION REQUEST IF IT IS NOT IN
PROPER FORM (SEE CHART ON PAGE 61). WE WILL NOTIFY YOU IF YOUR REDEMPTION
REQUEST IS NOT IN PROPER FORM.
If, as a result of your redemption, your account value drops below $1,000, we
may redeem the remaining shares in your account. We will notify you in writing
of our intent to redeem your shares. We will allow at least sixty days
thereafter for you to make an additional investment to bring your account value
up to at least $1,000 before we will process the redemption.
If you purchased your Class A Shares without any sales charge because your
initial investment was $1 million or more, you will pay a redemption fee equal
to 1.00% of the proceeds from the redemption of your Shares you are redeeming if
you purchased those Shares within one year of the date of your purchase. See the
discussion of "Reduced Sales Charges" on page 53.
SIGNATURE GUARANTEES
Your redemption request must be accompanied by a "signature guarantee" under
certain circumstances, such as if you are redeeming shares valued at $50,000 or
greater or if you ask us to send the redemption proceeds to an address other
than the address of record or to a person other than the registered
shareholder(s) for the account.
CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES. There are no deferred charges for the sale of Class A Shares,
except that investors who paid no initial sales charge on their purchase of
Class A Shares by investing $1 million or more will pay a 1% contingent deferred
sales charge on any Class A Shares redeemed within one year of purchase.
CLASS B SHARES. If you redeem your Class B Shares within six years of the date
you purchased the Shares, you will pay a contingent deferred sales charge as
described on page 55.
CLASS C SHARES. If you redeem your Class C Shares within eighteen months of the
date you purchased the Shares, you will pay a contingent deferred sales charge
equal to 1.00% of the lesser of (1) the original purchase price or (2) the net
asset value of the shares being redeemed.
CLASS D SHARES. There are no a contingent deferred sales charges imposed on
redemptions of Class D Shares of the Orbitex Focus 30 Fund.
THIRD PARTY TRANSACTIONS
If you buy and redeem shares of the Funds through a member of the National
Association of Securities Dealers, Inc., that member may charge a fee for that
service.
The Orbitex Group of Funds has authorized one or more brokers to accept on its
behalf purchase and redemption orders. Such brokers are authorized to designate
intermediaries to accept orders on the Fund's
55
<PAGE>
behalf. The Fund will be deemed to have received the order when an authorized
broker or a broker authorized designee accepts your order. You order will be
priced at the Funds' net asset value next computed after it is received by the
authorized broker or broker authorized designee.
REDEMPTION-IN-KIND
The Funds reserve the right to honor requests for redemption or repurchase
orders by making payment in whole or in part in readily marketable securities
("redemption in kind") if the amount of such a request is large enough to affect
operations (for example, if the request is greater than $250,000 or 1% of a
Fund's assets). The securities will be chosen by the Fund and valued at the
Fund's net asset value. A shareholder may incur transaction expenses in
converting these securities to cash.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
METHOD OF
REDEMPTION REDEMPTION PROCEDURES
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE You may authorize redemption of some or all shares in your account with the Funds by telephoning the
[LOGO] Funds at 1-888-ORBITEX between 8:30 a.m. and 4:00 p.m. Eastern time on any day the Funds are open. You
will NOT be eligible to use the telephone redemption service if you:
- have declined or canceled your telephone investment privilege;
- wish to redeem less than $1,500;
- must provide supporting legal documents such as a signature guarantee, or if
- necessary, for redemption requests by corporations, trusts and partnerships; and
- wish to redeem from a retirement account.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
BY MAIL If you are redeeming Shares of the ORBITEX GROWTH FUND, ORBITEX INFO-TECH & COMMUNICATIONS FUND,
[LOGO] or the ORBITEX STRATEGIC NATURAL RESOURCES FUND, you may send your redemption request to:
Orbitex Group of Funds
P.O. Box 8069
Boston, Massachusetts 02266-8069
If you are redeeming Shares of the ORBITEX FINANCIAL SERVICES FUND,
ORBITEX FOCUS 30 FUND, ORBITEX HEALTH & BIOTECHNOLOGY FUND or the ORBITEX
UTILITIES FUND, you may send your redemption request to:
Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
You must include the following information in your written request:
- a letter of instruction stating the name of the Fund, the number
of shares you are redeeming, the names in which the account is
registered and your account number;
- other supporting legal documents, if necessary, for redemption
requests by corporations, trusts and partnerships;
- a signature guarantee, if necessary
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
BY WIRE You may request your redemption proceeds be wired directly to the bank account designated on your
[LOGO] application. The Funds' transfer agent will charge you a $10.00 fee for each wire redemption. The
transfer agent will deduct the fee directly from your account. Your bank may also impose a fee for
the incoming wire.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
REQUEST IN For our mutual protection, all redemption requests must include:
"GOOD ORDER" - your account number
- the amount of the transaction
- for mail request, signatures of all owners EXACTLY as registered on the account
- signature guarantees, if required (signature guarantees can be obtained at most banks,
credit unions, and
56
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
METHOD OF
REDEMPTION REDEMPTION PROCEDURES
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
licensed brokers
- any supporting legal documentation that may be required
YOUR REDEMPTION REQUEST WILL BE PROCESSED AT THE
NEXT-DETERMINED SHARE PRICE AFTER WE HAVE RECEIVED ALL
REQUIRED INFORMATION.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
IMPORTANT Once we have processed your redemption request, and a confirmation
NOTE number has been given, the transaction CANNOT be revoked.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTIONS FOR REDEMPTION PROCEEDS
You may receive your redemption proceeds by check or by wire.
CHECK REDEMPTIONS. Normally we will mail your check within two business days of
a redemption.
WIRE REDEMPTIONS. Before you can receive redemption proceeds by wire, you must
establish this option by completing a special form or the appropriate section of
your account application.
You may request that your redemption proceeds be wired directly to your bank
account. The Trust's transfer agent imposes a $10.00 fee for each wire
redemption and deducts the fee directly from your account. Your bank may also
impose a fee for the incoming wire. The redemption proceeds must be paid to the
same bank and account as designated on the Application or in written
instructions in proper form subsequently received by the Trust.
TELEPHONE REDEMPTIONS AND EXCHANGES.
We will automatically establish the telephone redemption option for your
account, unless you instruct us otherwise in writing. Telephone redemptions are
easy and convenient, but this account option involves a risk of loss from
unauthorized or fraudulent transactions. We will take reasonable precautions to
protect your account from fraud. You should do the same by keeping your account
information private and by reviewing immediately any account statements and
confirmations that you receive. Please contact us immediately about any
transaction you believe to be unauthorized.
Orbitex reserves the right to refuse a telephone redemption or exchange if the
caller cannot provide:
- - the account number
- - the name and address exactly as registered on the account
- - the primary social security or employer identification number as registered
on the account
- - We may also require a password from the caller.
Orbitex will not be responsible for any account losses due to telephone fraud,
so long as we have taken reasonable steps to verify the caller's identity. If
you wish to cancel the telephone redemption feature for your account, please
notify us in writing.
EXCHANGING SHARES
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.
You may exchange your shares for shares of the same class of another Fund at
no cost to you (or, if you hold D Class Shares of the Orbitex Focus 30 Fund,
you may exchange them for Class A Shares of another Orbitex Fund). If you
establish a new account by exchange, the exchanged shares must have a minimum
value of $2,500. All subsequent exchanges must have a
57
<PAGE>
minimum value of $250 per Fund. You may exchange shares either by telephone,
if you have not canceled your telephone privilege, or in writing. Written
requests for exchange must provide the following:
- - current Fund's name;
- - account names and numbers;
- - name of the Fund you wish to exchange your shares into;
- - the amount you wish to exchange;
- - specify the shareholder privileges you wish to retain (e.g., Telephone
Privileges); and
- - signatures of all registered owners.
To exchange shares by telephone, you should call 1-888-ORBITEX between 8:30 a.m.
and 4:00 p.m. Eastern time on any day the Funds are open. We will process
telephone requests made after 4:00 p.m. Eastern Time at the close of business on
the next business day. You should notify the Funds in writing of all shareholder
service privileges you wish to continue in any new account opened by a telephone
exchange request.
Please note that we will only accept exchanges if your ownership registrations
in both accounts are identical.
We will value your exchanged shares at their respective net asset value next
determined after the receipt of the exchange request. We will not impose an
initial sales charge, redemption fee or penalty on exchanges. Please note that
an exchange may have tax consequences for you. We reserve the right to modify or
terminate the exchange privilege upon sixty days' written notice to you.
TRANSFERRING REGISTRATION
You can transfer the registration of your shares in an Orbitex Fund to another
owner by completing a transfer form and sending it to American Data Services,
Inc., P.O. Box 5786, Hauppauge, New York 11788-0786.
58
<PAGE>
PRICING OF FUND SHARES
Each Fund's net asset value for each class of shares or NAV is calculated on
each day that the New York Stock Exchange is open. The NAV is the value of a
single share of a Fund. The administrators calculate the NAV for each Fund they
administer at the close of business of the New York Stock Exchange, normally
4:00 p.m. Eastern time. The NAV is determined by subtracting the total of the
Fund's liabilities from its total assets and dividing the remainder by the
number of shares outstanding. The value of each Fund's total assets is generally
based on the market value of the securities that the Fund holds. If market
values are not available, we will determine the fair value of securities using
procedures that the Board of Trustees has approved. We will also fair value
securities whose values are materially affected by events occurring after the
closing of a foreign market. In those circumstances where a security's price is
not considered to be market indicative, the security's valuation may differ from
an available market quotation. Foreign securities may be traded in their primary
markets on weekends or other days when the Fund does not price its shares.
Therefore, the NAV of Funds holding foreign securities may change on days when
shareholders will not be able to buy or redeem their Fund shares.
DISTRIBUTIONS
As a shareholder, you are entitled to your share of a Fund's net income and
capital gains on its investments. Each Fund passes substantially all of its
earnings along to its investors as distributions. When a Fund earns dividends
from stocks and interest from bonds and other debt securities and distributes
these earnings to shareholders, it is called a dividend distribution. A Fund
realizes capital gains when it sells securities for a higher price than it paid.
When net long-term capital gains are distributed to shareholders, it is called a
capital gain distribution. Net short-term capital gains are considered ordinary
income and are included in dividend distributions.
Long-term vs. Short-term capital gains: - Long-term capital gains are realized
on securities held for more than one year and are part of your capital gain
distribution. - Short-term capital gains are realized on securities held less
then one year and are part of your dividend distributions.
The Orbitex Focus 30 Fund distributes dividends quarterly, and capital gains
annually. The capital gain distributions will typically be declared and paid in
December.
The other Orbitex Funds distribute dividends and capital gains annually. These
distributions will typically be declared and paid in December.
You will receive distributions from a Fund in additional shares of the Fund
unless you choose to receive your distributions in cash. If you wish to change
the way in which you receive distributions, you should call 1-888-ORBITEX for
instructions.
If you have elected to receive distributions in cash, and the postal or other
delivery service returns your check to the Funds as undeliverable, you will not
receive interest on amounts represented by the uncashed checks.
59
<PAGE>
FEDERAL TAX CONSIDERATIONS
Your investment will have tax consequences that you should consider. Some of the
more common federal tax consequences are described here but you should consult
your tax consultant about your particular situation. ALTHOUGH IT IS NOT AN
INVESTMENT OBJECTIVE, THE FUNDS' ADVISER WILL ATTEMPT TO TAKE INTO ACCOUNT THE
TAX CONSEQUENCES OF ITS INVESTMENT DECISIONS. However, there may be occasions
when the Adviser's investment decisions will result in a negative tax
consequence for the Funds' shareholders.
TAXES ON DISTRIBUTIONS
You will generally be subject to pay federal income tax and possibly state taxes
on all Fund distributions. Your distributions will be taxed in the same manner
whether you receive the distributions in cash or additional shares of the Fund.
Distributions that are derived from net long-term capital gains will generally
be taxed as long-term capital gains. The rate of tax will depend on how long the
Fund held the securities on which it realized the gains. In general, for
individual shareholders, the maximum capital gain rate is 20 percent. All other
distributions, including short-term capital gains, will be taxed as ordinary
income. The Fund sends detailed tax information to its shareholders about the
amount and type of its distributions by January 31 for the prior calendar year.
TAXES ON SALES OR EXCHANGES
If you redeem your shares of a Fund, or exchange them for shares of another
Fund, you will be subject to tax on any taxable gain. Your taxable gain or loss
is computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should keep your account statements so that you or your tax preparer will be
able to determine whether a sale or exchange will result in a taxable gain or
loss.
"BUYING A DIVIDEND"
Unless your investment is in a tax-deferred account, you may want to avoid
investing in a Fund close to the date of a distribution because you pay the full
pre-distribution price for your shares and then receive part of your investment
back as a taxable distribution.
TAX WITHHOLDING
The Funds may be required to withhold U.S. federal income tax at the rate of 31%
from all taxable distributions and from proceeds from certain sales and
exchanges payable to shareholders who fail to provide the Funds with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Any such withheld amounts may be credited against the shareholder's U.S. federal
income tax liability.
60
<PAGE>
MANAGEMENT
INVESTMENT ADVISER
Orbitex Management, Inc., is the Funds' investment adviser (the "Adviser"). The
Adviser's address is 410 Park Avenue, New York, NY 10022. The Adviser is an
affiliate of Orbitex Management Ltd., an investment adviser that provides
investment services to individuals and institutions including Canadian unit
trusts.
Under the terms of an investment advisory agreement, the Adviser is responsible
for formulating the Funds' investment programs and for making day-to-day
investment decisions and engaging in portfolio transactions. The Adviser also
furnishes corporate officers, provides office space, services and equipment and
supervises all matters relating to the Fund's operations.
As compensation for its services, each of the following Funds paid the Adviser a
fee for the fiscal year ended April 30, 1999, at the annualized rate (expressed
as a percentage of average daily net assets) of 0% for the Growth Fund, 0% for
the Info-Tech & Communications Fund, 0% for the Strategic Natural Resources
Fund. As of July 12, 1999, the Health & Biotechnology Fund and Focus 30 Fund
commenced operations. The Financial Services Fund and Utilities Fund are
expected to commence operations in October 1999.
OTHER SERVICE PROVIDERS
The Funds rely on other companies to provide necessary services for their
day-to-day operations. Below is a list of these service providers. American
Data Services, Inc. is an affiliate of Orbitex Management, Inc.
ADMINISTRATOR FOR THE TRUST
American Data Services, Inc.
Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
SUB-ADMINISTRATOR FOR THE GROWTH FUND, INFO-
TECH & COMMUNICATIONS FUND AND STRATEGIC
NATURAL RESOURCES FUND
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN FOR TRUST
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR
AmeriMutual Funds Distributor, Inc.
Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
61
<PAGE>
TRANSFER AND DIVIDEND DISBURSING AGENT FOR THE
GROWTH FUND, INFO-TECH & COMMUNICATIONS FUND
AND STRATEGIC NATURAL RESOURCES FUND
Boston Financial Data Service, Inc.
Two Heritage Drive North Quincy
Massachusetts 02171
TRANSFER AND DIVIDEND DISBURSING AGENT FOR THE
FINANCIAL SERVICES FUND, FOCUS 30 FUND, HEALTH &
BIOTECHNOLOGY FUND AND UTILITIES FUND
American Data Services, Inc.
Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
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<PAGE>
[LOGO] FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended to help you understand the Funds'
financial performance for the fiscal period ended April 30, 1999. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Funds' financial statements, are included in the
Funds' annual report, which is available upon request.
FINANCIAL HIGHLIGHTS
Period Ended April 30, 1999
Financial Highlights For a Fund Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
ORBITEX GROWTH FUND
CLASS A SHARES CLASS A SHARES CLASS B SHARES
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999 (b) APRIL 30, 1998 (a) APRIL 30, 1999 (a)(b)
------------------ ------------------ ---------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $17.93 $15.00 $16.46
------ ------ ------
Income (Loss) from investment operations:
Net investment income (loss)..................... (0.15) 0.26(e) (0.12)
Net realized and unrealized gain on
investments and foreign currency
RELATED TRANSACTIONS................... 1.70 2.67 3.11
---- ---- ----
Total income from investment operations.......... 1.55 2.93 2.99
---- ---- ----
Less distributions from net investment
income........................................... (0.19) -- (0.21)
Less distributions from net realized gains....... (0.63) -- (0.63)
------ -- ------
Total distributions from net investment
INCOME AND NET REALIZED GAINS.......... (0.82) -- (0.84)
------ -- ------
NET ASSET VALUE, END OF PERIOD................... $18.66 $17.93 $18.61
------ ------ ------
TOTAL RETURN(c).................................. 9.07% 19.53% 18.61%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............. $1,422 $891 $54
Ratio of expenses to average net
assets(d).............................. 1.93% 2.11% 2.03%
Ratio of net expenses to average net
assets (net of custodial
credits)(d)............................ 1.88% 1.60% 2.00%
Ratio of total expenses to average net
assets before waivers, reimbursements
and custodial credits(d)............... 23.92% 50.13% 18.75%
Ratio of net investment income (loss) to
average net assets(d).................. (0.85)% 4.41%(e) (1.05)%
Portfolio turnover rate.......................... 957% 448% 957%
</TABLE>
(a) The commencement of investment operations was October 22, 1997 and
September 16, 1998 for Growth Fund Class A Shares and Class B Shares,
respectively.
(b) Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the period.
63
<PAGE>
(c) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains distributions, and assume no
sales charge. Had the Adviser, Administrator, Custodian and Distributor not
absorbed a portion of the expenses, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(d) Annualized for periods less than one year.
(e) Net investment income per share and the net investment income ratio
would have been lower without a certain investment strategy followed by the
Adviser during the current fiscal year.
64
<PAGE>
<TABLE>
<CAPTION>
ORBITEX INFO-TECH &
COMMUNICATIONS FUND
-------------------
CLASS A SHARES CLASS A SHARES CLASS B SHARES
-------------- -------------- --------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999 APRIL 30, 1998 (a) APRIL 30, 1999 (a)
-------------- ------------------ ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............... $19.62 $15.00 $18.23
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:.
Net investment loss................................ (0.08) 0.00 (0.08)
Net realized and unrealized gain on
investments and foreign currency
RELATED TRANSACTIONS..................... 11.26 4.62 12.51
----- ---- -----
Total income from investment operations............ 11.18 4.62 12.43
----- ---- -----
Less distributions from net investment
income............................................. -- -- --
Less distributions from net realized gains......... (0.18) -- (0.18)
------ -- ------
Total distributions from net investment
INCOME AND NET REALIZED GAINS............ (0.18) -- (0.18)
------ -- ------
NET ASSET VALUE, END OF PERIOD..................... $30.62 $19.62 $30.48
------ ------ ------
TOTAL RETURN(b).................................... 57.43% 30.80% 68.67%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............... $34,335 $2,440 $18,904
Ratio of expenses to average net
assets(c)................................ 2.07% 2.88% 2.41%
Ratio of net expenses to average net
assets (net of custodial
credits)(c).............................. 2.07% 2.40% 2.40%
Ratio of total expenses to average net
assets before waivers, reimbursements
and custodial credits(c)................. 4.04% 39.06% 4.41%
Ratio of net investment loss to average
net assets(c)............................ (0.70)% (1.27)% (1.40)%
Portfolio turnover rate............................ 360% 76% 360%
</TABLE>
(a) The commencement of investment operations was October 22, 1997 and
September 16, 1998 for Info-Tech & Communications Fund Class A Shares and
Class B Shares, respectively.
(b) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains distributions, and assume no
sales charge. Had the Adviser, Administrator, Custodian and Distributor not
absorbed a portion of the expenses, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(c) Annualized for periods less than one year.
65
<PAGE>
<TABLE>
<CAPTION>
ORBITEX STRATEGIC NATURAL RESOURCES FUND
----------------------------------------
CLASS A SHARES CLASS A SHARES CLASS B SHARES
-------------- -------------- --------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999(b) APRIL 30, 1998(a) APRIL 30, 1999(a)(b)
----------------- ----------------- --------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $16.54 $15.00 $12.22
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment gain (loss)........................................ 0.00 0.38(e) (0.05)
Net realized and unrealized gain (loss) on investments and
FOREIGN CURRENCY RELATED TRANSACTIONS.................... (1.25) 1.22 3.21(g)
------ ---- -------
Total income (loss) from investment operations.................... (1.25) 1.60 3.16
------ ---- ----
Less distributions from net investment income..................... (0.37) (0.03) (0.40)
Less distributions from net realized gains........................ 0.00(f) (0.03) 0.00(f)
------- ------ -------
Total distributions from net investment income and net realized
GAINS.................................................... (0.37) (0.06) (0.40)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.................................... $14.92 $16.54 $14.98
------ ------ ------
TOTAL RETURN(c)................................................... (6.86)% 10.74% 26.92%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).............................. $4,286 $5,698 $408
Ratio of expenses to average net assets(d)........................ 2.19% 2.45% 2.40%
Ratio of net expenses to average net assets (net of custodial
credits)(d).............................................. 2.17% 2.40% 2.40%
Ratio of total expenses to average net assets before waivers,
reimbursements and custodial credits(d).................. 8.76% 9.27% 8.49%
Ratio of net investment income (loss) to average net
assets(d)................................................ 0.00% 6.12%(e) (0.66)%
Portfolio turnover rate........................................... 921% 519% 921%
</TABLE>
(a) The commencement of investment operations was October 23, 1997 and
September 21, 1998 for Strategic Natural Resources Fund Class A Shares and
Class B Shares, respectively.
(b) Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the period. (c)
Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains distributions, and assume no
sales charge. Had the Adviser, Administrator, Custodian and Distributor not
absorbed a portion of the expenses, total returns would have been lower.
Total returns for periods less than one year are not annualized. (d)
Annualized for periods less than one year. (e) Net investment income per
share and the net investment income ratio would have been lower without a
certain investment strategy followed by the Adviser during the current
fiscal year. (f) Amount represents less than $0.01 per share. (g) The
amount shown may not accord with the change in aggregate gains and losses
of portfolio securities due to the timing of sales and redemptions of Fund
shares.
66
<PAGE>
<TABLE>
<CAPTION>
ORBITEX FOCUS 30 FUND CLASS D(1)
--------------------------------
YEAR ENDED OCTOBER 31
---------------------
1998 1997 1996 1995 (a) 1994 (a)
SIX MONTHS ---------- ---------- ---------- ---------- ----------
ENDED
APRIL 30,
1999 (b)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $19.02 $17.21 $14.13 $11.37 $9.78 $10.07
------ ------ ------ ------ ----- ------
INVESTMENT OPERATIONS:
Net investment income
(loss)............... (0.12) 0.32 0.18 0.08 -- 0.56
Net gains (losses) from
investments (realized
AND UNREALIZED)...... 4.62 2.54 3.34 2.76 1.77 (0.16)
---- ---- ---- ---- ---- ------
Total from investment
OPERATIONS........... 4.50 2.86 3.52 2.84 1.77 0.40
---- ---- ---- ---- ---- ----
DISTRIBUTIONS:
From net investment
income............... (0.17) (0.27) (0.18) (0.07) (0.05) (0.52)
In excess of net
investment income.... -- -- (0.11) (0.01) (0.13) --
From net realized gains....... (1.23) (0.78) (0.15) -- -- --
Tax return of capital......... -- -- -- -- -- (0.17)
-- -- -- -- -- ------
Total distributions........... (1.40) (1.05) (0.44) (0.08) (0.18) (0.69)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD........................ $22.12 $19.02 $17.21 $14.13 $11.37 $9.78
------ ------ ------ ------ ------ -----
TOTAL RETURN.................. 24.93%(2) 17.13% 25.18% 25.01% 18.10% 3.97%
--------- ------ ------ ------ ------ -----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................. $27,426 $29,535 $21,127 $9,315 $9,704 $7,277
Ratio of expenses to
average net
assets*.............. 2.85%(2)(c) 0.18% 0.42% 1.86% 3.01%** 0.75%
Ratio of net investment
income (loss) to
average net
assets*.............. (1.14%)(3) 1.60% 1.15% 0.53% 0.04% 2.17%
Portfolio turnover
RATE***.............. 30.20%(2) 196.35% 264.69% 391.00% 340.00% 1193.00%
--------- ------- ------- ------- ------- --------
* Ratios are presented net of fees voluntarily reduced. If such voluntary fee reductions had not occured,
the ratios would have been as follows:
Ratio of expenses to
average net assets............ 4.09%(3) 0.91% 1.05% 2.59% 5.77% 2.94%
Ratio of net investment
income (loss) to average
net assets.................... (2.38%)(3) 0.87% 0.88% (0.20%) (2.72%) (0.02%)
</TABLE>
As a result of certain tax adjustments necessitated by the Fund's failure to
qualify as a regulated investment company for the years ended October 31, 1995
and 1994, as well as other adjustments, the gross expense ratios previously
reported for these periods have been restated.
** Includes $50,460 of interest expense not subject to the expense reimbursement
agreement.
*** The Fund continues to be as fully invested in equities as possible.
Therefore, portfolio turnover is higher than most equity mutual funds because
purchases and sales of securities are necessary for settlement of
transactions requested by Fund shareholders.
(1) This information reflects the operation of the ASM Index 30 Fund, Inc.,
which was reorganized into Class D Shares of the Orbitex Focus 30 Fund on or
about July 12, 1999.
67
<PAGE>
(2) Not Annualized
(3) Annualized
(a) Audited by predecessor auditor.
(b) Prior to March 1, 1999, Vector Index Advisors, Inc. served the ASM Index 30
Fund, Inc. as investment advisor.
(c) Ratio includes amounts related to the general operating expnese and general
reserve expense recognized as a result of the termination of the investment
advisory agreement with the former Advisor (see Note 2 of the Notes to Financial
Statements). If such expenses had not been incurred, the ratio of expense to
average net assets would be 0.57% (annualized).
68
<PAGE>
WHERE TO GO FOR MORE INFORMATION:
You will find more information about the Orbitex Group of Funds in the following
documents:
- ANNUAL AND SEMI-ANNUAL REPORTS: Our annual and semi-annual reports
list the holdings in each Fund, describe each Fund's performance,
include financial statements for the Funds, and discuss the market
conditions and strategies that significantly affected the Funds'
performance during their last fiscal year.
- STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The Statement of
Additional Information contains additional and more detailed
information about each Fund.
The SAI and the financial statements included in the current annual and
semi-annual reports are incorporated by reference into (and are thus a part of)
this Prospectus.
THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS:
1. Call or write for one, and a copy will be sent without charge.
ORBITEX GROUP OF FUNDS
C/O AMERICAN DATA SERVICES, INC.
P.O. BOX 5786 HAUPPAUGE, NEW YORK 11788-0786
1-888-ORBITEX (OR 1-888-672-4839)
www.orbitexusa.com
2. Call or write the Public Reference Room of the Securities and Exchange
Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee for
this service. You can also go to the Public Reference Room and copy the
documents while you are there. Information about the Public Reference Room may
be obtained by calling the number below.
PUBLIC REFERENCE ROOM -- U.S. SECURITIES & EXCHANGE COMMISSIOn
WASHINGTON, D.C. 20549-6009
1-800-SEC-0330
3. Go to the SEC's website (www.sec.gov) and download a free text-only version.
IF YOU ARE A CURRENT FUND SHAREHOLDER WOULD LIKE INFORMATION ABOUT YOUR ACCOUNT,
ACCOUNT TRANSACTIONS, OR ACCOUNT STATEMENTS, PLEASE CALL US AT 1-888-ORBITEX (OR
1-888-672-4839)
IF YOU PURCHASED YOUR SHARES THROUGH A FINANCIAL INSTITUTION, YOU MAY CONTACT
THAT INSTITUTION FOR MORE INFORMATION.
The Orbitex Group of Funds' Investment Company Act File Number is 811-8037.
69
<PAGE>
ORBITEX GROUP OF FUNDS
Orbitex Financial Services Fund
Orbitex Growth Fund
Orbitex Info-Tech & Communications Fund
Orbitex Strategic Natural Resources Fund
Orbitex Focus 30 Fund
Orbitex Health & Biotechnology Fund
Orbitex Utilities Fund
Orbitex Cash Reserves Fund
STATEMENT OF ADDITIONAL INFORMATION
----------- ---, -----
This Statement of Additional Information is not a Prospectus, but is an
incorporated part of the Prospectuses and should be read in conjunction with the
Prospectuses of the Orbitex Group of Funds (the "Trust") dated December XX,
1999. To obtain a free copy of the Prospectuses or an annual report, please call
the Trust at 1-888-ORBITEX.
TABLE OF CONTENTS
ITEM PAGE
General Information and History 1
Investment Restrictions 2
Description of Securities, Other Investment Policies
and Risk Considerations 4
Management of the Trust 24
Principal Holders of Securities 26
Investment Management and Other Services 29
Administrator 31
Custodian 33
Transfer Agent Services 34
Distribution of Shares 34
Brokerage Allocation and Other Practices 37
Purchase and Redemption of Securities Being Offered 39
Shareholder Services 42
Determination of Net Asset Value 43
Taxes 44
Organization of the Trust 45
Performance Information About the Funds 46
Independent Accountants 48
Legal Matters 48
Financial Statements 48
For more information on any Orbitex Fund, including charges and expenses, call
Orbitex at the number indicated above for a free prospectus. Read it carefully
before you invest or send money.
GENERAL INFORMATION AND HISTORY
The Trust is an open-end management investment company, commonly known as
"mutual fund," and sells and redeems shares every day that it is open for
business. The Trust was organized as a Delaware business trust by a Declaration
of Trust dated December 13, 1996 and is registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940 (the
"1940 Act").
The Trust currently consists of eight portfolios: Orbitex Financial Services
Fund ("Financial Services Fund"), Orbitex Growth Fund ("Growth Fund"), Orbitex
Info-Tech & Communications Fund ("Info-Tech & Communications Fund"), Orbitex
Strategic Natural Resources Fund ("Strategic Natural Resources Fund"), Orbitex
Focus 30 Fund ("Focus 30 Fund"), Orbitex Health & Biotechnology Fund ("Health &
Biotechnology Fund"), Orbitex Utilities Fund ("Utilities Fund") and Orbitex Cash
Reserves Fund ("Cash Reserves Fund") (individually a "Fund" and collectively the
"Funds"). Each Fund other than the Financial
1
<PAGE>
Services Fund, Health & Biotechnology Fund and Utilities Fund are diversified.
Each Fund represents a separate series of beneficial interest in the Trust
having different investment objectives, investment programs, policies and
restrictions. Each Fund, except for the Focus 30 Fund and the Cash Reserves
Fund, offers the following three classes of shares: a front-end load Class A, a
contingent deferred sales charge Class B, and a level load Class C. The Focus 30
Fund offers three classes of shares: Class A, Class B and a no-load Class D. The
Cash Reserves Fund also offers two classes of shares: an Institutional Shares
class and an Institutional Service Shares class.
Each Fund is managed by Orbitex Management, Inc. (the "Adviser"), which directs
the day-to-day operations and the investment of assets of each Fund. Harris
Investment Management, Inc. serves as the sub-adviser to the Orbitex Cash
Reserves Fund (the "Sub-Adviser"). American Data Services, Inc. ("ADS") is the
administrator for each of the Funds, and the accounting agent, transfer agent
and dividend disbursing agent for Financial Services Fund, Focus 30 Fund, Health
& Biotechnology Fund, Utilities Fund, and the Cash Reserves Fund. State Street
Bank and Trust Company ("State Street") is the sub-administrator, accounting
agent, transfer agent and dividend disbursing agent for the Growth Fund, the
Info-Tech & Communications Fund and the Strategic Natural Resources Fund. State
Street is the custodian for each of the Funds. AmeriFunds Distributor, Inc. (the
"Distributor") distributes the shares of the Funds.
INVESTMENT RESTRICTIONS
The following policies and limitations supplement those set forth in the
Prospectuses. Unless otherwise noted, whenever a policy or limitation states a
maximum percentage of a Fund's assets that may be invested in any security or
other asset, or set forth a policy regarding quality standards, such standard or
percentage limitations will be determined immediately after and as a result of
the Fund's acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with a Fund's
investment policies and limitations.
A Fund's fundamental investment policies and limitations may be changed only
with the consent of a "majority of the outstanding voting securities" of the
particular Fund. As used in this Statement of Additional Information, the term
"majority of the outstanding voting securities" 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 investment policies of that Fund. Except for the fundamental
investment limitations listed below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed without shareholder approval.
THE FOLLOWING ARE THE FUNDS' FUNDAMENTAL INVESTMENT LIMITATIONS. A FUND WILL
NOT:
(1) 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) Issue any class of securities senior to any other class of securities
except in compliance with the 1940 Act.
(3) Borrow money for investment purposes in excess of 33-1/3% 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) 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
2
<PAGE>
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) Purchase or sell physical commodities or contracts thereon, except that
each Fund may enter into financial futures contracts and options thereon.
(6) 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) Make loans, except that each Fund in accordance with that Fund's
investment objective, policies and restrictions may: (i) invest in all or a
portion of an issue of publicly issued or privately placed bonds,
debentures, notes, other debt securities and loan participation interests
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) Other than the Financial Services Fund, Health & Biotechnology Fund and
Utilities Fund, 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) Invest 25% or more of the value of its total assets in any one
industry, except that: (i) the Financial Services Fund will invest at least
25% of its total assets in securities of companies in financial service
industries and industries supportive to financial service industries; (ii)
the Info-Tech & Communications Fund will invest at least 25% of its total
assets in the securities of companies in the communications, information
and related technology industries; (iii) the Strategic Natural Resources
Fund will invest at least 25% of its total assets in securities of
companies in natural resource industries and industries supportive to
natural resource industries; (iv) the Health & Biotechnology Fund will
invest at least 25% of its total assets in the securities of companies in
health, biotechnology and related industries; and (v) the Utilities Fund
will invest at least 25% of its total assets in securities of companies in
utility industries and industries supportive to utility industries. This
limitation (9) does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or repurchase agreements
secured by U.S. government securities.
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) Invest in portfolio companies for the purpose of acquiring or
exercising control of such companies.
(2) Invest in the securities of other investment companies except in
compliance with the 1940 Act.
(3) Invest in puts, calls, straddles, spreads or any combination thereof,
except to the extent permitted by the Prospectus and Statement of
Additional Information.
3
<PAGE>
(4) Purchase or otherwise acquire any security or invest in a repurchase
agreement if, as a result, more than 15% (or, in the case of the Cash
Reserves Fund, 10%) 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. If, through a change in values, net assets or
other circumstances, a Fund were in a position where more than 15% of its
net assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
(5) 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.
DESCRIPTION OF SECURITIES, OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following pages contain more detailed information about the types of
instruments in which a Fund may invest, strategies the Adviser, or Sub-Adviser,
as the case may be, may employ in pursuit of a Fund's investment objective and a
summary of related risks. The Adviser or Sub-Adviser, as the case may be) may
not buy all of these instruments or use all of these techniques unless it
believes that doing so will help a Fund achieve its investment objectives.
ADJUSTABLE RATE SECURITIES (ALL FUNDS). 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.
BELOW-INVESTMENT-GRADE DEBT SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH
RESERVES FUND). Each Fund may invest up to 35% of its net assets in debt
securities that are
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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
Advisers to be of comparable quality. 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. 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. Excerpts from S&P's and Moody's
descriptions of their bond ratings are contained in the Appendix to this SAI.
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
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 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 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
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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
attempts 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 will analyze the
creditworthiness of the issuer of an unrated security, as well as any financial
institution or other party responsible for payments on the security.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES (ALL FUNDS). Each Fund 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 businesses 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 (ALL FUNDS). Each Fund 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.
DEALER (OVER-THE-COUNTER) OPTIONS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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
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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.
EXPOSURE TO FOREIGN MARKETS (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH RESERVES
FUND). 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 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.
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 maybe
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 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. 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. In addition,
some emerging market countries impose transfer taxes or fees on a capital market
transaction.
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 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.
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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 Depositary
Receipts (ADRs), as well as other "hybrid" forms of ADRs, including European
Depositary Receipts (EDRs) and Global Depositary 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.
Investments in emerging markets can be subject to a number of types of taxes
that vary by country, change frequently, and are sometime defined by custom
rather than written regulation. Emerging countries can tax interest, dividends,
and capital gains through the application of a withholding tax. The local
custodian normally withholds the tax upon receipt of a payment and forwards such
tax payment to the foreign government on behalf of the Fund. Certain foreign
governments can also require a foreign investor to file an income tax return and
pay the local tax through estimated tax payments, or pay with the tax return.
Although not frequently used, some emerging markets have attempted to slow
conversion of their currency by imposing a repatriation tax. Generally, this tax
is applied to amounts which are converted from the foreign currency to the
investor's currency and withdrawn from the local bank account. Transfer taxes or
fees, such as stamp duties, security transfer taxes, and registration and script
fees, are generally imposed by emerging markets as a tax or fee on a capital
market transaction. Each emerging country may impose a tax or fee at a different
point in time as the foreign investor perfects his interest in the securities
acquired in the local market. A stamp duty is generally a tax on the official
recording of a capital market transaction. Payment of such duty is generally a
condition of the transfer of assets and failure to pay such duty can result in a
loss of title to such asset as well as loss of benefit from any corporate
actions. A stamp duty is generally determined based on a percentage of the value
of the transaction conducted and can be charged against the buyer (e.g., Cyprus,
India, Israel, Jordan, Malaysia, Pakistan, and the Philippines), against the
seller (e.g., Argentina, Australia, China, Egypt, Indonesia, Kenya, Portugal,
South Korea, Trinidad, Tobago, and Zimbabwe). Although such a fee does not
generally exceeded 100 basis points, certain emerging markets have assessed a
stamp duty as high as 750 basis points (e.g., Pakistan). A security transfer tax
is similar to a stamp duty and is generally applied to the purchase, sale or
exchange of securities which occur in a particular foreign market. These taxes
are based on the value of the trade and similar to stamp taxes, can be assessed
against the buyer, seller or both. Although the securities transfer tax may be
assessed in lieu of a stamp duty, such tax can be assessed in addition to a
stamp duty in certain foreign markets (e.g., Switzerland, South Korea,
Indonesia). Upon purchasing a security in an emerging market, such security must
often be submitted to a registration process in order to record the purchaser as
a
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legal owner of such security interest. Often foreign countries will charge a
registration or script fee to record the change in ownership and, where physical
securities are issued, issue a new security certificate. In addition to
assessing this fee upon the acquisition of a security, some markets also assess
registration charges upon the registration of local shares to foreign shares.
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 are
Section 1256 contracts and may result in the Fund entering into straddles.
Open Section 1256 contracts at fiscal year end 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. The holding period of the security offsetting an "in-the-money
qualified covered call" option 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, 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.
FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH RESERVES
FUND). 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 currency exposure 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 believes that one currency may experience a substantial
movement against another currency, including the U.S. dollar, or it wishes to
alter the Fund's exposure to the currencies of the countries in its investment
universe, it may enter into a forward contract to sell or buy foreign currency
in exchange for the U.S. dollar or another foreign currency. Alternatively,
where appropriate, a Fund may manage all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy
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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, the Adviser believes 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 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. 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.
FOREIGN FUTURES AND OPTIONS (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH RESERVES
FUND). 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
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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 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.
FUTURES CONTRACTS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 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 sub-indices 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 to manage a Fund's
exposure to 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 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.
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 in this Statement of Additional
Information.
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.
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Successful use of futures contracts by the Fund for hedging purposes is also
subject to the Adviser's (or Sub-Adviser) 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.
ILLIQUID OR RESTRICTED SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND). 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% (or, in the case of the Cash Reserves Fund, 10%) 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 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 will consider the trading markets for the specific security taking
into account the unregistered nature of a Rule 144A security. In addition, the
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
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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.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS (ALL FUNDS EXCEPT FOCUS 30 FUND). Direct
debt instruments are interests in amounts owed by a corporate, governmental, or
other borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each Fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protections than an unsecured
loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidations of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks and may be highly speculative. Borrowers that are in
bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities responsible for
the repayment of the debt may be unable, or unwilling, to pay interest and repay
principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, the Fund could be held liable as a
co-lender. Direct debt instruments may also involve a risk of insolvency of the
lending bank or other intermediary. Direct debt instruments that are not in the
form of securities may offer less legal protection to a Fund in the event of
fraud or misrepresentation. In the absence of definitive regulatory guidance,
each Fund relies on the Adviser's research in an attempt to avoid situations
where fraud or misrepresentation could adversely affect the Fund.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating the Fund to
pay additional cash on demand. These commitments may have the effect of
requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. A Fund will set aside appropriate
liquid assets in a custodial account to cover its potential obligations under
standby financing commitments.
Each Fund limits the amount of total assets that it will invest in any one
issuer or, except for the Financial Services Fund, Health & Biotechnology Fund,
and the Utilities Fund, in issuers within the same industry (see each Fund's
investment limitations). For purposes of these limitations, a Fund generally
will treat the borrower as the "issuer" of indebtedness held by the Fund. In the
case of loan participations where a bank or other lending institution serves as
financial intermediary between a Fund and the borrower, if the
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participation does not shift to the Fund the direct debtor-creditor relationship
with the borrower, SEC interpretations require the Fund, in appropriate
circumstances, to treat both the lending bank or other lending institution and
the borrower as "issuers" for these purposes. Treating a financial intermediary
as an issuer of indebtedness may restrict a Fund's ability to invest in
indebtedness related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying borrowers
represent many different companies and industries.
MATURITY OF DEBT SECURITIES. The maturity of debt securities may be considered
long (10 years or more), intermediate (3 to 10 years), or short-term (less than
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.
MORTGAGE PASS-THROUGH SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH
RESERVES FUND). 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
approved sellers/servicers 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
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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.
OPTIONS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 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 securities or currencies on which the Fund
holds a covered call position.
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 Funds will not
do), but capable of enhancing the Fund's
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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.
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, 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.
OPTIONS ON FUTURES CONTRACTS (ALL FUNDS EXCEPT CASH RESERVES FUND). Each Fund
may purchase and sell options on the same types of futures in which it may
invest.
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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.
PURCHASING CALL OPTIONS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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.
PURCHASING PUT OPTIONS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 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
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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.
REGULATORY LIMITATIONS. A 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.
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 yadvisory and administration fees. At the same time, the
Fund would continue to pay its own management fees and other expenses.
MASTER/FEEDER STRUCTURE. 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 (ALL FUNDS). 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
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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% (or, in the case of the Cash Reserves Fund, 10%) 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 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, or pursuant to
guidelines established 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.
SHORT SALES (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 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.
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.
19
<PAGE>
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.
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.
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
20
<PAGE>
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.
SWAP AGREEMENTS (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH RESERVES FUND). 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 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 will cause a Fund to enter into swap agreements only with counterparties
that would be eligible for consideration as repurchase agreement counterparties
under the Funds' repurchase agreement guidelines. 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 1940 Act, 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
21
<PAGE>
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.
TRADING IN FUTURES CONTRACTS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 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.
WARRANTS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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
22
<PAGE>
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.
WHEN-ISSUED SECURITIES (ALL FUNDS). 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 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.
WRITING COVERED PUT OPTIONS (ALL FUNDS EXCEPT CASH RESERVES FUND). 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 the 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.
UNITED STATES GOVERNMENT OBLIGATIONS (ALL FUNDS). 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 (ALL FUNDS). 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
23
<PAGE>
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).
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada is a confederation of 10 provinces with a parliamentary system of
government. The area, the world's second largest nation by landmass, is
inhabited by 30.2 million people, most of whom are decedents of France, the
United Kingdom and indigenous peoples. The country has a work force of over 15
million people in various industries such as trade, manufacturing, mining,
finance, construction and government. As an affluent, high-tech industrial
society, Canada today closely resembles the US in its market-oriented economic
system, pattern of production, and high living standards. Since World War II,
the impressive growth of the manufacturing, mining, and service sectors has
transformed the nation from a largely rural economy into one primarily
industrial and urban. While the country has many institutions which closely
parallel the United States, such as a transparent stock market and similar
accounting practices, it differs from the United States in that it has an
extensive social welfare system, much more akin to European welfare states.
Canada is endowed with extensive energy resources, and is a large producer and
net exporter of natural gas, coal, hydropower and uranium. Within this sector,
Canada is a major supplier of electric power and natural gas to the United
States. In addition, Canada's other particularly strong commodities are forest
products, mining, metals, and agricultural products such as grains. Accordingly,
the Canadian stock market is strongly represented by such basic materials
stocks, and movements in the supply and demand of industrial materials,
agriculture, and energy, both domestically and internationally, can have a
strong effect on market performance.
The United States is Canada's biggest trading partner, representing over 80% of
total trade in 1997. Automobiles and auto parts accounted for the largest export
items followed by energy, mining and forest products. Canada is the largest
energy supplier to the United States, while the United States is Canada's
largest foreign investor. The United States investment has been largely focused
on financial, energy, metals, and mining industries. The expanding economic and
financial integration of the United States and Canada will likely make the
Canadian economy and securities markets increasingly sensitive to U.S. economic
and market events.
For United States investors in Canadian markets, currency has become an
important determinant of investment return. Since Canada let its dollar float in
1970, its value has been in a steady decline against its United States
counterpart. While the decline has enabled Canada to stay competitive with its
more efficient southern neighbor, which buys four-fifths of its exports, United
States investors have seen their investment returns eroded by the impact of the
currency conversion.
MANAGEMENT OF THE TRUST
Trustees and Officers
Because Orbitex Group of Funds is a Delaware business trust, there are Trustees
appointed to run the Trust. These Trustees are responsible for overseeing the
general operations of the Adviser and the general
24
<PAGE>
operations of the Trust. These responsibilities include approving the
arrangements with companies that provide necessary services to the Funds,
ensuring the Funds' compliance with applicable securities laws and that
dividends and capital gains are distributed to shareholders. The Trustees have
appointed officers to provide many of the functions necessary for day-to-day
operations.
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 PRINCIPAL
NAME, AGE AND BUSINESS ADDRESS AGE OCCUPATION WITHIN THE PAST FIVE YEARS
<S> <C> <C>
Ronald S. Altbach 51 Trustee of the Trust.
1540 West Park Avenue Chairman, Paul Sebastian, Inc.(1994 - present)
Ocean, New Jersey (perfume distributor);
07712 President, Olcott Corporation (1992 - 1994)
(perfume distributor).
*Thomas T. Bachmann 52 Trustee of the Trust. Co-
410 Park Avenue Chairman of the Board of
New York, NY 10022 Director of Orbitex Management, Inc.
(1996 - present) (investment management); Chairman,
Orbitex Management, Ltd. (1986 - present)
(investment management).
*Otto J. Felber 66 Trustee of the Trust. Chairman of Orbitex
130 Adelaide Street Management, Inc. (1996 - present).
West, President, Felcom Capital, Corp. (1985 - present)
Suite 3205 (investment management)
Toronto, Ontario, President and Vice Chairman,
M5H3P5 Altamira Management, Ltd.
(1987 - 1997) (investment management).
*James L. Nelson 50 Chairman of Trust, President, Assistant
410 Park Avenue Treasurer and Assistant
New York, New York Secretary of the Trust.
10022 Director of Orbitex Management, Inc.
(1995 - present) (investment management); Chief
Executive Officer and President, Orbitex, Inc.
(1995 - 1999) (business development); President,
AVIC Group International (1993 - 1995)
(communications); President, Eaglescliff
Corporation (1986 - present) (consulting).
*Richard E. Stierwalt 44 Trustee of the Trust.
410 Park Avenue President, Chief Executive
New York, New York Officer, President and
10022 Director of Orbitex
Management, Inc. (1998 - present);
Consultant, Bisys Management, Inc. (1996 -1998)
(mutual fund distributor);
Chairman of the Board and
Chief Executive Officer,
Concord Financial Group
(1987 - 1996) (administrator
and distributor of mutual funds).
Stephen H. Hamrick 47 Trustee of the Trust.
Carey Financial Corp. Chairman, Carey Financial
50 Rockefeller Plaza Corporation (1995 - present)
New York, New York (broker-dealer); Chief
10020 Executive Officer, Wall
Street Investors Services (1994 - 1995) (retail
brokerage firm); Senior Vice
President, PaineWebber, Inc.
(1988 - 1994) (investment services).
25
<PAGE>
John D. Morgan 69 Trustee of the Trust.
32 Edgehill Road Chairman and Director, CIBC
Westmount, Quebec, Trust Company (1997 -
Canada H3Y1E9 present) (trust management).
Vice President, Midland Walwyn
(1990 - 1997) (investment banking).
M. Fyzul Khan 28 Secretary of the Trust.
410 Park Avenue Legal Counsel of Orbitex
New York, New York Management, Inc. (1998 to
10022 present) (investment adviser);
Attorney, CIBC Oppenheimer
(August 1997 March 1998) (hedge fund);
Law student, Widener
University School of Law (September 1994 - June 1997)
Kimberly Ratz 38 Treasurer of the Trust.
410 Park Avenue Chief Financial Officer of Orbitex Management, Inc.
New York, New York (1998 - present). America's Mortgage Source
10022 (1996 -1997)(mortgage banking); Finance
Management, Chase Manhattan Mortgage
(1988 - 1998) (mortgage banking).
</TABLE>
Each Trustee of the Trust who is not an interested person of the Trust or
Adviser receives a fee of $1,250 for each regular and special meeting of the
Board that the Trustee attends. The Trust also reimburses each such Trustee for
travel and other expenses incurred in attending meetings of the Board.
COMPENSATION TABLE*
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION FROM
RETIREMENT BENEFITS ESTIMATED ANNUAL REGISTRANT AND FUND
AGGREGATE COMPENSATION ACCRUED AS PART OF BENEFITS UPON COMPLEX PAID
NAME OF PERSON FROM FUND FUND EXPENSES RETIREMENT TO TRUSTEES
<S> <C> <C> <C> <C>
Ronald S. Altbach $5,000 N/A N/A $5,000
Thomas T. Bachmann $0 N/A N/A $0
Otto J. Felber $0 N/A N/A $0
Stephen H. Hamrick $3,750 N/A N/A $3,750
John D. Morgan $5,413 N/A N/A $5,413
James L. Nelson $0 N/A N/A $0
Richard E. Stierwalt $0 N/A N/A $0
</TABLE>
* The compensation table covers the period May 1, 1998 through April 30, 1999.
As of April 30, 1999, Trustees and officers of the Trust, as a group, owned less
than 1% of each of the Funds.
PRINCIPAL HOLDERS OF SECURITIES
As of July 16, 1999, the following shareholders were beneficial owners of 5% or
more of the outstanding shares of the Funds listed because they possessed voting
or investment power with respect to such shares:
ORBITEX GROWTH FUND - CLASS A% HELD
Cresta Ltd. 30.37%
P.O. Box N9932
Maritime House, Frederick Street
Nassau, Bahamas
Sharon Miller & Richard Mosse 11.84%
Attorney Trustees
Lauren E. Mosse Trust
142 E. 71st Street Apt. 3D
New York, NY 10021-5133
26
<PAGE>
Sharon Miller & Richard Mosse 11.84%
Attorney Trustees
Danielle T. Mossee Trust
142 E. 71st Street Apt. 3D
New York, NY 10021-5133
Sharon Miller & Richard Mosse 11.84%
Attorney Trustees
Julia B. Mosse Trust
142 E. 71st Street Apt. 3D
New York, NY 10021-5133
Donaldson Lufkin Jenrette 6.79%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
ORBITEX GROWTH FUND - CLASS B
Painewebber for the Benefit of 34.52%
Painewebber CDN FBO
John A Simmonds
P O BOX 3321
Weehawken NJ 07087-8154
Thomas F. Fitzpatrick 33.07%
Linda Fitzpatrick
1610 Barkalow Road
Wall, NJ 07719-3843
Painewebber for the Benefit of 26.57%
Dr. Pedro J Rullan
Retirement Plan Series 90-299
654 Ave Munoz Rivera
IBM Tower Suite 1003
San Juan PR 00918-4123
CIBC World Markets Corporation 5.18%
FBO 376-10055-15
P.O. Box 3484
Church Street Station
New York, NY 10008-3484
ORBITEX INFO-TECH & COMMUNICATIONS FUND - CLASS A
PaineWebber for the benefit of 7.55%
Melrich Associates
A Partnership
C/O RTA Associates
2000 S. Winston Road Building #4
Rochester, NY 14618-3922
ORBITEX INFO-TECH & COMMUNICATIONS FUND - CLASS B
None
27
<PAGE>
ORBITEX STRATEGIC NATURAL RESOURCES FUND -
CLASS A
Sidney Kimmel 21.46%
C/O Jones Apparel Group
1411 Broadway Floor 21
New York, NY 10018-3403
Daniel A. McAloon 6.34%
Clare M. McAloon Ten Comm
66 Union Hill Road
Madison, NJ 07940-2300
ORBITEX STRATEGIC NATURAL RESOURCES FUND - CLASS B
MSB Investment Trust 9.29%
Special Escrow Account P
28222 Agoura Rd #200
Agoura Hills CA 91301
First Clearing Corporation 5.52%
Dr. George S. Naifeh IRA
WFS AS Custodian
265 Long Branch East
Prescott, AZ 86303-5327
ORBITEX FOCUS 30 FUND CLASS A
Orbitex Management, Inc. 100.00%
410 Park Avenue
18th Floor
New York, NY 10022
ORBITEX FOCUS 30 FUND CLASS B
Orbitex Management, Inc. 100.00%
410 Park Avenue
18th Floor
New York, NY 10022
ORBITEX FOCUS 30 FUND CLASS D
National Financial Services Corp. 18.57%
5th Floor Attn: M Banks
Church Street Station
P O Box 3908 New York, NY 10008-3908
National Investor Services 10.79%
For the Exclusive Benefit
Of Our Customers
55 Water Street
New York, NY 10041
28
<PAGE>
Donaldson Lufkin & Jenrette 7.39%
Pershing Division
P O Box 2052 Jersey City NJ 07303-2052
ORBITEX HEALTH & BIOTECHNOLOGY FUND CLASS A
Cresta Limited 84.75%
Maritime House
Frederick Street
Nassau, Bahamas
The Anita H. Berkis Spousal Trust 8.48%
DTD 09/08/97
John Morgan TTEE
32 Edgehill Road
Westmount, Quebec
Canada H3Y 1EP
ORBITEX HEALTH & BIOTECHNOLOGY FUND CLASS B
Orbitex Management, Inc. 100.00%
410 Park Avenue
18th Floor
New York, NY 10022
A shareholder owning of record or beneficially more than 25% of a Fund's
outstanding shares may be considered a controlling person. That shareholder's
vote could have more significant effect on matters presented at a shareholder's
meeting than votes of other shareholders.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT ADVISER. Orbitex Management, Inc., located at 410 Park Avenue, New
York, NY 10022, serves as the Adviser of each Fund pursuant to Investment
Advisory Agreements that have been approved by the Board, including a majority
of the independent Trustees. The initial term of each Investment Advisory
Agreement is two years. However, the Investment Advisory Agreements 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 Agreements 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. The
Advisory Agreement for the Growth, Info-Tech & Communications and Strategic
Natural Resources Funds was last renewed by the Board of Trustees on March 9,
1999. The Advisory Agreements for the Focus 30, Health & Biotechnology, and Cash
Reserves Funds was initially approved by the Board of Trustees on June 29, 1999.
The Advisory Agreements for the Financial Services Fund and the Utilities Fund
was approved by the Board of Trustees on September 22, 1999. The portfolio
managers are supervised by John W. Davidson, CFA, Chief Investment Officer of
the Adviser.
The directors and the principal executive officers of the Adviser are: Otto J.
Felber, Chairman; Thomas T. Bachmann, Co-Chairman; Richard E. Stierwalt,
Director, CEO and President; James L. Nelson, Director; Kevin S. Beatson,
Director; M. Fyzul Khan, Secretary and Legal Counsel; and Kimberly Ratz,
Treasurer and Chief Financial Officer. The Adviser is a subsidiary of Orbitex
Financial Services Group, Inc., a US holding company.
In addition to the duties set forth in the Prospectus under the section entitled
"Management," 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 (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
29
<PAGE>
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.
For the advisory services provided and expenses assumed by it, the Adviser has
agreed to a fee from each Fund, computed daily and payable monthly at an annual
rate of 1.25% for the Financial Services Fund, 0.75% for the Growth Fund, 1.25%
for the Info-Tech & Communications Fund, 1.25% for the Strategic Natural
Resources Fund, 0.75% for the Focus 30 Fund, 1.25% for the Health &
Biotechnology Fund, 1.25% for the Utilities Fund, and 0.15% for the Cash
Reserves Fund.
The following table shows the amount of advisory fees paid by each Fund to the
Adviser and the amount of the advisory fees waived by the Adviser for the past
two fiscal years.
ADVISORY FEES ADVISORYFEES WAIVED
<TABLE>
<CAPTION>
PAID BY FUND BY THE ADVISER
------------ --------------
Growth Fund
<S> <C> <C>
April 30, 1998* 0 $2,423
April 30, 1999 0 $8,089
Info-Tech & Communications Fund
April 30, 1998* 0 $5,113
April 30, 1999 0 $211,268
Strategic Natural Resources Fund
April 30, 1998** 0 $25,989
April 30, 1999 0 $46,098
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998
** Fiscal period October 23, 1997 through April 30, 1998
The Adviser has contractually agreed to fee waivers and/or expense
reimbursements on the following funds for the contractual periods stated in the
chart below and in its sole discretion thereafter.
<TABLE>
<CAPTION>
Contractual
Fund Class A Class B Class C Class D Period
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Financial Services Fund 2.00% 2.60% 2.60% N/A 4/30/2000
Growth Fund 2.00% 2.60% 2.60% N/A 4/30/2000
Info-Tech & Communications Fund 2.00% 2.60% 2.60% N/A 4/30/2000
Strategic Natural Resources Fund 2.00% 2.60% 2.60% N/A 4/30/2000
FOCUS 30 FUND 1.00% 1.60% N/A 0.60% CURRENT - 1/1/2000
20
1.15% 1.75% N/A 0.75% 1/1/2000 - 7/1/2000
Health & Biotechnology Fund 2.00% 2.60% 2.60% N/A 4/30/2000
Utilities Fund 2.00% 2.60% 2.60% N/A 4/30/2000
Amerigo Fund 1.55% N/A 2.15% 1.15% 4/30/2000
Clermont Fund1.55% N/A 2.15% 1.15% 4/30/2000
</TABLE>
The Adviser has voluntarily agreed to waive or limit its fees and pay certain
operating expenses to the extent necessary to limit total fund operating of each
Fund with respect to each class of shares as follows:
30
<PAGE>
<TABLE>
<CAPTION>
Institutional Institutional
Shares Service Shares
<S> <C> <C>
Cash Reserves Fund 0.25% 0.50%
</TABLE>
The following table shows the amount of fee waivers and/or reimbursements by the
Adviser for the last three fiscal years. The Focus 30 Fund and Health &
Biotechnology Fund commenced operations on July 12, 1999 and July 15, 1999,
respectively. The Cash Reserves Fund is expected to commence operations in
January 2000; and the Financial Services Fund and the Utilities Fund are
expected to commence operations in January 2000.
<TABLE>
<CAPTION>
Amount of Reimbursed
Fund Expenses by the Adviser
-----------------------
<S> <C>
Growth Fund - Class A
April 30, 1998* $80,890
April 30, 1999 $203,594
Growth Fund - Class B
April 30, 1999** $2,208
Info-Tech & Communications Fund - Class A
April 30, 1998* $74,137
April 30, 1999 $11,543
Info-Tech & Communications Fund - Class B
April 30, 1999** $3,928
Strategic Natural Resources Fund - Class A
April 30, 1998*** $55,295
April 30, 1999 $159,491
Strategic Natural Resources Fund - Class B
April 30, 1999**** $2,832
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period September 16, 1998 through April 30, 1999.
*** Fiscal period October 23, 1998 through April 30, 1998.
**** Fiscal period September 21, 1998 through April 30, 1999.
INVESTMENT SUB-ADVISER
Harris Investment Management, Inc. (Harris Management) is the investment
sub-adviser. The sub-adviser's address is 190 S. LaSalle St., Chicago, Illinois
60690. Harris Management was organized and exists under the laws of the State of
Delaware and registered pursuant to the Investment Advisers Act of 1940. Harris
Management is a wholly-owned subsidiary of Harris Bankcorp, Inc. Harris Bankcorp
is a wholly-owned subsidiary of Bankmont Financial Corp, which in turn is a
wholly-owned subsidiary of Bank of Montreal, a publicly-traded Canadian banking
institution. Harris Management serves as a portfolio management agent for the
Harris Insight-R- Funds. As of March 31, 1999, Harris Investment Management,
Inc. managed approximately $13.4 billion of discretionary assets.
ADMINISTRATOR
The Administrator for the Funds is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.
31
<PAGE>
Pursuant to an Administrative Service Agreement with the Funds, the
Administrator provides all administrative services necessary for the Fund,
subject to the supervision of the Board of Trustees. The Administrator may
provide persons to serve as officers of the Fund. Such officers may be
directors, officers or employees of the Administrator or its affiliates.
The Administration Agreement was initially approved by the Board of Trustees at
a meeting on June 29, 1999. The Agreement shall remain in effect for two years
from the date of its initial approval, and subject to annual approval of the
Board of Trustees for one-year periods thereafter. The Administrative Service
Agreement is terminable by the Board of Trustees or the Administrator on sixty
days' written notice and may be assigned provided the non-assigning party
provides prior written consent. The Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence on the part of the
Administrator or reckless disregard of its obligations thereunder, the
Administrator shall not be liable for any action or failure to act in accordance
with its duties thereunder.
Under the Administrative Service Agreement, the Administrator provides all
administrative services, including, without limitation: (i) providing services
of persons competent to perform such administrative and clerical functions as
are necessary to provide effective administration of the Funds; (ii) overseeing
the performance of administrative and professional services to the Funds by
others, including the Funds' Custodian; (iii) preparing, but not paying for, the
periodic updating of the Funds' Registration Statement, Prospectus and Statement
of Additional Information in conjunction with Fund counsel, including the
printing of such documents for the purpose of filings with the Securities and
Exchange Commission and state securities administrators, preparing the Funds'
tax returns, and preparing reports to the Funds' shareholders and the Securities
and Exchange Commission; (iv) preparing in conjunction with Fund counsel, but
not paying for, all filings under the securities or "Blue Sky" laws of such
states or countries as are designated by the Distributor, which may be required
to register or qualify, or continue the registration or qualification, of the
Funds and/or its shares under such laws; (v) preparing notices and agendas for
meetings of the Board of Trustees and minutes of such meetings in all matters
required by the 1940 Act to be acted upon by the Board; and (vi) monitoring
daily and periodic compliance with respect to all requirements and restrictions
of the Investment Company Act, the Internal Revenue Code and the Prospectus.
The Administrator, pursuant to the Fund Accounting Service Agreement, provides
the Funds with all accounting services, including, without limitation: (i) daily
computation of net asset value; (ii) maintenance of security ledgers and books
and records as required by the Investment Company Act; (iii) production of the
Funds' listing of portfolio securities and general ledger reports; (iv)
reconciliation of accounting records; (v) calculation of yield and total return
for the Funds; (vi) maintaining certain books and records described in Rule
31a-1 under the 1940 Act, and reconciling account information and balances among
the Funds' custodian and Advisers; and (vii) monitoring and evaluating daily
income and expense accruals, and sales and redemptions of shares of the Funds.
For the services rendered to the Funds by the Administrator, the Funds pay the
Administrator a fee, computed daily and payable monthly at annual rate of 0.10%
on assets up to $100 million; 0.08% on assets from $100 million to $250 million;
0.05% on assets from $250 million to $500 million; and 0.03% on assets greater
than $500 million, or a minimum fee of $40,000 per Fund per year of each Fund's
average daily net assets. The Cash Reserves Fund pays the Administrator a fee
equal to 0.02% based upon prior months' average net assets. The Funds also pay
the Administrator for any out-of-pocket expenses.
In return for providing the Funds with all accounting related services, the
Funds pays the Administrator a monthly fee based on the Funds' average net
assets, plus any out-of-pocket expenses for such services.
SUB-ADMINISTRATOR
State Street is the sub-administrator of the Growth Fund, the Info-Tech &
Communications Fund and the Strategic Natural Resources Fund. State Street is a
Massachusetts trust company with a principal office at 225 Franklin Street,
Boston, Massachusetts 02111. State Street serves as administrator for other
mutual funds.
32
<PAGE>
Pursuant to a Sub-Administration Agreement for the benefit of the trust, State
Street provides all administrative services reasonably necessary for the Growth
Fund, the Info-Tech & Communications Fund and the Strategic Natural Resources
Fund, other than those provided by the Adviser and/or ADS, subject to the
supervision of the Administrator.
Under the Sub-Administration Agreement for the benefit of the trust, State
Street, assists the Administrator with certain of its responsibilities under the
administration agreement, including providing, without limitation: (i) services
of personnel competent to perform such administrative and clerical functions as
are necessary to provide effective administration of the Growth Fund, the
Info-Tech & Communications Fund and the Strategic Natural Resources Fund; (ii)
maintaining the books and records of the Growth Fund, the Info-Tech &
Communications Fund and the Strategic Natural Resources Fund (other than
financial and accounting books and records and records maintained by the Trust's
custodian or transfer agent); (iii) overseeing the insurance relationships of
the Growth Fund, the Info-Tech & Communications Fund and the Strategic Natural
Resources Fund; (iv) preparing or assisting in the preparation of all required
tax returns, proxy statements and reports to shareholders of the Growth Fund,
the Info-Tech & Communications Fund and the Strategic Natural Resources Fund,
and the Board of 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 shares of the Growth
Fund, the Info-Tech & Communications Fund and the Strategic Natural Resources
Fund 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 of the Growth Fund, the Info-Tech & Communications Fund and the
Strategic Natural Resources Fund 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 with respect to the Growth Fund, the
Info-Tech & Communications Fund and the Strategic Natural Resources Fund by the
Trust's custodian; (ix) evaluating expenses, projecting future expenses, and
processing payments of expenses; and (x) monitoring and evaluating performance
of accounting and related services provided to the Growth Fund, the Info-Tech &
Communications Fund and the Strategic Natural Resources Fund, by the Trust's
custodian.
The Sub-Administration Agreement is terminable at any time by the parties
thereto on sixty days' written notice. If a party other that State Street
terminates the original agreement within three years of its effective date, the
Fund must reimburse State Street for any fees waived by State Street. A
modification of the original administrative services agreement with State Street
shall not cause a termination of that agreement.
For the period September 16, 1997 through April 30, 1998, fees of State Street
accrued were: $43,750 for the Growth Fund, $43,750 for the Info-Tech &
Communications Fund and $43,750 for the Strategic Natural Resources Fund.
For fiscal year ended April 30, 1999, fees of State Street accrued were: $62,711
for the Growth Fund, $62,711 for the Info-Tech & Communications Fund and $62,858
for the Strategic Natural Resources Fund.
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; maintaining original entry documents and books of record and general
ledgers; posting cash receipts and disbursements; reconciling bank account
balances monthly; recording purchases 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.
33
<PAGE>
TRANSFER AGENT SERVICES
ADS provides transfer agent and dividend disbursing services to the Financial
Services Fund, Focus 30 Fund, Health & Biotechnology Fund, Utilities Fund, and
the Cash Reserves Fund.
State Street provides transfer agent and dividend disbursing services to the
Growth Fund, the Info-Tech & Communications Fund and the Strategic Natural
Resources Fund.
DISTRIBUTION OF SHARES
AmeriMutual Funds Distributor,, Inc. (the "Distributor" or "AmeriMutual") serves
as the distributor of the shares of each class of each Fund pursuant to a
Distribution Agreement between the Distributor and the Trust. The Distributor's
principal business address is 150 Motor Parkway, Hauppauge, NY 11788. Prior to
_________ __, 1999, Funds Distributor, Inc. ("FDI") served as the distributor of
shares of each class of each Fund pursuant to a Distribution Agreement between
FDI and the Trust.
Under the terms of the Class A, Class B and Class C Distribution Plans and
Agreements pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Rule 12b-1 Plans"), the Distributor receives front-end, contingent deferred
sales commissions anda level load on Class A, Class B, and Class C Shares,
respectively, and fees for providing services to the Class A, Class B and Class
C Shares of each Fund, other than the Cash Reserves Fund, under the Distribution
Agreements. In addition, pursuant to the Rule 12b-1 Plans, each of the Funds are
authorized to use a portion of their assets attributable to the Class A, Class B
and Class C Shares to finance certain activities relating to the distribution of
their shares to investors.
The Plan adopted for Class A Shares, allows each Fund, other than the Cash
Reserves Fund, to pay the Distributor quarterly at a rate equal to an annualized
rate of 0.40% of the average daily net assets attributable to the Class A Shares
of that Fund. The Plan adopted for Class B Shares allows each Fund, other than
the Cash Reserves Fund, to pay the Distributor quarterly at a rate equal to
0.75% of the average daily net assets attributable to the Class B Shares of that
Fund during that quarter. The Class B Plan also allows each Fund to pay the
Distributor for certain shareholder services provided to Class B shareholders or
other service providers that have entered into agreements with the Distributor
to provide these services. For these services, each Fund pays a shareholder
service fee equal to 0.25% of average net assets attributable to Class B Shares
of the Fund on an annualized basis. The Plan adopted for Class C Shares allows
each Fund, other than the Cash Reserves Fund, to pay the Distributor quarterly
at a rate equal to 0.75% of the average daily net assets attributable to the
Class C Shares of that Fund during that quarter. The Class C Plan also allows
each Fund to pay the Distributor for certain shareholder services provided to
Class C shareholders or other service providers that have entered into
agreements with the Distributor to provide these services. For these services,
each Fund pays a shareholder service fee equal to 0.25% of average net assets
attributable to Class C Shares of the Fund on an annualized basis. A Fund may
pay fees to the Distributor at a lesser rate, as agreed upon by the Board of
Trustees of the Trust and the Distributor. The Rule 12b-1 Plans authorize
payments to the Distributor as compensation for providing account maintenance
services to investors in the Class A, Class B and Class C Shares of the Fund,
including arranging for certain securities dealers or brokers, administrators
and others ("Recipients") to provide these services and paying compensation for
these services. Each Fund will bear its own costs of distribution with respect
to its Shares.
The services to be provided by Recipients may include, but are not limited to,
the following: assistance in the offering and sale of the Class A, Class B and
Class C Shares of the Funds and in other aspects of the marketing of the shares
to clients or prospective clients of the respective recipients; 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 to
investors in shares of a Fund as the Distributor or the Trust, on behalf of a
Fund, may reasonably request. The distribution services shall also include any
advertising and marketing services provided by or arranged by the Distributor
with respect to the Funds.
34
<PAGE>
The Distributor is required to provide a written report, at least quarterly to
the Board of Trustees of the Trust, specifying in reasonable detail the amounts
expended pursuant to the Rule 12b-1 Plans 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.
The initial term of the Rule 12b-1 Plans is one year and this 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 Trustees who are not "interested persons" of the Trust and
do not have a direct or indirect financial interest in the Rule 12b-1 Plans
("Rule 12b-1 Trustees") by votes cast in person at a meeting called for the
purpose of voting on the Rule 12b-1 Plans. The Rule 12b-1 Plans and Agreements
may be terminated at any time by the Trust or any Fund by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting Class
A or B Shares of the Trust or the affected Fund. The Rule 12b-1 Plans will
terminate automatically in the event of their assignment (as defined in the 1940
Act).
The Rule 12b-1 Plans may not be amended to increase materially the amount of the
Distributor's compensation to be paid by a Fund, unless such amendment is
approved by the vote of a majority of the outstanding voting securities of the
Fund (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 a Rule 12b-1 Plan. During the term of the Rule 12b-1 Plans, the selection and
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 Rule 12b-1 Plans, 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 a Rule 12b-1 Plan will be in writing and provide that:
(a) it may be terminated by the Trust or a Fund at any time upon sixty days'
written notice, without the payment of any penalty, by vote of a majority of the
respective Rule 12b-1 Trustees, or by vote of a majority of the outstanding
voting securities of the Trust or the affected Fund; (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.
The following table shows the distribution fees paid for Class A shares of the
Funds for the fiscal years ended April 30, 1998 and April 30, 1999. The Focus 30
Fund and Health & Biotechnology Fund commenced operations on July 12, 1999 and
July 15, 1999 respectively. The Cash Reserves Fund, Financial Services Fund, and
Utilities Fund, are expected to commence operations in January 2000.
Class A Distribution Fees
<TABLE>
<CAPTION>
Paid to Investment
Fund Professionals Retained by FDI
------------- ---------------
<S> <C> <C>
Growth Fund
April 30, 1998* $549.20 $487.28
April 30, 1999 $2,656.81 $1,595.25
Info-Tech & Communications Fund
April 30, 1998* $809.40 $620.63
April 30, 1999 $33,787.95 $20,190.48
Strategic Natural Resources Fund
April 30, 1998** $3,625.67 $3,149.26
April 30, 1999 $8,942.34 $5,429.90
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period October 23, 1997 through April 30, 1998.
35
<PAGE>
The following table shows the distribution fees paid and retained by FDI for
Class B shares of the Funds for the fiscal years ended April 30, 1998 and April
30, 1999. The Focus 30 Fund and Health & Biotechnology Fund commenced operations
July 12, 1999 and July 15, 1999, respectively. The Cash Reserves Fund, Financial
Services Fund, and Utilities Fund are expected to commence operations in January
2000.
Class B Distribution and Services Fees
<TABLE>
<CAPTION>
Distribution Fees Paid
to Investment Distribution Fees Shareholder Service
Fund Professionals Retained by FDI Fees Retained by FDI
------------- --------------- ---- ---------------
<S> <C> <C> <C> <C>
Growth Fund
April 30, 1999* $0 $111.13 $20.27 $0
Info-Tech & Communications Fund
April 30, 1999* $0 $26,078.91 $1,940.14 $0
Strategic Natural Resources Fund
April 30, 1999** $0 $475.52 $158.50 $0
</TABLE>
* Fiscal period September 16, 1998 through April 30, 1999.
** Fiscal period September 21, 1998 through April 30, 1999.
The following table shows the sales charge revenues collected, and retained by
FDI for the past two fiscal years.
<TABLE>
<CAPTION>
Sales Charge CDSC Revenue
Revenue
Amount Amount Amount Amount
Paid Retained Paid Retained
Fund to FDI by FDI to FDI by FDI
------ ------ ------ ------
<S> <C> <C> <C> >C
Growth Fund - Class A
April 30, 1998* $5,000 $0 $0 $0
April 30, 1999 $27,000 $0 $0 $0
Growth Fund - Class B
April 30, 1999** $2,472.10 $0 $228.91 $0
Info-Tech & Communications Fund -
<CAPTION>
Sales Charge CDSC Revenue
Revenue
Amount Amount Amount Amount
Paid Retained Paid Retained
Fund to FDI by FDI to FDI by FDI
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A
April 30, 1998* $48,000 $0 $0 $0
April 30, 1999 $1,872,000 $0 $0 $0
Info-Tech & Communications Fund -
Class B
April 30, 1999** $589,551 $0 $3,770.57 $0
Strategic Natural Resources Fund -
Class A
April 30, 1998*** $39,000 $0 $0 $0
36
<PAGE>
April 30, 1999 $113,000 $0 $0 $0
Strategic Natural Resources Fund -
Class B
April 30, 1999**** $13,768.29 $0 $975.50 $0
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period September 16, 1998 through April 30, 1999.
*** Fiscal period October 23, 1997 through April 30, 1998.
*** Fiscal period September 21, 1998 through April 30, 1999.
The following table shows amounts paid by each Fund under its Class A 12b-1
Plans during the fiscal year ended April 30, 1999. The Focus 30 Fund and Health
& Biotechnology Fund commenced operations July 12, 1999 and July 15, 1999,
respectively. The Cash Reserves Fund, Financial Services Fund, and the Utilities
Fund are expected to commence operations in January 2000.
<TABLE>
<CAPTION>
Compensation to Compensation to
Fund Underwriters Dealers
---- ------------ -------
<S> <C> <C>
Growth Fund $1,595 $2,657
Info-Tech & $20,190 $33,788
Communications Fund
Strategic Natural $5,430 $8,942
Resources Fund
</TABLE>
The following table shows amounts paid by each Fund under its Class B 12b-1
Plans during the fiscal year ended April 30, 1999. The Focus 30 Fund and Health
& Biotechnology Fund commenced operations July 12, 1999 and July 15, 1999,
respectively. The Cash Reserves Fund, the Financial Services Fund and the
Utilities Fund are expected to commence operations in January 2000.
<TABLE>
<CAPTION>
Interest
Carrying or
other
Compensation to Financing
Fund Sales Personnel Charges
---- --------------- -------
<S> <C> <C>
Growth Fund $20 $111
Info-Tech & $1,940 $26,079
Communications Fund
Strategic Natural $13 $475
Resources Fund
</TABLE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board of Trustees of the Trust, the
Adviser is responsible for making decisions with respect to the purchase and
sale of portfolio securities on behalf of the Funds. The Adviser is 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
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, consideration 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
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<PAGE>
Adviser or the Funds. It is not the policy of the Adviser 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 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 may receive research services in connection with
brokerage transactions, including designations in fixed price offerings.
The Adviser (and Sub-Adviser) 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 (or
Sub-Adviser) 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 (or Sub-Adviser) may be
relieved of expenses which it might otherwise bear. In some cases, research
services are generated by third parties but are provided to the Adviser (and
Sub-Adviser) by or through brokers.
Certain broker-dealers which provide quality execution services also furnish
research services to the Adviser (and Sub-Adviser). The Adviser (and
Sub-Adviser) have adopted brokerage allocation policies 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 (or Sub-Adviser) may assess the reasonableness of
commissions in light of the total brokerage and research services provided by
each particular broker. The Adviser (or Sub-Adviser) may also consider sales of
the Funds' Shares as a factor in the selection of broker-dealers.
Portfolio securities will not be purchased from or sold to the Adviser (or
Sub-Adviser), or the Distributor, or any affiliated person of any of them acting
as principal, except to the extent permitted by rule or order of the SEC.
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<PAGE>
For the fiscal period October 16, 1997 through April 30, 1998, the Funds paid
brokerage commissions as follows: $9,293 for the Growth Fund, $1,801 for the
Info-Tech & Communications Fund and $81,999 for the Strategic Natural Resources
Fund.
For the fiscal year ended April 30, 1999, the Funds paid brokerage commissions
as follows: $21,022 for the Growth Fund, $102,306 for the Info-Tech &
Communications Fund and $137,895 for the Strategic Natural Resources Fund.
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
WAIVERS OF INITIAL SALES CHARGE FOR CLASS A SHARES. The initial sales charge
Class A Shares of the Funds is 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 Advisor 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 Trust) on which
the investor has paid a front-end sales charge only; (10) purchases of Class A
Shares by clients of certain securities dealers offering programs in which the
client pays a separate fee to an advisor providing financial management or
consulting services, including WRAP fee programs; (11) purchases of Class A
Shares by certain fee paid investment advisers purchasing on behalf of their
clients; (12) purchases of Class A Shares made through certain fee-waived
programs sponsored by third parties; (13) Class A Shares issued in plans of
reorganization such as mergers, asset acquisitions and exchange offers to which
a Fund is a party; and, (14) purchases made through a broker-dealer or financial
intermediary which maintains a net asset value purchase program that enables the
Funds to realize certain economies of scale.
In addition, purchases may be made at net asset value by the following:
Investment Advisors or Financial Planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of such investment
advisors or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment advisor or
financial planner on the books and records of the broker or agent.
Retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in section 401(a), 403(b), or 457
of the Internal Revenue Code and "rabbi trusts".
The securities dealers offering WRAP fees or similar programs may charge a
separate fee for purchases and redemptions of Class A Shares. Neither the Fund,
the Advisor, nor the Distributor receives any part of the fees charged clients
of such securities dealers or financial advisors. To qualify for the purchase of
such Class A Shares, Fund Employees and other persons listed in section (2) must
provide the Transfer Agent with a letter stating that the purchase is for their
own investment purposes only and that the shares will not be resold except to
the Funds.
LETTER OF INTENT. In submitting a Letter of Intent to purchase Class A 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
39
<PAGE>
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 Class A 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 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 Class A
Shares, but if the investor's purchases of Class A 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 of 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, Class A 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, Class A 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
40
<PAGE>
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.
In-Kind. 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 ("NYSE") 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.
WAIVERS FOR CLASS C SHARES. Each fund may waive, where applicable, the CDSC on
redemption: (1) following the death of a shareholder, (2) if a shareholder
becomes unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in death or be of long-continued and indefinite duration, or (3) when a
total or partial redemption is made in connection with a distribution from IRAs
or other qualified retirement plans after attaining age 59-1/2.
The Distributor may waive the CDSC on the redemption of Class C shares of each
Fund owned by directors, trustees, officers and full-time employees of the
Trust, the Adviser, or the Distributor, including members of the immediate
families of such individuals and employee benefit plans established by such
entities. The funds may also waive the CDSC on the redemption of Class C shares
of each fund owned by banks, bank trust departments, savings and loan
associations, federal and state credit unions, trust companies, investment
advisers and broker-dealers, either in their fiduciary capacities or for their
own accounts. These institutions may charge fees to clients for whose accounts
they purchase shares at net asset value or for which the CDSC has been waived.
All CDSC's imposed on redemptions of each fund are paid to the distributor.
41
<PAGE>
CLASS D SHARES OF THE FOCUS 30 FUND. Class D Shares of the Focus 30 Fund are
available for purchase by the following persons: (1) shareholders who were
shareholders of the ASM Index 30 Fund at the time of the reorganization of the
ASM Fund into the Focus 30 Fund and certain related accounts of those
shareholders, (2) employees, and certain related accounts of employees, of
Orbitex Financial Services Group, Inc. ("OFSG") and its affiliates; and (3)
certain institutional investors. "Related accounts" include: the shareholder,
one of the shareholder's immediate family members, a trust or individual
retirement account or self-employed retirement plan for the benefit of the
shareholder or the shareholder's immediate family members, and the estate of the
shareholder or the shareholder's immediate family.
SHAREHOLDER SERVICES
Systematic Withdrawal Program. A shareholder owning or purchasing shares of any
Fund having a total value of $10,000 or more may participate in a systematic
withdrawal program providing regular monthly or quarterly payments. An
application form containing details of the Systematic Withdrawal Program is
available upon request from the Funds' transfer agent.
The Program is voluntary and may be terminated at any time by the shareholders.
Income dividends and capital gain distributions on shares of the Funds held in a
Systematic Withdrawal Program are automatically reinvested in additional shares
of the relevant Fund at net asset value. A Systematic Withdrawal Program is not
an annuity and does not and cannot protect against loss in declining markets.
Amounts paid to a shareholder from the Systematic Withdrawal Program represents
the proceeds from redemptions of Fund shares, and the value of the shareholder's
investment in a Fund will be reduced to the extent that the payments exceed any
increase in the aggregate value of the shareholder's shares (including shares
purchased through reinvestment of dividends and distributions). If a shareholder
receives payments that are greater than the appreciation in value of his or her
shares, plus the income earned on the shares, the shareholder may eventually
withdraw his or her entire account balance. This will occur more rapidly in a
declining market. For tax purposes, depending upon the shareholder's cost basis
and date of purchase, each withdrawal will result in a capital gain or loss. See
"Dividends, Distributions and Taxes" in this SAI and in the Funds' Prospectus.
The Funds offer certain shareholder services, which are designed to facilitate
investment in their shares. Each of the options is described in the Funds'
Prospectus. All of these special services may be terminated by either the Funds
or the shareholder without any prior written notice.
Systematic Exchange Program. The Systematic Exchange Program allows you to make
regular, systematic exchanges from one Orbitex Fund account into another Orbitex
Fund account. By setting up the program, you authorize the Fund and its agents
to redeem a set dollar amount or number of shares from the first account and
purchase shares of a second Fund. An exchange transaction is a sale and a
purchase of shares for federal income tax purposes and may result in a capital
gain or loss.
To participate in the Systematic Exchange Program, you must have an initial
account balance of $10,000 in the first account and at least $1,000 in the
second account. Exchanges may be made on any day or days of your choice. If the
amount remaining in the first account is less than the exchange amount you
requested, then the remaining amount will be exchanged. At such time as the
first account has a zero balance, your participation in the program will be
terminated. You may also terminate the program by calling or writing the Fund.
Once participation in the program has been terminated for any reason, to
reinstate the program you must do so in writing; simply investing additional
funds will not reinstate the program.
Automatic Account Builder. An investor may arrange to have a fixed amount of
$100 or more automatically invested in shares of a Fund monthly by authorizing
his or her bank account to be debited to invest specified dollar amounts in
shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to Automatic Account
Builder participants.
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<PAGE>
Further information about these programs and an application form can be obtained
from the Transfer Agent.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of a Fund will be determined for each class of
shares. The net asset value per share of a given class of shares of a Fund is
determined by calculating the total value of the Fund's assets attributable to
such class of shares, deducting its total liabilities attributable to such class
of shares in conformance with the provisions of the plan adopted by the Fund in
accordance with Rule 18f-3 under the 1940 Act., and dividing the result by the
number of shares of such class outstanding. The net asset value of shares of
each class of each Fund, other than the Cash Reserves Fund, is normally
calculated as of the close of trading on the NYSE on every day the NYSE is open
for trading. The NYSE is open Monday through Friday except on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value of the Cash Reserves Fund is normally
calculated at 3:00 p.m. Eastern time on each day that the Federal Reserve Bank
of New York is open. The Federal Reserve Bank of New York is open Monday through
Friday except on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
The net asset value per share of the different classes of a fund's shares is
expected to be substantially the same; from time to time, however, the per share
net asset value of the different classes of shares may differ.
For each Fund, other than the Cash Reserves Fund, 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 on the
basis of dealer supplied quotations or by pricing system selected by the Adviser
and approved by the Board of Trustees of the Trust. 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.
Short-term debt securities with a remaining maturity of 60 days or less are
amortized to maturity, provided such valuations represent par value.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above, are
valued as determined in good faith in accordance with procedures approved by the
Board of Trustees of the Trust.
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 NYSE 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 NYSE once on each day on which the NYSE 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 in accordance with procedures approved by the Board of Trustees of
the Trust.
The securities in the Cash Reserve Fund's portfolio are valued at their
amortized cost which does not take into account unrealized gains or losses on
securities. This method involves initially valuing a security at its cost and
thereafter assuming a constant amortization to maturity of any premium paid or
accreting discount. The amortized cost
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<PAGE>
method minimizes changes in the market value of the Fund's portfolio securities
and is intended to help maintain a stable price of $1.00 per share; there can be
no assurance, however, that the net asset value of the Cash Reserves Fund will
remain at $1.00.
TAXES
Each Fund intends to qualify as a "regulated investment company" ("RIC") under
Subchapter M of the Internal Revenue 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) a Fund must distribute
to its shareholders 90% of its ordinary income and net short-term capital gains;
and (c) 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 at
least 98% of its net capital gain (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 net capital gain are taxable as
such to shareholders in the year in which they are received except dividends
declared in October, November and December to the shareholders of record on a
specified date in such a month and paid in January of the following year are
taxable in the previous year.
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 gain reflects a Fund's excess of net long-term gains
over its net short-term losses. Each Fund must designate distributions of net
capital gain and must notify shareholders of this designation 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 gain.
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 Internal
Revenue 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
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<PAGE>
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 Strategic Natural Resources Fund intends to meet the requirements of the
Internal Revenue Code to "pass through" to its shareholders foreign income taxes
paid, but there can be no assurance that it will be able to do so. Shareholders
of the Strategic Natural Resources Fund 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 Internal Revenue Code, will not be affected by any such "pass through" of
foreign tax credits.
If, in any taxable year, a Fund should not qualify as a RIC under the Internal
Revenue Code: (1) that Fund would be taxed at normal corporate rates on the
entire amount of its taxable income without deduction for dividends paid 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 gain dividends), and may qualify for the deduction for
dividends received by corporations.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Fund may invest in the stock of
foreign companies that may be treated as "passive foreign investment companies"
("PFICs") under the Internal Revenue Code. Certain other foreign corporations,
not operated as investment companies, may also 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 unless the Fund makes a mark-to-market
election. Because it is not always possible to identify a foreign issuer as a
PFIC in advance of making the investment, the Fund's will elect to do
mark-to-market and identified PFIC to avoid the PFIC tax.
If a Fund purchases shares in certain foreign passive investment entities
described in the Internal Revenue Code as passive foreign investment companies
("PFIC"), the Fund will be subject to U.S. federal income tax on a portion of
any "excess distribution" (the Fund's ratable share of distributions in any year
that exceeds 125% of the average annual distribution received by the Fund in the
three preceding years or the Fund's holding period, if shorter, and any gain
from the disposition of such shares) even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund in respect of deferred taxes
arising from such "excess distributions." If the Fund were to invest in a PFIC
and elect to treat the PFIC as a "qualified electing fund" under the Internal
Revenue Code (and if the PFIC were to comply with certain reporting
requirements), in lieu of the foregoing requirements the Fund would be required
to include in income each year its pro rata share of the PFIC's ordinary
earnings and net realized capital gains, whether or not such amounts were
actually distributed to the Fund.
Pursuant to legislation enacted on August 5, 1997 any taxpayer holding shares of
"marketable" PFICs may make an election to mark that stock to market at the
close of the taxpayer's taxable year. A Fund making an irrevocable election will
mark its PFICs to market at taxable year-end for income tax purposes and at
October 31 for purposes of the excise tax minimum distribution requirements of
Code Section 4982. This provision is effective for taxable years of U.S. persons
beginning after December 31, 1997.
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
45
<PAGE>
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.
Costs incurred by the Growth Fund, Info-Tech & Communications Fund and Strategic
Natural Resources Fund in connection with their organization, estimated at
$15,000 for, will be amortized on a straight line basis over a five year period
beginning at the commencement of operations of each Funds. In the event that any
of the initial shares of the Funds are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of initial shares outstanding at the time
of such redemption. Costs for all other funds will not be amortized.
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. Average annual total return will
be calculated separately for Class A, Class B and Class D Shares. 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:
1/n
T=(ERV/P) - 1
Where:
T = average annual total return.
P = a hypothetical initial payment of $1,000.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1,5, or 10
year periods at the end of the1, 5, or 10 year
periods (or fractional portion).
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):
C = (ERV/P) - 1
Where:
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<PAGE>
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 Calculations.
In addition to providing cumulative total return information, the Cash Reserves
Fund may also illustrate its performance by providing information concerning its
yield and effective yield. Yield and effective yield will be calculated
separately for each class of shares of the Fund.
The Cash Reserve Fund's yield is computed by (a) determining the net change in
the value of a hypothetical pre-existing account in the Fund having a balance of
one share at the beginning of a seven calendar day period for which yield is to
be quoted; (b) dividing the net change by the value of the account at the
beginning of the period to obtain the base period return; and (c) annualizing
the results (I.E., multiplying the base period return by 365/7).
In addition, the Cash Reserves Fund may calculate a compound effective
annualized yield by determining the net change in the value of a hypothetical
pre-existing account in the Fund having a balance of one share at the beginning
of a seven calendar day period for which yield is to be quoted according to the
following formula:
365/7
Effective Yield = [(Base Period return + 1) - 1
The net change in the value of the account reflects the value of additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation.
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.
47
<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 a Fund's holdings.
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
PricewaterhouseCoopers 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 LLP, 200 Park Avenue, New York, New York 10166, which serves
as Counsel to the Trust.
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."
FINANCIAL STATEMENTS
Following are (1) the Schedules of Investments for the Orbitex Group of Funds as
of April 30, 1999, (2) the Statements of Assets and Liabilities as of April 30,
1999, (3) the Statements of Operations as of April 30, 1999, (4) the Statements
of Changes in Net Assets as of April 30, 1999, (5) the Financial Highlights as
of April 30, 1999 and (6) the Notes to the Financial Statements.
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<PAGE>
PART C. OTHER INFORMATION
Item 23. FINANCIAL STATEMENTS AND EXHIBITS
(a) Declaration of Trust of Orbitex Group of Funds (the "Trust), dated
December 13, 1996, previously filed in the Registration Statement on
January 29, 1997 is incorporated herein by reference.
(b) By-Laws of the Trust previously filed in the Registration Statement
on January 29, 1997 are incorporated herein by reference.
(c) Not applicable.
(d)(1) Investment Advisory Agreements, dated June 1, 1997 and renewed
March 9, 1999, by and between the Trust and Orbitex Management,
Inc. on behalf of the Orbitex Growth Fund, the Orbitex Info-Tech &
Communications Fund and the Orbitex Strategic Natural Resources
Fund and Orbitex Management, Inc. previously filed as Item 23(d)(1)
in Post-Effective Amendment No. 6 is incorporated herein by
reference.
(2) Investment Advisory Agreement, dated June 29, 1999, by and between
the Trust and Orbitex Management, Inc. on behalf of the Orbitex
Health & Biotechnology Fund is filed herein.
(3) Investment Advisory Agreement, dated June 29, 1999, by and between
the Trust and Orbitex Management, Inc. on behalf of the Orbitex
Cash Reserves Fund, is filed herein.
(4) Investment Advisory Agreement, dated June 29, 1999, by and between
the Trust and Orbitex Management, Inc. on behalf of the Orbitex
Focus 30 Fund, is filed herein.
(5) Investment Advisory Agreement by and between the Trust and Orbitex
Management, Inc. on behalf of the Orbitex Financial Services Fund
and the Orbitex Utilities Fund will be filed by subsequent
amendment.
(e)(1) Distribution Agreement, dated June 1, 1997, between the Trust and
Funds Distributor, Inc. previously filed as Item 23(e)(1) in
Post-Effective Amendment No. 6 is incorporated herein by reference.
(2) Form of Distribution Sub-Agreement previously filed in Pre-Effective
Amendment No. 2 to the Registration Statement dated September 26,
1997 is incorporated herein by reference.
(f) Not applicable.
(g)(1) Custodian Contract, dated May 14, 1997, by and between the Trust and
State Street Bank and Trust Company on behalf of the Orbitex Growth
Fund, the Orbitex Info-Tech & Communication Fund and the
Orbitex Strategic Natural Resources Fund previously filed as Item
(g)(1) in Post-Effective Amendment No. 6 is incorporated herein by
reference.
(h)(1) Transfer Agency and Service Agreement, dated May 14, 1997, by and
between the Trust and State Street Bank and Trust Company on behalf
of the Orbitex Growth Fund, the Orbitex Info-Tech & Communication
Fund and the Orbitex Strategic Natural Resources Fund previously
filed as Item (h)(1) in Post-Effective Amendment No. 6 is
incorporated herein by reference.
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<PAGE>
(2) Transfer Agency and Service Agreement on behalf of the Orbitex
Health & Biotechnology Fund, the Orbitex Cash Reserves Fund, the
Orbitex Focus 30 Fund, the Orbitex Financial Services Fund and the
Orbitex Utilities Fund will be filed by subsequent amendment.
(3) Administration Agreement, dated May 14, 1997, by and between the
Trust and State Street Bank and Trust Company on behalf of the
Orbitex Growth Fund, the Orbitex Info-Tech & Communication Fund and
the Orbitex Strategic Natural Resources Fund previously filed as
Item (h)(3) in Post-Effective Amendment No. 6 is incorporated
herein by reference.
(4) Administration Agreement on behalf of the Orbitex Health &
Biotechnology Fund, the Orbitex Cash Reserves Fund, the Orbitex
Focus 30 Fund, the Orbitex Financial Services Fund and the Orbitex
Utilities Fund will be filed by subsequent amendment.
(5) Form of Individual Retirement Account Agreement previously filed in
Pre-Effective Amendment No. 2 to the Registration Statement dated
September 26, 1997 is incorporated herein by reference.
(i)(1) Opinion and Consent of Rogers & Wells regarding the legality of the
securities being registered previously filed in Pre-Effective
Amendment No. 2 to the Registration Statement dated September 26,
1997 is incorporated herein by reference.
(2) Consent of Rogers & Wells to continued validity of the September 26,
1997 opinion letter previously filed in Post-Effective Amendment No.
4 to the Registration Statement dated August 19, 1998 is
incorporated herein by reference.
(3) Consent of Rogers & Wells regarding the legality of the securities
of the Orbitex Health & Biotechnology Fund, the Orbitex Cash
Reserves Fund and the Orbitex Focus 30 Fund previously filed as
Item (i)(3) in Post-Effective Amendment No. 6 is incorporated
herein by reference.
(j)(1) Consent of Independent Accountants to be filed by subsequent
amendment.
(2) Power of Attorney, dated March 29, 1999, previously filed as Item
(j)(2) in Post-Effective Amendment No. 6 is incorporated herein by
reference.
(3) Schedule for Computation of Performance Quotation previously filed
in Post-Effective Amendment No. 1 to the Registration Statement
dated March 27, 1998 is incorporated herein by reference.
(k) Not applicable.
(l) Form of Shareholder Subscription Agreement by and between Orbitex
Management, Inc. and the Trust on behalf of each Fund previously
filed in Pre-Effective Amendment No. 2 to the Registration
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<PAGE>
Statement dated September 26, 1997 is incorporated herein by
reference.
(m)(1) Class A Distribution Plan and Agreement Pursuant to Rule 12b-1 under
the Investment Company Act of 1940, dated June 1, 1997, and
amended January 21, 1998 previously filed as Item (m)(1) in
Post-Effective Amendment No. 6
(2) Amended Class B Distribution Plan and Agreement Pursuant to Rule
12b-1 under the Investment Company Act of 1940, amended as of
June 29, 1999 is filed herein.
(3) Shareholder Services Plan and Shareholder Servicing Agreement
(Non-Rule 12b-1 Plan) approved May 27, 1998 previously filed in
Post-Effective Amendment No. 4 to the Registration Statement dated
August 19, 1998 is incorporated herein by reference.
(n) Financial Data Schedule to be filed by subsequent Amendment.
(o) Revised Rule 18f-3 Plan for Multiple Classes of Shares dated
June 29, 1999, is filed herein.
Item 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.
Item 25. INDEMNIFICATION
Reference is made to Article VI of the Registrant's Amended
Declaration of Trust previously filed in the Registration Statement
on January 29, 1997.
The Registrant will indemnify its Trustees and officers to the
extent permitted by law. Indemnification may not be made if the
Trustee or officer has incurred liability by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties in the conduct of his office ("Disabling Conduct"). The means
of determining whether indemnification shall be made are (1) a final
decision on the merits by a court or other body before whom the
proceeding is brought that the Trustees or officer was not liable by
reason of Disabling Conduct, or (2) in the absence of such a
decision, a reasonable determination, based on a review of the
facts, that the Trustee or officer was not liable by reason of
Disabling Conduct. Such latter determination may be made either by
(a) vote of a majority of Trustees who are neither interested
persons (as defined in the Investment Company Act of 1940) nor
parties to the proceeding or (b) independent legal counsel in a
written opinion. The advancement of legal expenses may not occur
unless the Trustee or officer agrees to repay the advance (if it is
determined that he is not entitled to the indemnification) and one
of three other conditions is satisfied: (1) he provides security for
his agreement to repay; (2) the Registrant is insured against loss
by reason of lawful advances; (3) the Trustees who are not
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<PAGE>
interested persons and are not parties to the proceedings, or
independent counsel in a written opinion, determine that there is a
reason to believe that the Trustee or officer will be found entitled
to indemnification.
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.
Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
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 "Management" and to the section of the Statement of
Additional Information captioned "Investment Management and Other
Services." The information required by this Item 26 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).
Item 27. PRINCIPAL UNDERWRITER
(a) AmeriMutual Funds Distributor, Inc. (the "Distributor") acts as
distributor for the Orbitex Group of Funds. AmeriMutual Funds
Distributor, Inc. is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers, AmeriMutual Funds Distributor,
Inc. is located at 150 Motor Parkway, Hauppauge, NY 11788-0132.
AmeriMutual Funds Distributor, Inc. is an indirect wholly-owned
subsidiary of Orbitex Financial Services Group, Inc.
(b) The following is a list of the executive officers, directors and
partners of AmeriMutual Funds Distributor, Inc.:
Director Richard E. Stierwalt
President J. Christopher Klutch
Chief Financial Officer Vali Nasr
Vice President Nathan O'Steen
(c) Not Applicable.
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Item 28. 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 disbursement made to shareholders. Orbitex Management, Inc.,
pursuant to its 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 Sub-Administration Agreement, 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 Plan and Agreement adopted to Rule 12b-1 under
the 1940 Act.
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS.
Not applicable.
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<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, and Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the State of New York on the 25th day of October, 1999.
ORBITEX GROUP OF FUNDS
(Registrant)
By: ______________________________
James L. Nelson, President
Pursuant to the requirements of the Securities Act of 1933, as amended this
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Otto J. Felber* Trustee October 25, 1999
Otto J. Felber
Trustee, President, October 25, 1999
Assistant Treasurer &
Assistant Secretary
James L. Nelson
/s/ M. Fyzul Khan* Secretary October 25, 1999
M. Fyzul Khan
/s/ Kimberly S. Ratz* Treasurer October 25, 1999
Kimberly S. Ratz
/s/Ronald S. Altbach* Trustee October 25, 1999
Ronald S. Altbach
/s/Thomas T. Bachmann* Trustee October 25, 1999
Thomas T. Bachmann
/s/ Richard E. Stierwalt* Trustee and Assistant October 25, 1999
Secretary
Richard E. Stierwalt
/s/John D. Morgan* Trustee October 25, 1999
John D. Morgan
/s/Stephen H. Hamrick* Trustee October 25, 1999
Stephen H. Hamrick
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<PAGE>
* By:
James L. Nelson, Attorney -in-Fact
</TABLE>
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<PAGE>
EXHIBIT LIST
Exhibit
Number Description
- ------- -----------
Exhibit 1 Investment Advisory Agreements, dated June 29, 1999 by and
between the Trust and Orbitex Management, Inc. on behalf of
the Orbitex Health & Biotechnology Fund.
Exhibit 2 Investment Advisory Agreement, dated June 29, 1999, by and
between the Trust and Orbitex Management, Inc. on behalf of
the Orbitex Cash Reserves Fund.
Exhibit 3 Investment Advisory Agreement, dated June 29, 1999, by and
between the Trust and Orbitex Management, Inc. on behalf of
the Orbitex Focus 30 Fund.
Exhibit 4 Amended Class B Distribution Plan and Agreement Pursuant to Rule
12b-1 under the Investment Company Act of 1940, amended as of
June 29, 1999.
Exhibit 5 Revised Rule 18f-3 Plan for Multiple Classes of Shares dated
June 29, 1999.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 29th day of June, 1999 between Orbitex Group of
Funds, a Delaware business trust (the "Trust"), and Orbitex Management, Inc., a
New York corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, each having its own investment objective or objectives,
policies and limitations;
WHEREAS, the Trust intends to offer shares in several series, one of which
is designated as the Orbitex Health & Biotechnology Fund (the "Fund"), and the
Trust may offer shares of one or more additional series in the future;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory and administrative services to the Trust with respect to the Fund in
the manner and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, The parties hereto agree as follows:
1. SERVICES OF THE ADVISER.
1.1 INVESTMENT ADVISORY SERVICES. The Adviser shall act as the investment
adviser to the Fund and, as such, shall (i) obtain and evaluate such information
relating to the economy, industries, business, securities markets and securities
as it may deem necessary or useful in discharging its responsibilities
hereunder, (ii) formulate a continuing program for the investment of the assets
of the Fund in a manner consistent with its investment objective(s), policies
and restrictions, and (iii) determine from time to time securities to be
purchased, sold, retained or lent by the Fund, and implement those decisions,
including the selection of entities with or through which such purchases, sales
or loans are to be effected; provided, that the Adviser will place orders
pursuant to its investment determinations either directly with the issuer or
with a broker or dealer, and if with a broker or dealer, (a) will attempt to
obtain the best price and execution of its orders, and (b) may nevertheless in
its discretion purchase and sell portfolio securities from and to brokers who
provide the Adviser with research, analysis, advice and similar services and pay
such brokers in return a higher commission or spread than may be charged by
other brokers.
The Trust hereby authorizes any entity or person associated with the
Adviser, which is a member of national securities exchange, to effect any
transaction on the exchange for the account of the Trust which is permitted by
Section 11(a) of the Securities Exchange Act of 1934, as amended, and Rule
11a2-2(T) thereunder, and the Trust hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(a)(iv).
The Adviser shall carry out its duties with respect to the Fund's
investments in accordance with applicable law and the investment objectives,
policies and restrictions set forth in the
<PAGE>
Fund's then-current Prospectus and Statement of Additional Information, and
subject to such further limitations as the Trust may from time to time impose by
written notice to the Adviser.
1.2 ADMINISTRATIVE SERVICES. The Adviser shall manage the Trust's
business and affairs and shall provide such services required for effective
administration of the Trust as are not provided by employees or other agents
engaged by the Trust; provided, that the Adviser shall not have any obligation
to provide under this Agreement any direct or indirect services to the Trust's
shareholders, any services related to the distribution of Trust shares, or any
other services which are the subject of a separate agreement or arrangement
between the Trust and the Adviser. Subject to the foregoing, in providing
administrative services hereunder, the Adviser shall:
1.2.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without cost to
the Trust, or pay the cost of, such office space, office equipment and office
facilities as are adequate for the Trust's need.
1.2.2 PERSONNEL. Provide, without remuneration from or other cost to
the Trust, the services of individuals competent to perform all of the Trust's
executive, administrative and clerical functions which are not performed by
employees or other agents engaged by the Trust or by the Adviser acting in some
other capacity pursuant to a separate agreement or arrangement with the Trust.
1.2.3 AGENTS. Assist the Trust in selecting and coordinating the
activities of the other agents engaged by the Trust, including the Trust's
shareholder servicing agent, custodian, administrator, independent auditors and
legal counsel.
1.2.4 TRUSTEE AND OFFICERS. Authorize and permit the Adviser's
directors, officers and employees who may be elected or appointed as Trustees or
officers of the Trust to serve in such capacities, without remuneration from or
other cost to the Trust.
1.2.5 BOOKS AND RECORDS. Assure that all financial, accounting and
other records required to be maintained and preserved by the Trust are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations.
1.2.6 REPORTS AND FILINGS. Assist in the preparation of (but not pay
for) all periodic reports by the Trust to its shareholders and all reports and
filings required to maintain the registration and qualification of the Trust and
Trust shares, or to meet other regulatory or tax requirements applicable to the
Trust, under federal and state securities and tax laws.
2. EXPENSES OF THE TRUST.
2.1 EXPENSES TO BE PAID BY ADVISER. The Adviser shall pay all salaries,
expenses and fees of the officers, Trustees and employees of the Trust who are
officers, directors or employees of the Adviser.
In the event that the Adviser pays or assumes any expenses of the
Trust not required to be paid or assumed by the Adviser under this Agreement,
the Adviser shall not be obligated hereby to pay or assume the same or any
similar expense in the future; provided, that nothing herein contained shall be
deemed to relieve the Adviser of any obligation to the Trust under any separate
agreement or arrangement between the parties.
2.2 EXPENSES TO BE PAID BY THE TRUST. The Trust shall bear all expenses
of its operation, except those specifically allocated to the Adviser under this
Agreement or under any separate agreement
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between the Trust and the Adviser. Subject to any separate agreement or
arrangement between the Trust and the Adviser, the expenses hereby allocated to
the Trust, and not to the Adviser, include but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property.
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent engaged by
the Trust to service shareholder accounts.
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in
type, printing and distributing reports and other communications to
shareholders.
2.2.4 PROSPECTUSES. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of the Trust's Prospectus
and Statement of Additional Information and any supplements thereto and of
supplying them to shareholders.
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing the
Trust's net asset value per share, including any equipment or services obtained
for the purpose of pricing shares or valuing the Trust's investment portfolio.
2.2.6 COMMUNICATIONS. All charges for equipment or services used for
communications between the Adviser or the Trust and any custodian, shareholder
servicing agent, portfolio accounting services agent, or other agent engaged by
the Trust.
2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of the Trust's legal counsel and independent accountants.
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees other
than those affiliated with the Adviser, all expenses incurred in connection with
such unaffiliated Trustees' services as Trustees, and all other expenses of
meetings of the Trustees and committees of the Trustees.
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitations therefor.
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust under the Act and the
registration of the Trust's shares under the Securities Act of 1933, as amended
(the "1933 Act"), including all fees and expenses incurred in connection with
the preparation, setting in type, printing, and filing of any Registration
Statement, Prospectus and Statement of Additional Information under the 1933 Act
or the Act, and any amendments or supplements that may be made from time to
time.
2.2.11 STATE REGISTRATION FEES. All fees and expenses of taking
required action to permit the offer and sale of the Trust's shares under
securities laws of various states or jurisdictions, and of registration and
qualification of the Trust under all other laws applicable to the Trust or its
business activities (including registering the Trust as a broker-dealer, or any
officer of the Trust or any person as agent or salesperson of the Trust in any
state).
2.2.12 CONFIRMATIONS. All expenses incurred in connection with the
issue and transfer of Trust shares, including the expenses of confirming all
share transactions.
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2.2.13 BONDING AND INSURANCE. All expenses of bond, liability, and
other insurance coverage required by law or regulation or deemed advisable by
the Trustees of the Trust, including, without limitation, such bond, liability
and other insurance expenses that may from time to time be allocated to the
Trust in a manner approved by its Trustees.
2.2.14 BROKERAGE COMMISSIONS. All brokers' commissions and other
charges incident to the purchase, sale or lending of the Trust's portfolio
securities.
2.2.15 TAXES. All taxes or governmental fees payable by or with
respect to the Trust to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes.
2.2.16 TRADE ASSOCIATION FEES. All fees, dues and other expenses
incurred in connection with the Trust's membership in any trade association or
other investment organization.
2.2.17 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring and
extraordinary expenses as may arise including the costs of actions, suits, or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees and agents.
3. ADVISORY FEE.
As compensation for all services rendered, facilities provided and expenses
paid or assumed by the Adviser under this Agreement, the Fund shall pay the
Adviser on the last day of each month, or as promptly as possible thereafter, a
fee calculated by applying a monthly rate, based on the following annual
percentage rate, to the Fund's average daily net assets for the month: 0.75%.
4. RECORDS.
4.1 TAX TREATMENT. The Adviser shall maintain, or arrange for others to
maintain, the books and records of the Trust in such a manner that treats the
Fund as a separate entity for federal income tax purposes.
4.2 OWNERSHIP. All records required to be maintained and preserved by the
Trust pursuant to the provisions or rules or regulations of the Securities and
Exchange Commission under Section 31(a) of the Act and maintained and preserved
by the Adviser on behalf of the Trust are the property of the Trust and shall be
surrendered by the Adviser promptly on request by the Trust; provided, that the
Adviser may at its own expense make and retain copies of any such records.
5. REPORTS TO ADVISER.
The Trust shall furnish or otherwise make available to the Adviser such
copies of the Trust's prospectus, Statement of Additional Information, financial
statements, proxy statements, reports and other information relating to its
business and affairs as the Adviser may, at any time or from time to time,
reasonably require in order to discharge its obligations under this Agreement.
6. REPORTS TO THE TRUST.
The Adviser shall prepare and furnish to the Trust such reports,
statistical data and other information in such form and at such intervals as the
Trust may reasonably request.
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7. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the Adviser or any
affiliated person of the Adviser to render investment management and
administrative services to other investment companies, to act as investment
adviser or investment counselor to other persons, firms or corporations, or to
engage in other business activities.
8. LIMITATION OF LIABILITY OF ADVISER AND ITS PERSONNEL.
Neither the Adviser nor any director, officer or employee of the Adviser
performing services for the Trust at the direction or request of the Adviser in
connection with the Adviser's discharge of its obligations hereunder shall be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with any matter to which this Agreement relates, and the
Adviser shall not be responsible for any action of the Trustees of the Trust in
following or declining to follow any advice or recommendation of the Adviser;
PROVIDED, that nothing herein contained shall be construed (i) to protect the
Adviser against any liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of the Adviser's duties, or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement, or (ii) to protect any director, officer or employee of the Adviser
who is or was a Trustee or officer of the Trust against any liability of the
Trust or its shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office with the Trust.
9. EFFECT OF AGREEMENT.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or its By-Laws or any applicable
law, regulation or order to which it is subject or by which it is bound, or to
relieve or deprive the Trustees of the Trust of their responsibility for and
control of the conduct of the business and affairs of the Trust.
10. TERM OF AGREEMENT.
The term of this Agreement shall begin on the date first above written, and
unless sooner terminated as hereinafter provided, this Agreement shall remain in
effect for a period of two years from the date of this Agreement. Thereafter,
this Agreement shall continue in effect with respect to the Fund from year to
year, subject to the termination provisions and all other terms and conditions
hereof; PROVIDED, such continuance with respect to a Fund is approved at least
annually by vote of the holders of a majority of the outstanding voting
securities of the Fund or by the Trustees of the Trust; PROVIDED, that in either
event such continuance is also approved annually by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of either party hereto. The Adviser shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment thereof.
11. AMENDMENT OR ASSIGNMENT OF AGREEMENT.
Any amendment to this Agreement shall be in writing signed by the parties
hereto; PROVIDED, that no such amendment shall be effective unless authorized
(i) by resolution of the Trustees of the Trust, including the vote or written
consent of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of either party hereto, and (ii) by vote of a
majority of the outstanding
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voting securities of the Fund affected by such amendment. This Agreement shall
terminate automatically and immediately in the event of its assignment.
12. TERMINATION OF AGREEMENT.
This Agreement may be terminated at any time by either party hereto,
without the payment of any penalty, upon sixty (60) days' prior written notice
to the other party; PROVIDED, that in the case of termination by the Fund, such
action shall have been authorized (i) by resolution of the Trust's Board of
Trustees, including the vote or written consent of Trustees of the Trust who are
not parties to this Agreement or interested persons of either party hereto, or
(ii) by vote of majority of the outstanding voting securities of the Fund.
13. USE OF NAME.
The Trust is named the Orbitex Group of Funds and the Fund may be
identified, in part, by the name "Orbitex." The Adviser hereby grants to the
Trust a nonexclusive right and license to use the Orbitex name and as part of
the name of the Trust and the Fund only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the Adviser's
business as adviser or any extension, renewal or amendment thereof remain in
effect. The Trust agrees that it shall acquire no interest in the name
"Orbitex," that all uses thereof by the Trust shall inure to the benefit of the
Adviser and that it shall not challenge the validity or Adviser's ownership
thereof.
14. DECLARATION OF TRUST.
The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust's Declaration of Trust and
agrees that the obligations assumed by the Trust or the Fund, as the case may
be, pursuant to this Agreement shall be limited in all cases to the Trust or the
Fund, as the case may be, and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser understands
that the rights and obligations of any Fund under the Declaration of Trust are
separate and distinct from those of any and all other Funds. The Adviser further
understands and agrees that no Fund of the Trust shall be liable for any claims
against any other Fund of the Trust and that the Adviser must look solely to the
assets of the pertinent Fund of the Trust for the enforcement or satisfaction of
any claims against the Trust with respect to that Fund.
15. This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
16. INTERPRETATION AND DEFINITION OF TERMS.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the Act
shall be resolved by reference to such term or provision of the Act and to
interpretation thereof, if any, by the United States courts, or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested persons," "assignment" and "affiliated person," as used
in this Agreement shall have the meanings assigned to them by Section 2(a) of
the Act. In addition, when the effect of a requirement of the Act reflected in
any provision of this Agreement is modified, interpreted or relaxed by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or
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of general application, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
17. CAPTIONS.
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date and year
first above written.
ORBITEX GROUP OF FUNDS on behalf of its
Orbitex Health & Biotechnology Fund
By:
--------------------------------------
James L. Nelson
President and Chief Executive Officer
ORBITEX MANAGEMENT, INC.
By:
--------------------------------------
Richard E. Steirwalt
President and Chief Executive Officer
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 29th day of June, 1999 between Orbitex Group of
Funds, a Delaware business trust (the "Trust"), and Orbitex Management, Inc., a
New York corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, each having its own investment objective or objectives,
policies and limitations;
WHEREAS, the Trust intends to offer shares in several series, one of which
is designated as the Orbitex Cash Reserve Fund (the "Fund"), and the Trust may
offer shares of one or more additional series in the future;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory and administrative services to the Trust with respect to the Fund in
the manner and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. SERVICES OF THE ADVISER.
1.1 INVESTMENT ADVISORY SERVICES. The Adviser shall act as the investment
adviser to the Fund and, as such, shall (i) obtain and evaluate such information
relating to the economy, industries, business, securities markets and securities
as it may deem necessary or useful in discharging its responsibilities
hereunder, (ii) formulate a continuing program for the investment of the assets
of the Fund in a manner consistent with its investment objective(s), policies
and restrictions, and (iii) determine from time to time securities to be
purchased, sold, retained or lent by the Fund, and implement those decisions,
including the selection of entities with or through which such purchases, sales
or loans are to be effected; provided, that the Adviser will place orders
pursuant to its investment determinations either directly with the issuer or
with a broker or dealer, and if with a broker or dealer, (a) will attempt to
obtain the best price and execution of its orders, and (b) may nevertheless in
its discretion purchase and sell portfolio securities from and to brokers who
provide the Adviser with research, analysis, advice and similar services and pay
such brokers in return a higher commission or spread than may be charged by
other brokers.
The Trust hereby authorizes any entity or person associated with the
Adviser, which is a member of national securities exchange, to effect any
transaction on the exchange for the account of the Trust which is permitted by
Section 11(a) of the Securities Exchange Act of 1934, as amended, and Rule
11a2-2(T) thereunder, and the Trust hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(a)(iv).
<PAGE>
The Adviser shall carry out its duties with respect to the Fund's
investments in accordance with applicable law and the investment objectives,
policies and restrictions set forth in the Fund's then-current Prospectus and
Statement of Additional Information, and subject to such further limitations as
the Trust may from time to time impose by written notice to the Adviser.
1.2 ADMINISTRATIVE SERVICES. The Adviser shall manage the Trust's
business and affairs and shall provide such services required for effective
administration of the Trust as are not provided by employees or other agents
engaged by the Trust; provided, that the Adviser shall not have any obligation
to provide under this Agreement any direct or indirect services to the Trust's
shareholders, any services related to the distribution of Trust shares, or any
other services which are the subject of a separate agreement or arrangement
between the Trust and the Adviser. Subject to the foregoing, in providing
administrative services hereunder, the Adviser shall:
1.2.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without cost to
the Trust, or pay the cost of, such office space, office equipment and office
facilities as are adequate for the Trust's need.
1.2.2 PERSONNEL. Provide, without remuneration from or other cost to
the Trust, the services of individuals competent to perform all of the Trust's
executive, administrative and clerical functions which are not performed by
employees or other agents engaged by the Trust or by the Adviser acting in some
other capacity pursuant to a separate agreement or arrangement with the Trust.
1.2.3 AGENTS. Assist the Trust in selecting and coordinating the
activities of the other agents engaged by the Trust, including the Trust's
shareholder servicing agent, custodian, administrator, independent auditors and
legal counsel.
1.2.4 TRUSTEE AND OFFICERS. Authorize and permit the Adviser's
directors, officers and employees who may be elected or appointed as Trustees or
officers of the Trust to serve in such capacities, without remuneration from or
other cost to the Trust.
1.2.5 BOOKS AND RECORDS. Assure that all financial, accounting and
other records required to be maintained and preserved by the Trust are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations.
1.2.6 REPORTS AND FILINGS. Assist in the preparation of (but not pay
for) all periodic reports by the Trust to its shareholders and all reports and
filings required to maintain the registration and qualification of the Trust and
Trust shares, or to meet other regulatory or tax requirements applicable to the
Trust, under federal and state securities and tax laws.
2. EXPENSES OF THE TRUST.
2.1 EXPENSES TO BE PAID BY ADVISER. The Adviser shall pay all salaries,
expenses and fees of the officers, Trustees and employees of the Trust who are
officers, directors or employees of the Adviser.
2.2 In the event that the Adviser pays or assumes any expenses of the
Trust not required to be paid or assumed by the Adviser under this Agreement,
the Adviser shall not be obligated hereby to pay or assume the same or any
similar expense in the future; provided, that nothing herein contained shall be
deemed to relieve the Adviser of any obligation to the Trust under any separate
agreement or arrangement between the parties.
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2.3 EXPENSES TO BE PAID BY THE TRUST. The Trust shall bear all expenses
of its operation, except those specifically allocated to the Adviser under this
Agreement or under any separate agreement between the Trust and the Adviser.
Subject to any separate agreement or arrangement between the Trust and the
Adviser, the expenses hereby allocated to the Trust, and not to the Adviser,
include but are not limited to:
2.3.1 CUSTODY. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property.
2.3.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent engaged by
the Trust to service shareholder accounts.
2.3.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in
type, printing and distributing reports and other communications to
shareholders.
2.3.4 PROSPECTUSES. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of the Trust's Prospectus
and Statement of Additional Information and any supplements thereto and of
supplying them to shareholders.
2.3.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing the
Trust's net asset value per share, including any equipment or services obtained
for the purpose of pricing shares or valuing the Trust's investment portfolio.
2.3.6 COMMUNICATIONS. All charges for equipment or services used for
communications between the Adviser or the Trust and any custodian, shareholder
servicing agent, portfolio accounting services agent, or other agent engaged by
the Trust.
2.3.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of the Trust's legal counsel and independent accountants.
2.3.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees
other than those affiliated with the Adviser, all expenses incurred in
connection with such unaffiliated Trustees' services as Trustees, and all other
expenses of meetings of the Trustees and committees of the Trustees.
2.3.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitations therefor.
2.3.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust under the Act and the
registration of the Trust's shares under the Securities Act of 1933, as amended
(the "1933 Act"), including all fees and expenses incurred in connection with
the preparation, setting in type, printing, and filing of any Registration
Statement, Prospectus and Statement of Additional Information under the 1933 Act
or the Act, and any amendments or supplements that may be made from time to
time.
2.3.11 STATE REGISTRATION FEES. All fees and expenses of taking
required action to permit the offer and sale of the Trust's shares under
securities laws of various states or jurisdictions, and of registration and
qualification of the Trust under all other laws applicable to the Trust or its
business activities (including registering the Trust as a broker-dealer, or any
officer of the Trust or any person as agent or salesperson of the Trust in any
state).
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2.3.12 CONFIRMATIONS. All expenses incurred in connection with the
issue and transfer of Trust shares, including the expenses of confirming all
share transactions.
2.3.13 BONDING AND INSURANCE. All expenses of bond, liability, and
other insurance coverage required by law or regulation or deemed advisable by
the Trustees of the Trust, including, without limitation, such bond, liability
and other insurance expenses that may from time to time be allocated to the
Trust in a manner approved by its Trustees.
2.3.14 BROKERAGE COMMISSIONS. All brokers' commissions and other
charges incident to the purchase, sale or lending of the Trust's portfolio
securities.
2.3.15 TAXES. All taxes or governmental fees payable by or with
respect to the Trust to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes.
2.3.16 TRADE ASSOCIATION FEES. All fees, dues and other expenses
incurred in connection with the Trust's membership in any trade association or
other investment organization.
2.3.17 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring and
extraordinary expenses as may arise including the costs of actions, suits, or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees and agents.
3. ADVISORY FEE.
As compensation for all services rendered, facilities provided and expenses
paid or assumed by the Adviser under this Agreement, the Fund shall pay the
Adviser on the last day of each month, or as promptly as possible thereafter, a
fee calculated by applying a monthly rate, based on the following annual
percentage rate, to the Fund's average daily net assets for the month: 0.15%.
4. RECORDS.
4.1 TAX TREATMENT. The Adviser shall maintain, or arrange for others to
maintain, the books and records of the Trust in such a manner that treats the
Fund as a separate entity for federal income tax purposes.
4.2 OWNERSHIP. All records required to be maintained and preserved by the
Trust pursuant to the provisions or rules or regulations of the Securities and
Exchange Commission under Section 31(a) of the Act and maintained and preserved
by the Adviser on behalf of the Trust are the property of the Trust and shall be
surrendered by the Adviser promptly on request by the Trust; provided, that the
Adviser may at its own expense make and retain copies of any such records.
5. REPORTS TO ADVISER.
The Trust shall furnish or otherwise make available to the Adviser such
copies of the Trust's prospectus, Statement of Additional Information, financial
statements, proxy statements, reports and other information relating to its
business and affairs as the Adviser may, at any time or from time to time,
reasonably require in order to discharge its obligations under this Agreement.
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6. REPORTS TO THE TRUST.
The Adviser shall prepare and furnish to the Trust such reports,
statistical data and other information in such form and at such intervals as the
Trust may reasonably request.
7. RETENTION OF SUB-ADVISER.
Subject to the Trust's obtaining the initial and periodic approvals
required under Section 15 of the Act, the Adviser may retain one or more
sub-advisers, at the Adviser's own cost and expense, for the purpose of managing
the investments of the assets of one or more Funds of the Trust. Retention of
one or more sub-advisers shall in no way reduce the responsibilities or
obligations of the Adviser under this Agreement and the Adviser shall, subject
to Section 9 of this Agreement, be responsible to the Trust for all acts or
commissions of any sub-adviser in connection with the performance of the
Adviser's duties hereunder.
8. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the Adviser or any
affiliated person of the Adviser to render investment management and
administrative services to other investment companies, to act as investment
adviser or investment counselor to other persons, firms or corporations, or to
engage in other business activities.
9. LIMITATION OF LIABILITY OF ADVISER AND ITS PERSONNEL.
Neither the Adviser nor any director, officer or employee of the Adviser
performing services for the Trust at the direction or request of the Adviser in
connection with the Adviser's discharge of its obligations hereunder shall be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with any matter to which this Agreement relates, and the
Adviser shall not be responsible for any action of the Trustees of the Trust in
following or declining to follow any advice or recommendation of the Adviser or
any sub-adviser retained by the Adviser pursuant to Section 7 of this Agreement;
PROVIDED, that nothing herein contained shall be construed (i) to protect the
Adviser against any liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of the Adviser's duties, or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement, or (ii) to protect any director, officer or employee of the Adviser
who is or was a Trustee or officer of the Trust against any liability of the
Trust or its shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office with the Trust.
10. EFFECT OF AGREEMENT.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or its By-Laws or any applicable
law, regulation or order to which it is subject or by which it is bound, or to
relieve or deprive the Trustees of the Trust of their responsibility for and
control of the conduct of the business and affairs of the Trust.
11. TERM OF AGREEMENT.
The term of this Agreement shall begin on the date first above written, and
unless sooner terminated as hereinafter provided, this Agreement shall remain in
effect for a period of two years from the date of this Agreement. Thereafter,
this Agreement shall continue in effect with respect to the Fund
5
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from year to year, subject to the termination provisions and all other terms and
conditions hereof; PROVIDED, such continuance with respect to a Fund is approved
at least annually by vote of the holders of a majority of the outstanding voting
securities of the Fund or by the Trustees of the Trust; PROVIDED, that in either
event such continuance is also approved annually by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of either party hereto. The Adviser shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment thereof.
12. AMENDMENT OR ASSIGNMENT OF AGREEMENT.
Any amendment to this Agreement shall be in writing signed by the parties
hereto; PROVIDED, that no such amendment shall be effective unless authorized
(i) by resolution of the Trustees of the Trust, including the vote or written
consent of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of either party hereto, and (ii) by vote of a
majority of the outstanding voting securities of the Fund affected by such
amendment. This Agreement shall terminate automatically and immediately in the
event of its assignment.
13. TERMINATION OF AGREEMENT.
This Agreement may be terminated at any time by either party hereto,
without the payment of any penalty, upon sixty (60) days' prior written notice
to the other party; PROVIDED, that in the case of termination by the Fund, such
action shall have been authorized (i) by resolution of the Trust's Board of
Trustees, including the vote or written consent of Trustees of the Trust who are
not parties to this Agreement or interested persons of either party hereto, or
(ii) by vote of majority of the outstanding voting securities of the Fund.
14. USE OF NAME.
The Trust is named the Orbitex Group of Funds and the Fund may be
identified, in part, by the name "Orbitex." The Adviser hereby grants to the
Trust a nonexclusive right and license to use the Orbitex name and as part of
the name of the Trust and the Fund only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the Adviser's
business as adviser or any extension, renewal or amendment thereof remain in
effect. The Trust agrees that it shall acquire no interest in the name
"Orbitex," that all uses thereof by the Trust shall inure to the benefit of the
Adviser and that it shall not challenge the validity or Adviser's ownership
thereof.
15. DECLARATION OF TRUST.
The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust's Declaration of Trust and
agrees that the obligations assumed by the Trust or the Fund, as the case may
be, pursuant to this Agreement shall be limited in all cases to the Trust or the
Fund, as the case may be, and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser understands
that the rights and obligations of any Fund under the Declaration of Trust are
separate and distinct from those of any and all other Funds. The Adviser further
understands and agrees that no Fund of the Trust shall be liable for any claims
against any other Fund of the Trust and that the Adviser must look solely to the
assets of the pertinent Fund of the Trust for the enforcement or satisfaction of
any claims against the Trust with respect to that Fund.
6
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16. This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
17. INTERPRETATION AND DEFINITION OF TERMS.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the Act
shall be resolved by reference to such term or provision of the Act and to
interpretation thereof, if any, by the United States courts, or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested persons," "assignment" and "affiliated person," as used
in this Agreement shall have the meanings assigned to them by Section 2(a) of
the Act. In addition, when the effect of a requirement of the Act reflected in
any provision of this Agreement is modified, interpreted or relaxed by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or of general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
18. CAPTIONS.
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
19. EXECUTION IN COUNTERPARTS.
This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date and year
first above written.
ORBITEX GROUP OF FUNDS on behalf of its
Orbitex Cash Reserve Fund
By:
--------------------------------------
James L. Nelson
President and Chief Executive Officer
ORBITEX MANAGEMENT, INC.
By:
--------------------------------------
Richard E. Steirwalt
President and Chief Executive Officer
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 29th day of June, 1999 between Orbitex Group of
Funds, a Delaware business trust (the "Trust"), and Orbitex Management, Inc., a
New York corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series, each having its own investment objective or objectives,
policies and limitations;
WHEREAS, the Trust intends to offer shares in several series, one of which
is designated as the Orbitex Focus 30 Fund (the "Fund"), and the Trust may offer
shares of one or more additional series in the future;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory and administrative services to the Trust with respect to the Fund in
the manner and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. SERVICES OF THE ADVISER.
1.1 INVESTMENT ADVISORY SERVICES. The Adviser shall act as the investment
adviser to the Fund and, as such, shall (i) obtain and evaluate such information
relating to the economy, industries, business, securities markets and securities
as it may deem necessary or useful in discharging its responsibilities
hereunder, (ii) formulate a continuing program for the investment of the assets
of the Fund in a manner consistent with its investment objective(s), policies
and restrictions, and (iii) determine from time to time securities to be
purchased, sold, retained or lent by the Fund, and implement those decisions,
including the selection of entities with or through which such purchases, sales
or loans are to be effected; provided, that the Adviser will place orders
pursuant to its investment determinations either directly with the issuer or
with a broker or dealer, and if with a broker or dealer, (a) will attempt to
obtain the best price and execution of its orders, and (b) may nevertheless in
its discretion purchase and sell portfolio securities from and to brokers who
provide the Adviser with research, analysis, advice and similar services and pay
such brokers in return a higher commission or spread than may be charged by
other brokers.
The Trust hereby authorizes any entity or person associated with the
Adviser, which is a member of national securities exchange, to effect any
transaction on the exchange for the account of the Trust which is permitted by
Section 11(a) of the Securities Exchange Act of 1934, as amended, and Rule
11a2-2(T) thereunder, and the Trust hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(a)(iv).
<PAGE>
The Adviser shall carry out its duties with respect to the Fund's
investments in accordance with applicable law and the investment objectives,
policies and restrictions set forth in the Fund's then-current Prospectus and
Statement of Additional Information, and subject to such further limitations as
the Trust may from time to time impose by written notice to the Adviser.
1.2 ADMINISTRATIVE SERVICES. The Adviser shall manage the Trust's
business and affairs and shall provide such services required for effective
administration of the Trust as are not provided by employees or other agents
engaged by the Trust; provided, that the Adviser shall not have any obligation
to provide under this Agreement any direct or indirect services to the Trust's
shareholders, any services related to the distribution of Trust shares, or any
other services which are the subject of a separate agreement or arrangement
between the Trust and the Adviser. Subject to the foregoing, in providing
administrative services hereunder, the Adviser shall:
1.2.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without cost to
the Trust, or pay the cost of, such office space, office equipment and office
facilities as are adequate for the Trust's need.
1.2.2 PERSONNEL. Provide, without remuneration from or other cost to
the Trust, the services of individuals competent to perform all of the Trust's
executive, administrative and clerical functions which are not performed by
employees or other agents engaged by the Trust or by the Adviser acting in some
other capacity pursuant to a separate agreement or arrangement with the Trust.
1.2.3 AGENTS. Assist the Trust in selecting and coordinating the
activities of the other agents engaged by the Trust, including the Trust's
shareholder servicing agent, custodian, administrator, independent auditors and
legal counsel.
1.2.4 TRUSTEE AND OFFICERS. Authorize and permit the Adviser's
directors, officers and employees who may be elected or appointed as Trustees or
officers of the Trust to serve in such capacities, without remuneration from or
other cost to the Trust.
1.2.5 BOOKS AND RECORDS. Assure that all financial, accounting and
other records required to be maintained and preserved by the Trust are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations.
1.2.6 REPORTS AND FILINGS. Assist in the preparation of (but not pay
for) all periodic reports by the Trust to its shareholders and all reports and
filings required to maintain the registration and qualification of the Trust and
Trust shares, or to meet other regulatory or tax requirements applicable to the
Trust, under federal and state securities and tax laws.
2. EXPENSES OF THE TRUST.
2.1 EXPENSES TO BE PAID BY ADVISER. The Adviser shall pay all salaries,
expenses and fees of the officers, Trustees and employees of the Trust who are
officers, directors or employees of the Adviser; provided, however, that the
Adviser shall reduce the fee payable to it under this Agreement and shall
reimburse the Fund for expenses[, other than extraordinary or non-recurring
expenses,] incurred by the Fund to the extent necessary so that the expense
ratio of the Fund, in respect of Class I shares of the Fund only, shall not
exceed 0.60 of 1% until January 1, 2000 and 0.75 of 1% until July 1, 2000
In the event that the Adviser pays or assumes any expenses of the
Trust not required to be paid or assumed by the Adviser under this Agreement,
the Adviser shall not be obligated hereby to pay or assume the same or any
similar expense in the future; provided, that nothing herein contained shall be
2
<PAGE>
deemed to relieve the Adviser of any obligation to the Trust under any separate
agreement or arrangement between the parties.
2.2 EXPENSES TO BE PAID BY THE TRUST. The Trust shall bear all expenses
of its operation, except those specifically allocated to the Adviser under this
Agreement or under any separate agreement between the Trust and the Adviser.
Subject to any separate agreement or arrangement between the Trust and the
Adviser, the expenses hereby allocated to the Trust, and not to the Adviser,
include but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property.
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent engaged by
the Trust to service shareholder accounts.
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in
type, printing and distributing reports and other communications to
shareholders.
2.2.4 PROSPECTUSES. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of the Trust's Prospectus
and Statement of Additional Information and any supplements thereto and of
supplying them to shareholders.
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing the
Trust's net asset value per share, including any equipment or services obtained
for the purpose of pricing shares or valuing the Trust's investment portfolio.
2.2.6 COMMUNICATIONS. All charges for equipment or services used for
communications between the Adviser or the Trust and any custodian, shareholder
servicing agent, portfolio accounting services agent, or other agent engaged by
the Trust.
2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of the Trust's legal counsel and independent accountants.
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees other
than those affiliated with the Adviser, all expenses incurred in connection with
such unaffiliated Trustees' services as Trustees, and all other expenses of
meetings of the Trustees and committees of the Trustees.
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitations therefor.
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust under the Act and the
registration of the Trust's shares under the Securities Act of 1933, as amended
(the "1933 Act"), including all fees and expenses incurred in connection with
the preparation, setting in type, printing, and filing of any Registration
Statement, Prospectus and Statement of Additional Information under the 1933 Act
or the Act, and any amendments or supplements that may be made from time to
time.
2.2.11 STATE REGISTRATION FEES. All fees and expenses of taking
required action to permit the offer and sale of the Trust's shares under
securities laws of various states or jurisdictions, and of registration and
qualification of the Trust under all other laws applicable to the Trust or its
business
3
<PAGE>
activities (including registering the Trust as a broker-dealer, or any officer
of the Trust or any person as agent or salesperson of the Trust in any state).
2.2.12 CONFIRMATIONS. All expenses incurred in connection with the
issue and transfer of Trust shares, including the expenses of confirming all
share transactions.
2.2.13 BONDING AND INSURANCE. All expenses of bond, liability, and
other insurance coverage required by law or regulation or deemed advisable by
the Trustees of the Trust, including, without limitation, such bond, liability
and other insurance expenses that may from time to time be allocated to the
Trust in a manner approved by its Trustees.
2.2.14 BROKERAGE COMMISSIONS. All brokers' commissions and other
charges incident to the purchase, sale or lending of the Trust's portfolio
securities.
2.2.15 TAXES. All taxes or governmental fees payable by or with
respect to the Trust to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes.
2.2.16 TRADE ASSOCIATION FEES. All fees, dues and other expenses
incurred in connection with the Trust's membership in any trade association or
other investment organization.
2.2.17 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring and
extraordinary expenses as may arise including the costs of actions, suits, or
proceedings to which the Trust is a party and the expenses the Trust may incur
as a result of its legal obligation to provide indemnification to its officers,
Trustees and agents.
3. ADVISORY FEE.
As compensation for all services rendered, facilities provided and expenses
paid or assumed by the Adviser under this Agreement, the Fund shall pay the
Adviser on the last day of each month, or as promptly as possible thereafter, a
fee calculated by applying a monthly rate, based on the following annual
percentage rate, to the Fund's average daily net assets for the month: 0.75%.
4. RECORDS.
4.1 TAX TREATMENT. The Adviser shall maintain, or arrange for others to
maintain, the books and records of the Trust in such a manner that treats the
Fund as a separate entity for federal income tax purposes.
4.2 OWNERSHIP. All records required to be maintained and preserved by the
Trust pursuant to the provisions or rules or regulations of the Securities and
Exchange Commission under Section 31(a) of the Act and maintained and preserved
by the Adviser on behalf of the Trust are the property of the Trust and shall be
surrendered by the Adviser promptly on request by the Trust; provided, that the
Adviser may at its own expense make and retain copies of any such records.
5. REPORTS TO ADVISER.
The Trust shall furnish or otherwise make available to the Adviser such
copies of the Trust's prospectus, Statement of Additional Information, financial
statements, proxy statements, reports and other information relating to its
business and affairs as the Adviser may, at any time or from time to time,
reasonably require in order to discharge its obligations under this Agreement.
4
<PAGE>
6. REPORTS TO THE TRUST.
The Adviser shall prepare and furnish to the Trust such reports,
statistical data and other information in such form and at such intervals as the
Trust may reasonably request.
7. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the Adviser or any
affiliated person of the Adviser to render investment management and
administrative services to other investment companies, to act as investment
adviser or investment counselor to other persons, firms or corporations, or to
engage in other business activities.
8. LIMITATION OF LIABILITY OF ADVISER AND ITS PERSONNEL.
Neither the Adviser nor any director, officer or employee of the Adviser
performing services for the Trust at the direction or request of the Adviser in
connection with the Adviser's discharge of its obligations hereunder shall be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with any matter to which this Agreement relates, and the
Adviser shall not be responsible for any action of the Trustees of the Trust in
following or declining to follow any advice or recommendation of the Adviser;
PROVIDED, that nothing herein contained shall be construed (i) to protect the
Adviser against any liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of the Adviser's duties, or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement, or (ii) to protect any director, officer or employee of the Adviser
who is or was a Trustee or officer of the Trust against any liability of the
Trust or its shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office with the Trust.
9. EFFECT OF AGREEMENT.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or its By-Laws or any applicable
law, regulation or order to which it is subject or by which it is bound, or to
relieve or deprive the Trustees of the Trust of their responsibility for and
control of the conduct of the business and affairs of the Trust.
10. TERM OF AGREEMENT.
The term of this Agreement shall begin on the date first above written, and
unless sooner terminated as hereinafter provided, this Agreement shall remain in
effect for a period of two years from the date of this Agreement. Thereafter,
this Agreement shall continue in effect with respect to the Fund from year to
year, subject to the termination provisions and all other terms and conditions
hereof; PROVIDED, such continuance with respect to a Fund is approved at least
annually by vote of the holders of a majority of the outstanding voting
securities of the Fund or by the Trustees of the Trust; PROVIDED, that in either
event such continuance is also approved annually by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of either party hereto. The Adviser shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment thereof.
5
<PAGE>
11. AMENDMENT OR ASSIGNMENT OF AGREEMENT.
Any amendment to this Agreement shall be in writing signed by the parties
hereto; PROVIDED, that no such amendment shall be effective unless authorized
(i) by resolution of the Trustees of the Trust, including the vote or written
consent of a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of either party hereto, and (ii) by vote of a
majority of the outstanding voting securities of the Fund affected by such
amendment. This Agreement shall terminate automatically and immediately in the
event of its assignment.
12. TERMINATION OF AGREEMENT.
This Agreement may be terminated at any time by either party hereto,
without the payment of any penalty, upon sixty (60) days' prior written notice
to the other party; PROVIDED, that in the case of termination by the Fund, such
action shall have been authorized (i) by resolution of the Trust's Board of
Trustees, including the vote or written consent of Trustees of the Trust who are
not parties to this Agreement or interested persons of either party hereto, or
(ii) by vote of majority of the outstanding voting securities of the Fund.
13. USE OF NAME.
The Trust is named the Orbitex Group of Funds and the Fund may be
identified, in part, by the name "Orbitex." The Adviser hereby grants to the
Trust a nonexclusive right and license to use the Orbitex name and as part of
the name of the Trust and the Fund only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the Adviser's
business as adviser or any extension, renewal or amendment thereof remain in
effect. The Trust agrees that it shall acquire no interest in the name
"Orbitex," that all uses thereof by the Trust shall inure to the benefit of the
Adviser and that it shall not challenge the validity or Adviser's ownership
thereof.
14. DECLARATION OF TRUST.
The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust's Declaration of Trust and
agrees that the obligations assumed by the Trust or the Fund, as the case may
be, pursuant to this Agreement shall be limited in all cases to the Trust or the
Fund, as the case may be, and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser understands
that the rights and obligations of any Fund under the Declaration of Trust are
separate and distinct from those of any and all other Funds. The Adviser further
understands and agrees that no Fund of the Trust shall be liable for any claims
against any other Fund of the Trust and that the Adviser must look solely to the
assets of the pertinent Fund of the Trust for the enforcement or satisfaction of
any claims against the Trust with respect to that Fund.
15. This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
16. INTERPRETATION AND DEFINITION OF TERMS.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the Act
shall be resolved by reference to such term or provision of the Act and to
interpretation thereof, if any, by the United States courts, or, in the absence
of
6
<PAGE>
any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested persons," "assignment" and "affiliated person," as used
in this Agreement shall have the meanings assigned to them by Section 2(a) of
the Act. In addition, when the effect of a requirement of the Act reflected in
any provision of this Agreement is modified, interpreted or relaxed by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or of general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
17. CAPTIONS.
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
18. EXECUTION IN COUNTERPARTS.
This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date and year
first above written.
ORBITEX GROUP OF FUNDS on behalf of its
Orbitex Focus 30 Fund
By:
--------------------------------------
James L. Nelson
President and Chief Executive Officer
ORBITEX MANAGEMENT, INC.
By:
--------------------------------------
Richard E. Steirwalt
President and Chief Executive Officer
<PAGE>
AMENDED CLASS B DISTRIBUTION PLAN AND AGREEMENT PURSUANT TO RULE 12B-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
PLAN AND AGREEMENT made as of May 27, 1998, and amended as of June 29,
1999 by and between Orbitex Group of Funds (the "Trust") and Funds Distributor,
Inc. ("FDI").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
which offers for public sale separate series of shares of beneficial interest,
each corresponding to a distinct portfolio which may be further divided into
separate classes of shares (the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement (the
"Distribution Agreement") with FDI pursuant to which FDI has agreed to serve as
the Distributor of the Shares; and
WHEREAS, the Trust desires to adopt this amended Distribution Plan and
Agreement pursuant to Rule 12b-1 under the 1940 Act (the "Plan") on behalf of
its series with respect to the Class B Shares of the Orbitex Strategic Natural
Resources Fund, Orbitex Info-Tech & Communications Fund, Orbitex Growth Fund,
Orbitex Focus 30 Fund, Orbitex Health & Biotechnology Fund and of such other
series as may hereafter be designated (the "Funds") by the Trust's Board of
Trustees (the "Board") pursuant to which the Trust, with respect to each Fund,
will pay an account maintenance and a distribution fee to FDI in connection with
the distribution of the Class B Shares of the Fund; and
WHEREAS, FDI desires to serve as Distributor of the Shares and to
provide, or arrange for the provision of distribution services pursuant to the
Plan;
NOW THEREFORE, the parties agree as follows:
1. A. Each Fund is authorized to pay to FDI, as compensation for FDI's
account maintenance services under this Plan and Agreement, an account
maintenance fee at the rate of 0.25%, and, as compensation for FDI's sales and
promotional activities and services under this Plan and Agreement, a
distribution fee at the rate of 0.75%, on an annualized basis of the average net
assets attributable to Class B shares of the Fund. Such fees are to be paid by
each Fund monthly, or at such other intervals as the Board shall determine. Such
fees shall be based upon the applicable Fund's average daily net assets during
the preceding month, and shall be calculated and accrued daily. FDI shall use
such fee, among other things, to make the payments contemplated by Paragraph
2(B) below and to pay interest and principal where such payments have been
financed.
B. Any Fund may pay fees to FDI at a lesser rate than the fees
specified in Section I.A. of this Plan and Agreement as agreed upon by the Board
and FDI and as approved in the manner specified in subsections (a) and (b) of
Paragraph 3 of this Plan.
2. A. The Trust hereby authorizes FDI to enter into Sub-Agreements [in
the form attached hereto] with certain securities dealers or brokers,
administrators and others ("Recipients") to provide compensation to such
Recipients based on the net asset value of shares of the Fund held by clients or
customers of that Recipient, for activities and services of the type referred to
in Paragraph (B) of this Paragraph 2.
B. FDI shall provide, or arrange for Recipients with which FDI has
entered into Sub-Agreements to provide, distribution and account maintenance
services. The distribution services shall include assistance in the offering and
sale of shares of each Fund and in other aspects of the marketing of the shares
to clients or prospective clients of the respective Recipients including any
advertising or marketing services provided by or arranged by FDI with respect to
a Fund. The account
<PAGE>
maintenance services shall include answering routine inquiries concerning a
Fund; assisting in the maintenance of accounts or sub-accounts in a Fund and in
processing purchase or redemption transactions; making a Fund's investment plans
and shareholder services available; and providing such other information and
services to investors in shares of a Fund as FDI or the Trust, on behalf of the
Fund, may reasonably request.
3. This Plan shall not take effect with respect to any Fund unless it
has been approved, together with any related agreements, by a majority vote,
cast in person at a meeting (or meetings) called for the purpose of voting on
such approval, of: (a) the Board; and (b) those Trustees of the Trust who are
not "interested person" of the Trust and have no direct or indirect financial
interest in the operation of this Plan or any agreements related thereto (the
"Independent Trustees").
4. This Plan may continue in full force and effect with respect to a
Fund for so long as such continuance is specifically approved at least annually
in the manner provided for approval of this Plan in subsections (a) and (b) of
paragraph 3.
5. FDI shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended with respect to each Fund by
FDI under this Plan and the purposes for which such expenditures were made.
6. The Trust or any Fund may terminate this Plan at any time, without
the payment of any penalty, by vote of the Board, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the affected Fund. FDI may terminate this Plan with respect to the
Trust or any Fund, without payment of penalty, upon sixty (60) days written
notice to the Trust or the affected Fund. Notwithstanding the foregoing, this
Plan shall terminate automatically in the event of its assignment.
7. This Plan may not be amended to increase materially the amount of
fees to be paid by a Fund unless such amendment is approved by a vote of a
majority of the outstanding Class B shares of the affected Fund, and no material
amendment to the other provisions of this Plan shall be made unless approved in
the manner provided for approval and annual renewal in subsections (a) and (b)
of Paragraph 3 hereof.
8. The amount of distribution and account maintenance fees payable by
any Fund to FDI under this Plan and the amounts received by FDI under the
Distribution Agreement may be greater or lesser than the expenses actually
incurred by FDI on behalf of such Fund in serving as Distributor of the Shares.
The distribution and account maintenance fees with respect to a Fund will be
payable by such Fund to FDI until either this Plan or the Distribution Agreement
is terminated or not renewed with respect to the Shares of that Fund. If either
this Plan or the Distribution Agreement is terminated or not renewed with
respect to the Shares of any Fund, any distribution expenses incurred by FDI on
behalf of the Fund which are in excess of payments which FDI has received or
accrued through the termination date shall be the sole responsibility and
liability of FDI, and are not obligations of the Fund.
9. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons of the Trust shall be made solely at the
discretion of the Trustees who are not interested persons of the Trust.
10. As used in this Plan, the terms "majority of the outstanding voting
securities," "assignment" and "interested person" shall have the same meanings
as those terms have in the 1940 Act.
<PAGE>
11. The Trust shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
Paragraph 5 hereof for a period of not less than six years from the date
thereof, the first two years in an easily accessible place.
12. The Trustees of the Trust and the shareholders of each Fund shall
not be liable for any obligations of the Trust or any Fund under this Plan, and
FDI or any other person, in asserting any rights or claims under this Plan,
shall look only to the assets and property of the Trust or such Fund in
settlement of any such right or claim, and not to such Trustees or shareholders.
IN WITNESS WHEREOF, the Trust and FDI have executed this Amended
Class B Distribution Plan and Agreement on the 29 day of June, 1999.
ORBITEX GROUP OF FUNDS
Attest: By:
-------------------------- --------------------------
Secretary President
FUNDS DISTRIBUTOR, INC.
Attest: By:
-------------------------- --------------------------
Secretary President
<PAGE>
ORBITEX GROUP OF FUNDS
REVISED RULE 18f-3 PLAN FOR MULTIPLE CLASSES OF SHARES
JUNE 29, 1999
WHEREAS, The Orbitex Group of Funds (the "Trust") is a Delaware
business trust, registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), with the Securities and Exchange Commission (the "SEC") as an
open-end management investment company;
WHEREAS, pursuant to the terms of the Trust's Declaration of Trust, as
well as the 1940 Act and the rules and regulations thereunder, the Board of
trustees of the Trust (the "Board") has authority to approve and authorize the
issuance of, and has approved and authorized the issuance of shares of
beneficial interest of, Class A, Class B, and Class I of each fund (a "Fund"),
other than the Orbitex Cash Reserves Fund, Class D of the Orbitex Focus 30 Fund,
and Institutional Class and Institutional Service Class of the Orbitex Cash
Reserves Fund, of the Trust listed herein on Schedule A, as may be amended;
WHEREAS, the Trust wishes to adopt this Plan for Multiple Classes of
Shares (the "Multi-Class Plan"), which is a plan as contemplated by Rule 18f-3
of the 1940 Act; and
WHEREAS, at a meeting held on June 29, 1999, the Board, including a
majority of the Trustees who are not interested persons of the Trust (as defined
in section 2 (a)(19) of the 1940 Act) (the "Independent Trustees"), approved and
adopted this Revised Multi-Class Plan and determined that this Multi-Class Plan
is: (a) in the best interest of the holders of Class A Shares of each Fund
issuing those shares; (b) in the best interest of the holders of Class B Shares
of each Fund issuing those shares; (c) in the best interest of the holders of
Class D Shares of Orbitex Focus 30 Fund; (d) in the best interest of the holders
of Class I Shares of each Fund issuing those shares; (e) in the best interest of
the holders of Institutional Class of the Orbitex Cash Reserves Fund; (f) in the
best interest of the holders of the Institutional Service Class of the Orbitex
Cash reserves Fund Shares; and (g) in the best interests of the Trust as a
whole;
NOW THEREFORE, this Multi-Class Plan, as amended from time to time,
shall remain in effect until such time as the Board terminates this Multi-Class
Plan.
SECTION 1. CLASS DISTRIBUTION AND SHAREHOLDER SERVICES FEES
Class A Shares are principally offered by Funds Distributor, Inc. (the
"Distributor") to individuals at net asset value plus any applicable sales
charge. The maximum sales charge for each Fund is 5.75% of the public offering
price. These charges may be reduced for investors who invest more than $50,000.
The sales charge will also be waived in certain circumstances including for
purchases of $1 million or
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<PAGE>
more. However, the trust will apply a contingent deferred sales charge of 1% to
certain redemptions made within the first year after investing with respect to
shares purchased at net asset value without a sales charge. Class A Shares are
also subject to a distribution fee (as provided for by the Distribution Plan and
Agreement Pursuant to 12b-1 under the Investment Company Act of 1940) of .40% of
the average daily net assets of the Fund. The minimum initial investment for
Class A Shares is $2500 ($2,000 for individual retirement accounts).
Class B Shares are offered at their net asset value per share, without
any initial sales charge. However, there is a contingent deferred sales charge
on shares which are sold within six years of their purchase. There will be no
contingent deferred sales charge on shares acquired through reinvestment of
dividends. The contingent deferred sales charge will be based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. The contingent deferred sales charges are as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
YEARS AFTER PURCHASE CHARGE ON SHARES BEING SOLD
<S> <C>
1st Year 5.00%
2nd Year 4.00%
3rd Year 3.00%
4th Year 3.00%
5th Year 2.00%
6th Year 1.00%
After 6th Year None
</TABLE>
Class B Shares will automatically be converted to Class A Shares after six
years. Class B Shares are also subject to a distribution fee and an account
maintenance fee (as provided for by the Class B Distribution Plan and Agreement
Pursuant to 12b-1 under the Investment Company Act of 1940) of 0.75% and 0.25%
respectively, of the average daily net assets of the Fund. The minimum initial
investment for Class B Shares is $2,500 ($2,000 for individual retirement
accounts).
Class D Shares are only available to shareholders who held shares of
ASM Index 30 Fund on the date such fund was reorganized as the Orbitex Focus 30
Fund. The minimum subsequent investments in Class D Shares of the Orbitex Focus
30 Fund by individual investors is $100. Class D Shares are offered at their net
asset value per share without any initial sales charge and are not subject to
any asset-based distribution or account maintenance fee.
Class I Shares and the Institutional Class Shares are offered to
qualified institutions and certain fee-based investment and financial advisors
at net asset value and are not subject to any asset-based distribution or
account maintenance fee. Investors in the Class I Shares will be required to
make a minimum investment of one hundred thousand dollars ($100,000).
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<PAGE>
Institution Service Class Shares of the Orbitex Cash reserves fund are
subject to a non 12b-1 shareholder servicing fee of 0.25% of the average daily
net assets of the Fund payable to the Distributor for the provision of certain
services. The Institution Service Class Shares are offered at their net asset
value per share without any initial sales charge and are not subject to any
asset-based distribution or account maintenance fee.
Notwithstanding the foregoing, the aggregate amounts of any asset-based
distribution and/or account maintenance fee paid by the Trust shall not exceed
such amount as is permitted under Rule 2830 of the Conduct Rules of the National
Association of Securities dealers, Inc. (the "NASD"), as amended from time to
time, and any other rules or regulations promulgated by the NASD or the SEC
applicable to mutual fund distribution and service fees.
SECTION 2. ALLOCATION OF CLASS EXPENSES
Class A, Class B, Class D, Class I, Institutional Class and
Institutional Service Class Shares of a Fund, if applicable, represent an
interest in the same portfolio of securities of the Trust and have no exchange
privileges or conversion features except as noted above. Each class of shares
shall have the same rights, preferences, voting powers, restrictions and
limitations, except as follows:
(a) expenses related to the distribution of a class of shares or
to the services provided to shareholders of a class of shares
shall be borne solely by such class;
(b) each class will bear different Class Expenses (as defined
below);
(c) each class will have exclusive voting rights with respect to
matters that exclusively affect such class and separate voting
rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other
class; and
(d) each class will bear a different name or designation.
The Board, acting in its sole discretion, has determined that the
following expenses attributable to the shares of a particular class ("Class
Expenses") will be borne solely by the class to which they are attributable:
(1) asset-based distribution, account maintenance and shareholder
service fees, and
(2) extraordinary non-recurring expenses including litigation and
other legal expenses relating to a particular class.
Investment advisory fees, custodial fees, and other expenses relating
to the management of a Fund's assets shall not be allocated on a class-specific
basis.
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<PAGE>
SECTION 3. ALLOCATION OF FUND INCOME AND EXPENSES
Income, realized and unrealized capital gains and losses, and expenses
that are not allocated to a specific class pursuant to Section 2 above, shall be
allocated to each class of a Fund on the basis of the net asset value of that
class in relation to the net asset value of the Fund.
SECTION 4. EXPENSE WAIVERS OR REIMBURSEMENTS
All expense waivers or reimbursements will be in compliance with Rule
18f-3 issued under the 1940 Act.
SECTION 5. AMENDMENTS
This Multi-Class Plan may not be amended to change any material
provision unless such amendment is approved by a vote of the majority of the
Board, including a majority of the Trustees who are not interested persons of
the Trust, based on its finding that the amendment is in the best interest of
each class individually and the Trust as a whole.
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