As filed with the Securities and Exchange Commission on May 28, 1999
Registration No. 333-78789
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[x] Pre-Effective Amendment No. 1 [ ] Post-Effective Amendment No.
ORBITEX GROUP OF FUNDS
(Exact Name of Registrant as specified in Charter)
410 Park Avenue
New York, New York 10022
(Address of Principal Executive Offices)
(888) - ORBITEX
(Area Code and Telephone Number)
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Mr. James L. Nelson
Orbitex Group of Funds
410 Park Avenue
New York, New York 10022
(Name and Address of Agent for Service)
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copies to:
Leonard B. Mackey, Jr., Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
It is proposed that this filing become effective on June 18, 1999 pursuant to
Rule 488 under the Securities Act of 1933, as amended.
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Orbitex Focus 30 Fund Class D shares of
beneficial interest, no par value
Registrant has registered an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended; accordingly, no fee
is payable herewith.
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<PAGE>
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Part A Item No. and Caption Prospectus/Proxy Statement Caption
--------------------------- ----------------------------------
<S> <C>
Item 1. Beginning of Registration Statement and Cover Page; Cross Reference Sheet
Outside Front Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
Item 3. Synopsis Information and Risk Factors Synopsis; Risk Factors; Introduction; Comparative
Investment Policies and Styles
Item 4. Information About the Transaction Synopsis; Reasons for the Reorganization; Procedures
for the Reorganization; Certain Comparative Information
About Maryland funds and Delaware funds; Required Vote;
Annex A (Reorganization Agreement)
Item 5. Information About the Registrant Cover Page; Synopsis; Reasons for the Reorganization;
Comparative Investment Policies and Styles; The Orbitex
Group of Funds; Description of the Orbitex Focus 30
Fund; Additional Information About the Orbitex Group of
Funds
Item 6. Information About the Company Being Acquired Cover Page; Synopsis; Reasons for the Reorganization;
Comparative Investment Policies and Styles; Certain
Comparative Information About Maryland funds and
Delaware funds; Recommendation of the ASM Board of
Directors
Item 7. Voting Information Synopsis; Reasons for the Reorganization; Required
Vote; Recommendation of the ASM Board of Directors
Item 8. Interest of Certain Persons and Experts Security Ownership of Certain Beneficial Owners
Item 9. Additional Information Required for Not Applicable
Reoffering By Persons Deemed to be
Underwriters
Part B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Financial Statements of the Registrant and the Company
being acquired, including the Statements of Additional
Information contained therein, are incorporated herein
by reference
Item 12. Additional Information About the Registrant Description of Securities, Other Investment Policies
and Risk Considerations; Management of the Orbitex
Group of Funds; Principal Holders of Securities;
Investment Management and Other Services;
Administrator; Distribution of Shares; Brokerage
Allocation and Other Practices; Purchase and Redemption
of Securities Being Offered; Determination of Net Asset
Value; Taxes; Organization of the Orbitex Group of
Funds; Independent Accountants; Legal Matters; The
Statement of Additional Information of the Registrant,
as filed with the SEC on August 18, 1999 as part of the
Post-Effective Amendment to its Registration Statement
on Form N-1A
Item 13. Additional Information About the Company Financial Statements of the Company being acquired are
Being Acquired incorporated herein by reference to the Statement of
Additional Information of that Company
Item 14. Financial Statements Financial Statements of the Registrant contained in the
annual report of the Registrant for the fiscal year
ended April 30, 1998 and its semi-annual report for the
period ended October 31, 1998, each as attached as
Appendix D to the Proxy Statement/Prospectus
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part C Item No. and Caption Other Information Caption
--------------------------- -------------------------
<S> <C>
Item 15. Indemnification Indemnification: Incorporated by reference to part A
caption "Certain Comparative Information About Maryland
funds and Delaware funds -- Liability of Directors in
Maryland and Trustees in Delaware"
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
</TABLE>
<PAGE>
ASM INDEX 30 FUND, INC.
410 Park Avenue
New York, New York 10022
May __, 1999
Dear Stockholder:
A special meeting of stockholders of ASM Index 30 Fund, Inc., a Maryland
corporation ("ASM"), will be held at the principal executive offices of ASM at
410 Park Avenue, New York, New York 10022, on July 2, 1999, at 12:00 p.m. local
time (the "Special Meeting"). Formal notice of the Special Meeting appears on
the next page and is followed by the Proxy Statement/Prospectus.
In the attached Proxy Statement/Prospectus, stockholders are being
requested to consider and approve the proposed merger (the "Reorganization") of
ASM with and into the Orbitex Focus 30 Fund (the "New Orbitex Fund"), a
separate, newly-created series of Orbitex Group of Funds, a business trust
organized under the laws of the State of Delaware (the "Orbitex Group of
Funds"), pursuant to an Agreement and Plan of Reorganization, dated as of April
26, 1999, as amended, by and between ASM and the Orbitex Group of Funds, whereby
the New Orbitex Fund, as the surviving entity in the Reorganization, would
succeed to and assume all of ASM's assets and liabilities. The New Orbitex Fund
will generally have the same investment objectives and policies as ASM, except
that the New Orbitex Fund will operate as an actively-managed fund. The value of
each ASM stockholder's account with the New Orbitex Fund immediately after the
Reorganization will be the same as the value of such stockholder's account with
ASM immediately prior to the Reorganization. The Reorganization will qualify as
a tax-free reorganization.
Orbitex Management, Inc., a New York corporation ("Orbitex Management"),
has served as the interim investment adviser to ASM since March 1, 1999,
pursuant to an interim investment advisory agreement (the "Interim Orbitex
Agreement") approved by the Board of Directors of ASM (the "Board"). The Board
made this appointment after it terminated the engagement of Vector Index
Advisors, Inc. ("Vector") as ASM's investment adviser, following Vector's
announcement that it was planning to file for protection under the U.S.
bankruptcy laws. The Reorganization is designed to permit ASM to become part of
the Orbitex Group of Funds, which Orbitex Management also serves as investment
adviser. As part of the Orbitex Group of Funds, ASM would have the benefits of
certain economies with respect to administrative expenses and of being marketed
together with the other funds in the Orbitex Group of Funds.
The Interim Orbitex Agreement terminates by law on July 1, 1999, unless
earlier terminated upon 60 days' notice by either ASM or Orbitex Management.
Orbitex Management has explicitly advised the Board that it will not continue as
adviser to ASM if ASM's stockholders fail to approve the Reorganization. Orbitex
Management has, however, agreed that if ASM's stockholders fail to approve the
Reorganization by the requisite vote, it will continue to serve as interim
investment adviser to ASM for a reasonable period of time until a replacement
adviser is selected or until ASM is liquidated. The Board believes that in such
a case the prospects of finding a replacement adviser under such circumstances
and time constraints would be difficult. Thus, a failure to approve the
Reorganization by the requisite vote likely will result in a proposal to
liquidate ASM, subjecting ASM and its shareholders to further expenses and
consequences of the liquidation process.
After careful consideration, the Board has unanimously approved the
Reorganization and recommends that you read the enclosed materials carefully and
then vote "FOR" the Reorganization. It is important that you sign and return
your proxy card because approval of the Reorganization requires a specific
number of affirmative votes.
You are cordially invited to attend the Special Meeting. If you do not
expect to attend the Special Meeting, the Board requests that you vote by taking
a moment to sign and return your proxy cards in the enclosed postage paid return
envelope. You may also vote by telephone at 1-800-690-6903 or through the
internet at www.proxyvote.com by following the simple instructions on the Proxy
card provided. If we do not hear from you after a reasonable amount of time, you
may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote your shares.
Sincerely,
W. Keith Schilit
Acting Chairman of the Board of Directors
<PAGE>
----------
PART A
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ASM INDEX 30 FUND, INC.
410 Park Avenue
New York, New York 10022
(800) 333-4276
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on July 2, 1999
-----------------------------------------------------------
To the stockholders of ASM Index 30 Fund, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of ASM Index 30 Fund, Inc., a Maryland corporation ("ASM"), will be
held at the principal executive offices of ASM at 410 Park Avenue, New York, New
York 10022 on July 2, 1999, at 12:00 p.m., local time, for the following
purposes:
I. To consider and approve a reorganization (the "Reorganization") in which
ASM will be merged with and into the ORBITEX Focus 30 Fund (the "New
Orbitex Fund"), a separate, newly-created series of Orbitex Group of Funds,
a business trust organized under the laws of the State of Delaware (the
"Orbitex Group of Funds"), pursuant to an Agreement and Plan of
Reorganization, dated as of April 26, 1999, as amended (the "Reorganization
Agreement"), by and between the Orbitex Group of Funds and ASM, whereby the
New Orbitex Fund, as the surviving entity in the Reorganization, will
succeed to all of ASM's assets, in exchange for which each share of common
stock, par value $0.001 per share, of ASM outstanding (the "ASM Common
Stock") will represent one no par, Class D share of beneficial interest of
the New Orbitex Fund and the New Orbitex Fund will assume all of ASM's
liabilities.
II. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
ASM's stockholders of record as of the close of business on May 28, 1999
(the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting or any adjournment thereof. On the Record Date, [_____________] shares
of ASM common stock were issued and outstanding and entitled to vote.
A copy of the Reorganization Agreement is attached as Appendix A to the
attached Proxy Statement/Prospectus and forms a part of such Proxy
Statement/Prospectus.
THE BOARD HAS UNANIMOUSLY APPROVED THE REORGANIZATION AS BEING IN THE BEST
INTEREST OF ASM'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
REORGANIZATION.
STOCKHOLDERS ARE ENCOURAGED TO VOTE PROMPTLY BY EXECUTING AND RETURNING IN
THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY. STOCKHOLDERS MAY ALSO VOTE BY
TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE SIMPLE INSTRUCTIONS ON THE
PROXY CARD PROVIDED. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM
AT THE SPECIAL MEETING. ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY
GIVING WRITTEN NOTICE OF REVOCATION TO ASM AT ANY TIME BEFORE THE PROXY IS
EXERCISED OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
BY THE ORDER OF THE BOARD OF DIRECTORS
M. Fyzul Khan
May __, 1999 Secretary
<PAGE>
---------------------
PROXY STATEMENT/PROSPECTUS
---------------------
ORBITEX GROUP OF FUNDS
410 Park Avenue
New York, New York 10022
(800)-ORBITEX
ASM INDEX 30 FUND, INC.
410 Park Avenue
New York, New York 10022
(800) 333-4276
---------------------
This Proxy Statement/Prospectus, dated May __, 1999, is being furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of ASM Index 30 Fund, Inc., a Maryland corporation ("ASM"), for use at
a special meeting of the stockholders of ASM to be held in connection with the
proposed merger (the "Reorganization") of ASM with and into the ORBITEX Focus 30
Fund (the "New Orbitex Fund"), a separate, newly created series of the Orbitex
Group of Funds, a business trust organized under the laws of the State of
Delaware (the "Orbitex Group of Funds"), at the principal executive offices of
ASM at 410 Park Avenue, New York, New York 10022 on July 2, 1999, at 12:00 p.m.,
local time (including any adjournment or postponement thereof, the "Special
Meeting"). It is expected that the Notice of Special Meeting of Stockholders,
this Proxy Statement/Prospectus and the accompanying materials will first be
mailed to stockholders on or about May __, 1999. The terms of the Reorganization
are set forth in detail in the section entitled "Synopsis" contained of this
Proxy Statement/Prospectus. ASM'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE PROPOSAL DESCRIBED IN THE NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS.
The following documents contain additional information about the
Orbitex Group of Funds and ASM and are incorporated herein in their entirely by
reference.
1. The Statement of Additional Information regarding the Orbitex Group of
Funds. The Statement of Additional Information may be obtained without charge by
writing or calling the Orbitex Group of Funds at the address or telephone number
listed above.
2. The Current Prospectus of ASM, as filed with the SEC on April 23, 1999
as part of the Post-Effective Amendment to its Registration Statement on Form
N-1A. Such Current Prospectus may be obtained without charge by writing to ASM
Index 30 Fund, Inc., c/o Mutual Fund Services Co., Inc. ("MFS"), P.O. Box 7177,
6000 Memorial Drive, Dublin, Ohio 43017, or by calling 1-800-333-4276.
3. The Annual Report of ASM for the fiscal year ended October 31, 1998.
Such Annual Report may be obtained without charge by writing or calling MFS at
the address or telephone number listed above.
Information about the Orbitex Group of Funds (including the Statement of
Additional Information described above) can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on
the operation of the public reference room. This information is also available
on the SEC's Internet site at http://www.sec.gov and copies may be obtained upon
payment of a duplicating fee by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
This Proxy Statement/Prospectus provides you with detailed information
about the proposed Reorganization that a prospective investor ought to know
before voting. We encourage you to read this entire document carefully and
retain it for future reference. and is incorporated herein by reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
I. SYNOPSIS.................................................................3
A. Questions and Answers About the Reorganization..................3
B. ASM.............................................................5
C. The New Orbitex Fund............................................6
D. The Orbitex Group of Funds......................................7
E. The Reorganization..............................................7
F. The Special Meeting of Stockholders.............................8
II. RISK FACTORS.............................................................9
III. COMPARATIVE SUMMARY OF INVESTOR COSTS....................................9
IV. THE PROPOSAL: TO CONSIDER AND APPROVE THE REORGANIZATION................11
A. Introduction...................................................11
B. Reasons For The Reorganization.................................11
C. Procedures for the Reorganization..............................12
D. Description of the New Orbitex Fund Agreement..................13
E. Comparative Investment Policies and Styles.....................14
F. The Orbitex Group of Funds.....................................15
G. Certain Comparative Information about Maryland funds and
Delaware funds.................................................15
H. No Dissenters' Rights of Appraisal.............................18
I. Federal Income Tax Consequences................................18
J. Accounting Consequences........................................18
K. Expenses.......................................................18
L. Required Vote..................................................18
M. Recommendation of the ASM Board of Directors...................18
V. ADDITIONAL INFORMATION ABOUT THE ORBITEX GROUP OF FUNDS.................19
VI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.........................35
VII. OTHER MATTERS...........................................................35
VIII. ADDITIONAL INFORMATION..................................................35
2
<PAGE>
I. SYNOPSIS
The following summary is qualified in its entirety by the more detailed
information contained in other parts of this Proxy Statement/Prospectus. We urge
you to review this entire Proxy Statement/Prospectus.
A. Questions and Answers About the Reorganization
Q: What is the purpose of the Reorganization?
A: The principal purpose of the reorganization is to permit Orbitex Management
to continue to serve as investment adviser. Orbitex Management replaced our
previous investment adviser. Orbitex Management was selected by ASM's board
of directors after a careful review of candidates for the position and is
already serving as interim investment adviser to ASM pending completion of
the Reorganization.
Q: Why doesn't ASM simply sign a new investment advisory agreement with
Orbitex Management?
A: The corporate structure that will result from the Reorganization will be
consistent with the way Orbitex Management serves its other existing mutual
fund clients and, therefore, will allow Orbitex Management to serve the New
Orbitex Fund more efficiently than if it were to continue serving ASM in
its current form.
Q: What are the benefits of the proposed Reorganization?
A: We believe the reorganization should offer the following benefits:
o The Reorganization will ensure the continued services of our
investment adviser (Orbitex Management), which has substantial
resources and capabilities.
o Holders of Class D shares of beneficial interest in the New Orbitex
Fund will have the benefit of exchange privileges with Class A shares
of beneficial interest in the Orbitex Group of Funds.
o The New Orbitex Fund, as part of the Orbitex Group of Funds, will have
the benefit of marketing and administrative resources significantly
greater than those available to ASM in the past.
o Because the New Orbitex Fund's investment policies permit the use of
options and futures contracts, it has the potential to deliver higher
returns.
o While the expense ratio of managing the New Orbitex Fund in respect of
the Class D shares is likely to be higher than ASM's has been, the
overall expenses of managing the New Orbitex Fund can be spread over
the several classes of securities, in addition to the Class D shares,
that are to be issued by the New Orbitex Fund in the future.
Q: What are the differences between the investment objectives and policies of
the New Orbitex Fund and ASM.
A: The New Orbitex Fund will have a different management style from ASM.
Rather than continue to operate as an index-style fund as has ASM, the
Board believes that it is in the best interests of the ASM Stockholders to
employ the investment style of the New Orbitex Fund as an actively-managed
fund. Accordingly, while the New Orbitex Fund will invest primarily in the
30 companies that comprise the Dow Jones Industrial Average (the
"DJIA"),(1) Orbitex Management does not intend to invest in an equal
- ----------
(1) "Dow Jones Industrial Average" and "DJIA" are the property of Dow Jones &
Company, Inc. The New Orbitex Fund is neither affiliated with, nor endorsed
by, Dow Jones & Company, Inc.
3
<PAGE>
number of shares of each such company. Instead, Orbitex Management intends
to adjust the weighting of the New Orbitex Fund's investments among the 30
companies in an attempt to increase the return of the New Orbitex Fund by
investing a greater portion of the New Orbitex Fund's assets in those
companies in the DJIA that Orbitex Management believes will perform better
than other companies in the DJIA and reducing the weighting of those
companies that Orbitex Management believes will perform worse. Orbitex
Management will also be authorized to invest up to 10% of the New Orbitex
Fund's assets in the securities of the companies that are not included in
the DJIA but are included in the S&P 500 Index (the "S&P 500").(2) In
addition, the Board believes that the New Orbitex Fund's assets may be
invested more effectively if the New Orbitex Fund is permitted to use a
portion of its assets to engage in option and futures transactions
(collectively, "Derivative Transactions").
Q: What will happen if the Reorganization is not completed?
A: We believe that if the proposed Reorganization is not completed, it is
likely that ASM will be forced to liquidate. ASM's interim investment
advisory agreement with Orbitex Management provides that if the
Reorganization is not approved by the requisite vote of ASM's stockholders,
Orbitex Management will not be required to continue to provide investment
advisory services to ASM beyond a reasonable transitional period required
for ASM to retain another adviser or liquidate. ASM's board of directors
believes that, in that situation, it is unlikely ASM would be able to
retain another investment adviser and so the probable result would be a
liquidation of ASM.
Q: What are the detriments of the proposed Reorganization?
A: We expect the Reorganization to have the following detriments:
o The expense ratio of the New Orbitex Fund in respect of the Class D
shares is likely to be higher than ASM's has been.
o Because the New Orbitex Fund's investment policies permit the use of
options and futures contracts, it will be subject to greater risk of
loss.
o Because the New Orbitex Fund will not invest its assets solely in the
securities of the companies that comprise the Dow Jones Industrial
Average ("DJIA") and will not invest in the securities of the
companies that comprise the DJIA in the same manner as ASM, the
performance of the New Orbitex Fund will not track the performance of
the DJIA as closely as the performance of ASM was intended to track
the performance of the DJIA.
Q: What will happen to the ASM shares in my account?
A: The ASM shares in your account (including fractional shares) will be
converted into an identical number of shares (or fractions thereof) in the
New Orbitex Fund. The net asset value per share will be the same
immediately after the Reorganization as it was immediately before the
Reorganization.
Q: What do I need to do now?
A: Just vote your shares as soon as possible by mail by signing and returning
the proxy card in the enclosed envelope, or by telephone at 1-800-690-6903
or through the internet at www.proxyvote.com by following the simple
instructions on the proxy card, so that your shares can be voted at the
special stockholders' meeting on July 2, 1999.
- ----------
(2) "S&P 500 Index" and "S&P 500" are registered trademarks of McGraw-Hill Co.,
Inc. The New Orbitex Fund is neither affiliated with, nor endorsed by,
McGraw-Hill Co., Inc.
4
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Q: When do we expect the Reorganization to be completed?
A: We hope to complete the Reorganization as quickly as possible after the
stockholder vote.
Q: Who can help answer my questions?
A: If you have more questions about the Reorganization, you should contact:
M. Fyzul Khan
ASM Index 30 Fund, Inc.
410 Park Avenue
New York, New York 10022
Telephone: (212) 891-7900
Fax: (212) 891-7939
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at the
special stockholders' meeting. You can do this in one of three ways. First,
you can send a written notice stating that you revoke your proxy. Second,
you can complete and submit a new proxy card, dated a later date than the
first proxy card. Third, you can attend the meeting and vote in person.
Your attendance at the meeting without voting will not, however, revoke
your proxy. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q: What are the tax consequences of the Reorganization?
A: We have structured the Reorganization so that neither ASM nor our
stockholders will recognize any gain or loss for federal income tax
purposes in the Reorganization. The closing of the Reorganization is
conditioned, among other things, on the delivery of the legal opinion of
counsel to the Orbitex Group of Funds as to the tax consequences as to ASM
and ASM's stockholders.
B. ASM
ASM is a Maryland corporation registered as an investment company under the
Investment Company Act of 1940, as amended. ASM's investment objective is to
achieve total return through a combination of capital appreciation and current
income. ASM limits its investments to the common stocks of the 30 companies that
make up the well-known DJIA, all of which are listed on the New York Stock
Exchange. The stocks of these companies are widely known and represent major
American corporations engaged in a variety of industries. ASM invests at least
95% of its assets in an equal number of shares of each of these 30 companies,
without regard to the share prices of the individual stocks, with the goal of
tracking the total return of the DJIA. The balance of any assets not invested in
these companies is normally held in cash or cash equivalents. At April 26, 1999,
ASM's net asset value was $27.2 million.
ASM Stockholders may purchase shares of ASM without any sales charge
directly from ASM or through an investment adviser, financial planner, broker,
dealer or other investment professional. ASM Stockholders may buy shares at
ASM's Net Asset Value ("NAV"), next computed after the close of business
(currently 4:00 pm Eastern time) each day that the New York Stock Exchange
("NYSE") is open. The NAV is determined by dividing the value of ASM's
securities, cash and other assets, minus all expenses and liabilities, by the
number of shares outstanding. ASM's securities are valued each day at their
market value, which usually means the last quoted sale price on the security's
principal exchange on that day. ASM reserves the right to reject (and will
return) large purchase orders it receives after 3:00 pm for purchases on that
day.
ASM Stockholders may exchange their shares (minimum: $2,500 initial, $100
per subsequent investment) for shares of the Flex-Funds Money Market Fund,
provided such shares are offered in such ASM Stockholders' state of residence.
The exchange request may be made by phone or by mail. All new accounts resulting
from a share exchange will be subject to the same privileges as such ASM
Stockholders' original account. Currently,
5
<PAGE>
there is no charge applicable for share exchanges. Such exchange of shares,
however, is considered a taxable event for federal tax purposes. ASM may change,
discontinue or temporarily suspend this exchange privilege during unusual market
conditions or upon 60 days' notice to ASM Stockholders. In addition, ASM
Stockholders may elect to automatically make investments in ASM ($100 minimum
per transaction). There is no charge for this service; however, the transfer
agent will impose a fee if sufficient funds are not available in such ASM
Stockholders' account at the time of the automatic transaction.
ASM Stockholders may sell their shares of ASM back to ASM at any time. The
price per share will be the next NAV determined after such ASM Stockholder's
request is accepted in good order by ASM's transfer agent. Good order means that
a written request must be signed by the shareholder(s) and, when required, the
signature(s) must be guaranteed by an eligible guarantor institution (a bank,
broker-dealer, credit union, securities exchange, clearing agency or savings
association). No fees are imposed by ASM when shares are sold unless such ASM
Stockholder has purchased and redeemed shares six times within the last year.
ASM Stockholders may redeem by telephone up to 3:00 p.m. EST. ASM Stockholders
may redeem shares only on days when the NYSE is open, which is normally weekdays
except for certain holidays. Currently, the NYSE observes the following
holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
C. The New Orbitex Fund
The New Orbitex Fund was organized as a separate fund within the Orbitex
Group of Funds. The number of Class D shares of beneficial interest of the New
Orbitex Fund issued in the Reorganization will correspond to the number of
shares of ASM Common Stock issued and outstanding under Maryland law immediately
prior to the Reorganization. Class D shares will only be offered to the ASM
stockholders. The Class D shares will be no-load and not subject to a sales or
distribution ("Rule 12b-1") charge. The New Orbitex Fund will also offer Class A
and Class B Shares.
The New Orbitex Fund will continue to invest its assets in the 30 companies
that comprise the DJIA. Orbitex Management, however, does not intend to invest
in an equal number of shares of each such company. Instead, Orbitex Management
intends to adjust the weighting of the New Orbitex Fund's investments among the
30 companies in an attempt to increase the return of the New Orbitex Fund by
investing a greater portion of the New Orbitex Fund's assets in those companies
in the DJIA that Orbitex Management believes will perform better than other
companies in the DJIA and reducing the weighting of those companies that Orbitex
Management believes will perform worse. Additionally, in an attempt to increase
the return of the New Orbitex Fund, Orbitex Management is authorized to invest
up to 10% of the New Orbitex Fund's assets in the securities of companies that
are not included in the DJIA but are included in the S&P 500 Stock Index.
Class D shares of the New Orbitex Fund are available only to individuals
who are shareholders of ASM on the effective date of the Reorganization and to
certain institutional investors. The minimum for subsequent investments in Class
D Shares of the New Orbitex Fund by individual investors is $100. The New
Orbitex Fund or Orbitex Management may waive or lower this minimum in certain
cases. The price for the Class D shares will be based on the New Orbitex Fund's
NAV plus any applicable sales charge. NAV is determined as of the close of
trading on the NYSE (normally 4:00 p.m. Eastern time) every day that the NYSE is
open. Orders are priced at the next NAV calculated after the New Orbitex Fund
accepts an order. Like ASM, the New Orbitex Fund and its distributor reserves
the right to reject any purchase for any reason and to cancel any purchase due
to non-payment.
Owners of Class D shares may exchange such shares for Class A shares of
another fund in the Orbitex Group of Funds. If a new account is established by
such an exchange, the exchanged shares must have a minimum value of $2,500. All
subsequent exchanges must have a minimum value of $250 per fund. The Orbitex
Group of Funds will value the exchanged shares at their respective NAV next
determined after the receipt of the exchange request. Like ASM, the New Orbitex
Fund will not impose an initial sales charge, redemption fee or penalty on
exchanges. An exchange may have tax consequences to the owner of the shares. The
New Orbitex Fund reserves the right to modify or terminate the exchange
privilege upon sixty days' written notice to you.
Owners of Class D shares may sell all or any part of their shares, subject
to certain restrictions, to the New Orbitex Fund. Such shares are purchased at
the NAV next computed following receipt of a sale request in good
6
<PAGE>
order. If, as a result of such a sale, an account value drops below $1,000, such
owner of Class D shares may sell the remaining shares in its account. The New
Orbitex Fund will allow at least 60 days thereafter for an owner of Class D
shares to make an additional investment to bring its account value up to at
least $1,000 before the New Orbitex Fund will process the redemption. Like ASM,
there are no a contingent deferred sales charges imposed on redemptions of Class
D shares of the New Orbitex Fund.
The New Orbitex Fund reserves 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 the New Orbitex Fund's assets). The securities will be chosen
by the New Orbitex Fund and valued at the New Orbitex Fund's NAV. An owner of
Class D shares may incur transaction expenses in converting these securities to
cash. See the section entitled "Additional Information About the Orbitex Group
of Funds" of this Proxy Statement/Prospectus for additional information.
D. The Orbitex Group of Funds
The Orbitex Group of Funds, like ASM, is an open-end management investment
company. The Orbitex Group of Funds was established pursuant to an Agreement and
Declaration of Trust, as amended, dated December 31, 1996. Currently, the
Orbitex Group of Funds consists of three funds, the Orbitex Strategic Natural
Resources Fund, the Orbitex Info-Tech & Communications Fund and the Orbitex
Growth Fund. Each fund is a separate investment portfolio and has its own
investment objectives, programs, policies and restrictions. The Orbitex
Strategic Natural Resources Fund seeks capital growth through a flexible policy
of investing in securities of companies engaged in natural resource industries
and industries supportive to natural resource industries. The Orbitex Info-Tech
& Communications Fund seeks superior long-term capital growth through selective
investment in communication, information and related technology companies. The
Orbitex Growth Fund seeks long-term growth of capital through investment in
securities of companies of all sizes that offer potential for growth.
Additionally, each fund offers two classes of shares: Class A Shares which have
an initial sales charge and Class B Shares which have a deferred sales charge.
Class A Shares have a front end load, and purchasers thereof pay a charge of up
to 5.75% of the purchase price. Purchases of Class A Shares of $1 million or
more are not subject to any front load sales charge, but may be subject to a
1.0% contingent sales charge if redeemed within one year. Class A Shares of a
fund are subject to a service and distribution fee pursuant to Rule 12b-1 at the
rate of 0.40% of the average daily net assets of the fund. Although there is no
front end load sales charge for purchasers of Class B shares, there is a
contingent deferred sales charge on shares redeemed within six years of purchase
ranging from 5% in the first year to 1% in the sixth year. After the sixth year,
Class B Shares convert to Class A Shares. Class B Shares of a fund are subject
to service and distribution fees pursuant to Rule 12b-1 at the rate of 1.0% of
the average daily net assets of the fund.
Each fund is managed by Orbitex Management, a registered investment adviser
under the Investment Advisers Act of 1940, which directs the day-to-day
operations of each fund. The Orbitex Group of Funds principal executive offices
are at 410 Park Avenue, New York, New York 10022 and its telephone number is
1-888-ORBITEX. Orbitex Management's principal executive offices are at 410 Park
Avenue, New York, New York 10022.
E. The Reorganization
In the Reorganization:
o Each outstanding share of ASM's common stock (including fractional
shares) will be converted into an equal number of Class D Shares (or
fractions thereof) of the New Orbitex Fund.
o The New Orbitex Fund will generally have the same investment
objectives and policies as ASM except that the New Orbitex Fund will
operate as an actively-managed fund, will be permitted to use options
and futures contracts and will be authorized to invest up to 10% of
its assets in the securities of the companies that are not included in
the DJIA but are included in the S&P 500 Stock Index.
7
<PAGE>
o Orbitex Management will continue as the investment adviser to the New
Orbitex Fund and will be entitled to an investment management fee at
an annual rate equal to 0.75 of 1%.
o The New Orbitex Fund will, by operation of law, succeed to all of
ASM's assets and all of its liabilities.
o ASM's existing board of directors will be replaced by the board of
trustees of the Orbitex Group of Funds, none of whom is a member of
ASM's board.
F. The Special Meeting of Stockholders
Time, Place: ASM's special meeting of stockholders is
scheduled to be held at 12:00 p.m., on
July 2, 1999 at its principal executive
offices at 410 Park Avenue, New York,
New York 10022.
Record Date: ASM's board of directors has fixed the
close of business on May 28, 1999 as the
record date (the "Record Date") for the
determination of ASM's stockholders
entitled to notice of and to vote at the
special meeting of stockholders. On the
Record Date, [______________] shares of
ASM's common stock were issued and
outstanding and entitled to vote. Each
share is entitled to one vote and each
fractional share is entitled to a
fractional vote. All voting rights are
non-cumulative.
Required Vote: The affirmative vote of the holders of a
majority of ASM's outstanding shares of
common stock is required to approve the
Reorganization and the Reorganization
Agreement. Broker non-votes and
abstentions will have the same effect as
votes against the Reorganization.
Quorum: The presence, in person or by proxy, at
the special meeting of one-third of
ASM's shares of common stock outstanding
on the record date is required for a
quorum. Shares represented by
abstentions or broker non-votes are
counted for quorum purposes.
Voting of Proxies: If the proxy card furnished with this
Proxy Statement/Prospectus is properly
signed and returned, or if you vote your
proxy by telephone at 1-800-690-6903 or
through the internet at
www.proxyvote.com by following the
simple instructions on the proxy card,
it will be voted in accordance with the
instructions on that proxy card. If no
instructions are specified, the shares
represented by the proxy card will be
voted "FOR" the Reorganization.
Accountants: One or more representatives of
PricewaterhouseCoopers LLP, independent
accountants to ASM, will be available,
if so requested by a stockholder, at the
special meeting of stockholders of ASM
to respond to appropriate questions from
stockholders.
Recommendation of ASM's
Board of Directors: ASM's Board of Directors unanimously
recommends a vote "FOR" the
Reorganization.
8
<PAGE>
II. RISK FACTORS
As an actively-managed fund and as a fund that is permitted to invest up to
10% of its assets in securities of companies that are not included in the DJIA
but are included in the S&P 500, there will be an increased risk that the New
Orbitex Fund's returns will deviate from the returns of the DJIA. For example,
the New Orbitex Fund's returns may be worse than those of the DJIA if Orbitex
Management's judgments and decisions regarding the relative weighting of the
securities held of each of the 30 companies is incorrect. In addition, gains and
losses on Derivative Transactions depend on Orbitex Management's ability to
correctly predict the direction of securities prices or other factors. Risks in
the use of these Derivative Transactions include: (a) the risk that securities
prices or other factors affecting the value of ASM's investments do not move in
the directions being hedged against, in which case ASM will have incurred the
cost of the derivative (either its purchase price or, by writing an option,
losing the opportunity to profit from increases in the value of the securities
covered) with no tangible benefit; (b) imperfect correlation between the prices
of derivatives and the movements of the securities prices being hedged; (c) the
possible absence of a liquid secondary market for any particular derivative at
any time; (d) the potential loss if the counterpart to the transaction does not
perform as promised; and (e) the possible need to defer closing out certain
positions to avoid adverse tax consequences. In particular, the risk of loss
from certain types of futures transactions is potentially unlimited.
III. COMPARATIVE SUMMARY OF INVESTOR COSTS
The information set forth below shows what ASM's management and
administrative fee, other expense and total operating expense ratios would have
been for its most recent fiscal year if the proposed management fee payable to
Orbitex Management had been in effect, based on ASM's assets as of April 26,
1999 of approximately $27.2 million.
- --------------------------------------------------------------------------------
12 MONTHS ENDED DECEMBER 31, 1998
% OF AVERAGE
DAILY NET ASSETS AMOUNT OF FEE % CHANGE
---------------- ------------- --------
MANAGEMENT FEE
Present Fee 0.08% $ 25,319.0
Proposed Fee 0.75% $237,365.0
---------- ----------
Difference 0.67% $212,046.0 837%
ADMINISTRATIVE FEE
Present Fee N/A $25,000.00
Proposed Fee 0.10% $31,649.00
---------- ----------
Difference N/A $ 6,649.00 27%
- --------------------------------------------------------------------------------
9
<PAGE>
The following table describes the fees and expenses that an ASM Stockholder
may pay in connection with an investment in ASM today and in the New Orbitex
Fund on a pro forma basis.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Shareholder Fees ASM New Orbitex Fund
(Fees paid directly from your investment) Fund Class D Pro Forma
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (load) on Purchases (as a percentage of None None
offering price)
Sales Charge on Reinvested Dividends None None
Redemption Fees None None
Exchange Fees None None
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Annual Operating Expenses ASM New Orbitex Fund
(Expenses that are deducted from fund assets) Fund Class D Pro Forma
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fee 0.08% 0.00%
Other Annual Expenses 1.08% 0.60%
- --------------------- ----- -----
Total Fund Operating Expenses 1.16%(3) 0.60%(4)
</TABLE>
The following example(5) indicates both for the current expenses of ASM and
the pro-forma expenses of the New Orbitex Fund, the direct and indirect expenses
an investor could expect to incur in a one-year, three-year, five-year and
ten-year period, respectively:
One Year Three Years Five years Ten Years
-------- ----------- ---------- ---------
Current ASM: $118.0 $368.0 $638.0 $1,409.0
Pro-Forma of the
New Orbitex Fund: $ 69.0 $412.0 $779.0 $1,812.0
- ----------
(3) Prior to March 1, 1999, ASM's prior adviser voluntarily agreed to waive
fees and reimbursement expenses so that the expense ratio would not exceed
0.18%.
(4) Orbitex Management has agreed to waive its management fee and to reimburse
expenses, other than extraordinary or non-recurring expenses, so that the
expense ratio of the New Orbitex Fund does not exceed 0.60 of 1% until
January 1, 2000 and 0.75 of 1% until July 1, 2000.
(5) This example is based on the same hypothetical factors used by other funds
in their prospectuses: a $10,000 investment, 5% total return each year and
no change in expense levels. This example is the same whether an ASM
Stockholder sold his or her shares at the end of the period or kept them.
This example is for comparison only since actual returns and expenses will
be different.
10
<PAGE>
IV. THE PROPOSAL: TO CONSIDER AND APPROVE THE REORGANIZATION
A. Introduction
On March 9, 1999, the Board of Directors of ASM (the "Board") unanimously
approved, and recommended that the ASM Stockholders approve, the merger (the
"Reorganization") of ASM into the Orbitex Focus 30 Fund (the "New Orbitex
Fund"), a separate, newly-created series of the Orbitex Group of Funds, whereby
the New Orbitex Fund will be the surviving entity, pursuant to an Agreement and
Plan of Reorganization, dated April 26, 1999, as amended (the "Reorganization
Agreement"), by and between ASM and the Orbitex Group of Funds substantially in
the form attached hereto as Appendix A. Each ASM Stockholder will receive for
his or her shares of ASM Common Stock an equal number of no par value, Class D
shares of beneficial interest of the New Orbitex Fund (each an "NOF Share" and
together the "NOF Shares"). (See "Federal Income Tax Consequences" below). The
mailing address and principal executive offices of the Orbitex Group of Funds
are located at 410 Park Avenue, New York, New York 10022.
B. Reasons For The Reorganization
Orbitex Management serves as interim investment adviser to ASM. The
principal business address of Orbitex Management is 410 Park Avenue, New York,
New York 10022. Orbitex Management is also adviser to the Orbitex Group of
Funds. The principal purpose of the Reorganization is to permit Orbitex
Management to continue to serve as investment adviser. Orbitex Management
replaced ASM's previous investment adviser. On December 23, 1998, at a meeting
of the independent directors of the Board, the directors voted to notify ASM's
former advisor, Vector Index Advisers, Inc. ("Vector"), of the termination of
the management agreement, dated November 1, 1997, by and between ASM and Vector
(the "Vector Agreement"), effective sixty days after delivery of such notice of
termination, following Vector's announcement that it planned to seek protection
under the U.S. bankruptcy laws. In seeking a replacement for Vector, the Board
interviewed several potential replacement advisers, including Orbitex
Management. Orbitex Management agreed to serve as interim investment adviser to
ASM and to assume Vector's obligation to ASM under an expense reimbursement
receivable if, among other things, the Board would agree to recommend the
Reorganization to the ASM Stockholders for consideration and approval. In
evaluating Orbitex Management and the Reorganization, the Board reviewed
materials furnished, and considered representations made, by Orbitex Management
regarding its philosophy of management, performance expectations and methods of
operation insofar as they related to ASM, and its prior performance as
investment adviser to the Orbitex Group of Funds. In selecting Orbitex
Management and recommending the Reorganization for approval by the ASM
Stockholders, the Board, considering the best interests of the ASM Stockholders,
took into account all such factors as they deemed relevant, but gave no greater
weight to any of the following factors. Among such factors were the following:
nature, quality and extent of the services furnished by Orbitex Management; the
proposed advisory fee and cap; the advantages and possible disadvantages to ASM
of having a manager which also serves as adviser to other series within a fund;
the investment record of Orbitex Management; the proposed modification of ASM's
investment policy to allow for the possible future use of options and futures
strategies; the investment of up to 10% of the New Orbitex Fund's assets in the
securities of the companies that are not included in the DJIA but are included
in the S&P Stock Index; possible economies of scale resulting from an enhanced
distribution network and the elimination of duplicative fixed overhead expenses;
comparative data as to advisory fees; the risks assumed by Orbitex Management;
possible benefits to Orbitex Management from serving as manager to ASM; the
financial resources of Orbitex Management; and the importance of obtaining high
quality professional services for ASM.
Orbitex Management currently serves as interim adviser pursuant to a
management agreement, dated February 26, 1999 and effective March 1, 1999, by
and between ASM and Orbitex Management (the "Interim Orbitex Agreement"). The
Board approved the Interim Orbitex Agreement on February 26, 1999. The Interim
Orbitex Agreement is permitted pursuant to Rule 15a-4 under the Investment
Company Act of 1940, as amended (the "1940 Act"). Rule 15a-4 allows an
investment adviser to be retained by a fund in the event that the agreement
between the fund's former investment adviser and the fund has been terminated.
Under this rule, the newly-retained investment adviser to a fund is permitted to
serve the fund under an investment advisory agreement that has not yet been
approved by shareholders if (i) the agreement has been approved by the fund's
governing board as specified in the 1940 Act, (ii) the compensation to be
received by the investment adviser does not exceed the compensation paid to the
former investment adviser and (iii) the agreement is approved by shareholders
within the
11
<PAGE>
120 day period following the termination of the prior agreement. The terms and
conditions of the Interim Orbitex Agreement are substantially the same as those
of the Vector Agreement; however, Orbitex has not continued Vector's voluntary
agreement to limit ASM's expenses to 0.18% of the average daily net assets of
ASM. Under the Interim Orbitex Agreement, Orbitex Management maintains a
continuous investment program for ASM by making decisions and placing orders to
buy, sell or hold particular securities. Orbitex Management also supervises all
matters relating to the operation of ASM and obtains its corporate officers,
clerical staff, office space, equipment and services. Under the Interim
Management Agreement, Orbitex Management is entitled to receive a monthly fee at
an annual rate of 0.08 of 1% of ASM's average daily net assets for services
provided to ASM. In addition to the fee payable to Orbitex Management, ASM is
responsible for its operating expenses, including: (i) interest and taxes; (ii)
brokerage and futures commissions; (iii) insurance premiums; (iv) compensation
and expenses of directors other than those affiliated with Orbitex Management;
(v) legal and audit expenses; (vi) fees and expenses of the custodian,
shareholder servicing agent and transfer agent; (vii) fees and expenses for
registration or qualification of ASM and its shares under federal or state
securities laws; (viii) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders; (ix) other expenses incidental to
holding any shareholders' meetings; (x) dues or assessments of or contributions
to the Investment Company Institute or any successor; and (xi) such
non-recurring expenses as may arise, including litigation affecting ASM and the
legal obligations with respect to which ASM may have to indemnify its officers
and directors.
The Interim Orbitex Agreement terminates pursuant to the provisions of Rule
15a-4 discussed above on July 1, 1999, unless earlier terminated by either ASM
or Orbitex Management upon 60 days' notice to the other party. Orbitex
Management has explicitly advised the Board that it will not continue as adviser
to ASM if the ASM Stockholders fail to approve the Reorganization. Orbitex
Management has, however, agreed that if the ASM Stockholders fail to approve the
Reorganization by the requisite vote, it will continue to serve as interim
investment adviser to ASM for a reasonable period of time until a replacement
adviser is selected or until ASM is liquidated. The Board believes that finding
a replacement adviser under such circumstances and time constraints would be
difficult. Thus, a failure to approve the Reorganization by the requisite vote
will likely result in a proposal to liquidate ASM, subjecting ASM and its
shareholders to further expenses and consequences of the liquidation process.
C. Procedures for the Reorganization
In order to accomplish the Reorganization, the New Orbitex Fund was
organized as a separate fund within the Orbitex Group of Funds. The number of
NOF Shares corresponds to the number of shares of ASM Common Stock issued and
outstanding on the Record Date under Maryland law. Prior to the proposed
Reorganization, the New Orbitex Fund will have nominal assets and no
liabilities. The obligations of each of ASM and the Orbitex Group of Funds to
consummate the Reorganization are conditioned upon several customary conditions
having been satisfied, including without limitation the approval of the
Reorganization by the requisite number of ASM Stockholders and the effectiveness
of the Orbitex Group of Fund's post-effective amendment to its registration
statement under the Securities Act of 1933, as amended, relating to the New
Orbitex Fund. At the effective time of the Reorganization as defined in the
Reorganization Agreement (the "Effective Time"), ASM will be merged with and
into the New Orbitex Fund, as a result of which the New Orbitex Fund, as the
surviving entity in the Reorganization, will acquire and assume all of ASM's
assets and liabilities. Each share of ASM Common Stock outstanding (including
fractional shares) prior to the Reorganization will represent one NOF Share (or
fraction thereof) after the Reorganization. The value of each ASM Stockholder's
account with the New Orbitex Fund immediately after the Reorganization will be
the same as the value of such ASM Stockholder's account with ASM immediately
prior to the Reorganization.
It will not be necessary for holders of certificates representing shares of
ASM Common Stock to exchange their certificates for new certificates
representing the NOF Shares following consummation of the Reorganization. New
certificates will not be issued by the Orbitex Group of Funds after the
Reorganization to the ASM Stockholders unless specifically requested in writing.
ASM Stockholders who have not been issued certificates and whose shares are held
in an open account will automatically have those shares transferred to an open
account of the New Orbitex Fund and designated as NOF Shares.
12
<PAGE>
At the Effective Time, an investment advisory agreement in the form
attached hereto as Appendix B (the "New Orbitex Fund Agreement"), by and between
the Orbitex Group of Funds and Orbitex Management, in respect of the New Orbitex
Fund will become effective.
D. Description of the New Orbitex Fund Agreement
The New Orbitex Fund Agreement between the Orbitex Group of Funds and
Orbitex Management in respect to the New Orbitex Fund is similar to the
management agreement currently in place between the Orbitex Group of Funds and
Orbitex Management in respect of each of the other funds in the Orbitex Group of
Funds. The provisions of the New Orbitex Fund Agreement provide that Orbitex
Management will render investment supervisory and corporate administrative
services to the New Orbitex Fund, subject to the general supervision of the
trustees of the Orbitex Group of Funds (the "Trustees") and the stated policies
of the New Orbitex Fund. It will be the responsibility of Orbitex Management to
perform, or supervise the performance of, services in connection with the New
Orbitex Fund, including (i) the development of a continuing program for the
management of the New Orbitex Fund's assets; (ii) the placement of buy, sell or
exchange orders, or other trade in portfolio securities and other assets; (iii)
the placement of orders and the negotiation of commissions for the execution of
transactions in securities with or through broker-dealers, underwriters or
issuers; (iv) the preparation and supervision of the preparation of shareholder
reports and other shareholder communications; and (v) the assimilation and
evaluation of business and financial information in connection with the exercise
of its duties.
As compensation for all services rendered, facilities provided and expenses
paid or assumed by Orbitex Management under the New Orbitex Fund Agreement,
Orbitex Management will be entitled to receive a management fee at an annual
rate of 0.75 of 1%. In addition, Orbitex Management has agreed to waive its
management fee and to reimburse expenses, other than extraordinary or
non-recurring expenses, so that the expense ratio of the New Orbitex Fund in
respect of the Class D shares does not exceed 0.60 of 1% until January 1, 2000
and 0.75 of 1% until July 1, 2000. The Board believes the increase in the
management fee from the fee currently being paid by ASM is justified due to the
fact that at the Effective Time the New Orbitex Fund, while continuing primarily
to focus its investments in the securities of the 30 companies that comprise the
DJIA, will not function as an index fund as has ASM and will be authorized to
invest up to 10% of its assets in the securities of the companies that are not
included in the DJIA but are included in the S&P 500. Therefore, instead of the
"passive" management involved in an index fund, the assets of the New Orbitex
Fund will be actively managed by Orbitex Management. As a result, Orbitex
Management will be required to determine which securities to buy or sell based
on its research and analysis of the companies comprising the DJIA. In addition,
Orbitex Management may in the future engage in options and futures hedging
strategies for the New Orbitex Fund.
The New Orbitex Fund Agreement may be terminated at any time by either
party thereto, without the payment of any penalty, upon 60 days' prior written
notice to the other party; provided, that in the case of termination by the
Orbitex Group of Funds, such action has been authorized (i) by resolution of the
Orbitex Group of Funds' Board of Trustees, including the vote or written consent
of Trustees of the Orbitex Group of Funds who are not parties to the New Orbitex
Fund Agreement or interested persons of either party thereto, or (ii) by vote of
a majority of the outstanding voting securities of the Orbitex Group of Funds.
Securities held by the New Orbitex Fund may also be held by other funds for
which Orbitex Management acts as a manager or adviser. Securities may be held
by, or be appropriate investments for, the New Orbitex Fund as well as such
other clients of Orbitex Management. Because of different objectives or other
factors, a particular security may be bought for one or more clients when one or
more clients are selling the same security. If purchases or sales of securities
for the New Orbitex Fund, or other funds for which Orbitex Management acts as
manager or adviser arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds and clients in a manner deemed equitable to all. To the extent
that transactions on behalf of more than one client of Orbitex Management during
the same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
The advisory services of Orbitex Management to the New Orbitex Fund are not
exclusive under the terms of the New Orbitex Fund Agreement and Orbitex
Management is also free to, and does, render such services to others.
13
<PAGE>
Set forth below is a table listing the other funds for which Orbitex
Management currently acts as investment adviser, together with certain
information concerning the investment advisory fees paid by each such fund, all
of which are funds within the Orbitex Group of Funds.
Advisory Fee
Net Assets Annualized Rate
at April 6, (percentage of
1999 average daily
Fund (in millions) net assets)
- ---- ------------- -----------
Orbitex Strategic Natural Resources Fund $ 4.3 1.25%
Orbitex Info-Tech & Communications Fund $52.9 1.25%
Orbitex Growth Fund $ 1.6 0.75%
The description of the New Orbitex Fund Agreement is qualified in its
entirety by reference to the New Orbitex Fund Agreement which is attached hereto
as Appendix B.
E. Comparative Investment Policies and Styles
ASM's current investment objective is to track the total return of the 30
companies that make up the DJIA, all of which are listed on the New York Stock
Exchange. The stocks of these companies are widely known and represent major
American corporations engaged in a variety of industries. ASM currently seeks to
achieve its investment objectives by limiting its investments to the common
stocks of these companies. ASM invests at least 95% of its assets in an equal
number of shares of each of these 30 companies, without regard to the share
prices of the individual stocks. The balance of any assets not invested in these
companies is normally held in cash or cash equivalents.
The New Orbitex Fund will have a different management style from ASM.
Rather than continue to operate as an index-style fund as has ASM, the Board
believes that it is in the best interests of the ASM Stockholders to employ the
investment style of the New Orbitex Fund as an actively-managed fund.
Accordingly, while the New Orbitex Fund will invest primarily all of its assets
in the 30 companies that comprise the DJIA, Orbitex Management does not intend
to invest in an equal number of shares of each such company. Instead, Orbitex
Management intends to adjust the weighting of the New Orbitex Fund's investments
among the 30 companies in an attempt to increase the return of the New Orbitex
Fund by investing a greater portion of the New Orbitex Fund's assets in those
companies in the DJIA that Orbitex Management believes will perform better than
other companies in the DJIA and reducing the weighting of those companies that
Orbitex Management believes will perform worse. Orbitex Management will also be
authorized to invest up to 10% of the New Orbitex Fund's assets in the
securities of the companies that are not included in the DJIA but are included
in the S&P 500. In addition, the Board believes that the New Orbitex Fund's
assets may be invested more effectively if the New Orbitex Fund is permitted to
use a portion of its assets to engage in option and futures transactions
(collectively, "Derivative Transactions"). Orbitex Management will maintain a
portion of the New Orbitex Fund's assets in cash to process transactions of
beneficial owners and to pay expenses. In order to reduce the negative effect
this uninvested cash would have on the New Orbitex Fund's performance, Orbitex
Management may purchase or sell futures and options contracts. Such an
investment strategy will enable the New Orbitex Fund's cash balance to produce a
return similar to that of the underlying security or index on which the contract
is based. Orbitex Management does not intend to engage in transactions in
futures and options contracts for speculative purposes, but it may, to a limited
extent, engage in such transactions for the purpose of offsetting investment
risk. This is an investment strategy that Orbitex Management intends to use only
upon the future receipt of approval by the Board of Trustees of the Orbitex
Group of Funds expressly adopting this strategy.
The Board believes that it is necessary to have the flexibility to purchase
such options and futures contracts and engage in these strategies because such
types of instruments and investment techniques may be
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<PAGE>
deemed necessary for the New Orbitex Fund to achieve its investment objectives.
By expanding the universe of instruments the New Orbitex Fund may at a future
date purchase and the investment techniques in which the New Orbitex Fund may
engage, Orbitex Management will be given the opportunity to adjust the New
Orbitex Fund's portfolio from time to time in such manner as it then deems
appropriate. This flexibility will enable the Board to adapt to changing market
conditions.
ASM's fundamental investment restrictions are virtually identical to those
of the New Orbitex Fund except that ASM cannot purchase or sell futures or
options contracts and the New Orbitex Fund may purchase or sell such contracts.
While the New Orbitex Fund's fundamental investment restrictions do not prevent
it from purchasing or selling futures or options contracts, Orbitex Management
will not enter into such contracts unless the Board of Trustees of the Orbitex
Group of Funds approves the use of such contracts.
The text of ASM's investment restrictions and the New Orbitex Fund's
investment restrictions are attached hereto as Appendix C. See the section
entitled "Additional Information About the Orbitex Group of Funds" of this Proxy
Statement/Prospectus for additional information.
F. The Orbitex Group of Funds
The Orbitex Group of Funds, like ASM, is an open-end management investment
company. Its principal executive offices are at 410 Park Avenue, New York, New
York 10022 and its telephone number is 1-888-ORBITEX. The financial statements
of the Orbitex Group of Funds form part of this Proxy Statement/Prospectus from
the Orbitex Group of Funds' annual report for the fiscal year ended April 30,
1998 and its semi-annual report for the period ended October 31, 1998, each
attached hereto as Appendix D. See the section entitled "Additional Information
About the Orbitex Group of Funds" of this Proxy Statement/Prospectus for
additional information.
The Orbitex Group of Funds was established pursuant to an Agreement and
Declaration of Trust, dated December 31, 1996, as amended (the "Trust
Instrument"). Currently, the Orbitex Group of Funds consists of three funds, the
Orbitex Strategic Natural Resources Fund, the Orbitex Info-Tech & Communications
Fund and the Orbitex Growth Fund. Each fund is a separate investment portfolio
and has its own investment objectives, programs, policies and restrictions. The
Orbitex Strategic Natural Resources Fund seeks capital growth through a flexible
policy of investing in securities of companies engaged in natural resource
industries and industries supportive to natural resource industries. The Orbitex
Info-Tech & Communications Fund seeks superior long-term capital growth through
selective investment in communication, information and related technology
companies. The Orbitex Growth Fund seeks long-term growth of capital through
investment in securities of companies of all sizes that offer potential for
growth. Additionally, each fund offers two classes of shares: Class A Shares
which have an initial sales charge and Class B Shares which have a deferred
sales charge. Class A Shares have a front end load and purchasers thereof pay a
charge of up to 5.75% of the purchase price. Purchases of Class A Shares of $1
million or more are not subject to any front load sales charge, but may be
subject to a 1.0% contingent sales charge if redeemed within one year. Class A
Shares of a fund are subject to a service and distribution fee pursuant to Rule
12b-1 at the rate of 0.40% of the average daily net assets of the fund. Although
there is no front end load sales charge for purchasers of Class B shares, there
is a contingent deferred sales charge on shares redeemed within six years of
purchase ranging from 5% in the first year to 1% in the sixth year. After the
sixth year, Class B Shares convert to Class A Shares. Class B Shares of a fund
are subject to service and distribution fees pursuant to Rule 12b-1 at the rate
of 1.0% of the average daily net assets of the fund.
Each fund is managed by Orbitex Management, which directs the day-to-day
operations of each fund. State Street Bank and Trust Company serves as
administrator, custodian, accounting services agent, transfer agent and dividend
dispensing agent for each fund.
G. Certain Comparative Information about Maryland funds and Delaware funds
Summary of the Trust Instrument and By-Laws. The New Orbitex Fund has been
formed as one of several series established by the Orbitex Group of Funds
pursuant to the Trust Instrument and under Delaware law. As such, the operations
of the New Orbitex Fund will be governed by the Trust Instrument, the Orbitex
Group of Funds' By-Laws (the "By-Laws") and applicable Delaware law, rather than
by ASM's Articles of Incorporation, ASM's By-Laws and Maryland Law. The
operations of the New Orbitex Fund will be subject to the provisions of the 1940
Act, the rules and regulations of the SEC thereunder and applicable state
securities law. The Trust
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Instrument and By-Laws will govern the New Orbitex Fund. In addition, the
Orbitex Group of Funds' By-Laws require the affirmative vote of at least a
majority of the Trustees to amend the provisions of the By-Laws.
Trustees of the Orbitex Group of Funds. Subject to the provisions of the
Trust Instrument, the operations of the New Orbitex Fund are supervised by the
Trustees. The responsibilities, powers and fiduciary duties of the Trustees will
be substantially the same as those of the directors of ASM. Under Maryland Law,
a director of ASM may be removed with or without cause only by the affirmative
vote of a majority of shares entitled to vote for the election of directors. The
provisions of the Trust Instrument would permit the Board of Trustees to remove
a Trustee with or without cause by action of two-thirds of the Trustees or by
the vote of holders of shares of beneficial interest ("Beneficial Owners") of
two-thirds of the shares of the Orbitex Group of Funds present, in person or
represented by proxy, at a Special Meeting called for such purpose. The Trust
Instrument also requires a vote of a majority of the Trustees or the vote of
Beneficial Owners of a majority of the outstanding shares of the Orbitex Group
of Funds to amend such removal provision. The incumbent Trustees of the Orbitex
Group of Funds would remain as the Trustees of the Orbitex Group of Funds upon
consummation of the Reorganization.
Series of Delaware Trusts and Maryland Corporations. The Trust Instrument
permits the Board of Trustees to create one or more series of the Orbitex Group
of Funds and, with respect to each series, to issue an unlimited number of full
or fractional shares of that series or of one or more classes of shares of that
series. Each share of a series of a Delaware Trust, like each share of a series
of a Maryland corporation, represents an equal proportionate interest with each
other share in that series, none having priority or preference over another. The
directors of ASM have substantially similar rights under ASM's Articles of
Incorporation and Maryland law, except that they are required to specify a fixed
number of shares authorized for issuance. Delaware law also provides that
liabilities arising under a series shall only be enforceable against that series
and not the entire business trust or any other series thereunder if (i) the
trustees maintain separate and distinct records for each series, (ii) the
trustees hold and account for the assets of each series separately from the
other assets of the business trust or any series thereof, (iii) if the trust
instrument so provides and (iv) if the business trust's certificate of trust
sets forth notice of such limited liability. As the Trust Instrument provides
for such limited liability, the Orbitex Group of Funds' Certificates of Trust
gives notice of such limited liability and the Trustees maintain separate
records and assets for each series, any liability arising under one series would
not affect the other series. Maryland law has no such provision.
Delaware Trust Beneficial Owner Liability and Maryland Corporation
Stockholder Liability. One area of difference between the two forms of
organizations is the potential liability of Beneficial Owners and ASM
Stockholders. Under Delaware law, Beneficial Owners generally are not personally
liable for the obligations of a Delaware business trust, such as the Orbitex
Group of Funds. A Beneficial Owner is entitled to the same limitation of
liability extended to stockholders of private, for-profit corporations. Similar
statutory or other authority, however, limiting Beneficial Owner liability does
not exist in most other states. As a result, to the extent that the Orbitex
Group of Funds or a Beneficial Owner thereof is subject to the jurisdiction of
courts in those states, the courts may not apply Delaware law, thereby
subjecting the Beneficial Owner to liability. To guard against this risk, the
Trust Instrument (i) contains an express disclaimer of Beneficial Owner
liability for acts or obligations of the Orbitex Group of Funds and requires
that notice of such disclaimer be given in each agreement, obligation and
instrument entered into by the Orbitex Group of Funds or its Trustees and (ii)
provides for indemnification out of the Orbitex Group of Funds' property for any
Beneficial Owner held personally liable for the obligations of the Orbitex Group
of Funds. Thus, the risk of a Beneficial Owner incurring financial loss beyond
his or her investment because of Beneficial Owner liability is limited to
circumstances in which (i) a court refuses to apply Delaware law, (ii) no
contractual limitation of liability is in effect or (iii) the Orbitex Group of
Funds is unable to meet its obligations to indemnify a Beneficial Owner. In
light of Delaware law, the nature of the New Orbitex Fund's business and the
nature of its assets, the Board believes that the risk of personal liability to
a Beneficial Owner is extremely remote.
Stockholders of a Maryland corporation currently have no personal liability
for the corporation's acts or obligations, except that a stockholder may be
liable to the extent that: (i) the dividends he or she receives exceed the
amount which properly could have been paid under Maryland law, (ii) the
consideration paid to him by the Maryland corporation for his or her stock was
paid in violation of Maryland law or (iii) he or she otherwise receives any
distribution, payment or release which exceeds the amount which he or she could
properly receive under Maryland law.
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Liability of Directors in Maryland and Trustees in Delaware. Maryland law
provides that in addition to any other liability imposed by law, the directors
of a Maryland corporation may be liable to a Maryland corporation: (i) for
voting or assenting to the declaration of any dividend or other distribution of
assets to stockholders which is contrary to Maryland law, (ii) for voting or
assenting to certain distributions of assets to stockholders during liquidation
of the corporation, and (iii) for voting or assenting to a repurchase of the
shares of a Maryland corporation in violation of Maryland law. In the event of
any litigation against the directors or officers of ASM, Maryland law permits
ASM to indemnify a director or officer for certain expenses and to advance money
for such expenses only if he or she demonstrates that he or she acted in good
faith and reasonably believed that his or her conduct was in the best interest
of ASM. In addition, ASM's Articles of Incorporation limit the personal
liability of directors and officers to the corporation and its stockholders for
monetary damages, except to the extent that a judgment or other final
adjudication adverse to the director or officer is entered in a proceeding based
on a finding in the proceeding that the director's or officer's action, or
failure to act, was the result of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
Under Delaware law, a trustee of a business trust, while acting in such
capacity, is not personally liable to any person other than the business trust
and beneficial owners for any act, omission or obligation of the business trust
or any trustee thereof. In addition, to protect the Trustees against such
liability, the Trust Instrument provides that the Trustees will not be liable to
any person in connection with the assets or affairs of the Orbitex Group of
Funds and that a Trustee will not be liable for any errors of judgment or
mistakes of fact or law; but nothing in the Trust Instrument protects a trustee
against any liability to the Orbitex Group of Funds or its Beneficial Owners to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.
Voting Rights of Maryland Corporation Stockholders and Delaware Beneficial
Owners. Neither Maryland corporations nor Delaware business trusts are required
to hold annual meetings. ASM's By-laws, however, require ASM to hold an annual
meeting of stockholders in every year in which the 1940 Act requires
stockholders to elect directors, approve an investment advisory agreement,
ratify the selection of an independent public accountant or approve a
distribution agreement. Maryland law and the Articles of Incorporation and
By-laws of ASM provide that a special meeting of stockholders may be called by
(i) the Chairman of the Board, (ii) the President of ASM, (iii) a majority of
the Board's directors, (iv) for matters not substantially the same as a matter
voted on at any special meeting of the shareholders held during the preceding
twelve months, the holders of shares representing at least 25% of the shares
entitled to vote at such meeting and (v) for matters substantially the same as a
matter voted on at any special meeting of the shareholders held during the
preceding twelve months, the holders of shares representing at least 50% of the
shares entitled to vote at such meeting. The Trust Instrument provides that
Trustees may call special meetings of Beneficial Owners from time to time for
any purpose as may be prescribed by Delaware law, the Trust Instrument or the
Orbitex Group of Funds' By-laws. The Trust Instrument, however, does not grant
Beneficial Owners the right to call such special meetings.
The Trust Instrument provides that the Beneficial Owners have the power to
vote only with respect to (i) the election or removal of Trustees as provided
therein, (ii) the approval or termination of investment advisory agreements or
distribution contracts, (iii) the termination or reorganization of the Orbitex
Group of Funds or any series of the Orbitex Group of Funds, (iv) with respect to
amendments of the Trust Instrument, to the extent the amendment adversely affect
the rights of the Beneficial Owners, and (v) with respect to such additional
matters as may be required by law, the Trust Instrument, By-Laws or as the
Trustees may consider necessary or desirable. ASM's Articles of Incorporation
and Maryland law generally give stockholders substantially similar voting
rights. The Trust Instrument requires 30% of the Beneficial Owners of shares
entitled to vote to establish a quorum for the transaction of business at a
meeting of Beneficial Owners. The ASM Articles of Incorporation requires
one-third of the holders of shares present, in person or by proxy, at the
meeting to constitute a quorum.
The Trust Instrument provides that Beneficial Owners of each series also
have the power to vote on any matter required to be submitted to the Beneficial
Owners by the 1940 Act, Delaware law or otherwise. Under the Trust Instrument,
any matter affecting a particular series will not be considered approved unless
approved by the required vote of the Beneficial Owners of that series, and, to
the extent permitted by the 1940 Act, only Beneficial Owners of the affected
series are entitled to vote on matters concerning that series. Subject to the
foregoing, Beneficial Owners are not required to vote separately on the
selection of independent accountants, the election of trustees or any submission
with respect to a contract with a principal underwriter or distributor.
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Right of Inspection. Maryland law provides that persons who have been
stockholders of record for six months or more and who own at least five percent
of the shares of ASM may inspect the books of account and stock ledger of ASM.
The New Orbitex Fund's Beneficial Owners have the same rights to inspect the
records, accounts and books of the New Orbitex Fund as are permitted
stockholders of a Delaware business corporation. Currently, each stockholder of
a Delaware business corporation is permitted to inspect the records, accounts
and books of a business corporation for any legitimate business purposes.
The foregoing is only a summary of certain of the differences between ASM,
its Articles of Incorporation and By-laws and Maryland law and the Orbitex Group
of Funds, the Trust Instrument, the By-Laws and Delaware Law. It is not a
complete list of differences. ASM Stockholders should refer to the provisions of
such Articles of Incorporation, By-laws and Maryland law and the Trust
Instrument, By-laws and Delaware Law directly for a more thorough comparison.
ASM Stockholders on the Record Date may obtain copies of the organizational
documents of ASM by calling the telephone number set forth on the first page of
this Proxy.
H. No Dissenters' Rights of Appraisal
Maryland law does not entitle the ASM Stockholders to appraisal rights
(i.e., to demand and receive fair value of their stock) in the event of a merger
involving the stock of an open-end investment company registered with the SEC,
such as the Orbitex Group of Funds. Consequently, the ASM Stockholders will be
bound by the terms of the Reorganization Agreement if approved at the Special
Meeting. Any of the ASM Stockholders, however, may redeem his or her shares at
net asset value prior to the closing date of the Reorganization.
I. Federal Income Tax Consequences
The Reorganization and the transactions contemplated by the Reorganization
Agreement will be tax-free. Consummation of the Reorganization is subject to
receipt of an opinion of Rogers & Wells LLP, counsel to the Orbitex Group of
Funds, that, under Section 368(a) of the Internal Revenue Code of 1986, as
amended, the merger of ASM into the New Orbitex Fund pursuant to the
Reorganization Agreement will not give rise to the recognition of income, gain
or loss for federal income tax purposes to ASM or the ASM Stockholders. An ASM
Stockholder's adjusted basis for tax purposes in shares of the New Orbitex Fund
after the Reorganization will be the same as his or her adjusted basis for tax
purposes in the shares of ASM Common Stock immediately before the
Reorganization. Each ASM Stockholder should consult his or her own tax adviser
with respect to the state and local tax consequences of the proposed
transaction.
J. Accounting Consequences
The Reorganization will be accounted for as a business combination under
generally accepted accounting principles for investment companies.
K. Expenses
The expenses related to the Reorganization will be borne by Orbitex
Management.
L. Required Vote
The affirmative vote of a majority of the votes of shares of ASM Common
Stock entitled to vote on the Reorganization is required to approve the
Reorganization. For purposes of the vote for the Reorganization, abstentions and
broker non-votes will have the same effect as votes cast against the
Reorganization.
M. Recommendation of the ASM Board of Directors
The Board has unanimously approved the Reorganization and has determined
that the Reorganization is in the best interests of ASM and that the interests
of existing stockholders of ASM will not be diluted as a result of the
Reorganization. THE ASM BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
REORGANIZATION.
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V. ADDITIONAL INFORMATION ABOUT THE ORBITEX GROUP OF FUNDS
A. Information Regarding the New Orbitex Fund
This section describes the New Orbitex 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" below.
Investment Objective. The objective of the New Orbitex 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.
Principal Investment Strategies. The New Orbitex Fund's principal
investment strategies include:
o Investing at least 90% of its total assets in the common stock of some
or all of the 30 companies that make up the 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 New Orbitex Fund will not be an index fund; instead
Orbitex Management will weight the New Orbitex Fund's investments
toward the DJIA companies that its believes will perform better than
other DJIA companies; and
o Investing up to 10% of its assets in common stocks of companies
included in the S&P 500.
Principal Risks. The New Orbitex Fund is subject to the following principal
risks:
o 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 New Orbitex Fund will go up and down, which means
that you could lose money.
o 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 Orbitex Management believes is representative of its full value
or that it may even go down in price.
o Inflation Risk: There is a possibility that rising prices of goods and
services may have the effect of offsetting the New Orbitex Fund's
total return.
o Litigation That May Affect the New Orbitex Fund:. On February 8, 1999,
a suit was filed against a former director and officer of ASM, the
former investment adviser (Vector Investment Advisors, Inc.) of ASM,
and ASM itself alleging that the former officer of ASM failed to
invest in ASM amounts purportedly paid by the plaintiffs to ASM's
investment adviser. The relief sought 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 ASM from
transferring or permitting the dissipation of its assets. With the
possible exception of Steven H. Adler, a former officer and director
of ASM, ASM 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 ASM. Upon consummation of the
reorganization of ASM into the New Orbitex Fund, the New Orbitex Fund
will succeed to the obligations, if any, of ASM with respect to this
suit, including obligations of ASM to indemnify its officers and
directors. At the present time, the liability of the New Orbitex Fund,
if any, is not readily determinable.
Who May Want to Invest in the New Orbitex Fund. We designed the New Orbitex
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
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companies included in the DJIA; a stock fund to complement a portfolio of more
conservative investments; and a stock fund that uses primarily a blend of value
and growth oriented investment strategies
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 D Shares of the
New Orbitex 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 offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as a % of lower of original purchase None(2) 5.00% None
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 0.00% 0.75% 0.00%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(3) 0.00%
Other Expenses 0.60%(4) 0.60%(4) 0.60%(4)
Total Annual Operating Expenses 1.00%(5) 1.60%(5) 0.60%(5)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
o (1) Reduced for purchases of $50,000 or more by certain investors. See
"Your Account ? Classes in Detail ? Class A ? Reduced Sales Charge."
o (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%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account -- Classes in Detail -- Class A --
Reduced Sales Charge."
o (3) Including a 0.25% shareholder servicing fee.
o (4) Other expenses are estimated for the New Orbitex Fund for its initial
period of operations.
o (5) Orbitex Management has agreed to waive and/or reimburse fees and
expenses to the extent necessary so that Class A Shares' and Class B
Shares' total operating expenses do not exceed 2.00% and 2.60% of average
daily net assets. Orbitex Management may discontinue such fee waivers
and/or expense reimbursements at any time, in its sole discretion. Orbitex
Management has also agreed 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 New Orbitex Fund does not exceed 0.60
of 1% until January 1, 2000 and 0.75 of 1% until July 1, 2000. The
information contained in the above table and the example below reflects the
expenses of each class of the New Orbitex Fund without taking into account
any applicable fee waivers and/or reimbursements, except for those
applicable to the Class D shares through July 1, 2000.
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o Example. This example is intended to help you compare the cost of
investing in the New Orbitex Fund with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the New Orbitex 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 New
Orbitex 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:
Year Class A Class B Class D
---- ------- ------- -------
1 $ 678 $ 670 $ 69
3 $ 1,086 $ 1,026 $ 417
5 $ 1,526 $ 1,518 $ 797
10 $ 2,786 $ 2,982 $ 1,898
You would pay the following expenses if you did not redeem
your shares:
Year Class A Class B Class D
---- ------- ------- -------
1 $ 678 $ 170 $ 69
3 $ 1,086 $ 726 $ 417
5 $ 1,526 $ 1,318 $ 797
10 $ 2,786 $ 2,982 $ 1,898
Investment Details of the New Orbitex Fund
Investment Objective The objective of the New Orbitex 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 DJIA.
Principal Investment Strategies. The New Orbitex Fund seeks to achieve its
investment objective principally by investing in companies with well established
earnings and dividend histories. 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.
Principal Investments. The New Orbitex Fund invests at least 90% of its
assets in the common stock of some or all of the 30 companies that make up the
DJIA. Orbitex Management will weight the New Orbitex Fund's investments toward
the DJIA companies that its believes will perform better than other DJIA
companies. The New Orbitex Fund also invests up to 10% of its assets in common
stocks of companies included in the S&P 500.
Portfolio Manager. Courtney D. Smith is the portfolio manager for the New
Orbitex Fund. Mr. Smith joined Orbitex Management in 1996. Formerly, he was
President and Chief Investment Officer of Pinnacle Capital Management, Inc.,
which provides managed futures accounts. He was also President and Chief
Executive Officers of Quantum Financial Services, Inc., a futures and stock
brokerage firm. Mr. Smith also manages the Orbitex Growth Fund and the Orbitex
Health & Biotechnology Fund.
More Information About Risks. Many factors affect the New Orbitex Fund's
performance. The New Orbitex Fund's 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 New Orbitex Fund invests, and the New
Orbitex Fund's level of investment in the securities of those companies. WHEN
YOU REDEEM YOUR SHARES OF THE NEW ORBITEX FUND, 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 New Orbitex Fund's investments. The following factors may significantly
affect the New Orbitex Fund's performance:
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<PAGE>
o 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.
o 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.
o Defensive Strategies: In response to market, economic, political or other
conditions, Orbitex Management may temporarily use a different investment
strategy for the New Orbitex Fund for defensive purposes. Such a strategy
could include investing up to 100% of the New Orbitex Fund's assets in cash
or cash equivalent securities. If Orbitex Management does so, it could
affect the New Orbitex Fund's performance and the New Orbitex Fund might
not achieve its investment objective.
o 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.
o Derivatives and Other Strategies. The New Orbitex Fund may invest in
options, futures, foreign securities, foreign currencies, and other
derivatives (collectively, "Derivative Transactions"), and may enter into
certain types of short sales.
o If these practices are used by the New Orbitex Fund, the intent would be
primarily to hedge the New Orbitex Fund's portfolio. For example, the New
Orbitex 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 New Orbitex Fund. Or, the New Orbitex 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 New Orbitex Fund's holdings.
o Investing for hedging purposes may result in certain transaction costs,
which may reduce the New Orbitex 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.
o Year 2000. The New Orbitex Fund's operations depend on the seamless
functioning of computer systems in the financial service industry,
including those of Orbitex Management, 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 New
Orbitex Fund's business operations.
o Orbitex Management 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 New Orbitex Fund's major service providers have
informed Orbitex Management that they are taking comparable steps. Orbitex
Management 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 New Orbitex
Fund owns could have Year 2000 computer problems. These problems could
negatively affect the value of their securities, which, in turn, could
impact the New Orbitex Fund's performance. An issuer's Year 2000 readiness
is only one of many factors Orbitex Management may consider when making
investment decisions, and other factors may receive greater weight.
22
<PAGE>
B. Information Applicable to the Orbitex Group of Funds
o The following sections provide information applicable to all of the
Orbitex Funds, including the New Orbitex Fund. The other Orbitex Funds are
the Orbitex Strategic Natural Resources Fund, the Orbitex Info-Tech &
Communications Fund and the Orbitex Growth Fund. This section describes the
services that are available to shareholders.
Types Of Accounts. If you are making an initial investment in the Orbitex
Funds, you will need to open an account. You may establish the following types
of accounts:
o 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.
o 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.
o 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.
o 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.
o 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 in the Orbitex Group of Funds (other
than the New Orbitex Fund) offer two classes of shares (Class A and Class B).
The New Orbitex Fund offers a third class of shares ( Class D). Class D Shares
are only available to shareholders who previously were shareholders of ASM at
the time of the Reorganization.
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" 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. 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.
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.
23
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF CLASSES
- -------------------------------------------------------------------------------------------------------------------
Class A Initial Sales Charge Class B Contingent Deferred Sales Class D No Sales Charge (Focus 30 Fund
Charge only)
<S> <C> <C>
o Initial sales o No initial sales charge. This Note: Class D Shares are only available to
charge of 5.75% or allows 100% of your purchase shareholders who were shareholders of the
less. price to be invested in the New ASM Index 30 Fund.
o Lower sales Orbitex Fund.
charges for larger o Deferred sales charge of 5% o No initial or contingent deferred
investments. or less on shares you redeem sales charge.
o Lower annual within six years. o No annual marketing and service
expenses than Class B o An annual fee of 1.00% under (12b-1) fee.
Shares due to lower each Fund's rule 12b-1 plan, o Lower annual expenses than
marketing and service 0.75% of which is for marketing Class A and Class B.
(12b-1) fee of .40%. and 0.25% of which is for
shareholder services. This will
result in a lower total return
than comparable Class A Shares.
o Automatic conversion to
Class A Shares after six years,
thereby reducing future annual
expenses.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Class A Shares.
o Initial Sales Charge. The sales charge for Class A Shares of a fund is
5.75% of the offering price. However, Orbitex Management may reduce or
waive this sales charge as described in "Reduced Sales Charge."
o 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".
If you are a United States resident and are investing more than $50,000,
Orbitex Management will reduce the sales charge you pay. The chart below 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 if a fund involuntarily redeems your shares; or if
you reinvest the proceeds from your redemption in a fund within 90 days of your
redemption.
24
<PAGE>
<TABLE>
<CAPTION>
REDUCED SALES CHARGE FOR U.S. RESIDENTS
- --------------------------------------------------------------------------------------------------
Sales Charge as a
Sales Charge as a Percentage of Net Broker Reallowance
Percentage of Offering Investment as a Percentage of
Amount of Purchase Price (Net Asset Value) Offering Price(6)
<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(7) None(7) None(6)
- --------------------------------------------------------------------------------------------------
</TABLE>
o 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 fund as part of your current
investment. To qualify for this option, you must be either: (i) an
individual; (ii) an individual and spouse purchasing shares for your
own account or trust or custodial accounts for your minor children; or
(iii) a fiduciary purchasing for any one trust, estate or fiduciary
account, including employee benefit plans created under Sections 401
or 457 of the Internal Revenue Code of 1986, as amended, 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.
o 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.
o Exchanges of Class D Shares of the New Orbitex Fund into Class A
Shares of Other Orbitex Funds. If you received Class D Shares of the
New Orbitex Fund in exchange for shares of ASM, 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 New
Orbitex 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.
o 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
- ----------
(6) 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.
(7) The distributor will pay certain commissions to Selling Group Members 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.
25
<PAGE>
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 Shares
o 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: (i) redemptions made within one year after the death of
a shareholder or registered joint owner; (ii) redemptions made to
facilitate minimum required distributions made from an IRA or other
retirement plan account after age 70 1/2; and (iii) involuntary
redemptions made by a Fund.
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" below.
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.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
- ----------------------------------------------------------------------------------------------------
Years After Purchase That You Redeem Your Shares Contingent Deferred Sales Charge(8)
<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 6 Years................................................... None
- ----------------------------------------------------------------------------------------------------
</TABLE>
Class D Shares.
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 ASM on the date ASM was reorganized as the New
Orbitex Fund, and to certain institutional investors.
If you held shares of ASM, you may purchase additional Class D Shares of
the New Orbitex Fund for the account that was established when your received
shares of the New Orbitex Fund in exchange for your ASM Shares.
In addition, if you held shares of ASM on the date of reorganization, you
may purchase Class D Shares of the New Orbitex Fund for a new account
established for: (i) you; (ii) one of your immediate family members; (iii) a
trust or individual retirement account or self-employed retirement plan for the
benefit of you or any of your immediate family members; or (iv) your or an
immediate family member's estate.
Rule 12b-1 Plans in Detail. The Board of Trustees of the Orbitex Group of
Funds has adopted for Class A Shares and Class B Shares separate Distribution
Plans and Agreements pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Plans").
- ----------
(8) 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.
26
<PAGE>
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 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.
The Plan adopted for Class B Shares also allows each Fund to use part of
its assets for the sale and distribution of its Class B Shares, including
advertising, marketing and other promotional activities. For these services,
under the Plan, each Fund pays Funds Distributor, Inc., the Distributor, an
amount equal to 0.75% of average net assets attributable to Class B Shares of
that Fund on an annualized basis. 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 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
an 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 Shares and Class B 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 New Orbitex Fund are available only to individuals
who were shareholders of ASM on the date it was reorganized as the New Orbitex
Fund, and to certain institutional investors. The minimum for subsequent
investments in Class D shares of the New Orbitex Fund by individual investors is
$100.
The Orbitex Group of Funds or Orbitex Management 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 New Orbitex 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 New Orbitex Fund receives your order. For more
information on how we price shares, see "Pricing of Fund Shares".
The New Orbitex 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 United
States banks. If we cancel your purchase due to non-payment, you will be
responsible for any loss the New Orbitex Funds incur. We will not accept cash or
third-party checks for the purchase of shares.
27
<PAGE>
Purchasing Methods and Procedures
- --------------------------------------------------------------------------------
Method Of
Purchase Purchase Procedures
- -------- -------------------
Through a Contact your financial consultant.
Financial
Professional
Through The Distributor authorizes certain securities dealers, banks
Selling Group or other financial service firms (collectively, "Selling
Members Group Members") to purchase your shares. To receive that
day's share price:
o 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
o the Selling Group Member must transmit the order to the
New Orbitex Fund before 5:00 p.m. Eastern time on that
same day.
By Mail To purchase shares of the New Orbitex Fund, send your
completed application to:
Orbitex Group of Funds
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
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.
By Wire o Initial Purchase: 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."
o 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 the New Orbitex
Funds at:
Orbitex Group of Funds
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788-0132
By Telephone You may make subsequent purchases in your account by
telephoning 1-888-ORBITEX between 8:30 a.m. and 4:00 p.m.
Eastern time on any day the New Orbitex Fund is open. We
will electronically transfer money from the bank account you
designate on your Application to your 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".
Subsequent The minimum subsequent purchase is $250 per Fund, except for
Purchases reinvestment of dividends and distributions and Class D
purchases with minimum amount of $100.
28
<PAGE>
Purchasing Methods and Procedures
- --------------------------------------------------------------------------------
Method Of
Purchase Purchase Procedures
- -------- -------------------
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.
- --------------------------------------------------------------------------------
Redeeming Shares You have the right to sell ("redeem") all or any part of
your shares subject to certain restrictions. Selling your shares in the New
Orbitex Fund is referred to as a "redemption" because the New Orbitex 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'".
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 New Orbitex Fund 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 below). 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
to1.00% 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.
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. 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. There is no such charge for the sale of Class A Shares or
Class D 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. There are no a contingent deferred sales charges imposed on
redemptions of Class D Shares of the New Orbitex Fund.
Third Party Transactions. If you buy and redeem shares of the New Orbitex
Fund 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 New Orbitex Fund's behalf. The
New Orbitex Fund will be deemed to have received the order when an authorized
broker or a broker authorized designee accepts your order. Your order will be
priced at the New Orbitex Funds' net asset value next computed after it is
received by the authorized broker or broker authorized designee.
Redemption-in-kind. The New Orbitex Fund reserves 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
29
<PAGE>
$250,000 or 1% of a Fund's assets). The securities will be chosen by the New
Orbitex Fund and valued at the New Orbitex Fund's net asset value. A shareholder
may incur transaction expenses in converting these securities to cash.
Redemption Methods and Procedures
- --------------------------------------------------------------------------------
Method of
Redemption Redemption Procedures
- ---------- ---------------------
By Telephone You may authorize redemption of some or all shares in your
account with the New Orbitex Fund by telephoning the New
Orbitex Funds at 1-888-ORBITEX between 8:30 a.m. and 4:00
p.m. Eastern time on any day the New Orbitex Fund is 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 New Orbitex Fund, you may
send your redemption request to:
Orbitex Group of Funds
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
You must include the following information in your written
request: a letter of instruction stating the name of the New
Orbitex 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 application. The New
Orbitex 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 "Good For our mutual protection, all redemption requests must
Order" include: your account number; the amount of the transaction;
for mail request, signatures of all owners exactly as
registered on the account o signature guarantees, if
required (signature guarantees can be obtained at most
banks, credit unions, and licensed brokers; or 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 NOTE Once we have processed your redemption request, and a
confirmation number has been given, the transaction cannot
be revoked.
- --------------------------------------------------------------------------------
Options for Redemption Proceeds You may receive your redemption proceeds by
check or by wire.
o Check Redemptions. Normally we will mail your check within two
business days of a redemption.
o 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.
If we receive your request for a wire redemption by noon Eastern Time, the
wire will arrive at your bank by the close of business that same day. Requests
that we receive later than noon Eastern Time will arrive at your bank by the
close of business the following business day.
30
<PAGE>
We require a minimum redemption of $10,000 in order to send your redemption
proceeds by wire.
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 Group of Funds 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; and the primary social security or
employer identification number as registered on the account;
We may also require a password from the caller. Orbitex Group of Funds 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 New
Orbitex 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 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 Orbitex 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 Orbitex 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 New Orbitex 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 to
American Data Services, Inc., The Hauppauge Corporate Center, 150 Motor Parkway,
Hauppauge, New York 11788-0132.
Pricing of Fund Shares. Each Fund's net asset value per share 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
Funds 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 New Orbitex 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 New
Orbitex 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 New Orbitex 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.
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<PAGE>
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:
--------------------------------------------------
o Long-term capital gains are realized on
securities held for more than one year and
are part of your capital gain distribution.
o Short-term capital gains are realized on
securities held less then one year and are
part of your dividend distributions.
The New Orbitex 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
Orbitex Funds 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 Orbitex Funds as undeliverable,
you will not receive interest on amounts represented by the uncashed checks.
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, Orbitex Management will
attempt to take into account the tax consequences of its investment decisions.
However, there may be occasions when Orbitex Management's investment decisions
will result in a negative tax consequence for the New Orbitex Fund's to
shareholders.
o 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 each Orbitex 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 each Orbitex 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.
Each Orbitex Fund sends detailed tax information to its shareholders
about the amount and type of its distributions by January 31 for the
prior calendar year.
o Taxes on Sales or Exchanges If you redeem your shares of each Orbitex
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.
o "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.
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<PAGE>
o Tax Withholding. The Orbitex 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 Orbitex 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.
Management
Investment Orbitex Management. Orbitex Management, Inc., is the Orbitex
Funds' investment adviser. Orbitex Management's address is 410 Park Avenue, New
York, NY 10022. Orbitex Management 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, Orbitex Management is
responsible for formulating the New Orbitex Funds' investment programs and for
making day-to-day investment decisions and engaging in portfolio transactions.
Orbitex Management also furnishes corporate officers, provides office space,
services and equipment and supervises all matters relating to the New Orbitex
Fund's operations.
Other Service Providers. The New Orbitex Funds rely on other companies to
provide necessary services for their day-to-day operations. Below is a list of
these service providers.
o Administrator for the Orbitex Group of Funds
American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
o 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
o Custodian for the Orbitex Group of Funds
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
o Distributor for the Orbitex Group of Funds
Funds Distributor, Inc.
60 State Street
Boston, Massachusetts 02109
o 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
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<PAGE>
o Transfer and Dividend Disbursing Agent for the New Orbitex Fund and
Health & Biotechnology Fund
American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
o Counsel
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
o Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
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<PAGE>
VI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Board, the following persons owned of record 5% or
more of ASM Common Stock outstanding shares at March 9, 1999:
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
<S> <C>
Donaldson Lufkin & Jenrette 5.9%
Pershing Division
Jersey City, NJ 07311-2052
National Financial Services Corp. 12.6%
Church Street Station, 5th Floor
P.O. Box 3908
New York, NY 10008-3908
National Investor Services 7.3%
For the Exclusive Benefit of Our Customers
55 Water Street
New York, NY 10041
FTC & Co. 16.3%
Attn: Datalynx
House Account
P.O. Box 173736
Denver, CO 80217-3736
</TABLE>
As of March 9, 1999, the officers and directors of ASM owned less than 1% of
ASM.
VII. OTHER MATTERS
The Board does not intend to bring any matters before the Special Meeting
other than the Reorganization described above, and the Board is not aware of any
other matters to be brought before the Special Meeting or any adjournments
thereof by others. If any other matters legally come before the Special Meeting,
it is intended that the accompanying proxy will be voted on such matters in
accordance with the best judgment of the persons named in said proxy.
In the event that sufficient votes in favor of the proposals set forth in
the Notice of Special Meeting of Stockholders are not received by the date of
the Meeting, the proxyholders may propose one or more adjournments of the
Special Meeting for a period or periods of not more than sixty (60) days in the
aggregate to permit further solicitation of proxies, even though a quorum is
present. Any such adjournment will require the affirmative vote of a majority of
the votes cast on the question, in person or by proxy, at the session of the
Special Meeting to be adjourned. Proxies which are instructed to be voted
against the matters to be considered at the Special Meeting when it convenes
will be voted against a proposal to adjourn.
VIII. ADDITIONAL INFORMATION
Persons Making the Solicitation. The solicitation of proxies may be made
by, among others, directors of ASM and officers and employees of Orbitex
Management.
Shareholders Communication Corporation ("SCC") has been retained to assist
in the solicitation of proxies. SCC shall be paid approximately $3,500 by
Orbitex Management, Inc. In addition, Automatic Data Processing ("ADP") has been
retained to assist in the voting of proxies by telephone or the internet. ADP
will be paid approximately $7,900 by Orbitex Management. Orbitex Management will
reimburse ADP and SCC for their related out-of-pocket expenses. The solicitation
of proxies will be largely by mail, but may include, without
35
<PAGE>
additional cost to ASM, telephone, telegraphic or oral communications by
directors, officers or employees of Orbitex Management.
The expense of preparation, printing and mailing this Proxy
Statement/Prospectus and the other proxy materials that accompany the Proxy
Statement/Prospectus will be borne by Orbitex Management. Orbitex Management
will reimburse banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation materials to the beneficial owners of the ASM
Common Stock.
RESPECTFULLY SUBMITTED,
M. Fyzul Khan
Secretary
Dated: May __, 1999
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO VOTE THEIR SHARES BY MAIL BY SIGNING
AND RETURNING THE PROXY CARD IN THE ENCLOSED ENVELOPE (NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES), OR BY TELEPHONE OR THROUGH THE INTERNET BY
FOLLOWING THE SIMPLE INSTRUCTIONS ON THE PROXY CARD.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH, WHERE STOCK IS HELD JOINTLY, BOTH
SIGNATURES ARE REQUIRED.
36
<PAGE>
APPENDIX A
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
by and between
ORBITEX GROUP OF FUNDS
and
ASM INDEX 30 FUND, INC.
Dated as of April 26, 1999
and hereby
Amended and Restated as of May 28, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS.....................................1
ARTICLE II THE MERGER..............................................3
2.1. The Merger..................................................3
2.2. Effective Time..............................................3
2.3. Closing.....................................................4
2.4. Trustees and Officers of the Surviving Entity...............4
2.5. Effects of the Merger.......................................4
2.6. Further Assurance...........................................4
ARTICLE III CONVERSION OF SHARES....................................5
3.1. Conversion of Capital Stock.................................5
3.2. Exchange of Certificates....................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE FUND..............5
4.1. Organization and Qualification..............................5
4.2. Authority, Authorization and Enforceability.................5
4.3. Capitalization..............................................6
4.4. Subsidiaries................................................6
4.5. No Conflicts................................................6
4.6. Financial Statements; No Undisclosed Liabilities............6
4.7. Books and Records...........................................7
4.8. Legal Proceedings...........................................7
4.9. No Brokers or Finders.......................................7
4.10. Investment Company Registration.............................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE TRUST.............7
5.1. Organization and Qualification..............................7
5.2. Authority, Authorization and Enforceability.................8
5.3. Capitalization..............................................8
5.4. No Conflicts................................................8
5.5. Legal Proceedings...........................................8
5.6. No Brokers or Finders.......................................8
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<PAGE>
ARTICLE VI PRE-CLOSING COVENANTS...................................9
6.1. Investigations and Examinations.............................9
6.2. Conduct of Business.........................................9
6.3. No Shopping.................................................9
6.4. Covenant to Proceed.........................................9
6.5. Notice of Material Changes..................................9
6.6. Regulatory Approvals........................................9
6.7. No Default.................................................10
6.8. Preparation of Proxy Materials.............................10
6.9. Financial Statements.......................................10
ARTICLE VII CONDITIONS TO THE CLOSING..............................10
7.1. Conditions Precedent to the Obligations of the Fund to
Complete the Closing.....................................10
7.2. Conditions Precedent to the Obligations of the Trust to
Complete the Closing.....................................11
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............13
ARTICLE IX TERMINATION............................................13
ARTICLE X MISCELLANEOUS..........................................14
10.1. Publicity; Confidentiality.................................14
10.2. Waivers and Amendments.....................................14
10.3. Governing Law..............................................14
10.4. Notices....................................................14
10.5. Binding Effect; Assignment.................................17
10.6. Variations in Pronouns.....................................17
10.7. Counterparts...............................................17
10.8. Complete Agreement.........................................17
10.9. Headings...................................................17
10.10. Severability of Provisions.................................17
A-ii
<PAGE>
EXHIBITS
EXHIBIT A - Officer's Certificate of the Trust
EXHIBIT B - Secretary's Certificate of the Trust
EXHIBIT C - Opinion of Counsel to the Trust
EXHIBIT D - Officer's Certificate of the Fund
EXHIBIT E - Secretary's Certificate of the Fund
EXHIBIT F - Opinion of Counsel to the Fund
ANNEX
ANNEX A - Investment Policies of the Series
A-iii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement"), dated as of April 26, 1999, and hereby amended and restated as of
May 28, 1999, by and between Orbitex Group of Funds, a Delaware business trust
(the "Trust"), and ASM Index 30 Fund, Inc., a Maryland corporation (the "Fund").
WHEREAS, the Board of Trustees of the Trust and the Board of Directors of
the Fund have each determined that it is advisable and in the best interests of
their respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which the Fund would merge with
and into Trust and the Trust would be the surviving entity (the "Merger"); and
WHEREAS, Orbitex Management, Inc., a New York corporation ("Orbitex"), has
been engaged pursuant to a Management Agreement, dated February 28, 1999 and
effective March 1, 1999, by and between Orbitex and the Fund to serve as interim
investment advisor to the Fund in accordance with Rule 15a-4 under the 1940 Act;
and
WHEREAS, it is the intention of the parties that the Merger shall qualify
as a tax-free reorganization under Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, the Trust and the Fund desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants, representations and warranties herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is agreed:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
"Action or Proceeding" means any action, suit, proceeding or arbitration by
any Person, or any investigation or audit by any Governmental or Regulatory
Body.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such first Person.
"Authorities" has the meaning specified in Section 2.2.
A-1
<PAGE>
"Books and Records" means the Fund's or the Trust's, as the case may be,
minute books, stock transfer ledgers, financial statements, tax returns and
related work papers and letters from accountants, and other similar records.
"Business Combination" means, with respect to any Person, any merger,
consolidation, conversion, or combination to which such Person is a party, any
sale, dividend, split or other disposition of capital stock or other equity
interests of such Person, any sale, dividend or other disposition of all or
substantially all of the assets and properties of such Person or any sale,
dividend or disposition of a portion of the assets or properties of such Person
(other than in the ordinary course of business).
"Business Day" means a day other than Saturday, Sunday or a day on which
banks located in New York City are authorized or obligated to close.
"Certificates" has the meaning specified in Section 2.2.
"Closing" has the meaning specified in Section 2.3.
"Closing Date" has the meaning specified in Section 2.3.
"Contract" means any agreement, lease, evidence of indebtedness, mortgage,
indenture, security agreement or other contract, other than a ground lease.
"Delaware Law" has the meaning specified in Section 2.1 hereof.
"Declaration of Trust" has the meaning specified in Section 5.1.
"Disclosure Letter" has the meaning specified in Section 4.8.
"Effective Time" has the meaning specified in Section 2.2.
"Fund" has the meaning specified in the preamble hereof.
"Fund Share" has the meaning specified in Section 4.3.
"GCLM" has the meaning specified in Section 2.1.
"Governmental or Regulatory Body" means any court, tribunal, arbitrator or
any government or political subdivision thereof, whether federal, state, county,
local or foreign, or any agency, authority, official or instrumentality of any
such government or political subdivision.
"Law" means any law, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of any Governmental or Regulatory Body.
"Liabilities" means all indebtedness, obligations and other liabilities of
the Fund or the Trust, as the case may be (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due).
A-2
<PAGE>
"Material Adverse Effect" as to any Person means a material adverse effect
on the business, prospects, results of operations or financial condition of such
Person.
"Merger" has the meaning specified in the recitals.
"New Advisory Agreement" means the Management Agreement, to be dated the
Closing Date, by and between Orbitex and the Trust, pursuant to which Orbitex
will serve as adviser to the New OGF Series.
"New OGF Series" has the meaning specified in Section 3.1.
"New OGF Series Share" has the meaning specified in Section 3.1.
"1940 Act" means the Investment Company Act of 1940, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Orbitex" has the meaning specified in the preamble hereof.
"Order" means any writ, judgment, decree, injunction or similar order of
any Government or Regulatory Body, in each case whether preliminary or final.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental or Regulatory Body or other entity.
"Proxy Materials" has the meaning specified in Section 6.8 hereof.
"SEC" means the U.S. Securities and Exchange Commission.
"Surviving Entity" has the meaning specified in Section 2.1 hereof.
"Trust" has the meaning specified in the preamble hereof.
ARTICLE II
THE MERGER
2.1. The Merger. At the Effective Time, upon the terms and subject to the
conditions of this Agreement, the Fund shall be merged with and into the Trust
in accordance with the General Corporation Law of the State of Maryland (the
"GCLM") and Title 12 of the Delaware Code (the "Delaware Law"). The Trust shall
be the surviving entity in the Merger (the "Surviving Entity"). As a result of
the Merger, the outstanding shares of capital stock of the Fund shall be
converted or cancelled in the manner provided in Article III.
2.2. Effective Time. At the Closing, articles of merger (the "Articles of
Merger") and a certificate of merger (the "Certificate of Merger" and, together
with the Articles of Merger, the
A-3
<PAGE>
"Certificates") shall be duly prepared and executed by the Trust and the Fund
and thereafter delivered to the State Department of Taxation and Assessment of
the State of Maryland and the Secretary of State of the State of Delaware (the
"Authorities") for filing, in accordance with the applicable requirements of the
GCLM and the Delaware Law, on, or as soon as practicable after, the Closing
Date. The Merger shall become effective at the time of the filing of the
Certificates with the Authorities or at such other time as may be specified in
the Certificates (the "Effective Time").
2.3. Closing. The closing of the Merger (the "Closing") will take place at
the offices of Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166, or
at such other place as the parties hereto mutually agree, on a date and at a
time to be specified by the parties. which shall in no event be later than 10:00
a.m., local time, on the fifth Business Day following satisfaction of the
conditions set forth in Article VI or, if permissible, waived in accordance with
this Agreement, or on such other date as the parties hereto mutually agree (the
"Closing Date").
2.4. Trustees and Officers of the Surviving Entity. From and after the
Effective Time, the trustees and officers of the Surviving Entity shall be the
same persons who were the trustees and officers of the Trust immediately prior
to the Effective Time, and each of them shall continue in office until their
successors shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Entity's Declaration of Trust and applicable law.
2.5. Effects of the Merger. As a result of the Merger, all of the assets,
properties, rights, privileges, powers and franchises of the Fund and all of the
debts, liabilities, obligations and expenses, incurred, contracted or otherwise
existing of or with respect to the Fund shall belong to, be vested in and become
the assets, properties, rights, privileges, powers and franchises and the debts,
obligations and liabilities of the New OGF Series (and not of the Trust
generally or of any other series of the Trust); provided, that none of the
assets of any other series of that Trust shall belong to, and except as
otherwise expressly provided in the Declaration of Trust, none of the debts,
liabilities, obligations or expenses incurred, contracted or otherwise existing
of or with respect to the Trust generally or any other series of the Trust shall
be enforceable against the assets of the New OGF Series. Without limiting the
generality of the foregoing, the obligations of the Fund to indemnify and hold
harmless the directors of the Fund for their actions in their capacity as such
prior to the Merger, including the obligation to advance expenses, to the
maximum extent permitted by law, shall by virtue of the Merger and without
further action on the part of any party be and become the obligation and
liability of the New OGF Series and any successor thereto. In furtherance
thereof, the Trustees shall not approve or effect on behalf of or in respect of
the New OGF Series at any time during the three years following the Closing any
merger, consolidation or corporate reorganization, or any sale (in a single
transaction or series of related transactions) of all or substantially all of
the assets of the New OGF series, unless under the terms of the transaction the
surviving successor or transference entity is contractually bound by the
obligations described in Section 2.5. Subject to the foregoing, the effects of
the Merger shall be provided in the applicable provisions of the GCLM and the
Delaware Law.
2.6. Further Assurance. Trust and the Fund and the shall take such further
action as may be necessary or desirable and proper to consummate the
transactions contemplated hereby.
A-4
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder hereof, each Fund Share
shall be converted into the right to receive one no par value Class D share of
beneficial interest (each, a "New OGF Series Share") of a newly-created series
(the "New OGF Series") of the Trust having substantially the investment policies
set forth on Annex A to this Agreement. Each fraction of a Fund Share
outstanding at the Effective Time shall be converted into the same fraction of a
New OGF Series Share.
3.2. Exchange of Certificates. As soon as practicable after the Closing,
the Trust shall establish an open account in the share records of the Trust in
the name of each stockholder of the Fund, and representing the respective pro
rata number of Trust Shares due such stockholder. Certificates for Fund Shares
issued prior to the Effective Time shall represent outstanding New OGF Series
Shares after the Effective Time. Stockholders of the Fund who have not been
issued certificates and whose shares are held in open account with Mutual Fund
Services Co., Inc., as the Fund's transfer agent, shall be transferred to an
open account with American Data Services, Inc. in its capacity as the transfer
agent for the New OGF Series.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Trust as follows:
4.1. Organization and Qualification. The Fund is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland and is duly qualified, licensed or admitted to do business and is in
good standing as a foreign corporation under the laws of each jurisdiction in
which the nature of the business to be conducted by it makes such qualification,
licensing or admission necessary, except in such jurisdictions where the failure
to be so qualified, licensed or admitted and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the Fund or
its properties and assets.
4.2. Authority, Authorization and Enforceability. The execution, delivery
and performance by the Fund of this Agreement and the consummation of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Fund (the "Board") and the Board has resolved to
recommend the Merger to the Fund's stockholders and to call a special meeting of
the stockholders for the purpose of approving the Merger and this Agreement, to
be held as promptly as is practicable after the execution of the Agreement, but
in no event later than 30 days after the Trust has furnished the Proxy Materials
to the Fund's stockholders. Other than the affirmative vote of the holders of a
majority of the Fund Shares eligible to vote on the matter at the Fund's
stockholders meeting or any adjournment thereof, no other corporate action on
the part of the Fund or its stockholders is necessary to authorize the
execution, delivery and performance of this Agreement by the Fund or the
consummation by the
A-5
<PAGE>
Fund of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Fund and is a legal, valid and binding
obligation of the Fund enforceable in accordance with its terms.
4.3. Capitalization. The authorized capital of the Fund consists of
1,000,000,000 shares of common stock, par value $0.001 per share, of which as of
April 9, 1999, 1,259,834.863 shares were issued and outstanding (each, a "Fund
Share" and collectively, the "Fund Shares"). The Fund Shares are duly
authorized, validly issued, outstanding, fully paid and nonassessable. The Fund
has no shares of its capital stock reflected on the Books and Records of the
Fund as treasury shares. There are no outstanding options, warrants or other
rights of any kind to acquire from the Fund any shares of capital stock or
equity interests of the Fund or securities convertible into or exchangeable for,
or which otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor is the Fund committed to issue any stock appreciation or
similar rights or option, warrant, right or security.
4.4. Subsidiaries. The Fund has no subsidiaries.
4.5. No Conflicts. Except for consents, approvals, or waivers to be
received prior to Closing, the execution, delivery and performance by the Fund
of this Agreement does not, and the consummation of the transactions
contemplated herein will not, (i) violate or conflict with the terms, conditions
or provisions of its Articles of Incorporation, By-Laws or any Contract to which
the Fund is a party or by which it or its assets are bound, (ii) result in a
breach or violation by the Fund of any of the terms, conditions or provisions of
any Law or Order, or (iii) require any consent or approval of, filing with or
notice to, any Governmental or Regulatory Body.
4.6. Financial Statements; No Undisclosed Liabilities.
(a) (i) Prior to the execution of this Agreement, the Fund has delivered to
the Trust true and complete copies of the audited balance sheet of the Fund as
of October 31, 1998, and the related unaudited statements of income and changes
in net assets and financial highlights for the period then ended; and
(ii) Except as set forth in the notes thereto, all such financial
statements were prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods then ended, and fairly
present the financial condition and results of operations of the Fund as of the
respective dates thereof and for the respective periods covered thereby subject,
in the case of the unaudited financial statements, to normal year-end audit
adjustments and the absence of footnotes.
(b) Except as reflected or reserved against in the balance sheet included
in the Fund's audited October 31, 1998 balance sheet or in the notes thereto, or
as further described in Schedule 4.6(b), there are no Liabilities against,
relating to or affecting the Fund or any of its properties and assets, other
than those incurred in the ordinary course of business consistent with past
practice, which, individually or in the aggregate, would have a Material Adverse
Effect on the Fund or its properties or assets.
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<PAGE>
4.7. Books and Records. The minute books and other similar records of the
Fund as made available to the Trust prior to the execution of this Agreement
contain a true and complete record of all action taken at all meetings and by
all written consents in lieu of meetings of the stockholders, the board of
directors and committees of the board of directors of the Fund. The stock
transfer ledgers and other similar records of the Fund as made available to the
Trust prior to the execution of this Agreement accurately reflect all record
transfers prior to the execution of this Agreement in the capital stock of the
Fund. The Fund does not have any Books and Records which have not been made
available to the Trust.
4.8. Legal Proceedings. Except as set forth in a letter from the Fund to
the Trust dated the date of this Agreement (the "Disclosure Letter"), there is
no Action or Proceeding pending or, to the best of the Fund's knowledge,
threatened against, relating to or affecting the Fund.
4.9. No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of the
Fund in connection with the negotiation, execution or performance of this
Agreement or any other agreement contemplated hereby, or the consummation of the
transactions contemplated hereby, is or will be entitled to any broker's or
finder's or similar fees or other commissions as a result of the consummation of
such transactions.
4.10. Investment Company Registration. The Fund is duly registered as a
diversified, open-end management investment company under the 1940 Act, and
under all applicable state and foreign investment company or related laws. The
Fund has delivered to the Trust a true and complete copy of the Fund's currently
effective Form N-1A, as filed with the SEC, and has made available to the Trust
all state, federal and foreign registration forms, all prior Form N-1A filings
and all reports filed by the Fund with the SEC under the 1940 Act and the rules
promulgated thereunder or otherwise and under similar state and foreign statutes
within the last five years, and will provide to the Trust such forms and reports
as are filed from and after the date hereof and prior to the Closing Date. The
information contained in such forms and reports was or will be true and complete
in all material respects as of the time of filing and, except as indicated on a
subsequent form or report filed before the Closing Date, continues to be true
and complete in all material respects. Each such registration is in full force
and effect. The Fund has timely computed and publicized its net asset value in
accordance with the provisions of the 1940 Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Fund as follows:
5.1. Organization and Qualification. The Trust was organized pursuant to an
Agreement and Declaration of Trust, dated December 31, 1996 (the "Declaration of
Trust"), under the laws of the State of Delaware and is duly qualified, licensed
or admitted to do business and in good standing as a foreign trust under the
laws of each jurisdiction in which the nature of the business to be conducted by
it makes such qualification, licensing or admission necessary, except in such
jurisdictions where the failure to be so qualified, licensed or admitted or in
good
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<PAGE>
standing would not, individually or in the aggregate, have a Material Adverse
Effect on the Trust or its properties and assets.
5.2. Authority, Authorization and Enforceability. The execution, delivery
and performance of this Agreement by the Trust and the consummation of the
transactions contemplated herein have been duly and validly authorized by all
necessary corporate action on the part of the Trust. This Agreement has been
duly and validly executed and delivered by the Trust and is a legal, valid and
binding obligation of the Trust enforceable against it in accordance with its
terms.
5.3. Capitalization. The New OGF Series Shares, when issued, will be duly
authorized, validly issued, fully paid and non-assessable. The Trust is
authorized to issue an unlimited number of no par shares of beneficial interest
with respect to the New OGF Series.
5.4. No Conflicts. Except for consents, approvals, or waivers to be
received prior to Closing, the execution, delivery and performance of this
Agreement by the Trust does not, and the consummation of the transactions
contemplated herein will not, (i) violate or conflict with the terms, conditions
or provisions of the Declaration of Trust, By-Laws or any Contract to which the
Trust is a party or by which it or its assets are bound, (ii) result in a breach
or violation by the Trust of any of the terms, conditions or provisions of any
Law or Order, or (iii) require any consent or approval of, filing with or notice
to, any Governmental or Regulatory Body.
5.5. Legal Proceedings. There is no Action or Proceeding pending or, to the
best of the Trust's knowledge, threatened against, relating to or affecting the
Trust which (i) could reasonably be expected to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated herein or (ii) could
reasonably be expected, individually or in the aggregate with any other such
Action or Proceeding, to have a Material Adverse Effect on the Trust or its
properties and assets.
5.6. No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of the
Trust in connection with the negotiation, execution or performance of this
Agreement or the consummation of the transactions contemplated herein, is or
will be entitled to any broker's or finder's or similar fees or other
commissions as a result of the consummation of such transactions.
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<PAGE>
ARTICLE VI
PRE-CLOSING COVENANTS
From the date of the execution of this Agreement through the Closing Date:
6.1. Investigations and Examinations. Each party will cooperate and will
cause its representatives and agents to cooperate, in all reasonable respects in
connection with the performance by the other party of its inspection and
examination of such party.
6.2. Conduct of Business. Each party will (i) conduct its business in the
ordinary and normal course of business consistent with past practice in all
material respects and (ii) comply with any Law and Order applicable to such
business.
6.3. No Shopping. Each party agrees that it will not directly or indirectly
solicit, initiate or encourage submission of proposals or offers from any Person
or entity (other than the parties to this Agreement and their Affiliates)
relating to any Business Combination involving such party or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to such party for the purposes of, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to seek or effect any such Business Combination.
Each party shall promptly notify the other party if any proposal or offer, or
any inquiry or contact with any Person with respect thereto, is made and shall
describe in detail the terms and conditions of any proposal or offer made.
6.4. Covenant to Proceed. Each party hereto covenants to use all reasonable
efforts within its control (i) to prevent the breach of any representation or
warranty of such party hereunder, (ii) to satisfy all covenants of such party
and closing conditions hereunder, (iii) to cooperate with the other party hereto
and to take or cause to be taken all other actions and do, or cause to be done,
all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement and (iv) to promptly
cure any breach of a representation, warranty or covenant of such party
hereunder upon its learning of same.
6.5. Notice of Material Changes. Each party will notify the other parties
hereto of any material adverse change in such party's business, prospects,
results of operations or financial condition as soon as practicable following
such change.
6.6. Regulatory Approvals. Each party will (i) use best efforts and proceed
diligently and in good faith as promptly as practicable to obtain all consents,
approvals or actions of, to make all filings with and to give all notices to
Governmental or Regulatory Bodies required of the respective party or its
respective Affiliates to consummate the transactions contemplated hereby and
(ii) provide such other information and communications to such Governmental or
Regulatory Bodies as each such Governmental or Regulatory Body may reasonably
request in connection therewith. Each party will provide prompt notification to
the other party when any such consent, approval, action, filing or notice
referred to in clause (i) above is obtained, taken, made or given, as
applicable, and, prior to the Closing, will advise the other party of any
communications (and, unless precluded by Law, provide copies to the other party
of any such
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<PAGE>
communications that are in writing) with any Governmental or Regulatory Body
regarding any of the transactions contemplated herein.
6.7. No Default. No party hereto shall do any act or intentionally omit to
do any act which would cause a breach of any representation, warranty, covenant
or agreement by it under this Agreement.
6.8. Preparation of Proxy Materials. The Fund and the Trust shall cooperate
with each other in the preparation of the proxy statement and other materials
(collectively, the "Proxy Materials") required to be delivered to the Fund's
stockholders pursuant to the 1940 Act and any other applicable federal or state
securities laws in connection with the Merger, this Agreement and the New
Advisory Agreement and to cause such Proxy Materials to be filed with the SEC as
promptly as practicable after the execution of this Agreement.
6.9. Financial Statements. On or before June 30,1999, the Fund shall cause
to be prepared and delivered to the Trust the unaudited balance sheets of the
Fund as of April 30, 1999 and the related unaudited statements of operations and
changes in net assets and financial highlights for the period then ended, which
shall be prepared in accordance with GAAP and shall fairly present the financial
position of the Fund as of such date and the results of operations and changes
in net assets and financial highlights for the period then ended.
ARTICLE VII
CONDITIONS TO THE CLOSING
7.1. Conditions Precedent to the Obligations of the Fund to Complete the
Closing. The obligations of the Fund herein are subject to the fulfillment on or
prior to the Closing Date of the conditions set forth in this Section 7.1 below,
any one or more of which may be waived by the Fund.
(a) Representations, Warranties and Covenants. The representations and
warranties of the Trust contained in this Agreement shall be true, correct
and complete in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of such Closing Date
except as expressly stated herein to be made as of a specified date. The
Trust shall have performed and complied in all material respects with its
covenants and agreements required by this Agreement to be performed or
complied with by it on or prior to the Closing Date.
(b) No Injunctions. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of this Agreement or the related transactions shall be in
effect.
(c) SEC Related Matters. The Trust shall have filed with the SEC a
post-effective amendment to its registration statement under the 1940 Act
and the 1933 Act on Form N-1A relating to the New OGF Series Shares and
that registration statement shall have become effective and no order shall
have issued withdrawing, suspending or terminating such effectiveness, no
stop order shall have been issued with respect to the New OGF Series Shares
and no proceeding for any such purpose shall have been initiated or
threatened by the SEC.
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<PAGE>
(d) Closing Certificates. The Trust shall have delivered to the Fund a
certificate, dated the Closing Date and executed by the Chairman of the
Board, the President or any Executive or Senior Vice President of the
Trust, substantially in the form and to the effect of Exhibit A hereto, and
a certificate, dated the Closing Date and executed by the Secretary or
Assistant Secretary of the Trust, substantially in the form and to the
effect of Exhibit B hereto.
(e) Opinion of Counsel. The Fund shall have received an opinion of
Rogers & Wells LLP, counsel to the Trust, dated the Closing Date,
substantially in the form and to the effect of Exhibit C hereto.
(f) Tax Opinion of Counsel. The Fund shall have received an opinion
from Rogers & Wells LLP, counsel to the Trust, to the effect that the
Merger will constitute a tax free reorganization as defined in Section
368(a) of the Code.
(g) Closing Documents. The Trust will execute and deliver, or cause to
be executed and delivered, to the Fund all documents reasonably requested
by the Fund or reasonably necessary to effectuate the transactions
contemplated hereby, including without limitation, state and local transfer
tax and gains tax returns and any other filings in any applicable
governmental jurisdiction.
(h) Fund Stockholders' Meeting. The Merger and the other transactions
contemplated by this Agreement shall have been approved by the holders of a
majority of the Fund Shares entitled to vote on the merger, in accordance
with the requirements of the GCLM and Section 2 of Article VII of the
Fund's Articles of Incorporation.
7.2. Conditions Precedent to the Obligations of the Trust to Complete the
Closing. The obligations of the Trust herein are subject to the fulfillment on
or prior to the Closing Date of the conditions specified in this Section 7.2,
any one or more of which may be waived by the Trust.
(a) Representations, Warranties and Covenants. The representations and
warranties of the Fund contained in this Agreement shall be true, correct
and complete in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of such Closing Date
except as expressly stated herein to be made as of a specified date. The
Fund shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or
complied with by them on or prior to such Closing Date.
(b) No Injunctions. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of this Agreement or the related transactions shall be in
effect.
(c) SEC Related Matters. Confirmation shall have been received from
the SEC or its staff that the Fund is duly registered as a diversified,
open-end management investment company under the 1940 Act.
(d) Closing Certificates. The Fund shall have delivered to the Trust a
certificate, dated the Closing Date and executed by the Chairman of the
Board, the President or any Executive or
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<PAGE>
Vice President of the Company, substantially in the form and to the effect
of Exhibit D hereto, and a certificate, dated the Closing Date and executed
by the Secretary or any Assistant Secretary of the Company, substantially
in the form and to the effect of Exhibit E hereto.
(e) Opinion of Counsel. The Trust shall have received an opinion of
Stradley, Ronon, Stevens & Young, LLP, counsel to the Fund, dated the
Closing Date, substantially in the form and to the effect of Exhibit F
hereto.
(f) Tax Opinion of Counsel. The Trust shall have received an opinion
from Rogers & Wells LLP, counsel to the Trust, to the effect that the
Merger will constitute a tax free reorganization as defined in Section
368(a) of the Code.
(g) Closing Documents. The Fund will execute and deliver, or cause to
be executed and delivered, to the Trust all documents reasonably requested
by the Trust or reasonably necessary to effectuate the transactions
contemplated hereby, including without limitation, state and local transfer
tax and gains tax returns and any other filings in any applicable
governmental jurisdiction.
(h) Governmental and Regulatory Consents and Approvals. Other than the
filing provided for by Section 2.2, all consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Body, required
under applicable securities "blue sky" laws, or the failure of which to be
obtained or taken could be reasonably expected to have a Material Adverse
Effect on the New OGF Series, or on the ability of the Trust to consummate
the transactions contemplated hereby, shall have been obtained, all in form
and substance reasonably satisfactory to the Trust and no such consent,
approval or action shall contain any term or condition which could be
reasonably expected to result in a material diminution of the benefits of
the Merger to the Trust or the New OGF Series.
(i) Good Standing Certificates. The Fund shall have delivered to the
Trust (a) copies of the articles of incorporation (or other comparable
corporate charter documents), including all amendments thereto, of the Fund
certified by the Secretary of State of the State of Maryland or other
appropriate official of the jurisdiction of incorporation, (b) certificates
from the Secretary of State of the State of Maryland or other appropriate
official of the respective jurisdictions of incorporation to the effect
that the Fund is in good standing or subsisting in such jurisdiction,
listing all charter documents of the Fund on file and attesting to its
payment of all franchise or similar taxes, and (c) a certificate from the
Secretary of State of the State of Maryland or other appropriate official
in each jurisdiction in which the Fund is qualified or admitted to do
business to the effect that the Fund is duly qualified or admitted and in
good standing in such jurisdiction.
(j) Due Diligence. The Trust shall have completed, to its
satisfaction, its due diligence investigation of the Fund.
(k) Fund's Stockholders' Meeting. Each of the proposals contained in
the Proxy Materials shall have been ratified or approved, as the case may
be, by the requisite vote of the Fund's stockholders, each in accordance
with the GCLM.
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<PAGE>
(l) Financial Statements. The Trust shall have received from the Fund
the financial statements to be delivered pursuant to Section 6.9, which
financial statements shall be substantially consistent with the financial
data contained in the financial statements previously furnished to the
Trust by the Fund.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of each party contained in this
Agreement or any certificate delivered at the Closing shall survive to, and
shall expire upon, the Closing. No claim may be made against any party hereto,
and no party hereto shall have any liability to the other party hereto, with
respect to any inaccuracy in or any breach of any representation or warranty
after the Closing.
ARTICLE IX
TERMINATION
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual consent of the parties hereto;
(b) by the Trust upon any material breach by the Fund of any of its
representations, warranties or covenants contained in this Agreement;
provided, that the Fund shall have been given written notice of such breach
and a reasonable opportunity to cure such breach;
(c) by the Fund upon any material breach by the Trust of any of its
representations, warranties or covenants contained in this Agreement;
provided, that the Trust shall have been given written notice of such
breach and a reasonable opportunity to cure such breach; and
(d) by either party if the Closing hereunder does not occur by August
1, 1999.
In the event that this Agreement shall be terminated pursuant to this
Article IX, all further obligations of the parties under this Agreement shall
terminate without further liability of either party to the other party, except
for any liability of either party for any of its representations, warranties or
covenants, the breach of which was the cause of a termination pursuant to (b) or
(c) above.
ARTICLE X
MISCELLANEOUS
10.1. Publicity; Confidentiality. No publicity release or public
announcement concerning this Agreement or the transactions contemplated herein
shall be made by either party
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<PAGE>
hereto without advance approval thereof by the other party hereto; provided,
however, that (i) approval by such other party of any proposed press release or
other public disclosure shall not be unreasonably withheld or delayed and (ii)
if any such party is advised by legal counsel that such public disclosure by
such party is required by Law or by any listing agreement with any national
securities exchange or automated quotation system to which such party is
subject, such party may make such disclosure without the prior approval of the
other party hereto, provided that the disclosing party, to the extent
practicable, first provides the other party with a copy or draft of such
proposed disclosure and provides such other party an opportunity to review and
comment thereon.
10.2. Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.
10.3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any judicial proceeding
brought against any of the parties to this Agreement on any dispute arising out
of this Agreement or any matter related hereto may be brought in the courts of
the State of New York and, by execution and delivery of this Agreement, each of
the parties hereto accepts the non-exclusive jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement.
10.4. Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be given by (i) personal
delivery, (ii) United States registered or certified mail (postage prepaid,
return receipt requested) addressed as hereinafter provided, (iii) a nationally
recognized overnight courier or (iv) telephonic facsimile transmission. Notice
shall be sent and deemed given when (i) if personally delivered or via overnight
courier, then upon receipt (or the date delivery is refused) by the receiving
party, or (ii) if mailed, then three business days after being postmarked, or
(iii) if sent via telephonic facsimile transmission, then upon receipt by a
designated facsimile receiving device in the office of the receiving party.
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<PAGE>
Until further notice, notices and other communications hereunder shall be
addressed to the parties as follows:
If to the Trust:
Orbitex Group of Funds
c/o Orbitex Management, Inc.
410 Park Avenue, 18th Floor
New York, NY 10022
Attention: M. Fyzul Khan, Esq.
Telephone: (212) 891-7914
Facsimile: (212) 616-7954
With a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166-0153
Attention: John A. Healy, Esq.
Telephone: (212) 878-8000
Facsimile: (212) 878-8375
If to the Fund:
c/o M. Fyzul Khan
ASM Index 30 Fund, Inc.
410 Park Avenue
18th Floor
New York, NY 10022
Attention: Dan Calabria, Esq.
Telephone: (212) 891-7914
Facsimile: (212) 616-7954
With copies to:
W. Keith Schilit
16215 Villareal
Tampa, FL 33613
Telephone: (813) 908-6446
Facsimile: (813) 908-6556
Stradley, Ronan, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Attention: Steven M. Felsenstein, Esq.
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Telephone: (215) 564-8074
Facsimile: (215) 564-8120
10.5. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and legal
representatives. Except as otherwise provided herein, this Agreement is not
assignable by any party hereto without the prior written consent of the other
parties hereto and any other purported assignment shall be null and void.
10.6. Variations in Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
10.7. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.8. Complete Agreement. This Agreement, the Disclosure Letter and the New
Advisory Agreement, constitute the complete agreement of the parties with
respect to the subject matter thereof, and supersede all prior agreements or
understandings among the parties hereto.
10.9. Headings. The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
10.10. Severability of Provisions. If any provision or any portion of any
provision of this Agreement or the application of such provision or any portion
thereof to any Person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions of this
Agreement, or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
ORBITEX GROUP OF FUNDS
By: /s/ James L. Nelson
--------------------------------------------
Name: James L. Nelson
Title: President and Chief Executive Officer
ASM INDEX 30 FUND, INC.
By: /s/ W. Keith Schilit
--------------------------------------------
Name: W. Keith Schilit
Title: Acting Chairman of the Board of
Directors and Authorized Signatory
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<PAGE>
ANNEX A
TO MERGER
AGREEMENT
Investment Policies of the Series
The Fund has adopted the following restrictions (in addition to those
indicated in its prospectus) as fundamental policies, which may not be changed
without the favorable vote of the holders of a "majority," as defined in the
1940 Act, of the Fund's outstanding voting securities. Under the 1940 Act, the
vote of the holders of a majority of a Fund's outstanding voting securities
means the vote of the holders of the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which the holders of more than 50% of its
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
The Fund may not:
(i) Purchase securities on margin, except ASM may make margin deposits (a) in
connection with permissible options and futures transactions, subject to
restriction (4) below and (b) on such short-term credits as may be
necessary for the clearance of transactions.
(ii) Make short sales of securities or maintain a short position.
(iii) Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not
exceeding 10% of its total assets (not including the amount borrowed) and
will not make investments while borrowings in excess of 5% of the value
of the Fund's total assets are outstanding.
(iv) Buy or sell commodities or commodity futures contracts, or buy or sell
real estate, real estate limited partnership interests or other interests
in real estate, except ASM may (a) purchase and sell securities which are
secured by real estate and securities of companies which invest or deal
in real estate and (b) enter into financial futures transactions and
options thereon.
(v) Make loans (except for purchases of publicly-traded debt securities
consistent with the Fund's investment policies).
(vi) Make investments for the purpose of exercising control or management.
(vii) Act as underwriter (except to the extent the Fund may be deemed to be an
underwriter in connection with the sale of securities in the Fund's
investment portfolio).
(viii) Invest 25% or more of its total assets (calculated at the time of
purchase and taken at market value) in any one industry.
(ix) As to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities), or purchase more than 10% of all outstanding voting
securities of any one issuer.
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<PAGE>
EXHIBIT A
TO MERGER
AGREEMENT
OFFICER'S CERTIFICATE
---------------------
I, James L. Nelson, President and Chief Executive Officer of Orbitex
Group of Funds, a Delaware business trust (the "TRUST"), pursuant to Section
7.1(d) of the Agreement and Plan of Reorganization, dated as of April 26, 1999
(the "MERGER AGREEMENT"; capitalized terms not defined herein shall have the
meanings ascribed to them in the Merger Agreement), by and between the Trust
and ASM Index 30 Fund, Inc., a Maryland corporation, DO HEREBY CERTIFY on
behalf of the Trust that:
(1) Each of the representations and warranties made by the
Trust in the Merger Agreement (other than those made as of a specified date
earlier than the date hereof) is true and correct in all material respects on
and as of the date hereof as though made on and as of the date hereof, and each
of the representations and warranties made by the Trust as of specified date
earlier than the date hereof was true and correct in all material respects as
of such earlier date.
(2) Each of the agreements, covenants and obligations
required by the Merger Agreement to be performed or complied with by the Trust
at or before the Closing has been duly performed or complied with in all
material respects.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ____ day of June,
1999.
ORBITEX GROUP OF FUNDS
By:_______________________________________
Name: James L. Nelson
Title: President and Chief Executive Officer
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<PAGE>
EXHIBIT B
TO MERGER
AGREEMENT
ASSISTANT SECRETARY'S CERTIFICATE
---------------------------------
I, Kevin P. Meehan, Assistant Secretary of Orbitex Group of Funds,
a Delaware business trust (the "TRUST"), pursuant to Section 7.1(d) of the
Agreement and Plan or Reorganization, dated as of April 26, 1999 (the "MERGER
AGREEMENT"), by and between the Trust and ASM Index 30 Fund, Inc., a Maryland
corporation, DO HEREBY CERTIFY on behalf of the Trust as follows:
1. Attached hereto as EXHIBIT A is a true, complete and correct
copy of the Agreement and Declaration of Trust of the Trust and all amendments
thereto (as so amended, the "DECLARATION OF TRUST"), and no amendment to the
Declaration of Trust has been authorized or become effective since the date of
the last of such amendments, no amendment or other document relating to or
affecting the Declaration of Trust has been filed in the office of the
Secretary of State of the State of Delaware since such date and no action has
been taken by the Trust, its stockholders, directors or officers in
contemplation of the filing of any such amendment or other document or in
contemplation of the liquidation or dissolution of the Trust.
2. Attached hereto as EXHIBIT B is a true, complete and correct
copy of the By-Laws of the Trust as in full force and effect on the date hereof
and at all times since [date of last amendment].
3. Attached hereto as EXHIBIT C is a true, complete and correct
copy of resolutions adopted by the Board of Trustees of the Trust with respect
to the Merger Agreement and the transactions contemplated thereby, which
resolutions were duly and validly adopted at a meeting of the Board of Trustees
of the Trust on March ___, 1999, at which a quorum was present and acting
throughout. All such resolutions are in full force and effect on the date
hereof in the form in which adopted and no other resolutions have been adopted
by the Board of Trustees of the Trust or any committee thereof relating to the
Merger Agreement and the transactions contemplated thereby.
4. Each of the following named individuals is a duly elected or
appointed, qualified and acting officer of the Trust who holds, and at all
times since April 9, 1999 has held, the office set opposite such individual's
name, and the signature written opposite the name and title of such officer is
such officer's genuine signature:
James L. Nelson President and Chief
Executive Officer ________________________________
Kimberly S. Ratz Treasurer ________________________________
A-20
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ____ day of June,
1999.
ORBITEX GROUP OF FUNDS
By:___________________________
Name: Kevin P. Meehan
Title: Assistant Secretary
I, James L. Nelson, President and Chief Executive Officer of the
Trust, DO HEREBY CERTIFY on behalf of the Trust that Kevin P. Meehan is the
duly elected or appointed, qualified and acting Assistant Secretary of the
Trust, and the signature set forth above is the genuine signature of such
officer.
_________________________
Name: James L. Nelson
Title: President and Chief
Executive Officer
A-21
<PAGE>
EXHIBIT C
TO MERGER
AGREEMENT
[R&W LETTERHEAD]
___________, ____
ASM Index 30 Fund, Inc.
410 Park Avenue
18th Floor
New York, New York 10022
Dear Sirs:
We have acted as special counsel to Orbitex Group of Funds, a
Delaware business trust (the "Trust"), in connection with the Agreement and
Plan of Reorganization, dated as of April 26, 1999 (the "Merger Agreement"), by
and between the Trust and ASM Index 30 Fund, Inc., a Maryland corporation, and
the transactions contemplated thereby. Capitalized terms not defined herein
shall have the meanings ascribed to them in the Merger Agreement. We are
rendering this opinion to you pursuant to Section 7.1(e) of the Merger
Agreement.
In rendering the opinions expressed below, we have examined such
documents and such corporate records of the Trust as we have deemed necessary
as a basis for the opinions hereinafter expressed. In such examination, we
have assumed the genuineness of all signatures, the authenticity of documents
submitted to us as originals, the conformity with the original documents of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents. When facts relevant to such opinions were not
independently established, we have relied upon the representations and
warranties as to factual matters made in or pursuant to the Merger Agreement
and upon certificates of government officials and of the Trust and its
officers.
Based upon the foregoing and having regard to legal considerations
we deem relevant, we are of the opinion that:
1. The Trust was organized under the laws of the State of Delaware
and is duly qualified, licensed or admitted to do business and in good standing
as a foreign trust under the laws of each jurisdiction in which the nature of
the business to be conducted by it makes such qualification, licensing or
admission necessary, except in such jurisdictions where the failure to be so
qualified, licensed or admitted or in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on the Trust or its properties
and assets.
2. The execution, delivery and performance of the Merger Agreement
by the Trust and the consummation of the transactions contemplated therein have
been duly and validly authorized by all necessary corporate action on the part
of the Trust. The Merger Agreement has been duly and validly executed and
delivered by the Trust and is a legal, valid and binding obligation of the
Trust enforceable against it in accordance with its terms.
A-22
<PAGE>
3. The New OGF Series Shares, when issued, will be duly
authorized, validly issued, fully paid and non-assessable. The Trust is
authorized to issue an unlimited number of no par shares of beneficial interest
with respect to the New OGF Series.
4. The execution, delivery and performance by the Trust of the
Merger Agreement did not, and the consummation of the transactions contemplated
thereby will not, (a) violate or conflict with the terms, conditions or
provisions of the Declaration of Trust, By-Laws or any Contract to which the
Trust is a party or by which it or its assets are bound, (b) result in a breach
or violation by the Trust of any terms, conditions or provisions of any Law or
Order, or (c) require any consent or approval of, filing with or notice to, any
Governmental or Regulatory Body.
We express no opinion herein as to (i) the "blue sky" laws of any
State, and (ii) the laws of any jurisdiction other than the laws of the State
of New York and Title 12 of the Delaware Code ("Delaware Law"). With respect
to matters concerning the Delaware Law involved in the opinions set forth
above, we draw your attention to the fact that we are not admitted to the Bar
in the State of Delaware and we are not experts in the laws of the State of
Delaware and that any such opinions concerning Delaware Law are based on our
reasonable familiarity with Delaware Law as a result of our prior involvement
in transactions involving such laws.
These opinions may not be relied on by any person or entity other
than you without our prior written consent.
Very truly yours,
A-23
<PAGE>
EXHIBIT D
TO MERGER
AGREEMENT
OFFICER'S CERTIFICATE
---------------------
I, W. Keith Schilit, Acting Chairman of the Board of Directors and
Authorized Signatory of ASM Index 30 Fund, Inc., a Maryland corporation (the
"FUND"), pursuant to Section 7.2(d) of the Agreement and Plan of
Reorganization, dated as of April 26, 1999 (the "MERGER AGREEMENT"; capitalized
terms not defined herein shall have the meanings ascribed to them in the Merger
Agreement), by and between Orbitex Group of Funds, a Delaware business trust,
and the Fund, DO HEREBY CERTIFY on behalf of the Fund that:
(1) Each of the representations and warranties made by the Fund in
the Merger Agreement (other than those made as of a specified date earlier than
the date hereof) is true and correct in all material respects on and as of the
date hereof as though made on and as of the date hereof, and each of the
representations and warranties made by the Fund as of a specified date earlier
than the date hereof was true and correct in all material respects as of such
earlier date.
(2) Each of the agreements, covenants and obligations required by
the Merger Agreement to be performed or complied with by the Fund at or before
the Closing has been duly performed or complied with in all material respects.
IN WITNESS WHEREOF, the Fund has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ____ day of June,
1999.
ASM INDEX 30 FUND, INC.
By:__________________________________
Name: W. Keith Schilit
Title: Acting Chairman of the Board
of Directors and Authorized
Signatory
A-24
<PAGE>
EXHIBIT E
TO MERGER
AGREEMENT
SECRETARY'S CERTIFICATE
-----------------------
I, M. Fyzul Khan, Secretary of ASM Index 30 Fund, Inc., a Maryland
corporation (the "FUND"), pursuant to Section 7.2(d) of the Agreement and Plan
of Reorganization, dated as of April 26, 1999 (the "MERGER AGREEMENT"), by and
between Orbitex Group of Funds, a Delaware business trust, and the Fund, DO
HEREBY CERTIFY on behalf of Fund as follows:
(1) Attached hereto as EXHIBIT A is a true, complete and correct
copy of the Articles of Incorporation of the Fund and all amendments thereto
(as so amended, the "ARTICLES OF INCORPORATION"), and no amendment to the
Articles of Incorporation has been authorized or become effective since the
date of the last of such amendments, no amendment or other document relating to
or affecting the Articles of Incorporation has been filed in the office of the
Secretary of State of the State of Maryland since such date and no action has
been taken by the Fund, its stockholders, directors or officers in
contemplation of the filing of any such amendment or other document or in
contemplation of the liquidation or dissolution of the Fund.
(2) Attached hereto as EXHIBIT B is a true, complete and correct
copy of the By-Laws of the Fund as in full force and effect on the date hereof
and at all times since [date of last amendment].
(3) Attached hereto as EXHIBIT C is a true, complete and correct
copy of resolutions adopted by the Board of Directors of the Fund with respect
to the Merger Agreement and the transactions contemplated thereby, which
resolutions were duly and validly adopted at a meeting of the Board of
Directors of the Fund on March __, 1999, at which a quorum was present and
acting throughout. All such resolutions are in full force and effect on the
date hereof in the form in which adopted and no other resolutions have been
adopted by the Board of Directors of the Fund or any committee thereof relating
to the Merger Agreement and the transactions contemplated thereby.
(4) Attached hereto as EXHIBIT D is a true, complete and correct
copy of the minutes from the Special Meeting of Stockholders of the Fund, held
on June __, 1999, with respect to the Merger Agreement and the transactions
contemplated thereby, which contain resolutions which were duly adopted at a
meeting of the stockholders of the Fund on June __, 1999, at which a quorum was
present and acting throughout. All such resolutions are in full force and
effect on the date hereof in the form in which adopted and no other resolutions
have been adopted by the stockholders of the Fund relating to the Merger
Agreement and the transactions contemplated thereby.
A-25
<PAGE>
(5) Each of the following named individuals is a duly elected or
appointed, qualified and acting officer of the Fund who holds, and at all times
since April 9, 1999 has held, the offices set opposite such individual's name,
and the signature written opposite the name and title of such officer is such
officer's genuine signature:
M. Fyzul Khan Secretary _____________________________
A-26
<PAGE>
IN WITNESS WHEREOF, the Fund has caused this Certificate to be executed on its
behalf by the undersigned on and as of the ____ day of June, 1999.
ASM INDEX 30 FUND, INC.
By:__________________________________
Name: M. Fyzul Khan
Title: Secretary
I, W. Keith Schilit, Acting Chairman of the Board of Directors and
Authorized Signatory of Fund, DO HEREBY CERTIFY on behalf of Fund that M. Fyzul
Khan is the duly elected or appointed, qualified and acting Secretary of Fund,
and the signature set forth above is the genuine signature of such officer.
__________________________________
Name: W. Keith Schilit
Title: Acting Chairman of the Board of
Directors and Authorized Signatory
A-27
<PAGE>
EXHIBIT F
TO MERGER
AGREEMENT
[STRADLEY, RONAN LETTERHEAD]
_______________, ____
Orbitex Group of Funds
410 Park Avenue
18th Floor
New York, N.Y. 10022
Dear Sirs:
We have acted as special counsel to ASM Index 30 Fund, Inc., a
Maryland corporation (the "Fund"), in connection with the Agreement and Plan
of Reorganization, dated as of April 26, 1999 (the "Merger Agreement"), by and
between Orbitex Group of Funds, a Delaware business trust, and the Fund and the
transactions contemplated thereby. Capitalized terms not defined herein shall
have the meanings ascribed to them in the Merger Agreement. We are rendering
this opinion to you pursuant to Section 7.2(e) of the Merger Agreement.
In rendering the opinions expressed below, we have examined such
documents and such corporate records of the Fund as we have deemed necessary as
a basis for the opinions hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of documents
submitted to us as originals, the conformity with the original documents of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents. When facts relevant to such opinions were not
independently established, we have relied upon the representations and
warranties as to factual matters made in or pursuant to the Merger Agreement
and upon certificates of government officials and of the Fund and its
respective officers.
Based upon the foregoing and having regard to legal considerations
we deem relevant, we are of the opinion that:
1. The Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and is duly
qualified, licensed or admitted to do business and is in good standing as a
foreign corporation under the laws of each jurisdiction in which the nature of
the business to be conducted by it makes such qualification, licensing or
admission necessary, except in such jurisdictions where the failure to be so
qualified, licensed or admitted and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on the Fund or its properties
and assets.
2. The execution, delivery and performance by the Fund of the
Merger Agreement and the consummation of the transactions contemplated therein
have been duly and validly authorized by the Board of Directors of the Fund and
by the stockholders and no other corporate action on the part of the Fund or
its stockholders is necessary to authorize the execution, delivery and
performance of the Merger Agreement by the Fund or the consummation by the Fund
A-28
<PAGE>
of the transactions contemplated thereby. The Merger Agreement has been duly
and validly executed and delivered by the Fund and is a legal, valid and
binding obligation of Fund enforceable against the Fund in accordance with its
terms.
3. The authorized capital stock of the Fund consists solely of
______ shares of Common Stock, par value $0.001 per share, of which only the
Fund Shares have been issued and are outstanding. The Fund Shares are duly
authorized, validly issued, outstanding, fully paid and nonassessable. The Fund
has no shares of its capital stock reflected on the Books and Records of the
Fund as treasury shares. There are no outstanding options, warrants or other
rights of any kind to acquire from the Fund any shares of capital stock or
equity interests of the Fund or securities convertible into or exchangeable
for, or which otherwise confer on the holder thereof any right to acquire, any
such additional shares, nor is the Fund committed to issue any stock
appreciation or similar rights or option, warrant, right or security.
4. The Fund has no subsidiaries.
5. The execution, delivery and performance by the Fund of the
Merger Agreement did not, and the consummation of the transactions contemplated
thereby will not, (a) violate or conflict with the terms, conditions or
provisions of the Articles of Incorporation or By-Laws or any Contract to which
the Fund is a party or by which it or its assets are bound, (b) result in a
breach or violation by the Fund of any of the terms, conditions or provisions
of any Law or Order or (c) require any consent or approval of, filing with or
notice to, any Governmental or Regulatory Body.
6. The Fund is duly registered as a diversified, open-end
management investment company under the 1940 Act, and under all applicable
state and foreign investment company or related laws. Each such registration
is in full force and effect. Fund has timely computed and publicized its net
asset value in accordance with the provisions of the 1940 Act.
We express no opinion herein as to (i) the "blue sky" laws of any
State, or (ii) laws of any jurisdiction other than the laws of the State of
Maryland and the General Corporation Law of the State of Maryland.
These opinions may not be relied on by any person or entity other
than you without our prior written consent.
Very truly yours,
A-29
<PAGE>
APPENDIX B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the 4th 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 Focused 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 deemed to relieve the Adviser of any obligation to the
B-2
<PAGE>
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 activities (including registering the Trust as a broker-
B-3
<PAGE>
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.
B-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 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.
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.
B-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 any controlling decision of any such
B-6
<PAGE>
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.
B-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 Focused 30 Fund
By: ____________________________________
James L. Nelson
President and Chief Executive Officer
ORBITEX MANAGEMENT, INC.
By: ____________________________________
Richard E. Steirwalt
President and Chief Executive Officer
<PAGE>
APPENDIX C
ASM's INVESTMENT RESTRICTIONS STATE:
The Fund has adopted the following restrictions (in addition to those
indicated in its prospectus) as fundamental policies, which may not be changed
without the favorable vote of the holders of a "majority," as defined in the
1940 Act, of the Fund's outstanding voting securities. Under the 1940 Act, the
vote of the holders of a majority of a Fund's outstanding voting securities
means the vote of the holders of the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which the holders of more than 50% of its
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
The Fund may not:
1. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow on an unsecured basis from banks for
temporary or emergency purposes or for the clearance of transactions
in amounts not exceeding 10% of its total assets (not including the
amount borrowed) and will not make investments while borrowings in
excess of 5% of the value of the Fund's total assets are outstanding.
4. Buy or sell commodities or commodity futures contracts, or buy or sell
real estate, real estate limited partnership interests or other
interests in real estate (although it may purchase and sell securities
which are secured by real estate and securities of companies which
invest or deal in real estate).
5. Make loans (except for purchases of publicly-traded debt securities
consistent with the Fund's investment policies).
6. Make investments for the purpose of exercising control or management.
7. Act as underwriter (except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities in the Fund's
investment portfolio).
8. Invest 25% or more of its total assets (calculated at the time of
purchase and taken at market value) in any one industry.
9. As to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer (other
than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities), or purchase more than 10% of all
outstanding voting securities of any one issuer.
THE NEW ORBITEX FUND'S INVESTMENT RESTRICTIONS STATE:
The Fund has adopted the following restrictions (in addition to those
indicated in its prospectus) as fundamental policies, which may not be changed
without the favorable vote of the holders of a "majority," as defined in the
1940 Act, of the Fund's outstanding voting securities. Under the 1940 Act, the
vote of the holders of a majority of a Fund's outstanding voting securities
means the vote of the holders of the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which the holders of more than 50% of its
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
C-1
<PAGE>
The Fund may not:
1. Purchase securities on margin, except (a) the Fund may make margin
deposits in connection with permissible options and futures
transactions subject to restriction (4) below and (b) on such
short-term credits as may be necessary for the clearance of
transactions.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow on an unsecured basis from banks for
temporary or emergency purposes or for the clearance of transactions
in amounts not exceeding 10% of its total assets (not including the
amount borrowed) and will not make investments while borrowings in
excess of 5% of the value of the Fund's total assets are outstanding.
4. Buy or sell commodities or commodity futures contracts, or buy or sell
real estate, real estate limited partnership interests or other
interests in real estate, except the Fund may (a) purchase and sell
securities which are secured by real estate and securities of
companies which invest or deal in real estate and (b) enter into
financial futures and options thereon.
5. Make loans (except for purchases of publicly-traded debt securities
consistent with the Fund's investment policies).
6. Make investments for the purpose of exercising control or management.
7. Act as underwriter (except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities in the Fund's
investment portfolio).
8. Invest 25% or more of its total assets (calculated at the time of
purchase and taken at market value) in any one industry.
9. As to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer (other
than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities), or purchase more than 10% of all
outstanding voting securities of any one issuer.
C-2
<PAGE>
APPENDIX D
[THIS PAGE INTENTIONALLY LEFT BLANK]
D-1
<PAGE>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUNDS
Managed by Orbitex Management, Inc.
Performance Review: Orbitex Strategic Natural Resources Fund significantly
outperformed the Lipper Natural Resources Fund Category during the period from
October 23, 1997 (commencement of operations) to April 30, 1998. The total
return for the Fund was 10.74% versus (3.80)%(a) for the Lipper Natural
Resources Fund Category and 22.49%(a) for the S&P 500 Index. The Fund seeks to
achieve its objective through a flexible policy of investing primarily in common
stocks of companies engaged in natural resource industries and industries
supportive to natural resource industries.
This has been a challenging period for most natural resource sectors. The
combination of a strong El Nino, the second warmest winter ever, turmoil in
emerging markets and other Asian countries and increased OPEC production in
November 1997 have prompted a sharp drop off in crude oil prices and other
resources (e.g., gold, aluminum, copper). Crude oil prices have reached the
lowest levels since 1988. OPEC will meet on June 24, 1998 to discuss production
cuts. Some oil projects may have to shut down, because it is not economical to
produce at the low oil prices. Weather experts recently announced that La Nina
is here which could bring us cold winters, hot summers and a pick-up in
hurricane activity. This along with production cuts from OPEC countries should
stabilize prices and we expect to see a better environment by fourth
quarter1998.
On the positive side, natural gas, paper/forest products and select chemical
companies have been strong performers. some of these sectors are beneficiaries
of the lower oil prices. Natural gas prices have remained firm throughout the
period, as that market is looking for a return to more normal weather during the
summer and into next winter. Also, natural gas pipelines are full to capacity
and the strategic United States Reserve Base is declining.
Throughout the period, the Fund benefited from its above average emphasis on
large capitalization, defensive, valuD-oriented securities within the natural
resource sectors. Noteworthy company performance spanned a diverse group of
sectors. The Fund benefited from its position in Exxon, Western Atlas, Smith
International, Cytec Industries and Phelps Dodge. Despite the strong
fundamentals in the natural gas industry, Coho Energy, Forcenergy and Seagull
Energy were weak performers.
Outlook: Our bias toward large capitalization equities continues as the markets
struggle with the near term concerns of emerging markets and lower oil prices.
however, we see an improved environment toward the end of 1998 as supply/demand
excesses should come into balance with anticipated OPEC and non-OPEC production
cuts. In fact, many natural resource sectors and stocks have rarely, if ever,
sold at such low valuations. We are extremely positive on the longer term
outlook for the natural resources markets.
We appreciate your investment in Orbitex Strategic Natural Resources Fund.
D-2
<PAGE>
The following graph shows a comparison of hypothetical investment of $10,000 in
Strategic Natural Resources Fund (assumes reinvestment of all dividends and
distributions and a one time sales charge) versus the Lipper Natural Resources
Fund Category and the S&P 500 Index.
[GRAPH]
CUMULATIVE TOTAL RETURN* SUMMARY
Period Ended
April 30, 1998(a)
-----------------
Strategic Natural Resources Fund 10.74%
Strategic Natural Resources Fund (incl. max. 5.75% sales charge) 4.34%
Lipper Natural Resources fund Category** (3.80)%
S&P 500 Index** 22.49%
- ----------
(a) Commencement date of operations for Strategic Natural Resources Fund is
October 23, 1997. Performance for the benchmark is not available from
commencement date of operations through April 30, 1998. For that reason,
performance for the benchmark is shown from November 1, 1997 through April 30,
1998.
* Total return is calculated assuming reinvestment of all dividends. Total
returns would have been lower had the Advisor (Orbitex Management, Inc.) and the
Administrator and Custodian (State Street Bank and Trust Company) not waived or
reimbursed a portion of their fees. Results represent past performance and do
not indicate future results. The value of an investment in the Fund and the
return on investment both will fluctuate and redemption proceeds may be higher
or lower than an investor's original cost.
** The Lipper Natural Resources Fund Category and the S&P 500 Index are
unmanaged indexes whereas the Fund is actively managed. The performance of these
indexes does not reflect any applicable sales charges or other expenses
associated with investment in the Fund; direct investment in these indexes is
not possible. Index performance is not intended to represent the future
performance of Strategic Natural Resources Fund.
D-3
<PAGE>
ORBITEX GROUP OF FUNDS
INFO-TECH & COMMUNICATIONS FUND
Managed by Orbitex Management, Inc.
Performance Review: During the period from October 22, 1997 (commencement of
operations) to April 30, 1998, Info-Tech & Communications Fund had a total
return of 30.80%, compared with a total return of 22.49%(a) for the S&P 500
Index and 16.09%(a) for the Lipper Science & Technology Index. The fund seeks to
achieve superior long-term capital growth through selective investment in
companies engaged in the communication, information and related technology
industries.
Towards the end of 1997, the Fund was conservatively positioned in holdings such
as the regional Bell operating companies, AT&T and Sprint. With a more positive
outlook toward the market emerging at the beginning of January, the Fund was
repositioned into more aggressive technology investments. Specifically, the Fund
was focused on the deployment and operation of new communications networks
around the world. With the rapid privatization of public communications services
companies around the world and the rapid consumer and business adoption of the
internet, this area, we believed would be the most timely area into which to
focus the Fund's assets. In turn, we chose to avoid most of the traditional
personal computer hardware and software related companies, which proved to be
particularly fortuitous for the Fund.
Some of the top performing names for the Fund during this period included Nokia,
which increased over 75% from the beginning of the year. We bought Nokia because
of its attractive valuation relative to its growth prospects and its market
domination in cellular handsets over it primary competitors, Motorola and
Ericcson. Nokia continues to be a top holding in the Fund. Lucent, which has
nearly doubled in price since January, was another significant contributor to
the Fund's performance. The market recognized both its strong and predictable
earnings stream as well as its emerging market dominance as the leading supplier
of carrier-class communications equipment. On the services front. WorldCom, with
its pending merger with MCI, stands in our view to emerge as the world's
foremost telecommunications services provider with a single bundled customer
offering of long distance, local, internet and data services. We continue to
believe that following the merger, WorldCom will have tremendous long term
potential. It remains a core holding of the Fund. Lastly, in search of new ideas
to capitalize on the outlook for the internet, the Fund established a position
in OzEmail, the leading internet services provider and search engine in
Australia and New Zealand. Viewed as extremely inexpensive relative to its U.S.
- - based peer group, the stock has effectively doubled since February of this
year. However, we continue to see considerable upside in this largely
under-followed stock, and it constitutes one of the Fund's largest holdings.
Weak performing sectors for the Fund were semi-conductors and our Latin American
holdings. Both Telebras, the phone company of Brazil, and CANTV, the phone
company of Venezuela, proved mildly disappointing during the period. Venezuela
was impacted by falling oil prices, and Telebras's proposed break-up was marred
when the government of Brazil suddenly determined that the break-up would be
treated as a taxable event. Neither position is currently held by the Fund,
given the overall weakness in emerging market currencies as a result of the
current Asia crisis. The Fund's semiconductor holdings, including, Texas
Instruments and Maxim, have been flat to slightly down since being added to the
Fund in early February. However, since these firms operate in specialized
industries, and are not significantly impacted by the memory sector of the
semiconductor industry, we view their long term prospects as favorable. The Fund
maintained a relatively defensive posture, having 29% of its net assets in cash
equivalents as of the end of the reporting period.
Outlook: We believe that many sectors within the technology arena will prove to
be under pressure in the year ahead. Clearly, there is decline in both corporate
and consumer computer hardware demand driven by the lack of adequate networks to
utilize the power of their respective technologies. Hence, we will continue to
focus our investments this year on companies across the globe that are either
providing solutions to the network bottleneck or emerging communications service
companies seeking to deploy network solutions to the corporate and consumer
market place. Many of these companies have high growth prospects and valuations,
and accordingly, are highly priced relative to the market indexes. However, we
utilize a variety of valuation techniques to derive target prices for the
securities in the Fund relative to current market benchmarks. By maintaining
this discipline, we believe we can effectively manage the risk in these often
volatile securities relative to the broad market indexes.
We appreciate your investment in Orbitex Info-Tech & Communications Fund.
D-4
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in Info-Tech & Communications Fund (assumes reinvestment of all dividends and
distributions and a one time sales charge) versus the Lipper Science &
Technology Index and the S&P 500 Index.
[GRAPH]
CUMULATIVE TOTAL RETURN* SUMMARY
Period Ended
April 30, 1998(a)
-----------------
Info-Tech & Communications Fund 30.80%
Info-Tech & Communications Fund (incl. max. 5.75% sales charge) 23.24%
Lipper Science & Technology Index** 16.09%
S&P 500 Index** 22.49%
- ----------
(a) Commencement date of operations for Info-Tech & Communications Fund is
October 22, 1997. Performance for the benchmark is not available from
commencement date of operations through April 30, 1998. For that reason,
performance for the benchmark is shown from November 1, 1997 through April
30, 1998.
* Total return is calculated assuming reinvestment of all dividends. Total
returns would have been lower had the Advisor (Orbitex Management, Inc.) and
Administrator and Custodian (State Street Bank and Trust Company) not waived or
reimbursed a portion of their fees. Results represent past performance and do
not indicate future results. The value of an investment in the Fund and the
return on investment both will fluctuate and redemption proceeds may be higher
or lower than an investor's original cost.
** The Lipper Science & Technology Index and the S&P 500 Index are unmanaged
indexes whereas the Fund is actively managed. The performance of these indexes
does not reflect any applicable sales charges or other expenses associated with
investment in the Fund; direct investment in these indexes is not possible.
Index performance is not intended to represent the future performance of
Info-Tech & Communications Fund.
D-5
<PAGE>
ORBITEX GROUP OF FUNDS
GROWTH FUND
Managed by Orbitex Management, Inc.
Performance Review: From the commencement of operations of the Fund, October 22,
1997 to April 30, 1998, Orbitex Growth Fund had a return of 19.53%, versus
22.49% for the S&P 500 Index. The objective of the Fund is long-term growth of
capital. The Fund seeks to achieve its objective through investment in
securities believed by Orbitex Management, Inc. to have significant appreciation
potential.
Over the same period of time, the S&P Midcap 400 Index returned 11.05% and the
small capitalization Russell 2000 Index returned only 5.38%. Throughout the
period, the Fund invested in both growth and value oriented stocks, with large,
middle and smaller capitalizations, which probably contributed to the lagging
performance relative to the largD-cap, growth-oriented S&P 500 Index. At around
the mid-point of the measurement period, the Fund changed principal managers,
and this contributed to an unusually heavy turnover in shares held by the Fund.
This was done not for reasons of differing style, but for reasons of differing
preferences in terms of industry exposures. The effects of our portfolio
realignment is very difficult to measure, but we believe it had a material
negative impact upon performance.
Despite the dreadful economic collapse in emerging Asia and Japan during the
period, which added significantly to market volatility, domestically both
liquidity and economic growth remained very strong. The pressure upon prices of
commodities of all kinds kept inflation under check, and Gross Domestic Product
and the U.S. savings rates appear to have accelerated concurrently in the first
part of 1998. The capital markets have reflected this prosperity.
The Fund benefited from excellent performances in stocks among many diverse
industry groupings. Financial service companies, such as H.F. Ahmanson, Comerica
and Fleet Financial turned in healthy gains. In the high technology sectors,
companies such as THE, Inc., Visual Networks and Symbol technologies performed
very well.
We had notably poor performances in companies such as Medpartners, Cellegy
Pharmaceuticals and Check Point Software (modest gains were realized on partial
sales of Cellegy and Check Point, which are still held).
Portfolio Composition: The Fund's sector and stock weightings are a result of
bottom-up stock picking across all capitalizations, on the basis of capital
gains potential versus risk. As a result, performance is unlikely to mimic any
one broad index. At this writing, the Fund has taken on a fairly conservative
tilt, given what we believe to be very high valuations achieved in the market by
a number of companies that would otherwise be excellent candidates for the
portfolio. Examples include consumer packaged goods companies, many large
pharmaceutical companies, and many technology companies. In their stead, the
Fund maintains a material but temporary cash position, and a higher weighting
than would be typical in the utility industries.
Outlook: The capital markets are expected to remain in relatively healthy
condition in the near-term, due to very strong growth in the money supply, muted
inflation and the strong U.S. Dollar. We do anticipate an increase in
uncertainty relative to earnings prospects, however, and look for increasing
volatility in stock prices. If we are correct in this assessment, opportunities
to reestablish holdings in attractive sectors (such as those mentioned above) at
prudent prices will emerge before long and the Fund has reserves with which to
act on short order. In the contrary case, in which excessively high-valued
stocks continue upward, the Fund will most likely increase investments in more
valuD-oriented, lower volatility stocks.
We appreciate your investment in Orbitex Growth Fund.
D-6
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in Growth Fund (assumes reinvestment of all dividends and distributions and a
one time sales charge) versus the S&P 500 Index.
[GRAPH]
CUMULATIVE TOTAL RETURN* SUMMARY
Period Ended
April 30, 1998(a)
-----------------
Growth Fund- 19.53%
Growth Fund (incl. max. 5.75% sales charge) 12.66%
S&P 500 Index** 22.49%
- ----------
(a) Commencement date of operations for Growth Fund is October 22, 1997.
Performance for the benchmark is not available from commencement date of
operations through April 30, 1998. For that reason, performance for the
benchmark is shown from November 1, 1997 through April 30, 1998.
* Total return is calculated assuming reinvestment of all dividends. Total
returns would have been lower had the Advisor (Orbitex Management, Inc.) and
Administrator and Custodian (State Street Bank and Trust Company) not waived or
reimbursed a portion of their fees. Results represent past performance and do
not indicate future results. The value of an investment in the Fund and the
return on investment both will fluctuate and redemption proceeds may be higher
or lower than an investor's original cost.
** The S&P Index are unmanaged index whereas the Fund is actively managed. The
performance of the index does not reflect any applicable sales charges or other
expenses associated with investment in the Fund; direct investment in the index
is not possible. Index performance is not intended to represent the future
performance of Growth Fund.
D-7
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN HIGH YIELD FUND
Managed by J.P. Morgan Investment Management, Inc.
Performance Review: From the commencement of operations of the Fund, October 20,
1997 to April 30, 1998, Orbitex Asian High Yield Fund had a return of (5.71)%,
versus 11.57%(a) for the Lipper Merging Market Debt Funds Category. The
objective of the Fund is high current income. The Fund seeks to achieve this
objective by investing in primarily in lower rates and unrated debt securities
of companies, financial institutions and governments based in Asia. Capital
appreciation is a secondary objective.
Market Overview: The Asian High Yield Fund was launched into the worst market
that Asian fixed income assets have seen in years. Several countries, including
Thailand, the Philippines, Malaysia, Taiwan, and Korea devalued their
currencies, resulting in a significant deterioration in prices for Asian bonds
and stocks. In addition, virtually a complete evaporation of liquidity in the
region forced some of the countries (Korea, Thailand, and Indonesia) to seek
International Monetary Fund (IMF) balance of payments assistance.
The Asian debt market fell to a low in January 1998 as currencies tumbled.
However, the debt market recovered somewhat as individual governments took steps
to avoid a sovereign default. By the end of the first quarter of 1998, the Asian
market was dominated by two main themes. The first was positive, the improvement
of the liquidity crisis in Asia (except Indonesia). As a result, a fall in Asian
currencies quickly converted trade deficits into surpluses for the affected
countries. This provided the region with billions of dollars a month of inflows
which eased long term funding pressures. The return of liquidity induced rallies
in both Asian equity investments and the emerging market debt which had fallen
for fear of the crisis expanding. The second theme of lower commodity prices was
negative as the Asian economic contraction had far exceeded expectations. This
contraction led to falls in a wide range of commodity prices which faced
increased Asian supply and/or reduced Asian demand. While improved liquidity
tightened emerging market spreads across the board, falling commodity prices
constrained the rally in several markets.
Fund Overview: The Asian High Yield Fund began operations on October 20, 1997
and invested in a number of Asian countries, as well as some non-Asian
countries. Concentrations were established in Indonesia and Thailand where
attractive corporate securities could be found. As the fourth quarter of 1997
unfolded, investments in Korea became particularly compelling and some of the
corporate holdings in Indonesia were reduced to purchase sovereign securities in
Korea. At December 31, 1997, the Fund had an investment allocation of 29% in
Korea, 17% in the Philippines, and 13% in Indonesia.
For the fourth quarter of 1997, the Fund had a negative return of (10.9)%. This
performance was significantly worse than the Salomon Smith Barney High Yield
Market Index which returned 2.38% and the Salomon Smith Barney Broad Investment
Grade Index which returned 2.95%. However, this was much better than Asian
equities which had a negative return of (30.7)% over the same period.
The Fund returned 3.52% for the first quarter 1998. At the beginning of the
quarter, the portfolio was invested in 7 countries. When spreads in Asia began
to look tight relative to similarly rated Latin American bonds, country
allocation was expanded to 13 countries during the quarter to include Malaysia,
Hong Kong, and Japan, as well as a number of Latin American or European
countries. The Fund's holdings in Indonesia were significantly cut back, as
Indonesia's threat to implement a currency board met with widespread
disapproval, including disapproval from the U.S. and IMF. The Fund, which was
most heavily invested in Korea in terms of individual exposure, was well
positioned for the spread tightening which took place over the quarter. Country
allocation in Thailand was also increased slightly but was limited somewhat by
the lack of supply.
We appreciate your investment in Orbitex Asian High Yield Fund.
D-8
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in Asian High Yield Fund (assumes reinvestment of all dividends and
distributions and a one time sales charge) versus the Lipper Emerging Market
Debt Funds Category.
[GRAPH]
CUMULATIVE TOTAL RETURN* SUMMARY
Period Ended
April 30, 1998(a)
-----------------
Asian High Yield Fund- (5.71)%
Asian High Yield Fund (incl. max. 4.75% sales charge) (10.20)%
Lipper Emerging Market Debt Funds Caregory** 11.57%
- ----------
(a) Commencement date of operations for Asian High Yield Fund is October 20,
1997. Performance for the benchmark is not available from commencement date of
operations through April 30, 1998. For that reason, performance for the
benchmark is shown from November 1, 1997 through April 30, 1998.
* Total return is calculated assuming reinvestment of all dividends. Total
returns would have been lower had the Advisor (Orbitex Management, Inc.) and
Administrator and Custodian (State Street Bank and Trust Company) not waived or
reimbursed a portion of their fees. Results represent past performance and do
not indicate future results. The value of an investment in the Fund and the
return on investment both will fluctuate and redemption proceeds may be higher
or lower than an investor's original cost.
** The Lipper Emerging Markets Debt Funds Category is an unmanaged index whereas
the Fund is actively managed. The performance of the index does not reflect any
applicable sales charges or other expenses associated with investment in the
Fund; direct investment in the index is not possible. Index performance is not
intended to represent the future performance of Growth Fund.
D-9
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN SELECT ADVISORS FUND
Managed by Bankers Trust Company and Asia Strategic Investment Limited
Performance Review and Holdings: For the period from October 31, 1997
(commencement of operations) to April 30, 1998, the Fund declined (2.93)%,
compared with (5.63%)(a) for the MSCI Asia Ex-Japan Free Index, the Fund's
benchmark. The Fund's objective is superior long-term capital growth through
selective investment in Asian companies. The Fund seeks to achieve its objective
by investing at least 65% of its total assets in equity securities of Asian
companies in normal market conditions.
From October 31, 1997 to April 30, 1998, the Asian financial crisis has taken a
huge toll on the currencies and asset value within the region. All regional
markets have undergone tremendous contractions and volatilities. Given the
abnormally poor operating conditions, the Fund was more concerned about capital
preservation and stayed unusually defensive by holding a very high level of
cash. This has caused the Fund's holdings in Asian securities to stay below the
suggested prospectus percentages for some time. The move has enhanced
performance as all the markets declined sharply during the period.
The Fund has maintained a very disciplined approach by investing only when there
is believed to be good value. Relatively large exposures were installed in the
more stable economies of Hong Kong and Singapore, and the weaker "crisis
economies" of Korea, Indonesia, Thailand and Malaysia were generally avoided.
This led to a brief period of underperformance, in the first quarter of 1998,
when the latter markets staged a strong but short lived rally. This was soon
reversed as the poor economic fundamentals rD-asserted themselves, and these
markets went into sharp decline again.
As these markets corrected, the Fund has become more active over the recent
weeks in investing its cash. Decisions based on stock selection led to small
positions being placed in Korea, Thailand, and Malaysia,. We have participated
in the recapitalization of two Thai banks, namely Bangkok Bank and Thai Farmers
Bank. This will be an area that we shall be keeping an eye out for
opportunities.
The portfolio's investments are generally composed of large, liquid, index
stocks. We have recently gone overweight in Hong Kong and Singapore preferring
their stronger economic fundamentals and more consistent and sensible policies,
and relatively sound financial systems. Weightings in the crisis economies are a
function of our stock selection process rather than top down considerations.
Thus, we are overweighted in Thailand and neutral in Korea. Our cautious
assessments on Indonesia and the Philippines have not changed, and no weightings
are kept in those markets. We are actively looking for purchases as value
emerges in India and Taiwan.
Outlook: Given the large uncertainties and volatilities in the markets, the Fund
will remain defensive in the near term. Some cash will be kept, and we shall
continue with our disciplined investment approach. We still favor the sounder
and more matured markets of Hong Kong and Singapore, and we shall retain our
cautious approach to the smaller markets where stock selection will be the key.
We appreciate your investment in Orbitex Asian Select Advisors Fund.
D-10
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in Asian Select Advisors Fund (assumes reinvestment of all dividends and
distributions and a one time sales charge) versus the MSCI Asia Ex-Japan Free
Index.
[GRAPH]
CUMULATIVE TOTAL RETURN* SUMMARY
Period Ended
April 30, 1998(a)
-----------------
Asian Select Advisors Fund- (2.93)%
Asian Select Advisors Fund (incl. max. 5.75% sales charge) (8.54)%
MSCI Asia Ex-Japan Free Index** (5.63)%
- ----------
(a) Commencement date of operations for Asian Select Advisors Fund is October
31, 1997. Performance for the benchmark is not available from commencement date
of operations through April 30, 1998. For that reason, performance for the
benchmark is shown from November 1, 1997 through April 30, 1998.
* Total return is calculated assuming reinvestment of all dividends. Total
returns would have been lower had the Advisor (Orbitex Management, Inc.) and
Administrator and Custodian (State Street Bank and Trust Company) not waived or
reimbursed a portion of their fees. Results represent past performance and do
not indicate future results. The value of an investment in the Fund and the
return on investment both will fluctuate and redemption proceeds may be higher
or lower than an investor's original cost.
** The MSCI Asia Ex-Japan Free Index is an unmanaged index whereas the Fund is
actively managed. The performance of the index does not reflect any applicable
sales charges or other expenses associated with investment in the Fund; direct
investment in the index is not possible. Index performance is not intended to
represent the future performance of Asian Select Advisors Fund.
D-11
<PAGE>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUND
SCHEDULE OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Shares Market
Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 91.21%
Agricultural Machinery - 2.43%
Delta & Pine Land Co. ..................... 3,000 $ 138,188
----------
Aluminum - 2.85%
Alcan Aluminum, Ltd. ...................... 5,000 162,500
----------
Chemicals - 4.90%
Cytec Industries, Inc. (a) ................ 2,000 109,500
Dow Chemical Co. .......................... 1,000 96,687
Du Pont (E.I.) de Nemours and Co. ......... 1,000 72,813
----------
279,000
----------
Gas Exploration - 9.54%
Anderson Exploration, Ltd. (a) ............ 4,000 48,673
Coho Energy, Inc. (a) ..................... 10,000 75,625
Forcenergy, Inc. (a) ...................... 3,000 69,187
Oryx Energy Co. (a) ....................... 4,000 104,500
Seagull Energy Corp. (a) .................. 10,000 170,625
Weatherford Enterra, Inc. (a) ............. 1,500 75,094
----------
543,704
----------
Gas & Pipeline Utilities - 1.66%
Williams Companies, Inc. .................. 3,000 94,875
----------
International Oil - 7.50%
Poco Petroleum, Ltd. (a) .................. 2,000 22,798
Ranger Oil, Ltd. .......................... 17,000 117,938
Santa Fe International Corp. .............. 1,500 58,781
Texaco, Inc. .............................. 2,000 123,000
YPF Sociedad Anonima, ADR.................. 3,000 104,625
----------
427,142
----------
Mining - 10.88%
Barrick Gold Corp. ........................ 4,000 89,750
Freeport-McMoRan Copper & Gold, Inc.,
Class A ................................... 7,000 124,686
Getchell Gold Corp. (a) ................... 3,000 73,875
Greenstone Resources, Ltd. (a) ............ 15,000 91,875
Newmont Mining Corp. ...................... 2,500 80,468
Phelps Dodge Corp. ........................ 1,500 100,688
Placer Dome, Inc. ......................... 4,000 59,000
----------
620,342
----------
See Notes to Financial Statements.
D-12
<PAGE>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Oil - 12.48%
Atlantic Richfield Co. .................... 2,000 $ 156,000
----------
Canadian 88 Energy Corp. (a) .............. 20,000 97,500
Exxon Corp. ............................... 1,000 72,937
Halliburton Co. ........................... 2,500 137,500
Pennzoil Co. .............................. 1,000 64,063
Triton Energy, Ltd. (a) ................... 1,500 60,188
Unocal Corp. .............................. 3,000 122,812
----------
711,000
----------
Oil & Gas Drilling - 8.70%
Ensco International, Inc. ................. 5,000 141,250
Santa Fe International Corp. .............. 8,000 82,500
Smith International, Inc. (a) ............. 1,500 88,125
Ultramar Diamond Shamrock Corp. ........... 3,000 96,937
UTI Energy Corp. (a) ...................... 5,000 86,875
----------
495,687
----------
Oil & Gas Exploration and Production - 9.34%
Benz Energy, Ltd. (a) ..................... 10,000 12,448
Bonavista Petroleum, Ltd. (a) ............. 13,000 53,184
Canadian Conquest Exploration, Inc. (a) ... 50,000 40,211
EEX Corp. (a) ............................. 10,000 96,875
Global Industries, Inc. (a) ............... 2,500 56,719
Pacalta Resources, Ltd. (a) ............... 5,000 35,666
Probe Exploration, Inc. (a) ............... 15,000 65,037
Total SA, ADR.............................. 2,000 117,500
Ultra Petroleum Corp. (a) ................. 15,000 54,023
----------
531,663
----------
Paper & Related Products - 9.39%
Asia Pulp & Paper Co., Ltd., ADR .......... 4,000 58,250
Champion International Corp. .............. 2,000 107,625
Louisiana-Pacific Corp. ................... 5,000 109,375
Tembec, Inc., Class A (a) ................. 10,000 66,086
Union Camp Corp. .......................... 1,300 78,488
Weyerhaeuser Co. .......................... 2,000 115,250
----------
535,074
----------
Petroleum Services - 10.46%
Baker Hughes, Inc. ........................ 2,500 101,250
Barrington Petroleum, Ltd. (a) ............ 15,000 46,156
Lyondell Petrochemical Co. ................ 3,000 98,625
Noble Drilling Corp. (a) .................. 2,500 80,781
Seven Seas Petroleum, Inc. (a) ............ 2,000 42,500
Veritas DGC, Inc. (a) ..................... 2,000 108,375
Western Atlas, Inc. ....................... 1,500 118,500
----------
596,187
----------
See Notes to Financial Statements.
D-13
<PAGE>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Software - 0.16%
Mobius Management Systems, Inc. (a) ....... 500 $ 9,250
----------
Steel - 0.92%
AK Steel Holding Corp. .................... 2,500 52,500
----------
TOTAL COMMON STOCKS - (Cost $4,805,529) 5,197,112
----------
SHORT TERM INVESTMENTS (Cost $181,000) - 3.18% Principal
TIME DEPOSIT - 3.18% Amount
----------
State Street Bank and Trust Co.,
5.250%, 05/01/1998 ........................ $ 181,000 181,000
----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $4,986,529) - 94.39% 5,378,112
OTHER ASSETS AND LIABILITIES - 5.61% 319,722
----------
NET ASSETS - 100.00% $5,697,834
==========
================================================================================
(a)....Denotes non-income producing security.
ADR - American Depository Receipt
See Notes to Financial Statements.
D-14
<PAGE>
ORBITEX GROUP OF FUNDS
INFO - TECH & COMMUNICATIONS FUND
SCHEDULE OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 71.81%
Advertising - 4.78%
DoubleClick, Inc. (a) ....................... 2,800 $ 116,725
----------
Business Services - 5.61%
At Home Corp., Series A (a) ............... 1,700 56,631
Nokia Corp., ADR .......................... 1,200 80,250
----------
136,881
----------
Communication Services - 2.36%
China Telecom Hong Kong, Ltd., ADR (a) .... 1,000 38,625
Exodus Communications, Inc. (a) ........... 500 19,000
----------
57,625
----------
Electronics - 16.75%
Altera Corp. (a) .......................... 1,000 40,500
Applied Materials, Inc. (a) ............... 1,000 36,125
ARM Holdings Plc, ADR (a) ................. 500 20,188
Broadcom Corp. (a) ........................ 2,000 96,000
Lexmark International Group, Inc.,
Class A (a) ............................... 600 34,725
Maxim Integrated Products, Inc. (a) ....... 1,500 60,562
Motorola, Inc. ............................ 900 50,062
Texas Instruments, Inc. ................... 1,100 70,469
----------
408,631
----------
Networking Products - 0.90%
Cisco Systems, Inc. (a) ................... 300 21,975
----------
Software - 14.33%
ISS Group, Inc. (a) ....................... 1,000 44,250
Mobius Management Systems, Inc. (a) ....... 1,500 27,750
Ozemail, Ltd., ADR ........................ 10,000 228,125
Visual Networks, Inc. (a) ................. 1,500 49,687
----------
349,812
----------
Telecommunications Equipment - 8.76%
Advanced Radio Telecom Corp. (a) .......... 1,500 21,938
Ascend Communications, Inc. (a) ........... 1,600 69,700
DSC Communications Corp. (a) .............. 1,000 18,000
Lucent Technologies, Inc. ................. 400 30,450
Newbridge Networks Corp. (a) .............. 1,000 29,312
Northern Telecom, Ltd. .................... 400 24,350
Reltec Corp. (a) .......................... 500 19,938
----------
213,688
----------
See Notes to Financial Statements.
D-15
<PAGE>
ORBITEX GROUP OF FUNDS
INFO - TECH & COMMUNICATIONS FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Telecommunications Services - 6.28%
Metronet Communications Corp., Class B (a) 1,000 $ 25,000
NTL, Inc. (a) ............................. 1,000 39,000
Omnipoint Corp. (a) ....................... 2,200 53,900
Tellabs, Inc. (a) ......................... 500 35,438
----------
153,338
----------
Telephone - 12.04%
BCE, Inc. ................................. 500 21,281
Compania Anonima Nacional Telefonos de
Venezuela, ADR ............................ 1,200 40,200
E. Spire Communications, Inc. (a) ......... 900 17,100
ITC Deltacom, Inc. (a) .................... 500 14,313
Nextlink Communications, Inc., Class A (a) 800 24,000
Powertel, Inc. (a) ........................ 1,600 36,600
Sprint Corp. .............................. 400 27,325
Telecomunicacoes Brasileiras, ADR.......... 400 48,725
WorldCom, Inc. ............................ 1,500 64,172
----------
293,716
----------
TOTAL COMMON STOCKS - (Cost $1,446,288) 1,752,391
----------
SHORT TERM INVESTMENTS (Cost $706,000) - 28.93% Principal
TIME DEPOSIT - 28.93% Amount
--------
State Street Bank and Trust Co.,
5.250%, 05/01/1998 ...................... $ 706,000 706,000
----------
TOTAL INVESTMENTS (COST $2,152,288) - 100.74% 2,458,391
OTHER ASSETS AND LIABILITIES - (0.74)% (18,049)
----------
NET ASSETS - 100.00% $2,440,342
==========
================================================================================
(a) Denotes non-income producing security
ADR - American Depository Receipt
See Notes to Financial Statements.
D-16
<PAGE>
ORBITEX GROUP OF FUNDS
GROWTH FUND
SCHEDULE OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 101.66%
Advertising - 1.64%
DoubleClick, Inc. (a) ..................... 350 $ 14,591
----------
Air Travel - 4.82%
AMR Corp. (a) ............................. 100 15,237
ASA Holdings, Inc. ........................ 440 16,720
Southwest Airlines Co. .................... 400 10,975
----------
42,932
----------
Auto Parts - 3.56%
CSK Auto Corp. (a) ........................ 700 18,900
Superior Industries International, Inc. ... 400 12,850
----------
31,750
----------
Banks - 1.91%
BankAmerica Corp. ......................... 200 17,000
----------
Broadcasting - 3.67%
TelD-Communications, Inc., Liberty Media
Group, Series A (a) ....................... 500 16,594
TelD-Communications, Inc., TCI Group, Series
A (a) ..................................... 500 16,125
----------
32,719
----------
Business Services - 3.22%
Equifax, Inc. ............................. 400 15,475
Manpower, Inc. ............................ 300 13,219
----------
28,694
----------
Chemicals - 2.17%
Dow Chemical Co. .......................... 200 19,337
----------
Computers & Business Equipment - 1.95%
Symbol Technologies, Inc. ................. 450 17,325
----------
Diversified Manufacturing- 1.91%
General Electric Co. ...................... 200 17,025
----------
Drugs & Health Care - 8.64%
Agouron Pharmaceuticals, Inc. (a) ......... 500 17,000
Amgen, Inc. ............................... 200 11,925
Biogen, Inc. (a) .......................... 100 4,438
Bristol-Myers Squibb Co. .................. 100 10,587
Cellegy Pharmaceuticals, Inc. (a) ......... 1,300 7,394
Merck & Co., Inc. ......................... 100 12,050
RLI Corp. ................................. 250 13,562
----------
76,956
----------
Electric Utilities - 2.95%
Eastern Utilities Assoc. .................. 1,000 26,250
----------
See Notes to Financial Statements.
D-17
<PAGE>
ORBITEX GROUP OF FUNDS
GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
Electronics - 5.25%
ARM Holdings Plc, ADR (a) ................. 200 $ 8,075
Maxim Integrated Products, Inc. (a) ....... 250 10,094
SGS-Thomson Microelectronics NV (a) ....... 100 8,450
Texas Instruments, Inc. ................... 100 6,406
Xilinx, Inc. (a) .......................... 300 13,725
----------
46,750
----------
Financial Services - 2.70%
Countrywide Credit Industries, Inc. ....... 250 12,094
Federal National Mortgage Assoc. .......... 200 11,975
----------
24,069
----------
Gas & Pipeline Utilities - 2.73%
Leviathan Gas Pipeline Partners ........... 750 24,328
----------
Homebuilders - 0.96%
Kaufman & Broad Home Corp. ................ 290 8,584
----------
Industrial Machinery - 3.46%
Magna International, Inc., Class A ........ 200 14,912
Tokheim Corp. (a) ......................... 1,000 15,875
----------
30,787
----------
Insurance - 0.96%
20th Century Industries ................... 300 8,550
----------
International Oil - 0.93%
Chevron Corp. ............................. 100 8,269
----------
Metals - 6.18%
Friedman Industries, Inc. ................. 5,775 42,591
Precision Castparts Corp. ................. 200 12,425
----------
55,016
----------
Mining - 3.09%
Getchell Gold Corp. (a) ................... 600 14,775
Homestake Mining Co. ...................... 1,100 12,787
----------
27,562
----------
Networking Products - 2.64%
3Com Corp. (a) ............................ 260 8,889
Cisco Systems, Inc. (a) ................... 200 14,650
----------
23,539
----------
Paper - 4.37%
Pope & Talbot, Inc. ....................... 2,500 38,906
----------
Petroleum Services - 1.06%
Global Marine, Inc. (a) ................... 400 9,425
----------
See Notes to Financial Statements.
D-18
<PAGE>
ORBITEX GROUP OF FUNDS
GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- ------------------------------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------------------------------
Real Estate - 2.02%
Catellus Development Corp.(a)................... 300 $ 5,344
Lennar Corp. ................................... 450 12,655
---------
17,999
---------
Retail - 1.36%
Viking Office Products, Inc. (a) ............... 500 12,094
---------
Retail Trade - 1.95%
Longs Drug Stores Corp. ........................ 600 17,362
---------
Savings and Loan - 3.49%
Golden West Financial Corp. .................... 150 15,797
H.F. Ahmanson & Co. ............................ 200 15,250
---------
31,047
---------
Software - 13.99%
Check Point Software Technologies, Ltd. (a) .... 200 5,875
Computer Associate International, Inc. ......... 300 17,569
Electronic Arts, Inc. (a) ...................... 300 13,875
HTE, Inc. (a) .................................. 500 14,000
Pegasystems, Inc. (a) .......................... 700 13,125
Peregrine Systems, Inc. (a) .................... 600 14,475
Transaction Systems Architects, Inc., Class A (a) 300 12,600
Visual Networks, Inc. (a) ...................... 1,000 33,125
---------
124,644
Telecommunications Services - 1.59%
Tellabs, Inc. (a) .............................. 200 14,175
---------
Tobacco - 1.86%
UST, Inc. ...................................... 600 16,538
---------
Transportation - 1.54%
C.H. Robinson Worldwide, Inc. .................. 600 13,725
---------
Trucking & Freight Forwarding - 3.09%
Air Express International Corp. ................ 400 10,500
Expeditores International ...................... 400 17,000
---------
27,500
---------
TOTAL COMMON STOCKS - (Cost $846,862) 905,448
---------
TOTAL INVESTMENTS (COST $846,862) - 101.66% 905,448
OTHER ASSETS AND LIABILITIES - (1.66)% (14,808)
----------
NET ASSETS - 100.00% 890,640
=========
================================================================================
(a) Denotes non-income producing security
ADR - American Depository Receipt
See Notes to Financial Statements.
D-19
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
BONDS AND NOTES - 106.23%
BRAZIL - 1.15%
Government - 1.15%
Republic of Brazil C Bond, 5.00%
with 3.00% Interest Capitalization,
04/15/2014 (a)(b).......................... $ 52,279 $ 43,326
----------
CHINA - 2.46%
Government - 1.22%
Guangdong International Trust
& Investment Corp., 8.750%, 10/24/2016 (c) 50,000 46,000
----------
Municipal - 1.24%
Zhuhai Hwy Co., Ltd., 11.500%, 07/01/2008
(c) ....................................... 50,000 46,750
----------
HONG KONG - 2.56%
Industrial - 1.26%
Hutchison Whampoa, Ltd., 6.950%, 08/01/2007
(c)........................................ 50,000 47,395
----------
Real Estate - 1.30%
Cheung Kong Finance, 5.500%, 09/30/1998 ... 50,000 49,125
----------
INDIA - 6.19%
Energy - 4.93%
Tata Electric Co., 7.875%, 08/19/2007 (c).. 200,000 185,720
----------
Industrials - 1.26%
Reliance Industries, Ltd., 8.125%,
09/27/2005 (c)............................. 50,000 47,500
----------
INDONESIA- 0.92%
Food, Beverage & Tobacco - 0.92%
Sampoerna International Financial Co.,
8.375%,
06/15/2006 (c)........................... 50,000 34,500
----------
JAPAN - 8.71%
Banks - 2.61%
Tokai Preferred Capital Co. LLC, 9.980%,
12/29/2049 (c)(d) 100,000 98,500
----------
Electric Utilities - 6.10%
Tenaga Nasional Berhad, 7.625%, 04/29/2007
(c) 50,000 44,875
Tenaga Nasional Berhad, 7.875%, 06/15/2004
(c) 200,000 184,790
----------
229,665
----------
See Notes to Financial Statements.
D-20
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN HIGH YIELD FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
KOREA - 37.61%
Banks - 8.75%
Korea Development Bank, 7.000%, 07/15/1999 $ 100,000 $ 98,590
Korea Development Bank, 7.375%, 09/17/2004 250,000 230,825
----------
329,415
----------
Government - 14.55%
Export-Import Bank of Korea, 6.500%,
02/10/2002 ................................ 110,000 100,937
Export-Import Bank of Korea, 6.500%,
11/15/2006 ................................ 200,000 175,000
Export-Import Bank of Korea, 7.100%,
03/15/2007 ................................ 80,000 74,800
Republic of Korea, 8.875%, 04/15/2008 ..... 200,000 197,210
----------
547,947
----------
Industrials - 4.96%
Pohang Iron & Steel, Ltd., 7.500%, 08/1/2002 200,000 187,000
----------
Telecommunications Services - 7.27%
Korea Telecom, 7.625%, 04/15/2007 ......... 100,000 88,744
SK Telecom Co., Ltd., 7.750%, 04/29/2004 .. 200,000 185,250
----------
273,994
----------
Utilities - 2.08%
Korea Electric Power Corp., 6.375%,
12/01/2003 ................................ 90,000 78,300
----------
MALAYSIA - 1.23%
Industrials - 1.23%
Petroliam Nasional Berhad, 7.125%,
08/15/2005 (c)............................. 50,000 46,340
----------
MEXICO - 2.75%
Industrials - 2.75%
AXA SA de CV, 9.000%, 08/04/2004 (c)....... 50,000 49,125
Copamex Industrias SA De CV, 11.375%,
04/30/2004 ................................ 50,000 54,625
----------
103,750
----------
PHILIPPINES - 21.15%
Energy - 9.21%
Ce Casecnan Water & Energy, Inc.,
Senior Note, 11.450%, 11/15/2005 ........ 100,000 105,200
Ce Casecnan Water & Energy, Inc.,
Senior Note, 11.950%, 11/15/2010 ........ 225,000 241,603
----------
346,803
----------
Government - 9.11%
Bangko Sentral Ng Philipinas, 8.600%,
06/15/2027 ................................ 100,000 90,000
ING Bank NV, Floating Rate Note, 02/12/1999
(c)(e)(d)(f) .............................. 100,000 104,250
Republic of Philippines, 8.875%, 04/15/2008 150,000 148,875
----------
343,125
----------
Telephone - 2.83%
Philippine Long Distance Telephone, 10.625%,
06/02/2004 ................................ 100,000 106,470
----------
See Notes to Financial Statements.
D-21
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN HIGH YIELD FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
RUSSIA - 1.17%
Government - 1.17%
Russia Ministry of Finance, 9.250%,
11/27/2001 ................................ $ 30,000 $ 29,475
Russia Ministry of Finance, 10.000%,
06/26/2007 ................................ 15,000 14,456
----------
43,931
----------
THAILAND - 12.12%
Banks - 4.58%
Bangkok Bank Public Co., Ltd., 7.250%,
09/15/2005 (c) ............................ 200,000 172,340
----------
Industrials - 7.54%
PTTEP International, Ltd., 7.625%,
10/01/2006 (c)............................. 320,000 283,888
----------
TURKEY - 5.37%
Government - 5.37%
Republic of Turkey, 10.000%, 09/19/2007 ... 100,000 102,500
Sultan, Ltd., Floating Rate Note, 8.750%,
06/11/1999 (d) ............................ 100,000 99,760
----------
202,260
----------
UNITED STATES - 2.84%
Government - 2.84%
United States Treasury Note, 6.875%,
05/15/2006 ................................ 100,000 107,062
----------
TOTAL BONDS AND NOTES - (Cost $4,015,710) 4,001,106
----------
PREFERRED STOCKS (Cost $49,716) - 1.32%
CHINA - 1.32% Shares
------
Industrials - 1.32%
Swire Pacific, Ltd., 9.33%, Series 144A(c). 2,200 50,050
----------
TOTAL LONG TERM INVESTMENTS - (Cost $4,065,426) 4,051,156
----------
See Notes to Financial Statements.
D-22
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN HIGH YIELD FUND
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (Cost $354,755) - 9.42%
UNITED STATES - 9.42%
Government - 9.42%
United States Treasury Bill,
4.850% - 4.990%, 06/25/1998 - 07/09/1998(g) $ 358,000 $ 354,755
----------
TOTAL INVESTMENTS (Cost $4,420,181) - 116.97% 4,405,911
OTHER ASSETS AND LIABILITIES - (16.97)% (639,354)
----------
NET ASSETS - 100.00% $3,766,557
==========
(a) The coupon rate shown on step-up coupon bond represents the rate as of
April 30, 1998.
(b) Bond pays stated or additional interest with "payment-in-kind" (PIK) bonds.
(c) Securities purchased pursuant to Rule 144A of the Securities Act of 1933
and may be resold in transactions exempt from registration, normally only
to qualified institutional buyers. At April 30, 1998, these securities
amounted to $1,442,023, representing 38.29% of the Fund's net assets.
(d) The coupon rate shown on floating rate note represents the rate at April
30, 1998.
(e) Illiquid security restricted as to resale, represents 2.77% (at value) of
the net assets of the Fund, with an acquisition date of 02/12/98 and
acquisition cost of $100,000.
(f) Structured Note which pays an interest amount at either the Philippines
T-Bill rate (currently at 17.7%, resets semi-annually) less 2.25% or LIBOR
plus 100 basis points, whichever is higher at the due date.
(g) The coupon rate represents the annualized yield at date of purchase.
See Notes to Financial Statements.
D-23
<PAGE>
ORBITEX GROUP OF FUNDS
ASIAN SELECT ADVISORS FUND
SCHEDULE OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Market
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 41.60%
HONG KONG - 19.04%
Conglomerates - 4.58%
Hutchison Whampoa ......................... 1,000 $ 6,184
----------
Real Estate - 4.65%
Citic Pacific, Ltd. ....................... 1,000 3,072
Wharf Holdings ............................ 2,000 3,202
----------
6,274
----------
Retail - 4.22%
New World Development Co., Ltd. ........... 2,000 5,693
----------
Telephone - 5.59%
China Telecom, Ltd. ....................... 2,000 3,796
Hong Kong Telecomm ........................ 2,000 3,744
----------
7,540
----------
KOREA - 4.04%
Electric Utilities - 4.04%
Korea Electric Power Corp. ................ 400 5,447
----------
SINGAPORE - 14.18%
Building Materials & Construction - 3.12%
Hong Leong Asia, Ltd. ..................... 5,000 4,202
----------
Electronics - 3.27%
Singapore Technologies .................... 5,137 4,415
----------
Telephone - 3.82%
Singapore Telecommunications, Ltd. ........ 3,000 5,156
----------
Transportation - 3.97%
Keppel Telecom & Transport ................ 8,000 5,359
----------
THAILAND - 4.34%
Banks - 4.34%
Bangkok Bank .............................. 600 1,506
Thai Farmers Bank Public Co., Ltd. ........ 1,900 4,350
----------
5,856
----------
TOTAL COMMON STOCKS - (Cost $57,817) 56,126
----------
TOTAL INVESTMENTS (Cost $57,817) - 41.60% 56,126
OTHER ASSETS AND LIABILITIES - 58.40% 78,795
----------
NET ASSETS -100.00% $ 134,921
==========
See Notes to Financial Statements.
D-24
<PAGE>
ORBITEX GROUP OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
Strategic
Natural Info-Tech & Asian High Asian
Resources Communications Growth Yield Select Advisors
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note 2)...... $ 5,197,112 $ 1,752,391 $ 905,448 $ 4,051,156 $ 56,126
Short term investments (Note 2)................... 181,000 706,000 - 354,755 -
------------- -------------- ------------ ------------- -------------
Total investments........................... 5,378,112 2,458,391 905,448 4,405,911 56,126
Cash.............................................. 855 2,760 81,923 378,422 85,944
Foreign currency, at value........................ 35,384 - - - 1,065
Receivable for securities sold.................... 372,880 - 18,627 - -
Interest receivable............................... 26 103 - 77,358 -
Dividends receivable.............................. 8,430 498 4,063 1,283 83
Receivable for fund shares sold................... 246,116 133,455 9,413 39,035 -
Receivable due from advisor (Note 3).............. 6,407 14,614 17,142 28,783 22,647
Prepaid expenses.................................. 6,048 6,049 5,381 6,179 5,378
Deferred organizational expenses (Note 2)......... 16,891 16,881 16,881 16,871 16,974
------------- -------------- ------------ ------------- -------------
TOTAL ASSETS.............................. 6,071,149 2,632,751 1,058,878 4,953,842 188,217
LIABILITIES
Payable for securities purchased.................. 310,203 117,894 114,432 376,771 -
Payable for fund shares redeemed.................. - 22,019 - - -
Payable for trustee fees (Note 3)................. 1,000 1,000 1,000 1,000 1,000
Payable for organizational expense (Note 2)....... 4,589 4,589 4,589 4,589 4,589
Payable for line of credit (Note 9)............... - - - 750,000 -
Accrued expenses and other liabilities............ 57,523 46,907 48,217 54,925 47,707
------------- -------------- ------------ ------------- -------------
TOTAL LIABILITIES......................... 373,315 192,409 168,238 1,187,285 53,296
------------- -------------- ------------ ------------- -------------
NET ASSETS............................ $ 5,697,834 $ 2,440,342 $ 890,640 $ 3,766,557 $ 134,921
============= ============== ============ ============= =============
NET ASSETS
Paid-in capital................................... $ 5,484,453 $ 2,164,523 $ 776,356 $ 3,931,613 $ 137,824
Undistributed net investment income............... 119,210 - 13,074 26,364 -
Accumulated net realized gain (loss) on
investments and foreign currency transactions.. (297,412) (30,284) 42,624 (177,150) (1,212)
Net unrealized appreciation (depreciation) on
investments and foreign currency transactions.. 391,583 306,103 58,586 (14,270) (1,691)
------------- -------------- ------------ ------------- -------------
NET ASSETS................................ $ 5,697,834 $ 2,440,342 $ 890,640 $ 3,766,557 $ 134,921
============= ============== ============ ============= =============
NET ASSET VALUE PER SHARE
Net asset value per share (based on shares
of beneficial interest outstanding, par
value $0.01 per share)......................... $ 16.54 $ 19.62 $ 17.93 $ 10.93 $ 14.56
============= ============== =========== ============== =============
Maximum sales charge (Note 1)..................... 5.75% 5.75% 5.75% 4.75% 5.75%
Offering price per share.......................... $ 17.55 $ 20.82 $ 19.02 $ 11.48 $ 15.45
============= ============== ============ ============= =============
Total shares outstanding at end of period......... 344,464 124,389 49,674 344,640 9,265
============= ============== ============ ============= =============
Cost of investments............................... $ 4,986,529 $ 2,152,288 $ 846,862 $ 4,420,181 $ 57,817
============= ============== ============ ============= =============
Foreign currency, at cost......................... $ 35,384 $ - $ - $ - $ 1,065
============= ============== ============ ============= =============
</TABLE>
See Notes to Financial Statements.
D-25
<PAGE>
ORBITEX GROUP OF FUNDS
STATEMENTS OF OPERATIONS
For the Period Ended April 30, 1998 *
<TABLE>
<CAPTION>
Strategic
Natural Info-Tech & Asian High Asian
Resources Communications Growth Yield Select Advisors
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income................................... $ 19,752 $ 2,943 $ 502 $ 122,532 $ 80
Dividend income................................... 157,738 1,726 18,839 1,283 310
Foreign taxes withheld............................ (369) (62) (7) - -
------------ ------------- ----------- ------------- -------------
TOTAL INVESTMENT INCOME........................ 177,121 4,607 19,334 123,815 390
EXPENSES
Custodian fee (Note 3)............................ 45,074 40,820 45,605 36,946 51,513
Administration fee (Note 3)....................... 43,750 43,750 43,750 43,750 43,750
Investment advisor fee (Note 3)................... 25,989 5,113 2,423 17,612 953
Professional fees................................. 24,000 24,000 24,000 24,000 24,000
Transfer agent fee................................ 14,860 15,028 14,893 14,971 14,129
Registration fees................................. 17,000 15,510 15,219 16,404 15,100
Distribution fee (Note 3)......................... 8,316 1,635 1,291 4,227 254
Printing expense.................................. 7,000 7,000 7,000 7,000 7,000
Insurance fee..................................... 2,917 2,917 2,917 2,917 2,917
Trustees' fee (Note 3)............................ 2,000 2,000 2,000 2,000 2,000
Miscellaneous expense............................. 30 28 28 2,001 58
Amortization of organizational expense (Note 2)... 1,963 1,973 1,973 1,983 1,880
Interest expense (Note 9)......................... - - - 1,924 -
------------ ------------- ----------- ------------- -------------
Total expenses before waivers,
reimbursements and custodial credits ......... 192,899 159,774 161,099 175,735 163,554
Expenses waived and reimbursed (Note 3)........... (142,005) (148,028) (154,315) (172,701) (160,290)
Fees reduced by credits allowed by the
custodian (Note 3).......................... (1,091) (1,929) (1,622) (1,110) (1,677)
------------ ------------- ----------- -------------- --------------
NET EXPENSES.................................. 49,803 9,817 5,162 1,924 1,587
------------ ------------- ----------- ------------- -------------
NET INVESTMENT INCOME (LOSS).................. 127,318 (5,210) 14,172 121,891 (1,197)
------------ ------------- ----------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments.................................... (290,842) (30,284) 41,526 (177,110) (1,212)
Foreign currency related transactions.......... (615) - - - 44
------------ ------------- ----------- ------------- -------------
Total net realized gain (loss).............. (291,457) (30,284) 41,526 (177,110) (1,168)
Net change in unrealized appreciation
(depreciation) on investment transactions...... 391,583 306,103 58,586 (14,270) (1,691)
------------ ------------- ----------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS)............................ 100,126 275,819 100,112 (191,380) (2,859)
------------ ------------- ----------- ------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................................. $ 227,444 $ 270,609 $ 114,284 $ (69,489) $ (4,056)
============ ============= =========== ============= =============
SALES CHARGE PAID TO
FUNDS DISTRIBUTOR, INC. ....................... $ 38,790 $ 47,510 $ 5,248 $ 55,389 $ 1,100
============ ============= =========== ============= =============
</TABLE>
* The commencement of investment operations was October 23, 1997 for Strategic
Natural Resources Fund, October 22, 1997 for Info-Tech & Communications Fund
and Growth Fund, October 20, 1997 for Asian High Yield Fund, and October 31,
1997 for Asian Select Advisors Fund.
See Notes to Financial Statements.
D-26
<PAGE>
ORBITEX GROUP OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended April 30, 1998 *
<TABLE>
<CAPTION>
Strategic
Natural Info-Tech & Asian High Asian
Resources Communications Growth Yield Select Advisors
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (loss)......................... $ 127,318 $ (5,210) $ 14,172 $ 121,891 $ (1,197)
Net realized gain (loss) on investments and
foreign currency related transactions............. (291,457) (30,284) 41,526 (177,110) (1,168)
Net change in unrealized appreciation
(depreciation) on investment transactions......... 391,583 306,103 58,586 (14,270) (1,691)
----------- ----------- ----------- ------------ ----------
Net increase (decrease) in net assets
resulting from operations......................... 227,444 270,609 114,284 (69,489) (4,056)
----------- ----------- ----------- ------------ ----------
Dividends and distributions to shareholders
from:
Net investment income................................ (7,147) - - (95,628) -
Distributions in excess of net realized gains........ (6,916) - - - -
----------- ----------- ----------- ------------ ----------
Total dividends and distributions to shareholders. (14,063) - - (95,628) -
----------- ----------- ----------- ------------ ----------
Fund share transactions:
Proceeds from fund shares sold....................... 10,833,321 2,171,752 756,356 5,998,122 118,977
Proceeds from reinvestment of dividends.............. 12,051 - - 21,381 -
Cost of fund shares redeemed......................... (5,380,919) (22,019) - (2,107,829) -
----------- ----------- ----------- ------------ ----------
Net increase from fund share transactions......... 5,464,453 2,149,733 756,356 3,911,674 118,977
Total increase in net assets......................... 5,677,834 2,420,342 870,640 3,746,557 114,921
----------- ----------- ----------- ------------ ----------
Net assets:
Beginning of period (Note 8)......................... 20,000 20,000 20,000 20,000 20,000
----------- ----------- ----------- ------------ ----------
End of period ....................................... $ 5,697,834 $ 2,440,342 $ 890,640 $ 3,766,557 $ 134,921
=========== =========== =========== ============ ==========
Number of fund shares:
Shares outstanding at beginning of period (Note 8)... 1,333 1,333 1,333 1,667 1,333
Shares sold.......................................... 709,678 124,204 48,341 528,380 7,932
Shares reinvested.................................... 713 - - 2,010 -
Shares redeemed...................................... (367,260) (1,148) - (187,417) -
------------ ----------- ----------- ------------ ----------
Net increase in shares outstanding................... 343,131 123,056 48,341 342,973 7,932
----------- ----------- ----------- ------------ ----------
Total shares outstanding at end of period......... 344,464 124,389 49,674 344,640 9,265
=========== =========== =========== ============ ==========
Undistributed net investment income at
end of period .................................... $ 119,210 $ - $ 13,074 $ 26,364 $ -
=========== =========== =========== ============ ==========
</TABLE>
* The commencement of investment operations was October 23, 1997 for Strategic
Natural Resources Fund, October 22, 1997 for Info-Tech & Communications Fund
and Growth Fund, October 20, 1997 for Asian High Yield Fund, and October 31,
1997 for Asian Select Advisors Fund.
See Notes to Financial Statements.
D-27
<PAGE>
ORBITEX GROUP OF FUNDS
FINANCIAL HIGHLIGHTS
For the Period Ended April 30, 1998 (a)
Selected data based on a share outstanding throughout the period indicated
<TABLE>
<CAPTION>
Strategic
Natural Info-Tech &
Resources Communications Growth Asian High
Fund Fund Fund Yield Fund
---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $ 15.00 $ 15.00 $ 15.00 $ 12.00 $ 15.00
--------- --------- --------- --------- ---------
Income (loss) from investment
operations:
Net investment income .................. 0.38 (d) 0 0.26(d) 0.45 0.00
Net realized and unrealized gain
(loss) on investments and foreign
currency related transactions .......... 1.22 4.62 2.67 (1.15) (0.44)
--------- --------- --------- --------- ---------
Total income (loss) from investment
operations ............................. (1.60) 4.62 2.93 (0.7) (0.44)
--------- --------- --------- -------- ---------
Less distributions from net investment
income ................................. (0.03) - - (0.37) -
Less distributions in excess of
capital gains .......................... (0.03) - - - -
--------- --------- --------- --------- ---------
Total distributions from net
investment income and net capital gains (0.06) - - (0.37) -
--------- --------- --------- --------- ---------
Net asset value, end of period $ 16.54 $ 19.62 $ 17.93 $ 10.93 $ 14.56
========== ========== ========== ========== =========
Total Return (b) 10.74% 30.80% 19.53% (5.71)% (2.93)
========= ========= ========= ========= =========
Ratios and Supplemental Data:
Net assets, end of period (in 000's) $ 5,698 $ 2,440 $ 891 $ 3,767 $ 135
---
Ratio of expenses to average net
assets (including interest expense) (c) 2.40% 2.40% 1.60% 0.14% 2.50%
Ratio of expenses to average net
assets (including interest expense and
custodial credits) (c) 2.45% 2.88% 2.11% 0.22% 5.14%
Ratio of expenses to average net
assets without expenses waived,
reimbursed and/or reduced by custodial
credits (c) 9.27% 39.06% 50.13% 12.47% 257.54%
Ratio of net investment income (loss)
to average net assets (c) 6.12% (d) -1.27% 4.41% 8.65% (d) (1.89)
Portfolio turnover rate 519% 76% 448% 173% 5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The commencement of investment operations was October 23, 1997 for
Strategic Natural Resources Fund, October 22, 1997 for Info-Tech &
Communications Fund and Growth Fund, October 20, 1997 for Asian High Yield
Fund, and October 31, 1997 for Asian Select Advisors Fund.
(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 Advisor, Administrator and Custodian not absorbed a
portion of the expenses, total returns would have been lower. Periods less
than one year are not annualized.
(c) Annualized for periods less than one year.
(d) Net investment income per share and the net investment income ratio would
have been lower without a certain investment strategy followed by the
Advisor during the current fiscal year.
D-28
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
1. Organization
Orbitex Group of Funds (the "Trust") was incorporated in Delaware in December
1996 and is registered under the Investment Company Act of 1940 (the "1940
Act"), as amended, as an open-end management investment company. The Trust is
comprised of five funds (collectively the "Funds" and individually the "Fund")
as follows: Strategic Natural Resources Fund, Info-Tech & Communications Fund,
Growth Fund, Asian High Yield Fund and Asian Select Advisors Fund. Each Fund
operates as a diversified investment company except Asian High Yield Fund which
operates as a non-diversified investment company. The commencement date of
operations for Strategic Natural Resources Fund, Info-Tech & Communications
Fund, Growth Fund, Asian High Yield Fund and Asian Select Advisors Fund was
October 23, 1997, October 22, 1997, October 22, 1997, October 20, 1997 and
October 31, 1997, respectively. All Funds are offered at net asset value plus a
maximum sales load of 5.75%, except for Asian High Yield Fund, which is offered
at net asset value plus a maximum sales load of 4.75%.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Security Valuation and Transactions
Equity securities are valued at the last sale price on the exchange or in the
over-thD-counter market in which such securities are primarily traded, as of the
close of business on the day the securities are being valued, or lacking any
sales, at the last available bid price. Long-term debt obligations are valued at
the mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality and type; however, when the Advisor or Sub-Advisor deems it
appropriate, prices obtained from an independent pricing service will be used.
Short term debt investments with maturities less than 60 days are valued at
amortized cost or original cost plus accrued interest, each of which
approximates fair value.
Foreign securities are valued on the basis of market quotations from the primary
market in which they are traded, and are translated from the local currency into
U.S. dollars using current exchange rates.
Securities for which current market quotations are not readily available or for
which quotations are not deemed by Orbitex Management, Inc. (the "Advisor") to
be representative of market values are valued at fair value as determined in
good faith by or under the direction of the Trustees.
Investment security transactions are accounted for as of the trade date. Cost is
determined and gains and losses are based upon the specific identification
method for both financial statement and federal income tax purposes.
Foreign Currency Translation
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
and income receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions. Purchases
and sales of securities are translated into U.S. dollars at the contractual
currency rates established at the approximate time of the trade.
Net realized gains and losses on foreign currency transactions represent net
gains and losses from currency realized between the trade and settlement dates
on securities transactions and the difference between income accrued versus
income received. The effects of changes in foreign currency exchange rates on
investments in securities are included with the net realized and unrealized gain
or loss on investment securities.
D-29
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998
Income Taxes
It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income and gains to its shareholders and therefore, no provision for
federal income tax has been made. Each Fund is treated as a separate taxpayer
for federal income tax purposes.
Investment Income
Corporate actions (including cash dividends) are recorded net of nonreclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis.
Market discount, original issue discount and premium are accreted and amortized
respectively, on a yield to maturity basis. The value of additional securities
received as interest or dividend payments is recorded at their fair value as
income and as the cost basis of such securities.
Expenses
Expenses of the Trust which are directly identifiable to a specific Fund are
allocated to that Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds.
Distributions to Shareholders
Income dividends will normally be declared and distributed quarterly for the
Asian High Yield Fund and annually for each of the other Funds. All Funds
declare and pay net realized capital gain distributions annually. The character
of income and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds, timing differences and
differing characterization of distributions made by each Fund as a whole.
Deferred Organizational Costs
Organizational expenses have been deferred and are being amortized over a period
of five years commencing with operations. The Advisor has agreed with respect to
each of the Funds that, if any of the initial shares of a Fund are redeemed
during such amortization period by the holder thereof, the redemption proceeds
will be reduced for any unamortized organization expenses in the same ratio as
the number of shares redeemed bears to the number of initial shares held at the
time of redemption. The Advisor has paid a majority of the organizational costs
of the Funds and was reimbursed by the Funds.
Repurchase Agreements
Each Fund may enter into repurchase agreements. In a repurchase agreement, a
Fund buys a security and the seller simultaneously agrees to repurchase the
security on a specified future date at an agreed-upon price. The repurchase
price reflects an agreed-upon interest rate during the time the Fund's money is
invested in the security. Because the security constitutes collateral for the
repurchase obligation, a repurchase agreement can be considered a collateralized
loan. The Fund's risk is the ability of the seller to pay the agreed-upon price
on the maturity date. If the seller is unable to make a timely repurchase, the
Fund could experience delays in the receipt of expected proceeds, suffer a loss
in principal or current interest, or incur costs in liquidating the collateral.
The Trustees have established criteria to evaluate the creditworthiness of
parties with which the Funds may enter into repurchase agreements.
D-30
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998
Structured Notes
Each Fund may invest in structured notes, whose principal amount, redemption
terms or conversion terms are related to specific securities or other indices.
The prices of structured securities have historically been subject to high
volatility and their interest or dividend rates may at times be substantially
lower than prevailing market rates.
Other
There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks may involve foreign
currency exchange rate fluctuations, adverse political and economic developments
and the imposition of unfavorable foreign governmental laws and restrictions.
There is significant potential for continuing economic and political turmoil in
the Pacific Basin and Southeast Asia, such turmoil could have a negative effect
on the share prices of the Funds; particularly the Asian High Yield Fund and the
Asian Select Advisors Fund.
The Strategic Natural Resources Fund, Info-Tech & Communications Fund and Asian
High Yield Fund may focus their investments in certain industries, subjecting
them to greater risk than funds that are more diversified.
3. Fees and Compensation Paid to Affiliates and Other Parties
Advisory Fees
Each Fund has entered into an Investment Advisory Agreement with the Advisor. As
compensation for the services rendered, facilities furnished, and expenses borne
by the Advisor, the Funds will pay the Advisor a fee accrued daily and paid
monthly, at the annualized rate of 1.25% for the Strategic Natural Resources
Fund, 1.25% for the Info-Tech & Communications Fund, 0.75% for the Growth Fund,
1.25% for the Asian High Yield Fund, and 1.50% for the Asian Select Advisors
Fund. The Advisory Agreement also provides that the Advisor may retain
Sub-Advisers at the Advisor's own cost and expense, for the purpose of managing
the investment of the assets of one or more Funds of the Trust.
The Advisor has agreed to waive or limit its fees and to pay certain operating
expenses to the extent necessary to limit total fund operating expenses, net of
waivers and custodial credits, to an annualized rate of 2.40%, 2.40%, 1.60%,
2.00%, and 2.50% for the Strategic Natural Resources Fund, Info-Tech &
Communications Fund, Growth Fund, Asian High Yield Fund and Asian Select
Advisors Fund, respectively, subject to possible reimbursement by the Asian High
Yield Fund in future years if such reimbursement can be achieved within the
foregoing expense limit. The Advisor has agreed to waive or limit its fees and
to pay all operating expenses, not including interest expense but including fee
waivers and custodial credits, of the Asian High Yield Fund for the first 150
days of the Fund's operation and in 60 day intervals thereafter. The waivers for
the advisor's fee for the period ended April 30, 1998 amounted to $25,989,
$5,113, $2,423, $17,612 and $953 for Strategic Natural Resources Fund, Info-Tech
& Communications Fund, Growth Fund, Asian High Yield Fund and Asian Select
Advisors Fund, respectively. The reimbursements for the period ended April
30,1998 amounted to $55,295, $74,137, $80,890, $96,111 and $82,263 for Strategic
Natural Resources Fund, Info-Tech & Communications Fund, Growth Fund, Asian High
Yield Fund and Asian Select Advisors Fund, respectively.
Sub-Advisory Fees
Asian High Yield Fund and Asian Select Advisors Fund both have Sub-Advisory
relationships. Pursuant to separate Sub-Advisory Agreements among each
Sub-Advisor, the Advisor and the Trust, each Sub-Advisor is responsible for the
selection and management of portfolio investments for a Fund, or for its segment
of a particular Fund, in accordance with the Fund's investment objective and
policies and under the supervision of the Advisor.
D-31
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
On a monthly basis, each Sub-Advisor receives a sub-advisory fee, paid by the
Advisor, based on the applicable Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Asia Strategic J.P. Morgan
Bankers Trust Company Investment Investment
Management Limited Management, Inc.
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asian High Yield - - 0.50% on the first $50
Fund million average daily net
assets of the Fund; 0.45%
on the next $50 million
average daily net assets
of the Fund; and 0.40% on
the average daily net
assets over $100 million
of the Fund
- --------------------------------------------------------------------------------------------------
Asian Select 0.70% of the average 0.50% of the average -
Advisors Fund daily net assets of daily net assets of
the Fund advised by the Fund advised by
Bankers Trust Asia Strategic
Company. Investment
Management Limited
- --------------------------------------------------------------------------------------------------
</TABLE>
Administration Fees
State Street Bank and Trust Company ("State Street") serves as the Administrator
of the Trust. For providing administrative services to the Funds, State Street
will receive from each Fund, a monthly fee at an annual rate of 0.10% of the
first $100 million of each Fund's average daily net assets, plus 0.08% of the
next $100 million of each Fund's average daily net assets, plus 0.06% of each
Fund's average daily net assets in excess of $200 million, subject to certain
minimum requirements. State Street agreed to waive certain fees for the period
ended April 30, 1998 which amounted to $40,014, $41,403, $41,412, $40,544, and
$41,610 for Strategic Natural Resources Fund, Info-Tech & Communications Fund,
Growth Fund, Asian High Yield Fund and Asian Select Advisors Fund, respectively.
Custodian Fees
State Street serves as the Trust's custodian, including holding all portfolio
securities and cash assets of the Trust and providing accounting services
including daily valuation of the shares of each Fund, for which it receives an
annual custody and accounting fee. State Street agreed to waive certain fees for
the period ended April 30, 1998 which amounted to $20,707, $27,375, $29,590,
$18,434 and $35,464 for Strategic Natural Resources Fund, Info-Tech &
Communications Fund, Growth Fund, Asian High Yield Fund and Asian Select
Advisors Fund, respectively.
Distributor
Funds Distributor, Inc. (the "Distributor") serves as the distributor of the
shares of each Fund pursuant to a Distribution Plan and Agreement, pursuant to
Rule 12b-1 under the 1940 Act, between the Distributor and the Trust. The Rule
12b-1 Plan and Agreement provides for payment of a fee to the Distributor at an
annualized rate of 0.30% of the average daily net assets of the Asian High Yield
Fund and 0.40% of the average daily net assets of each of the other Funds.
Trustees Fees
The Funds pay no compensation to their Trustees who are employees of the Advisor
or Sub-Advisors. Trustees who are not Advisor or Sub-Advisor employees receive
an annual fee of $5,000.
D-32
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998
4. Aggregate Unrealized Appreciation and Depreciation
The identified cost of investments in securities owned by each Fund for federal
income tax purposes and their respective gross unrealized appreciation and
depreciation at April 30, 1998, were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Identified Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Natural Resources Fund............. $ 5,014,480 $ 429,886 $ 66,254 $ 363,632
Info-Tech & Communications Fund.............. 2,152,288 329,395 23,292 306,103
Growth Fund.................................. 847,500 77,002 19,054 57,948
Asian High Yield Fund........................ 4,420,181 42,108 56,378 (14,270)
Asian Select Advisors Fund................... 57,817 2,219 3,910 (1,691)
</TABLE>
5. Investment Transactions
The cost of purchases and the proceeds from sales of investments, other than
U.S. Government obligations and short-term securities, for the period ended
April 30, 1998, were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
Strategic Natural Resources Fund........ $ 22,061,773 $ 16,965,402
Info-Tech & Communications Fund......... 1,950,955 474,383
Growth Fund............................. 3,178,134 2,372,798
Asian High Yield Fund................... 6,461,606 2,333,508
Asian Select Advisors Fund.............. 61,126 2,097
Purchases and sales of U.S. Government obligations aggregated $2,105,657 and
$1,997,957, respectively, for the Asian High Yield Fund.
6. Beneficial Interest
The following schedule shows the number of shareholders each owning 5% or more
of a Fund and the total percentage of the Fund held by such shareholders:
5% or Greater Shareholders
--------------------------------
Number % of Fund Held
- --------------------------------------------------------------------------------
Strategic Natural Resources Fund......... 2 48%
Info-Tech & Communications Fund.......... 1 36%
Growth Fund.............................. 4 87%
Asian High Yield Fund.................... 4 70%
Asian Select Advisors Fund............... 3 93%
The following schedule shows the number of affiliates each owning 5% or more of
a Fund and the total percentage of the Fund held by such affiliates:
5% or Greater Affiliates
-----------------------------------------
Fund Name % of Fund Held
- --------------------------------------------------------------------------------
Growth Fund................... James Nelson 6%
Asian Select Advisors Fund.... Konrad Krill 72%
Asian Select Advisors Fund.... Orbitex Management Inc. 14%
D-33
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998
7. Capital Loss Carryforward
At April 30, 1998, the Info-Tech Communications Fund had available for federal
income tax purposes unused capital losses of $30,284, expiring in the Year 2006.
Under current tax law, capital losses realized after October 31, may be deferred
and treated as occurring on the first day of the following fiscal year. For the
fiscal year ended April 30, 1998, the following Funds have elected to defer
losses occurring between November 1, 1997 and April 30, 1998 under these rules,
as follows:
Capital Currency
Losses Losses
Name of Fund Deferred Deferred
------------ -------- --------
Strategic Natural Resources Fund........ $269,461 $706
Asian High Yield Fund................... 177,282 -
Asian Select Advisors Fund.............. 1,212 -
Such deferred losses will be treated as arising on the first day of the fiscal
year ending April 30, 1999.
8. Initial Capitalization and Offering of Shares
During the period from May 29, 1997 to the commencement of investment operations
for each of the Funds, each Fund had no operations other than those related to
organizational matters, including the initial capital contribution of $20,000
for each Fund and the issuance of 1,333 shares for each of the Funds, with the
exception of the Asian High Yield Fund which issued 1,667 shares. There were no
additional transactions until commencement of investment operations for each of
the Funds.
9. Line of Credit
The Trust participates in a $10 million line of credit provided by Deutsche Bank
AG, New York Branch (the "Bank") under a Credit Agreement (the "Agreement")
dated February 17, 1998. Under the Agreement, each Fund as a separate and
distinct borrower may borrow up to a designated base commitment allocation
specified in the Agreement, plus its pro rata portion of any unused commitment
allocation of the other borrowers under the agreement. Interest is payable in
respect to the unpaid principal amount depending on the type of loan designated
by the borrower. The Funds are charged an annualized commitment fee computed at
a rate equal to 0.10 of 1% on a annual basis of the daily average unutilized
credit balance. The Agreement requires, among other provisions, that the
aggregate outstanding principal amount of the loans made to each borrower under
the Agreement shall not exceed the lesser of (i) 33 1/3% of the value of the
total assets of the borrower less all liabilities and indebtedness not
represented by senior securities; and (ii) any borrower limitations described
for such borrowers in the Trust's prospectus.
During the fiscal year ending April 30, 1998, only the Asian High Yield Fund had
borrowings under the Agreement. The Asian High Yield Fund entered into a NIBOR
based loan agreement on April 16, 1998 in the amount of $750,000, with an
interest rate of 6.15625% (NIBOR rate plus 50 basis points). The expiration date
of the loan is May 15, 1998.
D-34
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998
10. Subsequent Events (Unaudited)
At the May 27, 1998 Board Meeting, the Trustees voted to accept the resignation
of J.P. Morgan Investment Management, Inc. as the Sub-Advisor on the Asian High
Yield Fund, which will be effective July 1998. The Fund will be managed by its
current investment advisor, Orbitex Management Inc.
Additionally, the Trustees have approved, by unanimous vote, the addition of a
new fund to the series, Orbitex West Coast Fund, and the addition of two new
classes of shares. Class I shares will be an institutional class of shares
offered to qualified institutions and certain feD-based investment and financial
advisors. Class I shares will be offered at net asset value and subject to a
shareholder servicing fee at an annual rate of 0.25% of the average daily net
asset value of the Class I shares beneficially owned by the clients receiving
the service. Class B shares will also be offered at net asset value, without any
initial sales charge. However, there will be a contingent deferred sales charge
on Class B shares which are sold within six years of their purchase date. Class
B shares will also be subject to a distribution fee of 0.75% of the average
daily net assets attributable to Class B shares of the Fund.
D-35
Report of Independent Accountants
To the Trustees and Shareholders of Orbitex Group of Funds,
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the five funds (each a
"Fund") comprising Orbitex Group of Funds (the "Trust") at April 30, 1998, and
the results of each Fund's operations, the changes in each Fund's net assets and
the financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 1998 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmation from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 12, 1998
D-36
<PAGE>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUND
Managed by Orbitex Management Inc.
Performance Review: The period April 30, 1998 to October 31, 1998 has been a
very challenging period for most investors, including natural resource
investors. During the period the Orbitex Strategic Natural Resources Fund Class
A Shares had a total return of (23.46)%, compared to (0.41)% for the S&P 500
Index and (24.42)% for the Lipper Natural Resources Fund Category; however,
since inception (October 23, 1997) to October 31, 1998, the Class A Shares'
performance is (15.24)% compared to 17.42% for the S&P 500 Index and (30.52)%
for the Lipper Natural Resources Fund Category. The Class B Shares' performance
is 3.44% for the period September 21, 1998 (inception) to October 31, 1998. The
Fund seeks to achieve its objective through a flexible policy of investing
primarily in common stocks of companies engaged in natural resource industries
and industries supportive to natural resource industries.
Concerns over global growth, especially from the Pacific Rim and other emerging
countries is prolonging the weakness in commodity prices. Crude oil prices
continue to trade near record low levels despite the Organization of Petroleum
Exporting Countries' ("OPEC") agreement to cut production twice in the past six
months. Additionally, many natural gas and integrated oil companies have cut
back on exploration and production expenditures, negatively impacting the Fund's
holdings in oil service companies like Diamond Offshore Drilling, Petroleum GEO
Services ADR, and Schlumberger Ltd. Seasonally, November through April is a
strong demand period for some natural resources including oil, natural gas,
gold, and copper. Weather experts recently announced that La Nina is here which
may cause a cold winter, thus potentially increasing prices in heating oil and
natural gas. We believe that as a result of the recent decline in oil revenue by
OPEC countries there is tremendous pressure to increase oil prices. The gold and
other precious metals markets should stabilize as we enter the traditionally
strong demand period driven by Christmas buying, the wedding season in India and
the launch of the Chinese new year. The Fund is positioned in Barrick Gold and
Newmont Mining which we believe will benefit from improved precious metals
performance.
During the period, the depressed valuations led to an increase in corporate
stock buybacks and merger and acquisition activity. The Fund continues to place
above average emphasis on large capitalization, defensive, cash rich and cost
cutting securities within the natural resource sector. Despite the difficult
environment, noteworthy company performance spanned a diverse group of sectors.
The Fund benefited from its positions in Exxon Corporation, Stillwater Mining,
Dupont and Fort James. Despite the strong fundamentals in the natural gas
industry, Comstock Resources, EEX Corporation and Nuevo Energy were
disappointing performers.
Outlook: We see an improving environment for the natural resources sector toward
the end of 1998 and into 1999 as oversupplied inventory levels improve (due to
less supply). Production for some of these commodities is slowing or stopping
due to the prolonged weakness in commodity prices. The cure for low commodity
prices is that low commodity prices tend to generate demand. Additionally, the
weaker United States dollar and lower global interest rates should stabilize
growth and put more liquidity into the system; thereby increasing demand for
natural resources. We are extremely positive on the longer term outlook for the
natural resource markets. These companies have rarely, if ever, sold at such low
valuations.
We appreciate your investment in the Orbitex Strategic Natural Resources Fund.
D-37
<PAGE>
Performance Review: During the period from April 30, 1998 to October 31, 1998,
the Info-Tech & Communications Fund Class A Shares had a total return of
(0.71)%, which compares with a total return of (0.41)%, for the S&P 500 Index
and (5.12)% for the Lipper Science & Technology Index; however, since inception
(October 22,1997) to October 31, 1998, the Class A Shares' performance is 29.87%
compared to 17.42% for the S&P 500 Index and 3.33% for the Lipper Science &
Technology Category. The Class B Shares' performance is 6.69% for the period
September 16, 1998 (inception) to October 31, 1998. The Fund seeks to achieve
superior long-term capital growth through selective investment in companies
engaged in the communications, information and related technology industries.
This six-month period for the Fund was an extremely challenging and volatile
period in the stock market. The Fund showed strong relative strength against the
major indexes and its peer group from May through July, posting a peek
performance in mid-July for a year-to-date return of 54% (January 1, 1998,
through July 21, 1998). With the prospect of rising turmoil throughout the
emerging markets, the Fund moved into more conservative holdings consisting of
both domestic and international traditional telecommunications services
companies with a supporting dividend yield. However, few securities in the
market were unaffected by the Russian devaluation of the Ruble, leading stocks
lower in the period of August through the first week of October. At its low
point, the Fund declined to a year-to-date gain of 20%. The Fund repositioned
into more aggressive, attractively valued, smaller capitalization technology
stocks during the ruble crisis that increased performance in the market rally
that ensued in the latter half of October.
Some of the top performing investments for the Fund during the six-month period
included stocks in the semiconductor, software, internet, networking and
telecommunications services sectors. In the semiconductor arena, the Fund
focused on very specialized companies that design communications related
semiconductors, such as PMC Sierra and its data networking chips, Maxim with its
consumer electronics analog chips and Texas Instruments with its digital signal
processor chips (DSP's) used in cellular telephones. In the software arena, the
Fund was particularly successful with its investment in Saville Systems, a
leading vendor of telecommunications billing software. In networking,
investments in Cisco, Northern Telecom, Uniphase, Ascend, FORE and a host of
others, have played a key role in the Fund's performance since the beginning of
the year. In the telecommunications services arena, WorldCom continues to be one
of the Fund's top holdings. With the completion of the MCI merger, WorldCom's
unique, global telecommunications market position continues to be recognized by
the marketplace. Lastly, the internet has played a significant role in the
Fund's performance with investments in Inktomi, D-Bay, DoubleClick, Broadcast
Communications and Ozemail.
The Fund experienced weak performance from its holdings of international
telecommunications stocks. The Fund's investments in Telebras, Portugal Telecom,
Telecom ltalia and Deutsche Telecom, intended to provide downside support, had a
negative impact on the Fund and have been eliminated. Additionally, the Fund's
investments in wireless services stocks Omnipoint and Powertel were a
disappointment. The Fund, however, continues to view these wireless services
stocks as central opportunities in the burgeoning world of wireless phone
service and continues to maintain these investments.
Outlook: While it seems paradoxical to some, technology, driven by the emerging
communications boom occurring on a world-wide basis, has proven to be the flight
to safety sector during the period. A flight to safety implies a degree of
predictability. The communications industry is in its infancy. The emergence of
the strong consumer demand for internet services, corporate demand for
increasing network bandwidth and speed, and the deregulation of the world
telecommunications service providers are bringing new levels of growth and
opportunity for many of today's leading technology companies. It is these growth
opportunities that the Fund continues to focus on going forward. As new,
statD-of-thD-art networks are established around the world, the long-term
outlook for semiconductors, software, networking and the internet continues to
be extremely compelling. This exciting and complex era of technology securities
continues to capture investor's attention and offers many growth prospects.
We appreciate your investment in the Orbitex Info-Tech & Communications Fund.
D-38
<PAGE>
Performance Review: For the period April 30, 1998 to October 31, 1998, the
Orbitex Growth Fund had a total return of (7.08)% versus (0.41)% for the S&P 500
Index and (6.84)% for the Lipper Growth Fund Category; however, since inception
(October 22, 1997) to October 31, 1998, the Class A Shares' performance is
11.07% compared to 17.42% for the S&P 500 Index and 5.39% for the Lipper Growth
Fund Category. The Class B Shares' performance is 1.15% for the period September
16, 1998 (inception) to October 31, 1998. The Fund seeks to achieve its
objective of long-term growth of capital through investments in securities that
have the potential for significant appreciation.
The mood among investors has shifted significantly since reaching lows on August
31, 1998 and everyone is hoping the value created by this market downturn will
last through year-end. Despite the ongoing concerns in emerging Asian and
Japanese Markets, plus the liquidity concerns with hedge funds, the market
sentiment has turned very bullish as equity prices continue to melt-up. United
States gross domestic product remains stronger than originally expected and the
Federal Reserve has provided liquidity with three interest rate decreases. Also,
the market breadth has broadened and is no longer concentrated in the top growth
stocks. We believe this market breadth is a bullish sign for the general market.
The Fund benefited from concentrated weightings in the pharmaceutical,
financial, and technology areas while underweighting the energy and basic
industry sectors. Notable performers for the period include Schering Plough,
Mellon Bank, Gateway 2000 and General Electric. Disappointing performance for
the period included Atlantic Richfield and FPL Group.
Portfolio Composition: The Fund's sector and stock weighting are a result of
bottom-up stock picking across all capitalizations. The Fund continues to have a
fairly standard approach to record high valuations achieved in the market by a
number of companies in the internet sector. On October 31, 1998, the Fund had a
12% cash position, a material but temporary cash position.
Outlook: We expect the financial markets to remain volatile in the near term as
the markets struggle between lower global interest rates and earnings growth for
1999. Inflation continues to be low and we see no reason for inflation to be a
concern over the near term. Commodity prices remain depressed and there is
little, if any, pricing power. During this environment, the Fund will continue
to seek out quality, valuD-oriented growth stocks.
We appreciate your investment in the Orbitex Growth Fund.
D-39
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
STRATEGIC NATURAL RESOURCES FUND
SCHEDULE OF INVESTMENTS
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
COMMON STOCKS - 92.87%
Aluminum - 1.75%
Alcan Aluminum, Ltd.............................................. 2,500 $ 63,281
-------------
Building Construction - 1.73%
J. Ray McDermott SA (a).......................................... 2,000 62,750
-------------
Chemicals - 3.71%
Crompton & Knowles Corp.......................................... 3,000 48,188
Du Pont (E.I.) de Nemours and Co. ............................... 1,500 86,250
-------------
134,438
Electric Utilities - 5.83%
FPL Group, Inc. ................................................. 1,500 93,844
PG&E Corp. ...................................................... 1,750 53,265
Unicom Corp. .................................................... 1,700 64,069
-------------
211,178
Gas Exploration - 2.99%
Anderson Exploration, Ltd. (a) .................................. 2,500 25,437
Oryx Energy Co. (a) ............................................. 2,500 35,000
Seagull Energy Corp. (a) ........................................ 4,000 47,750
--------------
108,187
Gas & Pipeline Utilities - 1.03%
K N Energy, Inc. ................................................ 750 37,266
-------------
International Oil - 15.76%
Chevron Corp. ................................................... 1,000 81,500
Conoco, Inc., Class A (a) ....................................... 3,500 87,062
Mobil Corp. ..................................................... 1,000 75,688
Ranger Oil, Ltd. (a) ............................................ 10,000 63,750
Royal Dutch Petroleum Co., NY Shares............................. 2,400 118,200
Texaco, Inc. .................................................... 1,200 71,175
USX-Marathon Group .............................................. 2,250 73,547
-------------
570,922
Life Sciences - 1.63%
Monsanto Co. .................................................... 1,450 58,906
-------------
Mining - 11.08%
Aber Resources, Ltd. (a) ........................................ 3,000 16,818
Apex Silver Mines, Ltd. (a) ..................................... 4,500 41,063
Barrick Gold Corp. .............................................. 2,500 53,437
Freeport-McMoRan Copper & Gold, Inc., Class A ................... 3,500 41,781
Getchell Gold Corp. (a) ......................................... 3,000 52,500
Newmont Mining Corp. ............................................ 3,500 74,375
Normandy Mining, Ltd. ........................................... 20,000 17,888
Phelps Dodge Corp. .............................................. 1,000 57,625
Stillwater Mining Co. (a) ....................................... 1,000 32,375
Viceroy Resource Corp. (a) ...................................... 6,500 13,480
401,342
-------------
See Notes to Financial Statements.
</TABLE>
D-40
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
- ---------------------------------------------------------------------------------------------------------------------
STRATEGIC NATURAL RESOURCES FUND
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
Oil - 12.26%
Atlantic Richfield Co. .......................................... 1,250 $ 86,094
Canadian 88 Energy Corp. (a) .................................... 7,000 24,951
Exxon Corp. ..................................................... 2,500 178,125
Pennzoil Co. .................................................... 1,000 35,875
Sun Company, Inc. ............................................... 1,000 34,312
Unocal Corp. .................................................... 2,500 84,844
444,201
-------------
Oil & Gas Drilling - 0.85%
Diamond Offshore Drilling, Inc................................... 1,000 30,688
-------------
Oil & Gas Exploration And Production - 21.72%
Anadarko Petroleum Corp.......................................... 2,000 67,750
Baytex Energy, Ltd., Class A (a)................................. 5,000 16,850
Benz Energy, Ltd. (a)............................................ 25,000 11,342
Bonavista Petroleum Ltd. (a)..................................... 2,500 11,909
Burlington Resources, Inc........................................ 2,750 113,266
Canadian Natural Resources, Ltd. (a) ............................ 2,000 34,997
Comstock Resources, Inc. (a) .................................... 6,000 29,625
EEX Corp. (a) ................................................... 10,000 38,750
Enron Corp. ..................................................... 2,000 105,500
Global Industries, Inc. (a) ..................................... 3,500 33,687
Gulf Canada Resources, Ltd. ..................................... 10,000 37,500
Kerr-Mcgee Corp. ................................................ 1,200 47,850
Nuevo Energy Co. (a) ............................................ 2,500 52,969
Pacalta Resources, Ltd. (a) ..................................... 4,000 13,739
Probe Exploration, Inc. (a) ..................................... 10,000 16,202
Sharpe Resources Corp. (a) ...................................... 30,000 13,027
Snyder Oil Corp. ................................................ 3,000 47,812
Suncor Energy Inc. .............................................. 500 15,878
Ultra Petroleum Corp. (a) ....................................... 5,000 6,092
Vastar Resources, Inc. .......................................... 1,500 71,719
-------------
86,464
Oil Field Service - 4.34%
BJ Services Co. (a).............................................. 2,000 40,875
Petroleum Geo-Services, ADR (a) ................................. 1,000 21,375
Schlumberger Ltd. ............................................... 1,000 52,500
Tidewater, Inc. ................................................. 1,500 42,468
-------------
157, 218
Paper & Related Products - 4.30%
Champion International Corp. .................................... 1,500 47,906
Fort James Corp. ................................................ 1,500 60,469
Mead Corp. ...................................................... 1,500 47,437
-------------
155,812
-------------
</TABLE>
See Notes to Financial Statements.
D-41
<PAGE>
ORBITEX GROUP OF FUNDS
INFO-TECH & COMMUNICATIONS FUND
SCHEDULE OF INVESTMENTS
October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
Petroleum Services - 2.69%
Phillips Petroleum Co. .......................................... 1,500 64,875
Varco International, Inc. (a) ................................... 3,000 32,438
--------------
97,313
--------------
Retail - 1.20%
- ------------------------------------------------------------------------- 1,000 43,500
--------------
Home Depot, Inc. ................................................
TOTAL COMMON STOCKS - (Cost $3,471,272) 3,363,466
--------------
SHORT TERM INVESTMENT (Cost $441,000)- 12.18% Principal
TIME DEPOSIT - 12.18% Amount
------
State Street Bank and Trust Co.,
4.750%, 11/2/1998 .................................................... $ 441,000 441,000
--------------
TOTAL INVESTMENTS (Cost $3,912,272) - 105.05% 3,804,466
OTHER ASSETS AND LIABILITIES - (5.05)% (182,735)
-------
NET ASSETS - 100.00% $ 3,621,731
- -------------------------------------------------------------------------- ================
</TABLE>
(a) Denotes non-income producing security
ADR - American Depository Receipt
See Notes to Financial Statements.
D-42
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
INFO-TECH & COMMUNICATIONS FUND
SCHEDULE OF INVESTMENTS
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
COMMON STOCKS - 70.19%
Advertising - 2.97%
DoubleClick, Inc. (a) ........................................... 11,600 $ 382,800
---------------
Broadcasting - 1.16%
Broadcast Communications PLC (a) ................................ 3,000 149,625
---------------
Computers & Business Equipment - 8.23%
Apple Computer, Inc. (a) ........................................ 5,000 185,625
Compaq Computer Corp. ........................................... 8,000 253,000
Gateway 2000, Inc. (a) .......................................... 7,000 390,688
Sun Microsystems, Inc. (a) ...................................... 4,000 233,000
---------------
1,062,313
Electronics - 9.82%
Maxim Integrated Products, Inc. (a) ............................. 5,000 178,438
Micron Technology, Inc. (a) ..................................... 5,000 190,000
PMD-Sierra, Inc. (a) ............................................ 11,500 516,062
Texas Instruments, Inc. ......................................... 6,000 383,625
---------------
1,268,125
Networking Products - 7.26%
Cisco Systems, Inc. (a) ......................................... 5,000 315,000
FORE Systems, Inc. (a) .......................................... 22,500 351,563
Newbridge Networks Corp. (a) .................................... 13,200 270,600
---------------
937,163
Software - 4.98%
Concentric Network Corp. (a) .................................... 8,000 194,000
Evolving Systems, Inc. (a) ...................................... 34,500 58,219
Ozemail, Ltd., ADR .............................................. 39,500 390,062
---------------
642,281
Telecommunications Services - 20.44%
GST Telecommunications, Inc. (a) ................................ 22,600 156,787
ICG Communications, Inc. (a) .................................... 30,000 620,625
Metronet Communications Corp., Class B (a) ...................... 2,000 46,000
Northern Telecom, Ltd. .......................................... 14,300 612,219
Omnipoint Corp. (a) ............................................. 75,200 695,600
Saville Systems PLC, ADR (a)..................................... 30,000 506,250
---------------
2,637,481
Telephone - 15.33%
ALLTEL Corp. .................................................... 9,400 440,037
AT&T Corp. ...................................................... 3,500 217,875
Intermedia Communications, Inc. (a) ............................. 28,000 518,000
MCI WorldCom, Inc. (a) .......................................... 10,331 570,788
Powertel, Inc. (a) .............................................. 15,600 232,050
---------------
1,978,750
---------------
TOTAL COMMON STOCKS - (Cost $8,602,410) 9,058,538
---------------
</TABLE>
See Notes to Financial Statements.
D-43
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
INFO-TECH & COMMUNICATIONS FUND
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998 (Unaudited)
Principal Market
Amount Value
<S> <C> <C>
SHORT TERM INVESTMENTS (Cost $3,106,000)- 24.06%
COMMERCIAL PAPER - 24.06% Prudential Funding Corp.
5.750%, 11/2/1998 $ 3,106,000 $ 3,106,000
-----------------
TOTAL INVESTMENTS (Cost $11,708,410) - 94.25% 12,164,538
OTHER ASSETS AND LIABILITIES- 5.75% $ 741.514
-----------------
NET ASSETS - 100.00% $ 12,906,052
=================
</TABLE>
(a) Denotes non-income producing security
ADR - American Depository Receipt
See Notes to Financial Statements.
D-44
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
COMMON STOCKS - 88.29%
Banks - 6.94%......................................................... 850 23,322
Charter One Financial, Inc. ..................................... 500 30,062
Mellon Bank Corp. ............................................... 550 20,866
Summit Bancorp. ................................................. 74,250
Broadcasting - 1.92% 450 ---------------
20,503
Clear Channel Communications, Inc. (a) ..........................
Computers & Business Equipment - 7.46% 500 21,875
Equant NV, NY Shares (a)......................................... 500 27,906
Gateway 2000, Inc. (a) .......................................... 500 30,094
Hewlett-Packard Co. ............................................. 79,875
Consumer Products - 1.55% 500 ---------------
16,531
Fortune Brands, Inc. ............................................
Cosmetics & Toiletries - 2.52% 600 ---------------
26,962
Gillette Co. ....................................................
Diversified - 2.01% 10 ---------------
21,480
Berkshire Hathaway, Inc., Class B (a)............................
Drugs & Health Care - 12.58% 400 19,500
American Home Products Corp. .................................... 300 30,862
Schering-Plough Corp. ........................................... 900 25,144
Tenet Healthcare Corp. (a) ...................................... 400 31,350
Warner-Lambert Co. .............................................. 500 ---------------
27,813
Watson Pharmaceuticals, Inc. (a) ................................ ---------------
134,669
Electrical Equipment - 2.25% 275 ---------------
24,063
General Electric Co. ............................................
Electric Utilities - 5.39% 500 31,281
FPL Group, Inc. ................................................. 700 ---------------
26,381
Unicom Corp. .................................................... ---------------
57,662
Financial Services - 1.37% 400 ---------------
14,625
Household International, Inc. ...................................
Food & Beverages - 2.37% 750 ---------------
25,313
PepsiCo, Inc. ...................................................
Insurance - 6.63% 800 35,750
American Bankers Insurance Group, Inc. .......................... 500 ---------------
35,250
SunAmerica, Inc. ................................................ ---------------
71,000
</TABLE>
See Notes to Financial Statements.
D-44
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------- ---------------------- --------------------
Shares Market
Value
- -------------------------------------------------------------------------- ---------------------- --------------------
<S> <C> <C>
Mining - 1.51%
Stillwater Mining Co. (a)........................................ 500 $ 16,188
--------------
Networking Products - 2.35%
Cisco Systems, Inc. (a).......................................... 400 25,200
--------------
Oil - 3.99%
Atlantic Richfield Co............................................ 300 20,663
Unocal Corp...................................................... 650 22,059
--------------
42,722
Oil & Gas Exploration And Production - 2.69%
Burlington Resources, Inc. ...................................... 700 28,831
--------------
Oil Field Service - 5.82%
BJ Services Co. (a) ............................................. 1,000 20,437
BJ's Wholesale Club, Inc. (a) ................................... 800 28,750
Schlumberger Ltd. ............................................... 250 13,125
--------------
62,312
Photography - 2.17%
Eastman Kodak Co. ............................................... 300 23,250
--------------
Retail - 2.03%
Home Depot, Inc. ................................................ 500 21,750
--------------
Retail Trade - 2.60%
Rite Aid Corp. .................................................. 700 27,781
--------------
Software - 3.49%
Electronic Arts, Inc. (a) ....................................... 550 22,619
Oracle Corp. (a) ................................................ 500 14,781
--------------
37,400
Telephone - 6.26%
AT&T Corp. ...................................................... 350 21,788
MCI WorldCom, Inc. (a) .......................................... 400 22,100
SBC Communications, Inc. ........................................ 500 23,156
--------------
67,044
Tobacco - 2.39%
Philip Morris Companies, Inc. ................................... 500 25,563
--------------
TOTAL COMMON STOCKS - (Cost $886,119) 944,974
TOTAL INVESTMENTS (Cost $886,119) - 88.29% 944,974
OTHER ASSETS AND LIABILITIES- 11.71% 125,297
-------------
NET ASSETS - 100.00% 1,070,271
=============
(a) Denotes non-income producing security
</TABLE>
See Notes to Financial Statements.
D-45
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
ASIA HIGH YIELD FUND
SCHEDULE OF INVESTMENTS
October 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Shares Market
Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENT (Cost $903,000) - 92.40%
United States - 92.40%
Time Deposit - 92.40%
State Street Bank and Trust Co.,
4.750% due 11/2/1998 ......................................... $ 903,000 $ 903,000
-----------
TOTAL INVESTMENTS (Cost $903,000) - 92.40% 903,000
OTHER ASSETS AND LIABILITIES- 7.60% 74, 299
-----------
NET ASSETS - 100.00% $ 977, 299
===========
</TABLE>
See Notes to Financial Statements.
D-46
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998 (Unaudited)
Strategic
Natural Info-Tech & Asian High
Resources Communications Growth Yield
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note 2) $ 3,363,466 $ 9,058,538 $ 944,974 $ --
Short term investments (Note 2)............ 441,000 3,106,000 -- 903,000
----------------------------------------------------------------
Total investments........................ 3,804,466 12,164,538 944,974 903,000
Cash....................................... -- 4,898 46,066 921
Foreign currency, at value (cost $ 131).... 131 -- -- --
Unrealized gain on forward currency contracts 446 -- -- --
Receivable for securities sold............. 133,130 476,735 95,306 238
Interest and Dividends receivable......... 2,386 2,164 605 --
Receivable for fund shares sold............ 3,500 304,952 -- 15,000
Receivable due from advisor (Note 3)....... 92,141 50,793 117,675 127,422
Deferred organizational expenses (Note 2).. 15,127 15,124 15,124 15,124
Other assets............................... 7,785 8,525 6,017 8,563
----------------------------------------------------------------
TOTAL ASSETS........................... 4,059,112 13,027,729 1,225,767 1,070,268
LIABILITIES
Payable to custodian....................... 3,512 -- -- --
Unrealized loss on forward currency contracts 2,606 -- -- --
Payable for securities purchased........... 321,219 -- 69,868 --
Payable for fund shares redeemed........... 22,362 32,189 -- --
Payable for trustee fees (Note 3).......... 1,586 1,578 1,578 1,564
Payable for organizational expenses (Note 2) 4,589 4,589 4,589 4,589
Accrued expenses and other liabilities..... 81,507 83,321 79,461 86,816
------------------------------------------------------------------
TOTAL LIABILITIES...................... 437,381 121,677 155,496 92,969
------------------------------------------------------------------
NET ASSETS............................. $ 3,621,731 $ 12,906,052 $ 1,070,271 $ 977,299
==============---===============---==============---============
NET ASSETS
Paid-in capital............................ $ 4,468,122 $ 12,544,475 $ 998,643 $ 2,045,301
Undistributed net investment income (loss). 117,953 (20,052) 10,942 2,780
Accumulated net realized gain (loss) on
investments and foreign currency transactions (854,378) (74,559) 1,831 (1,070,782)
Net unrealized appreciation (depreciation) on
investments and foreign currency translations (109,966) 456,188 58,855 --
----------------------------------------------------------------
NET ASSETS............................. $ 3,621,731 $ 12,906,052 $ 1,070,271 $ 977,299
============== =============== ============== ============
CLASS A SHARES:
Net assets.................................... $ 3,621,421 $ 12,060,477 $ 1,054,665 $ 977,001
============== =============== ============== ============
Net asset value per share (based on shares of
beneficial interest outstanding, par value
$.01 per share)............................ $ 12.66 $ 19.49 $ 16.66 $ 7.9
============== =============== ============== ============
Offering price per share...................... $ 13.43 $ 20.68 $ 17.68 $ 8.3
============== =============== ============== ============
Total shares outstanding at end of period..... $ 286,146 $ 618,800 $ 63,312 $ 122,525
============== =============== ============== ============
CLASS B SHARES:
Net assets.................................... $ 310 $ 845,575 $ 15,606 $ 298
============== =============== ============== ============
Net asset value and offering price per share
(based on shares of beneficial interest
outstanding, par value$.01 per share)...... $ 12.61 $ 19.46 $ 16.66 $ 7.96
============== =============== ============== ============
Total shares outstanding at end of period..... 25 43,441 937 37
============== =============== ============== ============
Investments, at cost.......................... $ 3,912,272 $ 11,708,410 $ 886,119 $ 903,000
============== =============== ============== ============
</TABLE>
See Notes to Financial Statements.
D-47
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
STATEMENTS OF OPERATIONS
October 31, 1998 (Unaudited)
For the Six Months Ended October 31, 1998 (Unaudited)
Strategic
Natural Info-Tech & Asian High
Resources Communications Growth Yield
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income............................ $ 12,087 $ 47,313 $ 2,641 $ 130,146
Dividend income............................ 32,281 14,886 2,854 1,283
Foreign taxes withheld..................... (430) (440) (26) --
-------------- ----------------- ---------------- --------------
TOTAL INVESTMENT INCOME.................. 43,938 61,759 5,469 131,429
EXPENSES
Custodian fee (Note 3)..................... 42,205 35,284 38,979 35,116
Administration fee (Note 3)................ 42,192 42,045 42,045 41,753
Investment advisor fee (Note 3)............ 24,467 45,251 3,350 17,019
Transfer agent fee......................... 21,408 20,852 20,193 20,504
Professional fees.......................... 19,336 19,253 19,253 19,095
Registration fees.......................... 16,445 14,322 16,134 12,593
Distribution fees (Note 3):
Class A Shares........................... 7,830 14,272 1,779 4,093
Class B Shares........................... -- 453 19 --
Printing expense........................... 4,929 4,906 4,906 4,860
Insurance fee.............................. 2,951 2,941 2,941 2,921
Amortization of organizational expenses (Note 2) 1,763 1,758 1,758 1,747
Trustees' fee (Note 3)..................... 1,711 1,703 1,703 1,690
Interest expense (Note 11)................. -- -- -- 11,796
Miscellaneous expense...................... 1,296 1,289 1,290 4,937
----------------------------------------------------------------
Total expenses before waivers,
reimbursements and custodial credits..... 186,533 204,329 154,350 178,124
Expenses waived and reimbursed (Note 3).... (140,275) (121,926) (146,331) (155,728)
Fees reduced by credits allowed by the
custodian................................ (1,063) (592) (418) (997)
-------------- --------------- -------------- ------------
NET EXPENSES............................. 45,195 81,811 7,601 21,399
-------------- --------------- -------------- ------------
NET INVESTMENT INCOME (LOSS)............. (1,257) (20,052) (2,132) 110,030
-------------- --------------- -------------- ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS Net realized loss on:
Investments.............................. (554,953) (44,275) 40,793) (893,632)
Foreign currency related transactions.... (2,013) -- -- --
-------------- --------------- -------------- ------------
Total net realized loss................ (556,966) (44,275) (40,793) (893,632)
-------------- --------------- -------------- ------------
Net change in unrealized appreciation (depreciation) on:
Investment transactions.................... (499,388) 150,085 269 14,270
Foreign currency related translations...... (2,161) -- -- --
-------------- --------------- -------------- ------------
Total net change in unrealized
appreciation (depreciation)............ (501,549) 150,085 269 14,270
-------------- --------------- -------------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS)......................... (1,058,515) 105,810 (40,524) (879,362)
-------------- --------------- -------------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS............................... $ (1,059,772) $ 85,758 $ (42,656) $ (769,332)
============== =============== ============== ============
SALES CHARGE PAID TO
FUNDS DISTRIBUTOR, INC..................... $ 34,695 $ 501,759 $ 7,609 $ 3,514
============== =============== ============== ============
</TABLE>
See Notes to Financial Statements.
D-48
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
Strategic Info-Tech &
Natural Communications
Resources Fund Fund
-------------------------------- ----------------------------
Six Months Six Months
Ended Period* Ended Period*
10/31/98 Ended 10/31/98 Ended
(unaudited) 4/30/98 (unaudited) 4/30/98
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (loss).................. $ (1,257) $ 127,318 $ (20,052) $ (5,210)
Net realized gain (loss) on investments
and foreign currency related transactions.. (556,966) (291,457) (44,275) (30,284)
Net change in unrealized appreciation
(depreciation) on investment transactions.. (501,549) 391,583 150,085 306,103
-------------- --------------- -------------- ------------
Net increase (decrease) in net assets
resulting from operations.................. (1,059,772) 227,444 85,758 270,609
-------------- --------------- -------------- ------------
Dividends and distributions to shareholders
from:
Net investment income:
Class A.................................... -- (7,147) -- --
Class B.................................... -- -- -- --
Distributions in excess of net realized gains -- (6,916) -- --
-------------- --------------- -------------- ------------
Total dividends and distributions to shareholders -- (14,063) -- --
--------------- --------------- -------------- ------------
Fund share transactions (Note 6).............. (1,016,331) 5,464,453 10,379,952 2,149,733
-------------- --------------- -------------- ------------
Total increase (decrease) in net assets...... (2,076,103) 5,677,834 10,465,710 2,420,342
-------------- --------------- -------------- ------------
Net assets:
Beginning of period .......................... 5,697,834 20,000 2,440,342 20,000
-------------- --------------- -------------- ------------
End of period................................. $ 3,621,731 $ 5,697,834 $ 12,906,052 $ 2,440,342
============== =============== ============== ============
Undistributed net investment income (loss) at
end of period.............................. $ 117,953 $ 119,210 $ (20,052) $ --
============== =============== ============== ============
* The commencement of investment operations was October 23, 1997 for Strategic Natural Resources Fund and October 22, 1997 for
Info-Tech & Communications Fund.
</TABLE>
See Notes to Financial Statements.
D-49
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Asian High
Growth Yield
Fund Fund
---------------------------- ------------------------------
Six Months Six Months
Ended Period* Ended Period*
10/31/98 Ended 10/31/98 Ended
(unaudited) 4/30/98 (unaudited) 4/30/98
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (loss).................. $ (2,132) $ 14,172 $ 110,030 $ 121,891
Net realized gain (loss) on investments
and foreign currency related transactions.. (40,793) 41,526 (893,632) (177,110)
Net change in unrealized appreciation
(depreciation) on investment transactions.. 269 58,586 14,270 (14,270)
-------------- --------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations.................. (42,656) 114,284 (769,332) (69,489)
-------------- --------------- -------------- ------------
Dividends and distributions to shareholders
from:
Net investment income
Class A Shares............................. -- -- (133,603) (95,628)
Class B Shares............................. -- -- (11) --
Distributions in excess of net
realized gains............................. -- -- -- --
-------------- --------------- -------------- ------------
Total dividends and distributions
to shareholders............................ -- -- (133,614) (95,628)
-------------- --------------- -------------- ------------
Fund share transactions (Note 6).............. 222,287 756,356 (1,886,312) 3,911,674
-------------- --------------- -------------- ------------
Total increase (decrease)in net assets........ 179,631 870,640 (2,789,258) 3,746,557
-------------- --------------- -------------- ------------
Net assets:
Beginning of period........................... 890,640 20,000 3,766,557 20,000
-------------- --------------- -------------- ------------
End of period................................. $ 1,070,271 $ 890,640 $ 977,299 $ 3,766,557
============== =============== ============== ============
Undistributed net investment income at
end of period.............................. $ 10,942 $ 13,074 $ 2,780 $ 26,364
============== =============== ============== ============
* The commencement of investment operations was October 22, 1997 for Growth Fund and October 20, 1997 for Asian High Yield Fund.
</TABLE>
See Notes to Financial Statements.
D-50
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
FINANCIAL HIGHLIGHTS
STRATEGIC NATURAL RESOURCES FUND
Selected data based on a share outstanding throughout each period indicated
Class A Shares Class A Shares Class B Shares
For the Six Months For the Period
Ended For the Period Ended
October 31, 1998 Ended October 31, 1998(a)
(unaudited)(b) April 30, 1998(a) (unaudited)(b)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $16.54 $15.00 $12.22
----------------- -------------------- -----------------
Income (loss) from investment operations:
Net investment income......................... (0.00) 0.38(e) (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions..... (3.88) 1.22 0.41
------------------- -------------------- ------------------
Total income (loss) from investment operations (3.88) 1.60 0.39
Less distributions from net investment income. -- (0.03) --
Less distributions in excess of capital gains. -- (0.03) --
-- ------ --
Total distributions from net investment income
and net capital gains......................... -- (0.06) --
---------------------- ------------------- -------------------
Net asset value, end of period................ $12.66 $16.54 $12.61
==================== =================== =====================
Total Return (c).............................. (23.46)% 10.74% 3.44%
================== ================= =======================
Ratios and Supplemental Data:
Net assets, end of period (in 000's).......... $3,621 $5,698 $--
Ratio of net expenses to average net assets (including
interest expense) (d)......................... 2.32% 2.40% 2.40%
Ratio of expenses to average net assets (including
interest expense and custodial credits) (d)... 2.37% 2.45% 2.46%
Ratio of total expenses to average net assets before
waivers, reimbursements and custodial credits (d) 9.56% 9.27% 9.26%
Ratio of net investment income (loss) to average
net assets (d)................................ 2.34% 6.12%(e) (1.20)%
Portfolio turnover rate....................... 396% 519% 396%
</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 since
the use of the undistributed method did not accord with the results of
operations.
(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 Advisor, Administrator and Custodian 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
Advisor during the current fiscal year.
See Notes to Financial Statements.
D-51
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
FINANCIAL HIGHLIGHTS
INFO-TECH & COMMUNICATIONS FUND
Selected data based on a share outstanding throughout each period indicated
Class A Shares Class A Shares Class B Shares
For the Six Months For the Period
Ended For the Period Ended
October 31, 1998 Ended October 31, 1998(a)
(unaudited) April 30, 1998(a) (unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $19.62 $15.00 $18.23
------------------- ----------------------- --------------------
Income (loss) from investment operations:
Net investment income......................... (0.03) -- (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions.... (0.10) 4.62 1.24
-------------------- ----------------------- -------------------
Total income (loss) from investment operations (0.13) 4.62 1.23
-------------------- ----------------------- -------------------
Less distributions from net investment income. -- -- --
Less distributions in excess of capital gains. -- -- --
-------------------- ----------------------- -------------------
Total distributions from net investment income
and net capital gains......................... -- -- --
-
Net asset value, end of period................ $19.49 $19.62 $19.46
==================== ======================== ==================
Total Return (b).............................. (0.71)% 30.80% 6.69
====================== ======================== ==================
Ratios and Supplemental Data:
Net assets, end of period (in 000's).......... $12,060 $2,440 $846
Ratio of net expenses to average net assets
(including interest expense) (c).............. 2.26% 2.40% 2.40%
Ratio of expenses to average net assets (including
interest expense and custodial credits) (c)... 2.28% 2.88% 2.01%
Ratio of total expenses to average net assets before waivers,
reimbursements and custodial credits (c)...... 5.67% 39.06% 4.19%
Ratio of net investment income (loss) to average
net assets (c)................................ (0.55)% (1.27)% (1.21)%
Portfolio turnover rate....................... 219% 76% 219%
</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 Advisor, Administrator and Custodian 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.
See Notes to Financial Statements.
D-52
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
FINANCIAL HIGHLIGHTS
GROWTH FUND
Selected data based on a share outstanding throughout each period indicated
Class A Shares Class A Shares Class B Shares
For the Six Months For the Period
Ended For the Period Ended
October 31, 1998 Ended October 31, 1998(a)
(unaudited) April 30, 1998(a) (unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $17.93 $15.00 $16.46
----------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income......................... (0.09) 0.26(d) (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions..... (1.18) 2.67 0.21
------------------------------------------------------------------------
Total income (loss) from investment operations (1.27) 2.93 0.20
Less distributions from net investment income. -- -- --
Less distributions in excess of capital gains. -- -- --
-----------------------------------------------------------------------------
Total distributions from net investment
income and net capital gains.................. -- -- --
-----------------------------------------------------------------------------
Net asset value, end of period................ $16.66 $17.93 $16.66
========================================================================
Total Return (b).............................. (7.08)% 19.53% 1.15%
======================== =================================================
Ratios and Supplemental Data:
Net assets, end of period (in 000's).......... $1,055 $891 $16
Ratio of net expenses to average net assets
(including interest expense) (c).............. 1.70% 1.60% 2.00%
Ratio of expenses to average net assets (including
interest expense and custodial credits) (c)... 1.80% 2.11% 2.07%
Ratio of total expenses to average net assets before waivers,
reimbursements and custodial credits (c)...... 34.67% 50.13% 26.98%
Ratio of net investment income (loss) to average
net assets (c)................................ 1.71% 4.41%(d) (0.24)%
Portfolio turnover rate....................... 458% 448% 458%
</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) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains distributions, and assume no
sales charge. Had the Advisor, Administrator and Custodian 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.
(d) Net investment income per share and the net investment income ratio would
have been lower without a certain investment strategy followed by the
Advisor during the current fiscal year.
See Notes to Financial Statements.
D-53
<PAGE>
<TABLE>
<CAPTION>
ORBITEX GROUP OF FUNDS
FINANCIAL HIGHLIGHTS
ASIA HIGH YIELD FUND
Selected data based on a share outstanding throughout each period indicated
Class A Shares Class A Shares Class B Shares
For the Six Months For the Period
Ended For the Period Ended
October 31, 1998 Ended October 31, 1998(a)
(unaudited) April 30, 1998(a) (unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $10.93 $12.00 $8.22
-----------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income......................... 0.51 0.45 0.03
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions..... (2.90) (1.15) 0.02
-----------------------------------------------------------------------
Total income (loss) from investment operations (2.39) (0.70) (0.05)
Less distributions from net investment income. (0.57) (0.37) (0.31)
Less distributions in excess of capital gains. -- -- --
------------------------------------------------------------------------
Total distributions from net investment income
and net capital gains......................... (0.57) (0.37) (0.31)
------------------------------------------------------------------------
Net asset value, end of period................ $7.97 $10.93 $7.96
========================================================================
Total Return (b).............................. (22.38)% (5.71)% 0.59%
========================================================================
Ratios and Supplemental Data:
Net assets, end of period (in 000's).......... $977 $3,767 $--
Ratio of net expenses to average net assets
(including interest expense) (c).............. 1.57% 0.14% 2.00%
Ratio of expenses to average net assets (including
interest expense and custodial credits) (c)... 1.64% 0.22% 2.20%
Ratio of total expenses to average net assets before waivers,
reimbursements and custodial credits (c)...... 13.02% 12.47% 25.35%
Ratio of net investment income (loss) to average
net assets (c)................................ 8.05% 8.65% 3.28%
Portfolio turnover rate....................... 118% 173% 118%
</TABLE>
- ----------------
(a) The commencement of investment operations was October 20, 1997 and
September 21, 1998 for Asian High Yield 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 Advisor, Administrator and Custodian 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.
See Notes to Financial Statements.
D-54
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 (unaudited)
1. Organization
Orbitex Group of Funds (the "Trust") was incorporated in Delaware in December
1996 and is registered under the Investment Company Act of 1940 (the "1940
Act"), as amended, as an open-end management investment company. The Trust is
comprised of four funds (collectively the "Funds" and each individually a
"Fund") as follows: Strategic Natural Resources Fund, Info-Tech & Communications
Fund, Growth Fund and Asian High Yield Fund. Each Fund operates as a diversified
investment company, except Asian High Yield Fund, which operates as a
non-diversified investment company. The Funds offer both Class A and Class B
Shares. Class A Shares are offered at net asset value plus a maximum sales load
of 5.75%, except for Asian High Yield Fund, which is offered at net asset value
plus a maximum sales load of 4.75%. Class B Shares are offered subject to a
contingent deferred sales charge and will convert to Class A Shares when they
have been outstanding approximately eight years.
The Asian Select Advisors Fund was liquidated on August 31, 1998.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Security Valuation and Translations
Equity securities are valued at the last sale price on the exchange or in the
over-thD-counter market in which such securities are primarily traded, as of the
close of business on the day the securities are being valued, or lacking any
sales, at the last available bid price. Long-term debt obligations are valued at
the mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality and type; however, when the Advisor or Sub-Advisor deems it
appropriate, prices obtained from an independent pricing service will be used.
Short-term debt investments with maturities less than 60 days are valued at
amortized cost or original cost plus accrued interest, each of which
approximates fair value.
Foreign securities are valued on the basis of market quotations from the primary
market in which they are traded, and are translated from the local currency into
U.S. dollars using current exchange rates.
Securities for which current market quotations are not readily available or for
which quotations are not deemed by Orbitex Management, Inc. (the "Advisor") to
be representative of market values are valued at fair value as determined in
good faith by or under the direction of the Trustees.
Investment security transactions are accounted for as of the trade date. Cost is
determined and gains and losses are based upon the specific identification
method for both financial statement and federal income tax purposes.
Foreign Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
and income receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions. Purchases
and sales of securities are translated into U.S. dollars at the contractual
currency rates established at the approximate time of the trade.
Net realized gains and losses on foreign currency transactions represent net
gains and losses from currency realized between the trade and settlement dates
on securities transactions and the difference between income accrued versus
income received. The effects of changes in foreign currency exchange rates on
investments in securities are included with the net realized and unrealized gain
or loss on investment securities.
D-55
<PAGE>
ORBITEX GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1998 (unaudited)
Income Taxes
It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income and gains to its shareholders and therefore, no provision for
federal income tax has been made.
Each Fund is treated as a separate taxpayer for federal income tax purposes.
Investment Income
Corporate actions (including cash dividends) are recorded net of nonreclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis.
Market discount, original issue discount and premium are accreted and amortized
respectively, on a yield to maturity basis. The value of additional securities
received as interest or dividend payments is recorded as income and as the cost
basis of such securities.
Expenses
Expenses of the Trust, which are directly identifiable to a specific Fund, are
allocated to that Fund. Expenses, which are not readily identifiable to a
specific Fund, are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. Each Fund's income, expenses (other than the fees mentioned above) and
realized and unrealized gains and losses are allocated proportionally each day
between the classes based upon the relative net assets of each class.
Distributions to Shareholders
Income dividends will normally be declared and distributed quarterly for the
Asian High Yield Fund and annually for each of the other Funds. All Funds
declare and pay net realized capital gain distributions annually. The character
of income and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds, timing differences and
differing characterization of distributions made by each Fund as a whole.
Deferred Organizational Costs
Organizational expenses have been deferred and are being amortized over a period
of five years commencing with operations. The Advisor has agreed with respect to
each of the Funds that, if any of the initial shares of a Fund are redeemed
during such amortization period by the holder thereof, the redemption proceeds
will be reduced for any unamortized organization expenses in the same ratio as
the number of shares redeemed bears to the number of initial shares held at the
time of redemption.
Repurchase Agreements
Each Fund may enter into repurchase agreements. In a repurchase agreement, a
Fund buys a security and the seller simultaneously agrees to repurchase the
security on a specified future date at an agreed-upon price. The repurchase
price reflects an agreed-upon interest rate during the time the Fund's money is
invested in the security. Because the security constitutes collateral for the
repurchase obligation, a repurchase agreement can be considered a collateralized
loan. The Fund's risk is the ability of the seller to pay the agreed-upon price
on the maturity date. If the seller is unable to make a timely repurchase, the
Fund could experience delays in the receipt of expected proceeds, suffer a loss
in principal or current interest, or incur costs in liquidating the collateral.
The Trustees have established criteria to evaluate the creditworthiness of
parties with which the Funds may enter into repurchase agreements.
Structured Notes
Each Fund may invest in structured notes, whose principal amount, redemption
terms or conversion terms are related to specific securities or other indices.
The prices of structured securities have historically been subject to high
volatility and their interest or dividend rates may at times be substantially
lower than prevailing market rates.
D-56
<PAGE>
Other
There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks may involve foreign
currency exchange rate fluctuations, adverse political and economic developments
and the imposition of unfavorable foreign governmental laws and restrictions.
There is significant potential for continuing economic and political turmoil in
the Pacific Basin and Southeast Asia, such turmoil could have a negative effect
on the share prices of the Funds; particularly the Asian High Yield Fund.
The Strategic Natural Resources Fund, Info-Tech & Communications Fund and Asian
High Yield Fund may focus their investments in certain industries, subjecting
them to greater risk than funds that are more diversified.
3. Fees and Compensation Paid to Affiliates and Other Parties
Advisory Fees
Each Fund has entered into an Investment Advisory Agreement with the Advisor. As
compensation for the services rendered, facilities furnished, and expenses borne
by the Advisor, the Funds will pay the Advisor a fee accrued daily and paid
monthly, at the annualized rate of 1.25% for the Strategic Natural Resources
Fund, 1.25% for the Info-Tech & Communications Fund, 0.75% for the Growth Fund
and 1.25% for the Asian High Yield Fund. The Advisory Agreement also provides
that the Advisor may retain Sub-Advisers at the Advisor's own cost and expense,
for the purpose of managing the investment of the assets of one or more Funds of
the Trust.
Through August 31, 1998, the Advisor had agreed to waive or limit its fees and
to pay certain operating expenses to the extent necessary to limit total fund
operating expenses net of waivers and custodial credits to an annualized rate of
2.40%, 2.40%, 1.60%, and 2.00% for Class A Shares of the Strategic Natural
Resources Fund, Info-Tech & Communications Fund, Growth Fund and Asian High
Yield Fund, respectively, subject to possible reimbursement by the Funds if such
reimbursement can be achieved within the foregoing expense limits. Effective
September 1, 1998, the Advisor has changed the expense limit on Class A Shares
of the Strategic Natural Resources Fund, Info-Tech & Communications Fund, and
Growth Fund, to 2.00 % annually of the Funds' relative average net assets.
The Advisor has agreed to waive or limit its fees and to pay certain operating
expenses to the extent necessary to limit total fund operating expenses net of
waivers and custodial credits to an annualized rate of 2.40%, 2.40%, 2.00%, and
2.00% for Class B Shares of the Strategic Natural Resources Fund, Info-Tech &
Communications Fund, Growth Fund and Asian High Yield Fund, respectively,
subject to possible reimbursement by the Funds if such reimbursement can be
achieved within the foregoing expense limits.
In addition, the Advisor has agreed to waive or limit its fees and to pay all
operating expenses, not including interest expense but including fee waivers and
custodial credits, of the Class A Shares of the Asian High Yield Fund for the
period from May 1, 1998 through June 15, 1998. This expense limit was changed to
an annualized rate of 1.00% for the period from June 16, 1998 through September
16, 1998. Effective September 17, 1998 this limit was changed to 2.00%.
The waivers for the Advisor's fee for the period ended October 31, 1998 amounted
to $24,467, $45,251, $3,350, and $8,421 for Strategic Natural Resources Fund,
Info-Tech & Communications Fund, Growth Fund and Asian High Yield Fund,
respectively. The reimbursements for the period ended October 31, 1998 amounted
to $97,422, $58,547, $124,852, and $129,360 for Strategic Natural Resources
Fund, Info-Tech & Communications Fund, Growth Fund and Asian High Yield Fund,
respectively.
Sub-Advisory Fees
For the period May 1, 1998 to May 31, 1998, the Asian High Yield Fund had a
Sub-Advisory relationship with J. P. Morgan Investment Management Inc. Pursuant
to a Sub-Advisory Agreement between the Sub-Advisor, the Advisor and the Trust,
the Sub-Advisor was responsible for the selection and management of portfolio
investments for the Fund, in accordance with the Fund's investment objective and
policies and under the supervision of the Advisor.
D-57
<PAGE>
The Sub-Advisor received a sub-advisory fee, paid by the Advisor of: 0.50% on
the first $50 million average daily net assets of the Fund; 0.45% on the next
$50 million average daily net assets of the Fund; and 0.40% on the average daily
net assets over $100 million of the Fund.
Effective May 31, 1998, J. P. Morgan Investment Management Inc. resigned as the
Sub-Advisor for the Fund. The Fund is currently
being managed by the Advisor.
Administration Fees
State Street Bank and Trust Company ("State Street") serves as the Administrator
of the Trust. For providing administrative services to the Funds, State Street
will receive from each Fund, a monthly fee at an annual rate of 0.10% of the
first $100 million of each Fund's average daily net assets, plus 0.08% of the
next $100 million of each Fund's average daily net assets, plus 0.06% of each
Fund's average daily net assets in excess of $200 million, subject to certain
minimum requirements. State Street agreed to waive certain fees for the period
ended October 31, 1998, which amounted to $18,386, $18,128, $18,129 and $17,947
for Strategic Natural Resources Fund, Info-Tech & Communications Fund, Growth
Fund and Asian High Yield Fund, respectively.
Custodian Fees
State Street also serves as the Trust's custodian, including holding all
portfolio securities and cash assets of the Trust and providing accounting
services which includes daily valuation of the shares of each Fund. For its
services State Street receives an annual custody and accounting fee which is
paid monthly.
Distributor
Funds Distributor, Inc. (the "Distributor") serves as the distributor of the
shares of each Fund pursuant to a Distribution Plan and Agreement, pursuant to
Rule 12b-1 under the 1940 Act, between the Distributor and the Trust. The Rule
12b-1 Plan and Agreement for Class A Shares provides for payment of a fee to the
Distributor at an annualized rate of 0.30% of the average daily net assets of
the Class A Shares of the Asian High Yield Fund and 0.40% of the average daily
net assets of the Class A Shares of the other Funds. The Rule 12b-1 Plan and
Agreement for Class B Shares provides for payment of a fee to the Distributor at
an annualized rate of 1.00% of the average daily net assets of the Class B
Shares of each Fund.
Trustees Fees
The Funds pay no compensation to their Trustees who are employees of the Advisor
or Sub-Advisors. Trustees who are not Advisor or Sub-Advisor employees receive
an annual fee of $5,000.
D-58
<PAGE>
4. Aggregate Unrealized Appreciation and Depreciation
The identified cost of investments in securities owned by each Fund for both
financial statement and federal income tax purposes, and their respective gross
unrealized appreciation and depreciation at October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Identified Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
<S> <C> <C> <C> <C>
Strategic Natural Resources Fund.......... $ 3,912,272 $ 93,428 $201,234 $(107,806)
Info-Tech & Communications Fund........... 11,708,410 1,141,775 685,587 456,188
Growth Fund............................... 886,119 63,004 4,148 58,855
Asian High Yield Fund..................... 903,000 -- -- --
</TABLE>
5. Investment Transactions
The cost of purchases and the proceeds from sales of investments, other than
U.S. Government obligations and short-term securities, for the period ended
October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Strategic Natural Resources Fund................... $13,861,434 $14,640,738
Info-Tech & Communications Fund.................... 19,002,988 11,846,926
Growth Fund........................................ 3,452,883 3,372,833
Asian High Yield Fund.............................. 1,383,092 4,452,581
</TABLE>
Purchases and sales of U.S. Government obligations aggregated $1,159,297 and
$1,272,031, respectively, for the Asian High Yield Fund.
6. Shareholder's Transactions
Following is a summary of shareholder transactions for each Fund:
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1998 Year Ended
(unaudited) April 30, 1998*
Shares Dollars Shares Dollars
<S> <C> <C>
Strategic Natural Resources
Class A Shares
Shares sold..................... 74,864 $1,061,126 709,678 $10,833,321
Shares issued to shareholders
in reinvestment.............. -- -- 713 12,051
Shares redeemed................. (133,182) (2,077,755) (367,260) (5,380,919)
--------- ----------- --------- -----------
Net increase (decrease)......... $(58,318) $(1,016,631) $343,131 $5,464,453
========= ============ ======== ==========
</TABLE>
D-59
<PAGE>
<TABLE>
<CAPTION>
For the Period
September 21, 1998
to October 31, 1998
(unaudited)
--------------------------
Shares Dollars
<S> <C> <C>
Strategic Natural Resources
Class B Shares
Shares sold............................. 25 $300
Shares issued to shareholders
in reinvestment....................... -- --
Shares redeemed....................... -- --
-- --
Net increase........................ 25 $300
== ====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1998 Year Ended
(unaudited) April 30, 1998*
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Info-Tech and Communications
Class A Shares
Shares sold............................. 618,931 $11,321,737 124,204 $2,171,752
Shares issued to shareholders
in reinvestment......................... -- -- -- --
Shares redeemed......................... (124,520) (1,709,182) (1,148) (22,019)
--------- ----------- ------- --------
Net increase............................ 494,411 9,612,555 123,056 $ 2,149,733
======== ========= ======= ============
</TABLE>
<TABLE>
<CAPTION>
For the Period
September 16, 1998
to October 31, 1998
(unaudited)
Shares Dollars
<S> <C> <C>
Info-Tech and Communications
Class B Shares
Shares sold............................. 43,709 $ 771,682
Shares issued to shareholders
in reinvestment......................... -- --
Shares redeemed......................... (267) (4,285)
----- -------
Net increase............................ 43,441 $ 767,397
======== ==========
</TABLE>
D-60
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1998 Year Ended
(unaudited) April 30, 1998*
------------- ---------------
Shares Dollars Shares Dollars
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Growth
Class A Shares
Shares sold............................. 29,624 $477,802 48,341 $756,356
Shares issued to shareholders
in reinvestment......................... -- -- -- --
Shares redeemed......................... (15,986) (270,815) -- --
------ ------- --------------- --------------
Net increase............................ 13,638 $206,987 48,341 $756,356
============ ============= ============== ==============
</TABLE>
For the Period
September 16, 1998
to October 31, 1998
(unaudited)
Shares Dollars
Growth
Class B Shares
Shares sold............................. 937 $15,300
Shares issued to shareholders
in reinvestment......................... -- --
Shares redeemed......................... -- --
-- --
Net increase............................ 937 $15,300
=== =======
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1998 Year Ended
(unaudited) April 30, 1998*
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Asian High Yield
Class A Shares
Shares sold............................. 12,879 $128,772 528,380 $5,998,122
Shares issued to shareholders
in reinvestment......................... 10,566 98,148 2,010 21,381
Shares redeemed.........................(245,560) (2,113,540) (187,417) (2,107,829)
------- --------- ------- ---------
Net increase (decrease)............ (222,115) $(1,886,620) 342,973 $3,911,674
======= ========== ======= ==========
</TABLE>
D-61
<PAGE>
For the Period
September 16, 1998
to October 31, 1998
(unaudited)
Shares Dollars
Asian High Yield
Class B Shares
Shares sold............................. 37 $308
Shares issued to shareholders
in reinvestment......................... -- --
Shares redeemed......................... -- --
-- --
Net increase.......................... 37 $308
== ====
*The commencement of investment operations was October 23, 1997 for Strategic
Natural Resources Fund, October 22, 1997 for Info-Tech & Communications Fund,
October 22, 1997 for Growth Fund and October 20, 1997 for Asian High Yield Fund.
7. Forward Currency Contracts
At October 31, 1998, The Strategic Natural Resources Fund had outstanding
forward currency contracts, which contractually obligate the Fund to deliver
currency at a specified date, as follows:
<TABLE>
<CAPTION>
U.S. Cost October 31, 1998 Unrealized
on Origination U.S. $ Appreciation
Foreign Currency Purchase Contracts Date Value (Depreciation)
- ----------------------------------- ------ ------- --------------
<S> <C> <C> <C>
AUD, expiring 11/4/98, (1 contract) $ 15,438 $ 15,637 $ 199
CAD, expiring 11/5/98-11/12/98,
(2 contracts) 454,464 453,659 (805)
--------------
$(606)
</TABLE>
<TABLE>
<CAPTION>
U.S. Cost October 31, 1998 Unrealized
on Origination U.S. $ Appreciation
Foreign Currency Purchase Contracts Date Value (Depreciation)
- ----------------------------------- ------ ------- ------------
<S> <C> <C> <C>
AUD, expiring 11/4/98, (1 contract) $ 15,738 $ 15,637 $ 101
CAD, expiring 11/5/98-11/12/98,
(4 contracts) 452,002 453,657 (1,655)
-------------
(1,554)
Net Unrealized Depreciation $ (2,160)
==============
</TABLE>
8. Beneficial Interest
The following schedule shows the number of shareholders each owning 5% or more
of a Fund and the total percentage of the Fund held by such shareholders:
<TABLE>
<CAPTION>
5% or Greater Shareholders
Number of Shareholders % of Fund Held
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Strategic Natural Resources Fund 1 1 24% 100%
Info-Tech & Communications Fund 1 5 17% 53%
Growth Fund 5 1 73% 98%
Asian High Yield Fund 5 3 34% 100%
There were no of affiliated shareholders as of October 31, 1998.
</TABLE>
D-62
<PAGE>
9. Capital Loss Carryforward
At April 30, 1998, the Info-Tech Communications Fund had available for federal
income tax purposes unused capital losses of $30,284, expiring in the Year 2006.
Under current tax law, capital losses realized after October 31, may be deferred
and treated as occurring on the first day of the following fiscal year. For the
fiscal year ended April 30, 1998, the following Funds have elected to defer
losses occurring between November 1, 1997 and April 30, 1998 under these rules,
as follows:
Capital Currency
Losses Losses
Name of Fund Deferred Deferred
------------ -------- --------
Strategic Natural Resources Fund....... $269,461 $706
Asian High Yield Fund.................. 177,282 --
Asian Select Advisors Fund............. 1,212 --
Such deferred losses will be treated as arising on the first day of the fiscal
year ending April 30, 1999.
10. Initial Capitalization and Offering of Shares
During the period from May 29, 1997 to the commencement of investment operations
for each of the Funds, each Fund had no operations other than those related to
organizational matters, including the initial capital contribution of $20,000
for each Fund and the issuance of 1,333 shares for each of the Funds, with the
exception of the Asian High Yield Fund which issued 1,667 shares. There were no
additional transactions until commencement of investment operations for each of
the Funds.
11. Line of Credit
The Trust participated in a $10 million line of credit provided by Deutsche Bank
AG, New York Branch (the "Bank") under a Credit Agreement (the "Agreement")
dated February 17, 1998 . Under the Agreement, each Fund as a separate and
distinct borrower may borrow up to a designated base commitment allocation
specified in the Agreement, plus its pro rata portion of any unused commitment
allocation of the other borrowers under the agreement. Interest is payable in
respect to the unpaid principal amount depending on the type of loan designated
by the borrower. The Funds are charged an annualized commitment fee computed at
a rate equal to 0.10 of 1% on a annual basis of the daily average unutilized
credit balance. The Agreement requires, among other provisions, that the
aggregate outstanding principal amount of the loans made to each borrower under
the Agreement shall not exceed the lesser of (i) 33 1/3% of the value of the
total assets of the borrower less all liabilities and indebtedness not
represented by senior securities; and (ii) any borrower limitations described
for such borrowers in the Trust's prospectus.
During the six months ended October 31, 1998, only the Asian High Yield Fund had
borrowings under the Agreement. The Asian High Yield Fund entered into a NIBOR
based loan agreement on April 16, 1998 in the amount of $750,000, with an
interest rate of 6.15625% (NIBOR rate plus 50 basis points). The expiration date
of the loan was May 15, 1998. Effective July 24, 1998, the Trust terminated the
Agreement with the Bank.
12. Subsequent Events
The Trustees have approved by unanimous vote, the liquidation of the Asian High
Yield Fund effective November 30, 1998.
D-63
<PAGE>
PROXY
ASM INDEX 30 FUND, INC.
410 Park Avenue
New York, New York 10022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Richard E. Stierwalt and M.
Fyzul Khan, and each of them, as proxies for the undersigned, with full power of
substitution and resubstitution, and hereby authorizes said proxies, and each of
them, to represent and vote, as designated on the card below, all stock of the
above Company held of record by the undersigned on May 28, 1999 at the Special
Meeting of Stockholders to be held on July 2, 1999, and at any adjournment
thereof.
The undersigned hereby revokes any and all proxies with respect to such stock
heretofore given by the undersigned. The undersigned acknowledges receipt of the
Proxy Statement/Prospectus dated May __, 1999.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER AND, IN THE DISCRETION OF SUCH PROXIES, UPON ANY AND
ALL OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENT THEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR
OF THE MATTERS SPECIFIED IN THE PROPOSAL.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. WHEN SHARES ARE HELD BY JOINT TENANTS,
EACH JOINT TENANT SHOULD SIGN.
When signing as attorney, executor, administrator, trustee, guardian or
custodian, please sign full title as such. If a corporation, please sign full
corporate name by authorized officer and indicate the signer's office. If a
partnership, please sign in partnership name. PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
To vote by Telephone
1) Read the Proxy Statement/Prospectus and have the Proxy card below at hand.
2) Call 1-800-690-6903.
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement/Prospectus and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
TO VOTE, MARK BLOCKS IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ASM INDEX 30 FUND, INC.
For address changes and/or comments,
please check this box and write them
on the back of the proxy card. |_|
For Against Abstain
To approve the Reorganization. |_| |_| |_|
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Signature (PLEASE SIGN WITHIN BOX) Date
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Signature (Joint Owners) Date
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PART B
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STATEMENT OF ADDITIONAL INFORMATION
Dated May __, 1999
ORBITEX GROUP OF FUNDS
410 Park Avenue
New York, New York 10022
(888) ORBITEX
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ASM INDEX 30 FUND, INC.
410 Park Avenue
New York, New York 10022
(800) 333-4276
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This Statement of Additional Information relating specifically to the
Reorganization consists of this cover page, the additional information about the
Registrant provided in this Part B and the following described documents, each
of which is incorporated herein by reference:
1. The Registrant's Statement of Additional Information, as filed with the
Securities and Exchange Commission on August 18, 1998 as part of the
Post-Effective Amendment to its Registration Statement on Form N-1A. Such
Statement of Additional Information may be obtained without charge by writing to
or calling the Orbitex Group of Funds at the address or telephone number listed
above.
2. The Statement of Additional Information of ASM, as filed with the
Securities and Exchange Commission on April 23, 1999 as part of the
Post-Effective Amendment to its Registration Statement on Form N-1A. Such
Statement of Additional Information can be obtained without charge by writing to
ASM Index 30 Fund, Inc., c/o Mutual Fund Services, P.O. Box 7177, 6000 Memorial
Drive, Dublin, Ohio 43017, or by calling 1-800-333-4276.
Terms not otherwise defined in this Statement of Additional Information
shall have the meaning given to them in the Proxy Statement/Prospectus contained
in Part A of this Registration Statement.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement/Prospectus, dated May __, 1999,
which has been filed by the Orbitex Group of Funds ("Orbitex") in connection
with a Special Meeting of Stockholders of the ASM Index 30 Fund, Inc. ("ASM"),
that has been called to vote on the Reorganization, pursuant to an Agreement and
Plan of Reorganization, dated April 26, 1999, as amended, by and between Orbitex
and ASM, and the transactions contemplated thereby. Copies of the Proxy
Statement/Prospectus may be obtained at no charge by writing to Orbitex at the
address listed above or by calling the toll free number listed above.
<PAGE>
TABLE OF CONTENTS
Page
DESCRIPTION OF SECURITIES, OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS...1
MANAGEMENT OF THE ORBITEX GROUP OF FUNDS......................................13
INVESTMENT MANAGEMENT AND OTHER SERVICES......................................15
ADMINISTRATOR.................................................................16
DISTRIBUTION OF SHARES........................................................17
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................18
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED...........................19
DETERMINATION OF NET ASSET VALUE..............................................22
TAXES.........................................................................23
ORGANIZATION OF THE ORBITEX GROUP OF FUNDS....................................25
INDEPENDENT ACCOUNTANTS.......................................................25
LEGAL MATTERS.................................................................25
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DESCRIPTION OF SECURITIES, OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following pages contain more detailed information about the types of
instruments in which the New Orbitex Fund may invest, strategies Orbitex
Management may employ in pursuit of the New Orbitex Fund's investment objective
and a summary of related risks. Orbitex Management may not buy all of these
instruments or use all of these techniques unless it believes that doing so will
help the New Orbitex Fund achieve its investment objectives.
ADJUSTABLE RATE SECURITIES. Adjustable rate securities (i.e., variable rate
and floating rate instruments) are securities that have interest rates that are
adjusted periodically, according to a set formula. The maturity of some
adjustable rate securities may be shortened under certain special conditions
described more fully below.
Variable rate instruments are obligations that provide for the adjustment
of their interest rates on predetermined dates or whenever a specific interest
rate changes. A variable rate instrument whose principal amount is scheduled to
be paid in 397 days or less is considered to have a maturity equal to the period
remaining until the next readjustment of the interest rate. Many variable rate
instruments are subject to demand features which entitle the purchaser to resell
such securities to the issuer or another designated party, either (1) at any
time upon notice of usually 397 days or less, or (2) at specified intervals, not
exceeding 397 days, and upon 30 days notice. A variable rate instrument subject
to a demand feature is considered to have a maturity equal to the longer of the
period remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand, if final
maturity exceeds 397 days or the shorter of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand if final maturity is within 397 days.
Floating rate instruments have interest rate reset provisions similar to
those for variable rate instruments and may be subject to demand features like
those for variable rate instruments. The interest rate is adjusted, periodically
(e.g., daily, monthly, semi-annually), to the prevailing interest rate in the
marketplace. The interest rate on floating rate securities is ordinarily
determined by reference to the 90-day U.S. Treasury bill rate, the rate of
return on commercial paper or bank certificates of deposit or an index of
short-term interest rates. The maturity of a floating rate instrument is
considered to be the period remaining until the principal amount can be
recovered through demand.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. The New Orbitex 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. The New Orbitex 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. The New Orbitex Fund may engage in
transactions involving dealer options. Certain risks are specific to dealer
options. While the New Orbitex Fund would look to a clearing corporation to
exercise exchange-traded options, if the New Orbitex 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 New Orbitex Fund as well as loss
of the expected benefit of the transaction.
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Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the New Orbitex 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 New Orbitex
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 New Orbitex Fund originally wrote the option. While
the New Orbitex 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 New Orbitex Fund, there can be no assurance that the New
Orbitex Fund will be able to liquidate a dealer option at a favorable price at
any time prior to expiration. Until the New Orbitex 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 New Orbitex Fund may be unable to liquidate a dealer
option. With respect to options written by the New Orbitex Fund, the inability
to enter into a closing transaction may result in material losses to the New
Orbitex Fund. For example, since the New Orbitex Fund must maintain a secured
position with respect to any call option on a security it writes, the New
Orbitex Fund may not sell the assets which it has segregated to secure the
position while it is obligated under the option. This requirement may impair the
New Orbitex 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. The New Orbitex Fund may treat the cover used for written OTC
options as liquid if the dealer agrees that the New Orbitex 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 New Orbitex Fund
will treat dealer options as subject to the New Orbitex Fund's limitation on
unmarketable securities. If the SEC changes its position on the liquidity of
dealer options, the New Orbitex Fund will change its treatment of such
instrument accordingly.
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND FORWARD FOREIGN
EXCHANGE CONTRACTS. The New Orbitex 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 New Orbitex
Fund entering into straddles.
Open Section 1256 contracts at fiscal year end will be considered to have
been closed at the end of the New Orbitex 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 New Orbitex 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 the New Orbitex 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.
FUTURES CONTRACTS. The New Orbitex 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 New Orbitex Fund's portfolio, as a cash management tool, or as an
efficient way for Orbitex Management to implement either an
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increase or decrease in portfolio market exposure in response to changing market
conditions. The New Orbitex Fund may, purchase or sell futures contracts with
respect to any stock index. Nevertheless, to hedge the New Orbitex Fund's
portfolio successfully, the New Orbitex 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 New Orbitex Fund's portfolio
securities.
Interest rate or currency futures contracts may be used to manage the New
Orbitex 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 New
Orbitex Fund. In this regard, the New Orbitex 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.
The New Orbitex 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
New Orbitex Fund's objectives in these areas.
Although the New Orbitex Fund has no current intention of engaging in
futures or options transactions other than those described above, it reserves
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 the New Orbitex 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. Orbitex Management 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 New Orbitex Fund's
underlying instruments sought to be hedged.
Successful use of futures contracts by the New Orbitex Fund for hedging
purposes is also subject to Orbitex Management's ability to correctly predict
movements in the direction of the market. It is possible that, when the New
Orbitex 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 New Orbitex Fund's portfolio
might decline. If this were to occur, the New Orbitex 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, Orbitex
Management believes that over time the value of the New Orbitex 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 the New Orbitex 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
New Orbitex 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 New Orbitex 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 New Orbitex 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
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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 Orbitex
Management might not result in a successful hedging transaction over a very
short time period.
ILLIQUID OR RESTRICTED SECURITIES. Restricted securities may be sold only
in privately negotiated transactions or in a public offering with respect to
which a registration statement is in effect under the Securities Act of 1933
(the "1933 Act"). Where registration is required, the New Orbitex 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 New
Orbitex 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 New Orbitex 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 Orbitex Group of Funds. If through the appreciation of illiquid securities
or the depreciation of liquid securities, the New Orbitex 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 New Orbitex Fund will take appropriate steps to
protect liquidity.
Notwithstanding the above, the New Orbitex 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. Orbitex Management under the supervision of
the Board of Trustees of the Orbitex Group of Funds, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the New
Orbitex 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, Orbitex Management
will consider the trading markets for the specific security taking into account
the unregistered nature of a Rule 144A security. In addition, Orbitex Management
could consider (1) the frequency of trades and quotes, (2) the number of dealers
and potential purchases, (3) any dealer undertakings to make a market, and (4)
the nature of the security and of marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored, and if as a
result of changed conditions it is determined that a Rule 144A security is no
longer liquid, the New Orbitex Fund's holdings of illiquid securities would be
reviewed to determine what, if any, steps are required to assure that the New
Orbitex 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 New Orbitex Fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. 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 the New Orbitex 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 the New Orbitex Fund does not
receive scheduled interest or principal payments on such indebtedness, the New
Orbitex Fund's share price and yield could be adversely affected. Loans that are
fully secured offer the New Orbitex 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 the New Orbitex
Fund. For example, if a loan is foreclosed, the New Orbitex 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 New
Orbitex Fund could be held liable as a colender. Direct debt instruments may
also involve a risk of insolvency
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of the lending bank or other intermediary. Direct debt instruments that are not
in the form of securities may offer less legal protection to the New Orbitex
Fund in the event of fraud or misrepresentation. In the absence of definitive
regulatory guidance, the New Orbitex Fund relies on Orbitex Management's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the New Orbitex 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, the New Orbitex 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 the New Orbitex Fund
were determined to be subject to the claims of the agent's general creditors,
the New Orbitex 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 the New Orbitex Fund may include letters
of credit, revolving credit facilities, or other standby financing commitments
obligating the New Orbitex Fund to pay additional cash on demand. These
commitments may have the effect of requiring the New Orbitex 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. The New Orbitex Fund will set aside appropriate liquid assets in a
custodial account to cover its potential obligations under standby financing
commitments.
The New Orbitex Fund limits the amount of total assets that it will invest
in any one issuer or in issuers within the same industry (see the New Orbitex
Fund's investment limitations attached as Appendix C to the Proxy
Statement/Prospectus in Part A). For purposes of these limitations, the New
Orbitex Fund generally will treat the borrower as the "issuer" of indebtedness
held by the New Orbitex Fund. In the case of loan participations where a bank or
other lending institution serves as financial intermediary between the New
Orbitex Fund and the borrower, if the participation does not shift to the New
Orbitex Fund the direct debtor-creditor relationship with the borrower, SEC
interpretations require the New Orbitex 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 the New Orbitex 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.
OPTIONS. Writing Covered Call Options. The New Orbitex Fund may write
(sell) American or European style "covered" call options and purchase options to
close out options previously written by the New Orbitex Fund. In writing covered
call options, the New Orbitex Fund expects to generate additional premium income
which should serve to enhance the New Orbitex 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 Orbitex Management'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 New Orbitex 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.
The New Orbitex Fund will write only covered call options. This means that
the New Orbitex Fund will own the security or currency subject to the option or
an option to purchase the same underlying security or currency,
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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 New Orbitex 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 New Orbitex 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
New Orbitex Funds will not do), but capable of enhancing the New Orbitex Fund's
total return. When writing a covered call option, the New Orbitex 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 New Orbitex 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 New Orbitex Fund has written expires, the New Orbitex 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 New Orbitex Fund will
realize a gain or loss from the sale of the underlying security or currency. The
New Orbitex Fund does not consider a security or currency covered by a call to
be "pledged" as that term is used in the New Orbitex 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 New
Orbitex 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, Orbitex
Management, 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 New Orbitex Fund for writing
covered call options will be recorded as a liability of the New Orbitex 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 New Orbitex 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 New Orbitex 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 New Orbitex 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 New Orbitex Fund will be
able to effect such closing transactions at favorable prices. If the New Orbitex
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 New Orbitex 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 New Orbitex 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 the New Orbitex 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, the New Orbitex 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.
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The New Orbitex 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 New Orbitex Fund.
OPTIONS ON FUTURES CONTRACTS. The New Orbitex Fund may purchase and sell
options on the same types of futures in which it may invest.
Options on futures are similar to options on underlying instruments except
that options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put), rather than to purchase
or sell the futures contract, at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds (in the case of a call) or is less than
(in the case of a put) the exercise price of the option on the futures contract.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on stock
index futures, the New Orbitex 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. The New Orbitex Fund may purchase American or
European style call options. As the holder of a call option, the New Orbitex
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 New Orbitex Fund may enter into
closing sale transactions with respect to such options, exercise them or permit
them to expire. The New Orbitex Fund may purchase call options for the purpose
of increasing its current return or avoiding tax consequences which could reduce
its current return. The New Orbitex 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 New Orbitex 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 New Orbitex 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 New Orbitex
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 New Orbitex
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). The New Orbitex Fund may purchase American or
European style put options. As the holder of a put option, the New Orbitex 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 New Orbitex Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire. The New Orbitex 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.
The New Orbitex Fund may purchase a put option on an underlying security or
currency (a "protective put") owned by the New Orbitex 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 New Orbitex 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 Orbitex
Management deems it desirable to continue to hold the security or currency
because of tax considerations.
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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.
The New Orbitex Fund may also purchase put options at a time when the New
Orbitex Fund does not own the underlying security or currency. By purchasing put
options on a security or currency it does not own, the New Orbitex Fund seeks to
benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the New Orbitex 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. The New Orbitex 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.
The New Orbitex 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 New Orbitex 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 New Orbitex Fund's assets at risk to 5%.
The New Orbitex 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 New
Orbitex 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 New Orbitex 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 the New
Orbitex Fund's assets to cover or identified accounts could impede portfolio
management or the New Orbitex 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, the New Orbitex Fund would comply with
such new restrictions.
OTHER INVESTMENT COMPANIES. The New Orbitex 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, the New Orbitex Fund may not
purchase more than 3% of the securities of any one investment company. As a
shareholder in an investment company, that Fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time, the New Orbitex Fund would continue to pay its own
management fees and other expenses.
MASTER/FEEDER STRUCTURE. Notwithstanding these limitations, the New Orbitex
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 New
Orbitex 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 New Orbitex 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 the New Orbitex Fund.
REPURCHASE AGREEMENTS. The New Orbitex Funds may invest in repurchase
agreements. A repurchase agreement is an instrument under which the investor
(such as the New Orbitex 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
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the sale, to repurchase the underlying security at a mutually agreed upon time
and price, thereby determining the yield during the term of the agreement. This
results in a fixed rate of return insulated from market fluctuations during such
period, unless the seller defaults on its repurchase obligations. The New
Orbitex Fund will only enter into repurchase agreements where (i) the underlying
securities are of the type (excluding maturity limitations) which the New
Orbitex 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 New Orbitex Fund's
custodian. Repurchase agreements usually are for short periods, often under one
week, and will not be entered into by the New Orbitex Fund for a duration of
more than seven days if, as a result, more than 15% of the net asset value of
the New Orbitex Fund would be invested in such agreements or other securities
which are not readily marketable.
The New Orbitex 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, the New Orbitex Fund could incur costs in connection
with the disposition of the collateral if the seller were to default. The New
Orbitex 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 Orbitex Group of Funds and only when the economic benefit to the
New Orbitex Funds is believed to justify the attendant risks. The New Orbitex
Funds have adopted standards for the sellers with whom they will enter into
repurchase agreements. The Board of Trustees of the Orbitex Group of Funds
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 New Orbitex Funds
may enter into repurchase agreements only with well-established securities
dealers or with member banks of the Federal Reserve System.
SHORT SALES. The New Orbitex 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 the New Orbitex 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 the New Orbitex 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 New Orbitex Fund is required to make a
margin deposit in connection with such short sales; the New Orbitex 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 New Orbitex Fund covers its short position, the New
Orbitex Fund will incur a loss; conversely, if the price declines, the New
Orbitex 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 the New Orbitex 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 New Orbitex Fund does 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 New Orbitex 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 New Orbitex 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.
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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, the New
Orbitex 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 New Orbitex Fund has sufficient assets
to satisfy its obligations under a futures contract, the New Orbitex 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. The New Orbitex Fund may elect to close some or all of its
futures positions at any time prior to their expiration. The New Orbitex Fund
would do so to reduce exposure represented by long futures positions or short
futures positions. The New Orbitex Fund may close its positions by taking
opposite positions which would operate to terminate the New Orbitex 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 New Orbitex Fund, and the New Orbitex 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 the New Orbitex 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 New Orbitex 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 New
Orbitex 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 the New Orbitex Fund seeks to close out an option position by writing or
buying an offsetting option covering the same underlying instrument, index or
contract and having the same exercise price and expiration date, its ability to
establish and close out positions on such options will be subject to the
maintenance of a liquid secondary market. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options, or underlying instruments;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange
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(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.
TRADING IN FUTURES CONTRACTS. A futures contract provides for the future sale by
one party and purchase by another party of a specified amount of a specific
financial instrument (e.g., units of a stock index) for a specified price, date,
time and place designated at the time the contract is made. Brokerage fees are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred to as buying or
purchasing a contract or holding a long position. Entering into a contract to
sell is commonly referred to as selling a contract or holding a short position.
Unlike when the New Orbitex Fund purchases or sells a security, no price
would be paid or received by the New Orbitex Fund upon the purchase or sale of a
futures contract. Upon entering into a futures contract, and to maintain the New
Orbitex Fund's open positions in futures contracts, the New Orbitex 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 New Orbitex
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." The New Orbitex 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 New
Orbitex Fund realizes a gain; if it is more, the New Orbitex Fund realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the New Orbitex Fund realizes a gain; if it is less, the New
Orbitex Fund realizes a loss. The transaction costs must also be included in
these calculations. There can be no assurance, however, that the New Orbitex
Fund will be able to enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If the New Orbitex Fund is not
able to enter into an offsetting transaction, the New Orbitex 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. The New Orbitex Fund may invest in warrants. Warrants are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which may be purchased on
their exercise, whereas call
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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. The New Orbitex 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 the New Orbitex
Fund to the issuer and no interest accrues to the New Orbitex Fund. At the time
the New Orbitex 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. The New Orbitex 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. The New Orbitex Fund may write American or European
style covered put options and purchase options to close out options previously
written by the New Orbitex 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.
The New Orbitex Fund would write put options only on a covered basis, which
means that the New Orbitex 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 New Orbitex 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 New Orbitex Fund would generally
write covered put options in circumstances where Orbitex Management wishes to
purchase the underlying security or currency for the New Orbitex Fund's
portfolio at a price lower than the current market price of the security or
currency. In such event the New Orbitex 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 New Orbitex 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 New Orbitex Fund.
In addition, the New Orbitex 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. These consist of various types of
marketable securities issued by the United States Treasury, i.e., bills, notes
and bonds. Such securities are direct obligations of the United States
Government and differ mainly in the length of their maturity. Treasury bills,
the most frequently issued marketable government security, have a maturity of up
to one year and are issued on a discount basis.
UNITED STATES GOVERNMENT AGENCY SECURITIES. These consist of debt securities
issued by agencies and instrumentalities of the United States Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association ("GNMA"), Farmer's Home
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation ("FHLMC"), the Farm
Credit Banks, the Federal National Mortgage Association ("FNMA"), and the United
States Postal Service. These securities are either: (i) backed by the full faith
and credit of the United States Government (e.g., United States Treasury Bills);
(ii) guaranteed by the United States Treasury (e.g., GNMA mortgage-backed
securities); (iii) supported by the issuing agency's or instrumentality's right
to borrow from the United States Treasury (e.g., FNMA Discount Notes); or (iv)
supported only by the issuing agency's or instrumentality's own credit (e.g.,
Tennessee Valley Association).
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MANAGEMENT OF THE ORBITEX GROUP OF FUNDS
*Because Orbitex Group of Funds is a Delaware business trust, there are
Trustees appointed to run the Orbitex Group of Funds. These Trustees are
responsible for overseeing the general operations of Orbitex Management and the
general operations of the Orbitex Group of Funds. These responsibilities include
approving the arrangements with companies that provide necessary services to the
New Orbitex Fund, ensuring the New Orbitex Fund's 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 Orbitex Group of Funds, 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 Orbitex Group of Funds (as defined in Section 2(a)(19) of the 1940 Act) is
indicated by an asterisk next to his name.
<TABLE>
<CAPTION>
Name, Age and Position with the Orbitex Group of Funds and
Business Address Age Principal Occupation within the Past Five Years
---------------- --- -----------------------------------------------
<S> <C> <C>
RONALD ATLBACH 51 Trustee of the Orbitex Group of Funds. Chairman,
1540 West Park Avenue Paul Sebastian, Inc. (perfume distributor)
Ocean, New Jersey 07712 (1994-present); President, Olcott Corporation
(perfume distributor) (1992-1994).
* THOMAS T. BACHMANN 52 Trustee of the Orbitex Group of Funds. Co-Chairman
410 Park Avenue of the Board of Trustees, Orbitex Management
New York, NY 10022 (investment management) (1996-present); Chairman,
Orbitex Management, Ltd. (investment management)
(1986-present).
* OTTO J. FELBER 66 Trustee of the Orbitex Group of Funds. President of
250 Bloor Street East Felcom Capital, Corp. (1985-present); President and
Suite 300 Vice-Chairman, Altamira Management Ltd. (investment
Toronto, Ontario management) (1987-1997).
Canada M2W 1E6
STEVE HAMRICK 47 Trustee of the Orbitex Group of Funds. Chairman,
Carey Financial Corp. Carey Financial Corporation (1995-present); Chief
50 Rockefeller Plaza Executive Officer, Wall Street Investor Services
New York, NY 10020 (brokerage) (1994-1995); Senior Vice President,
PaineWebber Incorporated (1988-1994).
JOHN MORGAN 69 Trustee of the Orbitex Group of Funds. Chairman and
32 Edge Hill Road Director, CIBC Trust Company (1997-present); Vice
Westmount President, Midland Walwyn (investment banking)
Quebec, Canada, H34 1E9 (1990-1997).
* JAMES L. NELSON 49 Chairman, President, Assistant Treasurer and
410 Park Avenue Assistant Secretary of the Orbitex Group of Funds.
New York, NY 10022 Director and Chief Executive Officer, Orbitex
Management, Inc., Chief Executive Officer and
President, Orbitex, Inc. (business development)
(1995-present); President AVIC Group International
(communications) (1993-1995); President, Eaglescliff
Corporation (consulting) (1986-present).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Position with the Orbitex Group of Funds and
Business Address Age Principal Occupation within the Past Five Years
---------------- --- -----------------------------------------------
<S> <C> <C>
RICHARD EDWARD STIERWALT 44 Trustee of the Orbitex Group of Funds. Chief Executive
410 Park Avenue Officer, President and Director. Consultant, Bisys
New York, NY 10022 Management Inc. (Mutual Fund Distributor) (1996-1998);
President, Bisys Management Inc. (Mutual Fund
Distributor) (1995-1996); Chairman and Chief Executive
Officer, Concord Financial Group (Mutual Fund
Distributor) (1987-1995).
M. FYZUL KHAN 27 Legal Counsel and Corporate Secretary of the Orbitex
410 Park Avenue Group of Funds (March 1998-present); Attorney at
New York, NY 10022 CIBC Oppenheimer (investment banking and management)
(August 1997-March 1998); law student at Widener
University School of Law (September 1994-June 1997).
KIMBERLY RATZ 38 Treasurer of the Orbitex Group of Funds. Chief
410 Park Avenue Financial Officer, America's Mortgage Source
New York, NY 10022 (Mortgage Banking) (1996-1997); Chase Manhattan
Mortgage (Mortgage Banking) (finance Manager)
(1988-1996)
</TABLE>
Each Trustee of the Orbitex Group of Funds who is not an interested person
of the Orbitex Group of Funds or Orbitex Management receives a fee of $1,250 for
each regular and special meeting of the Board that the Orbitex Group of Funds
attends. The Orbitex Group of Funds also reimburses each such Trustee for travel
and other expenses incurred in attending meetings of the Board.
14
<PAGE>
COMPENSATION TABLE*
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
BENEFITS ACCRUED ESTIMATED ANNUAL FROM REGISTRANT AND
AGGREGATE COMPENSATION AS PART OF FUND BENEFITS UPON FUND COMPLEX PAID TO
NAME OF PERSON FROM FUND EXPENSES RETIREMENT 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 $_____ N/A N/A $_____
John D. Morgan $_____ N/A N/A $_____
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 Orbitex Group of Funds,
as a group, owned less than 1% of each of the New Orbitex Funds.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Orbitex Management, located at 410 Park Avenue, New York, NY 10022, serves
as the adviser to the New Orbitex Fund pursuant to an Investment Advisory
Agreement that is expected to be approved by the Board of Trustees, including a
majority of the independent Trustees prior to the Reorganization. The initial
term of each Investment Advisory Agreement is two years. However, the Investment
Advisory Agreement may continue in effect from year to year if approved at least
annually by a vote of a majority of the Board 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 New Orbitex Fund.
The directors and the principal executive officers of Orbitex Management
are: Otto J. Felber, Chairman; Thomas T. Bachmann, Co-Chairman; Richard E.
Stierwalt, Director, CEO and President; James L. Nelson, Director; M. Fyzul
Khan, Secretary and Legal Counsel; and Kimberly Ratz, Treasurer and Chief
Financial Officer. Orbitex Management is a subsidiary of Orbitex, Inc., a
business development firm.
In addition to the duties set forth in the Prospectus under the section
entitled "Management," Orbitex Management, in furtherance of such duties and
responsibilities, is authorized in its discretion to engage in the following
activities or to cause or permit Orbitex Management to engage in the following
activities on behalf of the Orbitex Group of Funds: (i) develop a continuing
program for the management of the assets of the New Orbitex Fund; (ii) buy,
sell, exchange, convert, lend, or otherwise trade in portfolio securities and
other assets; (iii) place orders and negotiate the commissions for the execution
of transactions in securities with or through broker-dealers, underwriters, or
issuers; (iv) prepare and supervise the preparation of shareholder reports and
other shareholder communications; and (v) obtain and evaluate business and
financial information in connection with the exercise of its duties.
Subject to policies established by the Board of Trustees of the Orbitex
Group of Funds, which has overall responsibility for the business and affairs of
the New Orbitex Fund, Orbitex Management manages the operations of
15
<PAGE>
the New Orbitex Funds. In addition to providing advisory services, Orbitex
Management furnishes the New Orbitex Funds with office space and certain
facilities and personnel required for conducting the business of the New Orbitex
Funds.
ADMINISTRATOR
The Administrator for the New Orbitex Fund 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.
Pursuant to an Administrative Service Agreement with the New Orbitex Funds,
the Administrator provides all administrative services necessary for the New
Orbitex Fund, subject to the supervision of the Board of Directors. The
Administrator will provide persons to serve as officers of the New Orbitex Fund.
Such officers may be directors, officers or employees of the Administrator or
its affiliates.
The Administration Agreement is expected to be approved by the Board of
Trustees prior to the Reorganization. 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 New Orbitex Funds; (ii)
overseeing the performance of administrative and professional services to the
New Orbitex Funds by others, including the New Orbitex Funds' Custodian; (iii)
preparing, but not paying for, the periodic updating of the Orbitex Group of
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 Orbitex Group of Funds' tax
returns, and preparing reports to the New Orbitex 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 New Orbitex 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 New Orbitex Fund Accounting Service
Agreement, provides the New Orbitex 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 New Orbitex Funds' listing of
portfolio securities and general ledger reports; (iv) reconciliation of
accounting records; (v) calculation of yield and total return for the New
Orbitex Funds; (vi) maintaining certain books and records described in Rule
31a-1 under the 1940 Act, and reconciling account information and balances among
the New Orbitex Funds' Custodian and Orbitex Management; and (vii) monitoring
and evaluating daily income and expense accruals, and sales and redemptions of
shares of the New Orbitex Funds.
For the services rendered to the New Orbitex Funds by the Administrator,
the New Orbitex Funds pay the Administrator a fee, computed daily and payable
monthly at annual rate based on the New Orbitex Funds average daily net assets.
The New Orbitex Funds also pay the Administrator for any out-of-pocket expenses.
In return for providing the New Orbitex Funds with all accounting related
services, the New Orbitex Funds pays the Administrator a monthly fee based on
the New Orbitex Funds' average net assets, plus any out-of-pocket expenses for
such services.
16
<PAGE>
CUSTODIAN
State Street serves as the custodian of the Orbitex Group of Funds' assets
pursuant to a Custodian Contract by and between State Street and the Orbitex
Group of Funds. State Street's responsibilities include safeguarding and
controlling the Orbitex Group of Funds' cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Orbitex Group of Funds' investments. Pursuant to the Custodian Contract, State
Street also provides certain accounting and pricing services to the Orbitex
Group of Funds, including calculating the daily net asset value per share for
each Orbitex Fund; 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 Orbitex Management; and preparing monthly and annual
summaries to assist in the preparation of financial statements of, and
regulatory reports for, the Orbitex Group of Funds. The Orbitex Group of Funds
may employ foreign sub-custodians that are approved by the Board of Trustees to
hold foreign assets.
TRANSFER AGENT SERVICES
ADS provides transfer agent and dividend disbursing services to the New
Orbitex Fund.
DISTRIBUTION OF SHARES
Funds Distributor, Inc. (the "Distributor" or "FDI") serves as the
distributor of the shares of each class of the New Orbitex Fund pursuant to a
Distribution Agreement between the Distributor and the Orbitex Group of Funds.
The Distributor's principal business address is 60 State Street, Boston,
Massachusetts 02108.
Under the terms of the Class A and Class B 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 or contingent deferred
sales commissions or sales loads on Class A and Class B Shares and fees for
providing services to the Class A and Class B Shares of the New Orbitex Fund,
other than the Cash Reserves Fund, under the Distribution Agreements. In
addition, pursuant to the Rule 12b-1 Plans, each of the New Orbitex Funds are
authorized to use a portion of their assets attributable to the Class A and
Class B Shares to finance certain activities relating to the distribution of
their shares to investors.
The Plan adopted for Class A Shares, allows the Orbitex Funds, 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 the
Orbitex Funds, 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 the New Orbitex 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, the New Orbitex Fund pays a shareholder service fee equal to
0.25% of average net assets attributable to Class B Shares of the New Orbitex
Fund on an annualized basis. The New Orbitex Fund may pay fees to the
Distributor at a lesser rate, as agreed upon by the Board of Trustees of the
Orbitex Group of Funds 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 and Class B Shares of the New Orbitex Fund,
including arranging for certain securities dealers or brokers, administrators
and others ("Recipients") to provide these services and paying compensation for
these services. The New Orbitex 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 and Class
B Shares of the Orbitex Funds and in other aspects of the marketing of the
shares to clients or prospective clients of the respective recipients; answering
routine inquiries concerning the Orbitex Funds; assisting in the establishment
and maintenance of accounts or sub-accounts in the New Orbitex Fund and in
processing purchase and redemption transactions; making the New Orbitex Fund's
investment plans and shareholder services available; and providing such other
information and services to investors in shares of the New Orbitex Fund as the
Distributor or the Orbitex Group of Funds, on behalf of the New Orbitex 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 New Orbitex Funds.
17
<PAGE>
The Distributor is required to provide a written report, at least quarterly
to the Board of Trustees of the Orbitex Group of Funds, 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 Orbitex Group of Funds and a majority of the Trustees who are not
"interested persons" of the Orbitex Group of Funds 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 Orbitex Group of Funds 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 Orbitex Group of Funds 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 the New Orbitex Fund, unless
such amendment is approved by the vote of a majority of the outstanding voting
securities of the New Orbitex Fund (as defined in the 1940 Act). All material
amendments must be approved by a majority of the Board of Trustees of the
Orbitex Group of Funds 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 Orbitex Group of Funds 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 Orbitex Group of Funds or the New Orbitex
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 Orbitex Group of Funds
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.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board of Trustees of the Orbitex
Group of Funds, Orbitex Management is responsible for making decisions with
respect to the purchase and sale of portfolio securities on behalf of the New
Orbitex Funds. Orbitex Management 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 the New Orbitex Fund's portfolio securities, it
is Orbitex Management'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, the New Orbitex Fund may pay higher brokerage
commissions in return for brokerage and research services. In selecting
broker-dealers to execute the New Orbitex 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 Orbitex Management or the New
Orbitex Funds. It is not the policy of Orbitex Management 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
18
<PAGE>
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 New Orbitex 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, Orbitex Management may
effect principal transactions on behalf of the New Orbitex 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 New Orbitex Funds pay
to underwriters of newly-issued securities usually include a concession paid by
the issuer to the underwriter. Orbitex Management may receive research services
in connection with brokerage transactions, including designations in fixed price
offerings.
Orbitex Management receives 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
the New Orbitex Fund's portfolio is likely to be invested. Orbitex Management
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, Orbitex Management may be relieved of expenses which it
might otherwise bear. In some cases, research services are generated by third
parties but are provided to Orbitex Management by or through brokers.
Certain broker-dealers which provide quality execution services also
furnish research services to Orbitex Management. Orbitex Management has adopted
brokerage allocation policies embodying the concepts of Section 28(e) of the
Securities Exchange Act of 1934, which permits an investment Orbitex Management
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 Orbitex Management with respect to the accounts as
to which it exercises investment discretion. Accordingly, Orbitex Management may
assess the reasonableness of commissions in light of the total brokerage and
research services provided by each particular broker. Orbitex Management may
also consider sales of the New Orbitex Funds' Shares as a factor in the
selection of broker-dealers.
Portfolio securities will not be purchased from or sold to Orbitex
Management , 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.
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 New Orbitex 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 Orbitex Group of Funds, Orbitex
Management 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
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<PAGE>
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 Orbitex Group of
Funds) 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 the New Orbitex 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 Orbitex 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 New
Orbitex Fund, Orbitex Management, 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 New Orbitex Funds.
LETTER OF INTENT. In submitting a Letter of Intent to purchase Class A
Shares of the New Orbitex Funds at a reduced sales charge, the investor agrees
to the terms of the Prospectus, the Applications used to buy such shares, and
the language in this Statement of Additional Information as to Letters of
Intent, as they may be amended from time to time by the Orbitex Group of Funds.
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 Orbitex 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 Orbitex Group of Funds' transfer agent subject to
the Terms of Escrow.
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<PAGE>
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 Orbitex Fund equal in value to 5% of
the intended amount specified in the Letter shall be held in escrow by the
Orbitex Fund's transfer agent. For example, if the intended amount specified
under the Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000 purchase).
Any dividends and capital gains distributions on the escrowed shares will be
credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended amount specified in
the Letter, the investor must remit to the Distributor an amount equal to the
difference between the dollar amount of sales charges actually paid and the
amount of sales charges which would have been paid if the total amount purchased
had been made at a single time. Such sales charge adjustment will apply to any
shares redeemed prior to the completion of the Letter. If such difference in
sales charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints
the transfer agent of the Orbitex Group of Funds 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. The New Orbitex Fund intends to pay all redemptions of its shares
in cash. However, the New Orbitex 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 New Orbitex Funds, nevertheless,
pursuant to Rule 18f-1 under the 1940 Act, have filed a notification of election
under which the New Orbitex 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 Orbitex Group of Funds 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 Orbitex Group of Funds 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 New Orbitex 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
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period during which an emergency exists as a result of which disposal of
securities or determination of the net asset value of the New Orbitex Fund is
not reasonably practicable, or (3) for such other periods as the SEC may by
order permit for protection of shareholders of the New Orbitex Funds.
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 the 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 New Orbitex 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 New Orbitex
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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Funds will be determined for each
class of shares. The net asset value per share of a given class of shares of the
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 the 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 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.
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For the 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 Orbitex Management and approved by the Board of Trustees of the Orbitex Group
of Funds. Where such prices are not available, valuations will be obtained from
brokers who are market makers for such securities. However, in circumstances
where Orbitex Management 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 Orbitex Group of Funds.
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 the New
Orbitex Fund's net asset value is not calculated. The 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 Orbitex Group of Funds.
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 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 the 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) the
Fund must distribute to its shareholders 90% of its ordinary income and net
short-term capital gains; and (c) the 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, the 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. The Fund intends to make the required
distributions, but they cannot guarantee that they will do so. Dividends
attributable to the New Orbitex 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.
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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 the Fund's excess of net
long-term gains over its net short-term losses. The Fund must designate
distributions of net capital gain and must notify shareholders of this
designation within sixty days after the close of the Orbitex Group of Funds'
taxable year. A corporate shareholder of the 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 the Fund's taxable year.
At the time of purchase, the 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, the 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 the 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 the Fund's total assets
at the close of its taxable year comprise securities issued by foreign
corporations, the Fund may file an election with the Internal Revenue Service to
"pass through" to the Fund's shareholders the amount of any foreign income taxes
paid by the Fund. Pursuant to this election, shareholders will be required to:
(i) include in gross income, even though not actually received, their respective
pro rata share of foreign taxes paid by the Fund; (ii) treat their pro rata
share of foreign taxes as paid by them; and (iii) either deduct their pro rata
share of foreign taxes in computing their taxable income, or use it as a foreign
tax credit against U.S. income taxes (but not both). No deduction for foreign
taxes may be claimed by a shareholder who does not itemize deductions.
The 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 the New Orbitex 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 New Orbitex 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, the 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. The 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 the 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 the 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 New Fund's holding period, if
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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. The New Orbitex 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 ORBITEX GROUP OF FUNDS
As a Delaware business trust entity, the Orbitex Group of Funds need not
hold regular annual shareholder meetings and, in the normal course, does not
expect to hold such meetings. The Orbitex Group of Funds, 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 New Orbitex Funds; and (3) filling
vacancies on the Board of Trustees of the Orbitex Group of Funds in the event
that less than a majority of the Trustees were elected by shareholders. The
Orbitex Group of Funds 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 Orbitex Group of Funds 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 Orbitex Group of Funds. The New Orbitex 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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP whose address is 760 Federal Street, Boston,
Massachusetts 02110 serves as the Orbitex Group of Funds' 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
Orbitex Group of Funds.
LEGAL MATTERS
Legal advice regarding certain matters relating to the federal securities
laws applicable to the Orbitex Group of Funds 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 Orbitex Group of Funds.
The Orbitex Group of Funds has agreed that the word "Orbitex" in its name
is derived from the name of Orbitex Management; that such name is the property
of Orbitex Management for copyrights and/or other purposes; and that therefore,
such name may freely be used by Orbitex Management for other investment
companies, entities or products. The Orbitex Group of Funds has further agreed
that in the event that for any reason, Orbitex Management ceases to be its
investment Orbitex Management, the Orbitex Group of Funds will, unless Orbitex
Management otherwise consents, promptly take all steps necessary to change its
name to one which does not include "Orbitex."
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APPENDIX A
RATED INVESTMENTS - CORPORATE BONDS
Excerpts from MOODY'S INVESTORS SERVICES, INC. ("MOODY'S") description of
its bond ratings:
"Aaa":
Bonds that are rated "Aaa" are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge" Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
"Aa":
Bonds that are rated "Aa" are judged to be of
high-quality by all standards. Together with the "Aaa" group
they comprise what are generally known as "high-grade" bonds.
They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa"
securities.
"A":
Bonds that are rated "A" possess many favorable
investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa":
Bonds that are rated "Baa" are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appears adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba":
Bonds that are rated "Ba" are judged to have
speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
"B":
Bonds that are rated "B" generally lack
characteristics of desirable investments. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small.
"Caa":
Bonds that are rated "Caa" are of poor standing.
These issues may be in default or present elements of danger
may exist with respect to principal or interest.
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Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
Excerpts from STANDARD & POOR'S CORPORATION ("S&P") description of its bond
ratings:
"AAA":
Debt rated "AAA" has the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely
strong.
"AA":
Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from "AAA" issues by
a small degree.
"A":
Debt rated "A" has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
"BBB":
Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher
rated categories.
"BB", "B" AND "CCC":
Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligations. "BB" represents a lower degree of speculation
than "B" and "CCC" the highest degree of speculation. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
COMMERCIAL PAPER
The rating "PRIME-1" is the highest commercial paper rating assigned by
MOODY'S. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "PRIME-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
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PART C
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OTHER INFORMATION
Item 15. 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 and to the subsection of the Proxy
Statement/Prospectus entitled "Liability of Directors in Maryland and
Trustees in Delaware" under the caption "Certain Comparative
Information about Maryland funds and Delaware funds" in Part A of this
Registration Statement.
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 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 "193 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 16. Exhibits - References are to Registrant's Post-Effective Amendment to
its Registration Statement on Form N-1A, as filed with the Securities
and Exchange Commission on April 23, 1999 (the "N-1A Registration
Statement").
(1) Declaration of Trust of Orbitex Group of Funds (the "Trust"), dated
December 13, 1996, previously filed in the Registrant's Registration
Statement on January 29, 1997 is incorporated by reference into this
Registration Statement.
(2) By-Laws of the Orbitex Group of Funds previously filed in the
Registrant's Registration Statement on January 29, 1997 are
incorporated by reference into this Registration Statement.
(3) Not Applicable.
<PAGE>
(4) Agreement and Plan of Reorganization, dated April 26, 1999, as
amended, by and between the Orbitex Group of Funds and ASM (included
as Annex A to Registrant's Proxy Statement/Prospectus contained in
Part A of this Registration Statement).
(5)(a) Declaration of Trust of Orbitex Group of Funds (the "Trust"), dated
December 13, 1996, previously filed in the Registrant's Registration
Statement on January 29, 1997 is incorporated by reference into this
Registration Statement.
(5)(b) By-Laws of the Orbitex Group of Funds previously filed in the
Registrant's Registration Statement on January 29, 1997 are
incorporated by reference into this Registration Statement.
(6)(a) Investment Advisory Agreement, dated June 1, 1997, by and between the
Orbitex Group of Funds 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 in the N-1A Registration Statement is
incorporated by reference into this Regisration Statement.
(6)(b) Investment Advisory Agreement, by and between the Orbitex Group of
Funds and Orbitex Management, Inc. on behalf of the Orbitex Focus 30
Fund, as attached as Appendix B to Registrant's Proxy
Statement/Prospectus contained in Part A of this Registration
Statement.
(7)(a) Distribution Agreement, dated June 1, 1997, between the Orbitex Group
of Funds and Funds Distributor, Inc. on behalf of the Orbitex Growth
Fund, the Orbitex Info-Tech & Communications Fund and the Orbitex
Strategic Natural Resources Fund previously filed in the N-1A
Registration Statement is incorporated by reference into this
Regisration Statement.
(7)(b) Form of Distribution Sub-Agreement, previously filed in Pre-Effective
Amendment No. 2 to the Registration Statement, dated September 26,
1997, is incorporated by reference into this Registration Statement.
(7)(c) Form of Distribution Agreement on behalf of the Orbitex Focus 30 Fund
is filed herewith.
(8) Not Applicable.
(9)(a) Custodian Contract, dated May 14, 1997, by and between the Orbitex
Group of Funds and State Street Bank and Trust Company on behalf of
the Orbitex Growth Fund, the Orbitex Info-Tech & Communications Fund
and the Orbitex Strategic Natural Resources Fund previously filed in
the N-1A Registration Statement is incorporated by reference into this
Regisration Statement.
(9)(b) Form of Custodian Contract on behalf of the Orbitex Focus 30 Fund is
filed herewith.
(10)(a) 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 in the N-1A Registration Statement
is incorporated by reference into this Registration Statement.
(10)(b) Class B Distribution Plan and Agreement pursuant to Rule 12b-1 under
the Investment Company Act of 1940, dated May 27, 1998, previously
filed in Post-Effective Amendment No. 4 to the Registration Statement,
dated August 19, 1998, is incorporated by reference into this
Registration Statement.
(10)(c) Shareholder Services Plan and Shareholder Servicing Agreement
(Non-Rule 12-1 Plan) approved May 27, 1998 previously filed in the
Registrant's Post-Effective Amendment No. 4 to the Registration
Statement, dated August 19, 1998, is incorporated by reference into
this Registration Statement.
(11) Opinion and Consent of Rogers & Wells LLP, counsel to the Registrant,
with respect to the legality of the securities of the Orbitex Focus 30
Fund is filed herewith.
(12) Opinion and Consent of Rogers & Wells LLP with respect to tax matters
is filed herewith.
2
<PAGE>
(13)(a) Transfer Agency and Service Agreement, dated May 14, 1997, by and
between the Orbitex Group of Funds and State Street Bank and Trust
Company on behalf of the Orbitex Growth Fund, the Orbitex Info-Tech &
Communications Fund and the Orbitex Strategic Natural Resources Fund
previously filed in the N-1A Registration Statement is incorporated by
reference into this Registration Statement.
(13)(b) Form of Transfer Agency and Service Agreement on behalf of the Orbitex
Focus 30 Fund is filed herewith.
(13)(c) Administration Agreement, dated May 14, 1997, by and between the
Orbitex Group of Fund 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 in the N-1A Registration Statement is incorporated by
reference into this Registration Statement.
(13)(d) Form of Administration Agreement on behalf of the Orbitex Focus 30
Fund is filed herewith.
(13)(e) Form of Individual Retirement Account Agreement previously filed in
the Registrant's Pre-Effective Amendment No. 2 to the Registration
Statement, dated September 26, 1997, is incorporated by reference into
the Registration Statement.
(14)(a) Consent of PricewaterhouseCoopers LLP, independent accountants to the
Registrant, dated May 26, 1999, is filed herewith.
(14)(b) Consent of PricewaterhouseCoopers LLP, independent accountants to ASM
Index 30 Fund, Inc., dated May 28, 1999 is filed herewith.
(15)(a) Financial Statements of the Registrant previously filed in the N-1A
Registration Statement are incorporated by reference into this
Registration Statement.
(15)(b) Financial Statements of ASM contained in its Post-Effective Amendment
to its Registration Statement on Form N-1A, dated April 23, 1999, are
incorporated by reference into the Registration Statement.
(16) Power of Attorney, dated March 28, 1999, contained in the N-1A
Registration Statement is incorporated by reference into this
Registration Statement.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act [17 CFR 230.145c], the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-14 has been signed on
behalf of the registrant, in the City of New York and State of New York, on the
28th day of May, 1999.
ORBITEX GROUP OF FUNDS
By: /s/ Richard E. Stierwalt
-----------------------------------
Richard E. Stierwalt
Trustee and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 1 to the Registration Statement on Form N-14
has been signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Otto J. Felber* Trustee May 28, 1999
- ------------------------------
Otto J. Felber
Trustee, President, May 28, 1999
/s/ James L. Nelson* Assistant Treasurer &
- ------------------------------ Assistant Secretary
James L. Nelson
/s/ M. Fyzul Khan Secretary May 28, 1999
- ------------------------------
M. Fyzul Khan
/s/ Kimberly Ratz Treasurer May 28, 1999
- ------------------------------
Kimberly Ratz
/s/Ronald Altbach* Trustee May 28, 1999
- ------------------------------
Ronald Altbach
/s/Thomas Bachmann* Trustee May 28, 1999
- ------------------------------
Thomas Bachmann
/s/ Richard E. Stierwalt Trustee and Assistant May 28, 1999
- ------------------------------ Secretary
Richard E. Stierwalt
/s/John D. Morgan* Trustee May 28, 1999
- ------------------------------
John D. Morgan
/s/Stephen H. Hamrick* Trustee May 28, 1999
- ------------------------------
Stephen H. Hamrick
* By: /s/Richard E. Stierwalt
---------------------------------------
Richard E. Stierwalt, Attorney -in-Fact
</TABLE>
<PAGE>
EXHIBIT LIST
Exhibit 1 Form of Distribution Agreement on behalf of the Orbitex Focus 30
Fund.
Exhibit 2 Form of Custodian Contract on behalf of the Orbitex Focus 30
Fund.
Exhibit 3 Opinion and Consent of Rogers & Wells LLP, counsel to the
Registrant, with respect to the legality of the securities of the
Orbitex Group of Funds.
Exhibit 4 Opinion and Consent of Rogers & Wells LLP with respect to tax
matters.
Exhibit 5 Form of Administration Agreement on behalf of the Orbitex Focus
30 Fund.
Exhibit 6 Form of Transfer Agency and Service Agreement on behalf of the
Orbitex Focus 30 Fund.
Exhibit 7 Consent of PricewaterhouseCoopers LLP, independent accountants to
the Registrant, dated May 26, 1999.
Exhibit 8 Consent of PricewaterhouseCoopers LLP, independent accountants to
the Registrant, dated May 28, 1999.
EXHIBIT 1
DISTRIBUTION AGREEMENT
ORBITEX GROUP OF FUNDS
410 Park Avenue
New York, New York 10021
May __, 1999
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of shares of the
Orbitex Focus 30 Fund (the "Series"). For purposes of this agreement the term
"Shares" shall mean the authorized shares of the Series, if any, and otherwise
shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and in
accordance with, the Fund's registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing from time to time.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you may enter into sales or servicing agreements
with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the National
Association of Securities Dealers, Inc.'s (the "NASD") Rules of Fair Practice,
Constitution and By-Laws. You represent and warrant that you are a broker-dealer
registered with the Securities and Exchange Commission and that you are
registered with the relevant securities regulatory agencies in all fifty states,
the District of Columbia and Puerto Rico. You also represent and warrant that
you are a member in good standing of the NASD and that you will maintain
registration and membership for the life of the agreement.
1.4 You shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and/or state securities administrators.
<PAGE>
1.5 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by either of the parties hereto to render sales of a Fund's Shares not in
the best interest of the Fund, either of the parties hereto may decline to
accept any orders for, or make any sales of, any Shares until such time as those
parties deem it advisable to accept such orders and to make such sales and the
party making such determination shall advise promptly the other party of any
such determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided however, that
the Fund shall not pay any of the costs of advertising or promotion for the sale
of Shares.
1.7 The Fund agrees to execute any and all documents and to furnish any and
all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all reasonable expenses
which may be incurred in connection with such qualification. You shall pay all
expenses connected with your own qualification as a dealer under sate or Federal
laws and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
1.8 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you upon request with: (a) semi-annual reports and annual audited reports of the
Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
the Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.9 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares and the Fund have been carefully
prepared in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder. As used in
this agreement the terms "registration statement" and "prospectus" shall mean
any registration statement and prospectus, including the statement of additional
information incorporated by reference therein, filed with the Securities
Exchange Commission and any amendments and supplements thereto which at any time
shall have been filed with said Commission. The Fund represents and warrants to
you that any registration statement and prospectus, when such registration
statement becomes effective, will contain all statements required to be stated
therein in conformity with said Acts and the rules and regulations of said
Commission; that all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor any
prospectus when such registration statement becomes effective will include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
The Fund may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements
2
<PAGE>
to any prospectus as, in the light of future developments, may, in the opinion
of the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make offers of the Fund's
securities until such amendments are made. The Fund shall not file any amendment
to any registration statement or supplement to any prospectus without giving you
reasonable notice thereof in advance; provided, however, that nothing contained
in this agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus, or whatever character, as the Fund may deem advisable, such right
being in all respects absolute and unconditional.
1.10 The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form furnished by the Fund
in connection with the sale of Shares. The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any person who controls you
within the meaning of Section 15 of the Securities Act of 1933, as amended, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the reasonable cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or common law or otherwise, arising
out of or on the basis of any untrue statement, or alleged untrue statement, of
a material fact required to be stated in either any registration statement or
any prospectus or any statement of additional information, or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in any registration statement, any prospectus or any statement of
additional or necessary to make the statements in any of them not misleading,
except that the Fund's agreement to indemnify you, your officers or directors,
and any such controlling person will not be deemed to cover any such claim,
demand, liability or expense to the extent that it arises out of or is based
upon any such untrue statement, alleged untrue statement, omission or alleged
omission made in any registration statement, any prospectus or any statement of
additional information in reliance upon information furnished by you, your
officers, directors or any such controlling person to the Fund or its
representatives for use in the preparation thereof, and except that the Fund's
agreement to indemnify you and the Fund's representations and warranties set out
in paragraph 1.9 of this Agreement will not be deemed to cover any liability to
the Funds or their shareholders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of your duties, or by reason of your reckless disregard of your obligations and
duties under this Agreement ("Disqualifying Conduct"). The Fund's agreement to
indemnify you, your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such controlling person,
such notification to be given by letter, by facsimile or by telegram addressed
to the Fund at its address set forth above within a reasonable period of time
after the summons or other first legal process shall have been served. The
failure to notify the Fund of any such action shall not relieve the Fund from
any liability which the Fund may have to the person against whom such action is
brought by reason of any such untrue, or alleged untrue, statement or omission,
or alleged omission, otherwise than on account of the Fund's indemnity agreement
contained in this paragraph 1.10. The Fund will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability, but,
in such case, such defense shall be conducted by counsel of good standing chosen
by the Fund and approved by you. In the event the Fund elects to assume the
defense of any such suit and retain counsel of good standing approved by you,
the defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Fund does not elect
to assume the defense of any such suit, the Fund will reimburse you, your
officers and directors, or the controlling person or persons named as defendant
or defendants in such suit, for the reasonable fees and expenses of any counsel
retained by you or them. The Fund's indemnification agreement contained in this
paragraph 1.10 and the Fund's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by or
3
<PAGE>
on behalf of you, your officers and directors, or any controlling person, and
shall survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit of any controlling
persons and their successors. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against the Fund or any of its
officers or Board members in connection with the issue and sale of Shares.
1.11 You agree to indemnify, defend and hold the Fund, its several officers
and Board members, and any person who controls the Fund within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
reasonable cost of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in connection therewith)
which the Fund, its officers or Board members, or any such controlling person
may incur under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its officers or
Board members, or such controlling person resulting from such claims or demands,
(a) shall arise out of or be based upon any unauthorized sales literature,
advertisements, information, statements or representations or any Disqualifying
Conduct in connection with the offering and sale of any Shares, or (b) shall
arise out of or be based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by you to the Fund
specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by you to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Your agreement to indemnify
the Fund, its officers and Board members, and any such controlling person as
aforesaid, is expressly conditioned upon your being notified of any action
brought against the Fund, its officers or Board members, or any such controlling
person, such notification to be given by letter, by facsimile or by telegram
addressed to you at your address set forth above within a reasonable period of
time after the summons or other first legal process shall have been served. The
failure so to notify you of any such action shall not relieve you from any
liability which you may have to the person against whom such action is brought
by reason of any such untrue, or alleged untrue, statement or omission, or
alleged omission, otherwise than on account of your indemnity agreement
contained in this paragraph 1.11. You will be entitled to assume the defense of
any suit brought to enforce any such claim, demand or liability, but, in such
case, such defense shall be conducted by counsel of good standing chosen by you
and approved by the Fund. In the event you elect to assume the defense of any
such suit and retain counsel of good standing approved by the Fund, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in the case you do not elect to
assume the defense of any such suit, you will reimburse the Fund, the Fund's
officers and directors, or the controlling person or persons named as defendant
or defendants in such suit, for the reasonable fees and expenses of any counsel
retained by the Fund or them. Your indemnification agreement contained in this
paragraph 1.11 and your representations and warranties in this agreement shall
remain operative and in full force and effect regardless of any investigation
made by you or on behalf of you, your officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. You agree promptly to
notify the Fund of the commencement of any litigation or proceedings against you
or any of your officers or directors in connection with the issue and sale of
Shares.
1.12 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
4
<PAGE>
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.12 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares for any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.13 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or pros0pectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement of
a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you shall be offered at
a price per share (the "offering price") approximately equal to (a) the net
asset value (determined in the manner set forth in the Fund's charter documents)
plus (b) a sales charge, if any and except to those persons set forth in the
then-current prospectus, which shall be the percentage of the offering price of
such Shares as set forth in the Fund's then-current prospectus. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. In addition, Shares of any class of the Fund offered for sale by you may
be subject to a contingent deferred sales charge as set forth in the Fund's
then-current prospectus. You shall be entitled to receive any sales charge or
contingent deferred sales charge in respect of the Shares. Any payments to
dealers shall be governed by a separate agreement between you and such dealer
and the Fund's then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial two-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, proved that in either
events its continuance also is approved by a majority of the board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to the Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Trustees, by vote of a majority
of the outstanding voting securities of such Fund, or by you. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the Investment Company Act of 1940, as amended). You agree
to notify the Fund immediately upon the event of your expulsion or suspension by
the NASD. This Agreement will automatically and immediately terminate in the
event of your expulsion or suspension by the NASD.
5
<PAGE>
4. Miscellaneous
4.1 The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, your directors, officers and employees may from time to time
serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
4.3 This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
4.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
6
<PAGE>
Please confirm that the foregoing is in accordance with your understanding
and indicate your acceptance hereof by signing below, whereupon it shall become
a binding Agreement between us.
Very truly yours,
ORBITEX GROUP OF FUNDS
By: ____________________________
Name:____________________________
Title:___________________________
Accepted:
FUNDS DISTRIBUTOR, INC.
By: ____________________________
Name:____________________________
Title:___________________________
7
EXHIBIT 2
CUSTODIAN CONTRACT
<PAGE>
TABLE OF CONTENTS
Page
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.......................1
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY THE CUSTODIAN IN THE UNITED STATES..................................1
2.1 HOLDING SECURITIES.................................................1
2.2 DELIVERY OF SECURITIES.............................................2
2.3 REGISTRATION OF SECURITIES.........................................3
2.4 BANK ACCOUNTS......................................................4
2.5 AVAILABILITY OF FEDERAL FUNDS......................................4
2.6 COLLECTION OF INCOME...............................................4
2.7 PAYMENT OF FUND MONIES.............................................4
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED..........................................................5
2.9 APPOINTMENT OF AGENTS..............................................5
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS..................6
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM............7
2.12 SEGREGATED ACCOUNT.................................................7
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES............................8
2.14 PROXIES............................................................8
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES....................8
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES........................................................8
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS..............................8
3.2 ASSETS TO BE HELD..................................................8
3.3 FOREIGN SECURITIES SYSTEMS.........................................9
3.4 HOLDING SECURITIES.................................................9
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS.......................9
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND......................9
3.7 REPORTS BY CUSTODIAN...............................................9
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT............................9
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS...............................10
3.10 LIABILITY OF CUSTODIAN............................................10
3.11 REIMBURSEMENT FOR ADVANCES........................................10
3.12 MONITORING RESPONSIBILITIES.......................................10
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TABLE OF CONTENTS
(continued)
Page
3.13 BRANCHES OF U.S.BANKS.............................................11
3.14 TAX LAW...........................................................11
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND.....11
5. PROPER INSTRUCTIONS........................................................11
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY................................12
7. EVIDENCE OF AUTHORITY......................................................12
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME..........................................12
9. RECORDS....................................................................13
10.OPINION OF FUND'S INDEPENDENT ACCOUNTANT...................................13
11.REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS..........................13
12.COMPENSATION OF CUSTODIAN..................................................13
13.RESPONSIBILITY OF CUSTODIAN................................................13
14.EFFECTIVE PERIOD, TERMINATION AND AMENDMENT................................14
15.SUCCESSOR CUSTODIAN........................................................15
16.INTERPRETIVE AND ADDITIONAL PROVISIONS.....................................16
17.ADDITIONAL FUNDS...........................................................16
18.MASSACHUSETTS LAW TO APPLY.................................................16
19.REPRODUCTION OF DOCUMENTS..................................................16
20.SHAREHOLDER COMMUNICATIONS ELECTION........................................16
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This Contract between Orbitex Group of Funds, a business trust organized
and existing under the laws of Delaware, having its principal place of business
at 660 Madison Avenue, New York, New York hereinafter called the "Fund," and
State Street Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian."
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to offer shares in the Orbitex Focus 30 Fund (the
"Portfolio");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolio, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of the Declaration of Trust. The Fund on behalf of the Portfolio agrees to
deliver to the Custodian all securities and cash of the Portfolio, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio from time to time, and
the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolio,
("Shares") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Portfolio held or received by the
Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the Portfolio from time to time employ one or
more sub-custodians, located in the United States but only in accordance with an
applicable vote by the Board of Trustees of the Fund on behalf of the Portfolio,
and provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian. The
Custodian may employ as sub-custodian for the Fund's foreign securities on
behalf of the Portfolio the foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES.
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Portfolio all noncash property, to be held by it in the
United States including all domestic securities owned by the Portfolio, other
than (a) securities which are maintained pursuant to Section 2.10 in a clearing
agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury (each, a "U.S. Securities
System") and (b) commercial paper of an issuer for which State Street Bank and
Trust Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian (the
"Direct Paper System") pursuant to Section 2.11.
<PAGE>
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by the Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct Paper
book entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the Portfolio, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash of other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form
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<PAGE>
of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department of
the Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of Trustees
or of the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the Portfolio
or in the name of any nominee of the Fund on behalf of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively to the
Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Contract shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name,"
3
<PAGE>
the Custodian shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts basis only
of relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a bank account or
accounts in the United States in the name of the Portfolio of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Portfolio, other
than cash maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the investment Company Act of 1940. Funds held
by the Custodian for the Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited with each such bank or trust
company shall, on behalf of the Portfolio, be approved by vote of a majority of
the Board of Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund,
on behalf of the Portfolio, and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions from the Fund, on behalf of the Portfolio, make
federal funds available to the Portfolio as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks received in
payment for Shares which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered domestic securities held hereunder to which the Portfolio
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to the Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due the Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund, on behalf of the Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of the
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set
4
<PAGE>
forth in Section 2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth
in Section 2.11; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or in part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purchase, but only upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of the
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of the Portfolio to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the securities
had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
5
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2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by the Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S. Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the U.S. Securities System
which shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belong to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or
6
<PAGE>
damage if and to the extent that the Portfolio has not been made whole
for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by the Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer an receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the U.S. Securities System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio establish and maintain a
segregated account or accounts for and on behalf of the Portfolio, into which
account or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Portfolio or commodity
futures contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment
7
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companies and (iv) for other proper corporate purposes, BUT ONLY, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions from the Fund
on behalf of the Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
domestic securities of the Portfolio held by it and in connection with transfers
of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Portfolio or a nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to the
Portfolio such proxies, all proxy soliciting materials and all notices relating
to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the Fund for
the Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from issuers of
the securities being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on Schedule
A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions," as
defined in Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as subcustodian. Upon
receipt of Proper Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such subcustodians for maintaining custody of the
Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign subcustodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to effect the
Portfolio's foreign securities transactions. The Custodian shall identify on its
books as belong to the Fund, the foreign securities of the Fund held by each
foreign subcustodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or in a
book-entry system for the central handling of securities
8
<PAGE>
located outside the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions serving as
subcustodians pursuant to the terms hereof (Foreign Securities Systems and U.S.
Securities Systems are collectively referred to herein as the "Securities
Systems"). Where possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other noncash
property for all of its customers, including the Fund, with a Foreign
Sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other noncash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other noncash property belonging to the Fund and (ii) the
Custodian shall require that securities and other noncash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of the Portfolio
will not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or administration; (b)
beneficial ownership for the assets of the Portfolio will be freely transferable
without the payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as belonging to
the Portfolio; (d) officers of or auditors employed by, or other representatives
of the Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to the books
and records of the foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of the Portfolio held by the
foreign sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a foreign sub-custodian insofar as such
books and records relate to the performance of such foreign banking institution
under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio held by foreign sub-custodians, including but no
limited to an identification of entities having possession of the Portfolio's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Portfolio indicating, as to
securities acquired for the Portfolio, the identity of the entity having
physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign securities of
the Fund held outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the Portfolio
and delivery of securities maintained for the account of the Portfolio may be
effected in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a
9
<PAGE>
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set forth
in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, the Custodian and the Fund from
and against any loss, damage, cost, expense, liability or claim arising out of
or in connection with the institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth with
respect to sub-custodians generally in this Contract and, regardless of whether
assets are maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by paragraph
3.13 hereof, the Custodian shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except such loss
as may result from (a) political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses (excluding
a bankruptcy or insolvency of State Street London Ltd. not caused by political
risk) due to Acts of God, nuclear incident or other losses under circumstances
where the Custodian and State Street London Ltd. have exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of the Portfolio
including the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of the
Portfolio's assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will promptly inform the
Fund in the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the subject
of an exemptive order from the Securities and Exchange Commission is notified by
such foreign sub-custodian that there appears to be a substantial likelihood
that is shareholders' equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholders' equity has
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<PAGE>
declined below $200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolio's assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by paragraph
1 of this Contract.
(b) Cash held for the Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the direction of
the Custodian, State Street London Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of the
Fund to notify the Custodian of the obligations imposed on the Fund or the
Custodian as custodian of the Fund by the tax law of jurisdictions other than
those mentioned in the above sentence, including responsibility for withholding
and other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with regard to
such tax law shall be to use reasonable efforts to assist the Fund with respect
to any claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the Portfolio such
payments as are received for Shares of the Portfolio issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of the Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of the Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or repurchase
of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
5. PROPER INSTRUCTIONS.
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
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<PAGE>
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolio's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.
The Custodian may in its discretion, without express authority from the
Fund on behalf of the Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY.
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF
NET ASSET VALUE AND NET INCOME.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of the Portfolio and/or compute the net asset value per share
of the outstanding shares of the Portfolio and/or compute the net asset value
per share of the outstanding shares of the Portfolio or, if directed in writing
to do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to the Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of the Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to the Portfolio.
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<PAGE>
9. RECORDS.
The Custodian shall, with respect to the Portfolio, create and maintains
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT.
The Custodian shall take all reasonable action, as the Fund on behalf of
the Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-1A,
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS.
The Custodian shall provide the Fund, on behalf of the Portfolio at such
times as the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of the Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN.
So long as and to the extent that it is the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any future
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be held to the exercise of reasonable
care in carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence. It shall be entitled to rely
on and may act upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
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<PAGE>
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to the Portfolio act under Section 2.10 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by the Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as
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amended and that the Custodian shall not with respect to the Portfolio act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System by the Portfolio; provided further,
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund on behalf of
the Portfolio may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of the Portfolio shall
pay to the Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
15. SUCCESSOR CUSTODIAN.
If a successor custodian for the Fund, of the Portfolio shall be appointed
by the Board of Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities of the Portfolio then held
by it hereunder and shall transfer to an account of the successor custodian all
of the securities of the Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian or on before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of the Portfolio and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract on behalf of the Portfolio and to transfer to an account of such
successor custodian all of the securities of the Portfolio held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of the Portfolio, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in writing
signed by both parties and shall be annexed
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<PAGE>
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
17. ADDITIONAL FUNDS.
In the event that the Fund establishes one or more series of Shares in
addition to Orbitex Focus 30 Fund as well as portfolios to which the Custodian
renders services as custodian, including Orbitex Global Natural Resources Fund,
Orbitex Info-Tech & Communications Fund, Orbitex Growth Fund, Orbitex Asian High
Yield Fund and Orbitex Asian Select Advisers Fund, with respect to such
portfolio it desires to have the Custodian render services as custodian under
the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
19. REPRODUCTION OF DOCUMENTS.
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not reproduction was made by a party in
the regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
20. SHAREHOLDER COMMUNICATIONS ELECTION.
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no,"
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one or the alternatives below.
YES The Custodian is authorized to release the Fund's name, address
and share positions.
NO The Custodian is not authorized to release the Fund's name,
address and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ___ day of _____ 1999.
ATTEST ORBITEX GROUP OF FUNDS
By ______________________ By ____________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
By _______________________ By ____________________________
Fund's Authorized Officer
Date:
Certified:
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SCHEDULE A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of Orbitex Group of
Funds for use as sub-custodian for the Fund's securities and other assets:
SCHEDULE A
COUNTRIES, FOREIGN SUB-CUSTODIANS AND
FOREIGN SECURITIES DEPOSITORIES
APPROVED FOR THE
ORBITEX GROUP OF FUNDS
Country Sub-Custodian Central Depository
Australia Westpac Banking Corporation Austraclear Li
Reserve Bank I
Transfer System
Canada Canada Trustco Mortgage Company The Canadian D
for Securities
People's Republic of The Hongkong and Shanghai Banking
China Corporation Limited, Shanghai and Shanghai Secur
Shenzhen branches Registration C
Shenzhen Secur
Co., Ltd. (SSC
Hong Kong Standard Chartered Bank The Central C1
Settlement Sys
India Deutsche Bank AG None
Indonesia Standard Chartered Bank None
Republic of Korea SEOULBANK Korea Securiti
Malaysia Standard Chartered Bank Malaysian Cent
Malaysia Berhad Bhd. (MCD)
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Country Sub-Custodian Central Depository
New Zealand ANZ Banking Group New Zealand Ce
(New Zealand) Limited Depository Lim
Pakistan Deutsche Bank AG None
Singapore The Development Bank The Central De
of Singapore Ltd. Limited (CDP)
Sri Lanka The Hongkong and Shanghai Central Deposi
Banking Corporation Limited (Pvt) Limited
Taiwan - R.O.C. Central Trust of China The Taiwan Sec
Depository Com
Thailand Standard Chartered Bank Thailand Secur
Company Limited
Euroclear (The Euroclear System) / State Street London Limited
Cedel (Cedel Bank, societe anonyme) / State Street London Limited
19
EXHIBIT 3
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Telephone (212) 878-8000
Facsimile (212) 878-8375
Orbitex Group of Funds
410 Park Avenue
18th Floor
New York, New York 10022
Ladies and Gentlemen:
We have acted as special counsel for Orbitex Group of Funds, a Delaware business
trust (the "Trust"), in connection with the reorganization (the
"Reorganization") contemplated by the Agreement and Plan of Reorganization,
dated as of April 26, 1999 (the "Merger Agreement"), by and between the Trust
and ASM Index 30 Fund, Inc., a Maryland corporation, and the transactions
contemplated thereby. This letter is being delivered to you in connection with
the filing of the Trust's registration statement on Form N-14 (the "Registration
Statement") under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended.
We have examined and are familiar with the Trust's Agreement and Declaration of
Trust, the By-Laws of the Trust and such other documents as we have deemed
relevant to the matters referred to in this letter. We express no opinion herein
as to (i) the "blue sky" laws of any state or (ii) the laws of any jurisdiction
other than the laws of the State of New York and Title 12 of the Delaware Code
("Delaware Law"). We draw your attention to the fact that we are not admitted to
the Bar in the State of Delaware and we are not experts in the laws of the State
of Delaware and, to the extent that the opinion expressed below relates to
matters of Delaware Law , that opinion is based on our reasonable familiarity
with Delaware Law as a result of our prior involvement in transactions involving
such laws.
Based upon the foregoing, in our opinion, the Shares to be issued by the Trust
upon consummation of the Reorganization have been duly authorized for issuance
by the Trust, and upon issuance and delivery as described in the Registration
Statement, the Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission.
Very truly yours,
/s/ Rogers & Wells
EXHIBIT 4
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166-0153
Telephone 212 878-8000
Facsimile 212 878-8375
David T. Moldenhauer
Partner
DIRECT TELEPHONE 212 878-8384
DIRECT FACSIMILE
[email protected]
May 18, 1999
Orbitex Group of Funds
410 Park Avenue
18th Floor
New York, NY 10022
ASM Index 30 Fund, Inc.
410 Park Avenue
18th Floor
New York, NY10022
Re: United States Federal Income Tax Consequences of the Reorganization
of the ASM Index 30 Fund, Inc.
Ladies and Gentlemen:
You have requested our opinion as to certain United States federal income tax
consequences arising out of the transfer by ASM Index 30 Fund, Inc., a Maryland
corporation (the "Transferor Fund") of all its assets to the newly-created New
OGF Series of the Orbitex Group of Funds, a Delaware business trust (the
"Acquiring Fund") pursuant to the Agreement and Plan of Reorganization, dated as
of April 26, 1999 (the "Agreement") by and between the Acquiring Fund and the
Transferor Fund (the "Reorganization"). All capitalized terms used herein have
the respective meanings as set forth in the Agreement unless otherwise stated.
For purposes of this opinion, we have assumed that on the effective date of the
Reorganization (the "Effective Date"), the Transferor Fund will transfer all of
its assets to the Acquiring Fund and the Acquiring Fund will assume all of the
liabilities of the Transferor Fund, and each Fund Share of the Transferor Fund
will be converted into an equivalent number of shares of beneficial interest of
the Acquiring Fund, and as a result of the Reorganization, each stockholder of
the Transferor Fund will be credited with the number of full and fractional
Class D shares of the Acquiring Fund having an aggregate net asset value equal
to the value of the assets of the Transferor Fund less the liabilities of the
Transferor Fund.
In rendering the opinions expressed herein, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for the purpose of rendering this opinion, including the
Agreement.
<PAGE>
As to questions of fact material to this opinion, we have, with your approval,
where relevant facts were not independently established, relied upon, among
other things, the representations made in the Agreement.
The opinions set forth below are based upon the Internal Revenue Code of 1986,
as amended (the "Code"), the regulations promulgated by the Treasury Department,
published administrative announcements and rulings of the Internal Revenue
Service and court decisions, all as of the date of this letter.
Based on and subject to the foregoing, and such examinations of law as we have
deemed necessary, it is our opinion that for United States federal income tax
purposes:
(1) The acquisition by the Acquiring Fund of all the assets of the
Transferor Fund and the assumption by the Acquiring Fund of the Transferor
Fund's liabilities, followed by the conversion of the Fund Shares of the
Transferor Fund into an equivalent number of Acquiring Fund Shares will
constitute a reorganization within the meaning of Section 368(a)(1)(F) of the
Code, and the Transferor Fund and the Acquiring Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized to the Transferor Fund upon the
transfer of all of its assets to the Acquiring Fund and the Acquiring Fund's
assumption of the Transferor Fund's liabilities.
(3) No gain or loss will be recognized by the Acquiring Fund upon
receipt of the assets of the Transferor Fund and its assumption of the
Transferor Fund's liabilities.
(4) The stockholders of the Transferor Fund will recognize no gain or
loss upon the exchange of the Transferor Fund shares solely for Acquiring Fund
shares.
(5) The basis of the Transferor Fund's assets in the hands of the
Acquiring Fund will be the same as the basis of those assets in the hands of the
Transferor Fund immediately prior to the Reorganization.
(6) The basis of Acquiring Fund shares in the hands of the Transferor
Fund stockholders will be the same as their basis in Transferor Fund shares to
be exchanged therefor.
(7) The Acquiring Fund's holding period with respect to the assets
received from the Transferor Fund will include the period for which such assets
were held by the Transferor Fund.
(8) The holding period of Acquiring Fund shares to be received by
Transferor Fund stockholders will include the period during which Transferor
Fund shares to be surrendered in exchange therefor were held, provided such
Transferor Fund shares were held as capital assets by those stockholders on the
date of the Reorganization.
2
<PAGE>
(9) The Reorganization will not result in the termination of the
Transferor Fund's taxable year and the Transferor Fund's tax attributes
enumerated in Section 381(c) of the Code will be taken into account by the
Acquiring Fund as if there had been no Reorganization.
(10) The qualification of each of the Transferor Fund and the Acquiring
Fund as a regulated investment company (a "RIC") under Sections 851 through 855
of the Code will not be affected as a result of the Reorganization, except that,
upon the liquidation and dissolution of the Transferor Fund, it will no longer
qualify as a RIC.
The opinion set forth in (10) above is subject to the qualification that we have
made no independent investigation with respect to the qualification, as of the
date hereof, of the Transferor Fund or the Acquiring Fund as RICs under the
Code.
The opinions set forth in this letter represent our conclusions as to the
application of United States federal income tax law existing as of the date of
this letter to the transactions described herein. We can give no assurance that
legislative enactments, administrative changes or court decisions may not be
forthcoming that would modify or supersede our opinions.
The opinions contained herein are limited to those matters expressly covered; no
opinion is to be implied in respect of any other matter. The opinions set forth
herein are as of the date hereof and we disclaim any undertaking to update this
letter or otherwise advise you as to any changes of law or fact that may
hereinafter be brought to our attention. The opinions set forth herein may not
be relied on by any person or entity other than you without our prior written
consent.
Very truly yours,
ROGERS & WELLS LLP
Exhibit 5
ADMINISTRATION AGREEMENT
Agreement dated as of _______, 1999 by and between American Data Services,
Inc., a New York company (the "Administrator"), and Orbitex Group of Funds (the
"Fund").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund desires to retain the Administrator to furnish certain
administrative services to the Fund, and the Administrator is willing to furnish
such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints the Administrator to act as administrator with
respect to the Fund for purposes of providing certain administrative services
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to render the services stated herein.
This Agreement will apply to Orbitex Focus 30 Fund (the "Investment Fund").
In the event that the Fund establishes one or more additional investment funds
with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Fund shall notify the Administrator in writing.
Upon written acceptance by the Administrator, such investment fund shall become
subject to the provisions of this Agreement to the same extent as the Investment
Fund, except to the extent that such provisions (including those relating to the
compensation and expenses payable by the Fund and the Investment Fund) may be
modified with respect to each additional investment fund in writing by the Fund
and the Administrator at the time of the addition of the investment fund.
2. DELIVERY OF DOCUMENTS
To the extent not prepared by the Administrator for the Fund, the Fund will
promptly deliver to the Administrator copies of each of the following documents
and all future amendments and supplements, if any:
a. The Fund's charter document and by-laws;
b. The Fund's currently effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act
and the Fund's Prospectus and Statement of Additional Information
relating to the Investment Fund and all amendments and supplements
thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of Trustees of the
Fund (the "Board") authorizing (1) the Fund to enter into this
Agreement and (2) certain individuals on behalf of the Fund to (a)
give instructions to the Administrator pursuant to this Agreement and
(b) sign checks and pay expenses;
d. A copy of the investment advisory agreement between the Fund and its
investment adviser; and
<PAGE>
e. Such other certificates, documents or opinions which the Administrator
may, in its reasonable discretion, deem necessary or appropriate in
the proper performance of its duties;
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Fund that:
a. It is a Massachusetts trust company, duly organized, existing and in
good standing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in
The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or
threatened which would impair the Administrator's ability to perform
its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the
Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Administrator that:
a. It is a business trust, duly organized and existing and in good
standing under the laws of Delaware;
b. It has the corporate power and authority under applicable laws and by
its charter and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement;
d. It is an investment company properly registered under the 1940 Act;
e. Subject to Administrator performing under Section 5 (x), a
registration statement under the 1933 Act and the 1940 Act has been
filed and will be effective and remain effective during the term of
this Agreement. The Fund also warrants to the Administrator that as of
the effective date of this Agreement, all necessary filings under the
securities laws of the states in which the Fund offers or sells its
shares have been made;
f. No legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties
and obligations under this Agreement;
g. Its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the
Fund or any law or regulation applicable to it; and
-2-
<PAGE>
h. As of the close of business on the date of this Agreement, the Fund is
authorized to issue an unlimited amount of shares of beneficial
interest.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Fund and the review and
comment by the Fund's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Fund and the
Administrator:
a. Oversee the determination and publication of the Fund's net asset
value in accordance with the Fund's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Fund's custodian of certain books and
records of the Fund as required under Rule 31a-1(b) of the 1940 Act;
c. Prepare the Fund's federal, state and local income tax returns for
review by the Fund's independent accountants and filing by the Fund's
treasurer;
d. Review calculation, submit for approval by officers of the Fund and
arrange for payment of the Fund's expenses;
e. Prepare for review and approval by officers of the Fund financial
information for the Fund's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be sent
to Fund shareholders, and arrange for the printing and dissemination
of such reports and communications to shareholders;
f. Prepare for review by an officer of and legal counsel for the Fund the
Fund's periodic financial reports required to be filed with the
Securities and Exchange Commission ("SEC") on Form N-SAR and financial
information required by Form [N-1A/N-2] and such other reports, forms
or filings as may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the Fund as
may be mutually agreed upon and not otherwise prepared by the Fund's
investment adviser, custodian, legal counsel or independent
accountants;
h. Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may reasonably
request;
i. Make such reports and recommendations to the Board concerning the
performance and fees of the Fund's custodian and transfer and dividend
disbursing agent ("Transfer Agent") as the Board may reasonably
request or deems appropriate;
j. Oversee and review calculations of fees paid to the Fund's investment
adviser, custodian and Transfer Agent;
k. Consult with the Fund's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the accounting
policies of the Fund;
l. Review implementation of any dividend reinvestment programs authorized
by the Board;
-3-
<PAGE>
m. Respond to, or refer to the Fund's officers or Transfer Agent,
shareholder inquiries relating to the Fund;
n. Provide periodic testing of portfolios to assist the Fund's investment
adviser in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the 1940 Act and Fund
prospectus limitations as may be mutually agreed upon;
o. Review and provide assistance on shareholder communications;
p. Maintain general corporate calendar;
q. Maintain copies of the Fund's charter and by-laws;
r. File annual and semi-annual shareholder reports with the appropriate
regulatory agencies; review text of "President's letters" to
shareholders and "Management's Discussion of Fund Performance" (which
shall also be subject to review by the Fund's legal counsel);
s. Organize, attend and prepare minutes of shareholder meetings;
t. Provide consultation on regulatory matters relating to portfolio
management, Fund operations and any potential changes in the Fund's
investment policies, operations or structure; act as liaison to legal
counsel to the Fund and, where applicable, to legal counsel to the
Fund's independent Board members;
u. Maintain continuing awareness of significant emerging regulatory and
legislative developments which may affect the Fund, update the Board
and the investment adviser on those developments and provide related
planning assistance where requested or appropriate;
v. Develop or assist in developing guidelines and procedures to improve
overall compliance by the Fund and its various agents;
w. Counsel and assist the Fund in the handling of routine regulatory
examinations and work closely with the Fund's legal counsel in
response to any non-routine regulatory matters;
Subject to review and comment by the Fund's legal counsel:
x. Prepare and file with the SEC and Fund's registration statement and
amendments thereto, including updating the Prospectus and Statement of
Additional Information, where applicable;
y. Prepare and file with the SEC proxy statements; provide consultation
on proxy solicitation matters;
z. Prepare agenda and background materials for Board meetings, make
presentations where appropriate, prepare minutes and follow-up on
matters raised at Board meetings;
aa. Prepare and file with the SEC Rule 24f-2 notices; and
bb. Prepare and file necessary documentation to allow the Fund to offer
and sell its shares in various states pursuant to the specific
instructions of the Fund and as detailed in Schedule B to this
Agreement.
-4-
<PAGE>
The Administrator shall provide the office facilities and the personnel
required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Fund such compensation for the
Administrator's services provided pursuant to this Agreement as may be agreed to
from time to time in a written fee schedule approved by the parties and
initially set forth in Schedule A to this Agreement. The fees are accrued daily
and billed monthly and shall be due and payable upon receipt of the invoice.
Upon the termination of this Agreement before the end of any month, the fee for
the part of the month before such termination shall be prorated according to the
proportion which such part bears to the full monthly period and shall be payable
upon the date of termination of this Agreement. In addition, the Fund shall
reimburse the Administrator for its reasonable out-of-pocket costs incurred in
connection with this Agreement.
The Fund agrees promptly to reimburse the Administrator for any equipment
and supplies specially ordered by or for the Fund through the Administrator and
for any other expenses not contemplated by this Agreement that the Administrator
may incur on the Fund's behalf at the Fund's request or with the Fund's consent.
The fund will bear all expenses that are incurred in its operation and not
specifically assumed by the Administrator. Expenses to be borne by the Fund,
include, but are not limited to: organizational expenses; cost of services of
independent accountants and outside legal and tax counsel (including such
counsel's review of the Fund's registration statement, proxy materials, federal
and state tax qualification as a regulated investment company and other reports
and materials prepared by the Administrator under this Agreement); cost of any
services contracted for by the Fund directly from parties other than the
Administrator; cost of trading operations and brokerage fees, commissions and
transfer taxes in connection with the purchase and sale of securities for the
Fund; investment advisory fees; taxes, insurance premiums and other fees and
expenses applicable to its operation; costs incidental to any meetings of
shareholders including, but not limited to, legal and accounting fees, proxy
filing fees and the costs of preparation, printing and mailing of any proxy
materials; costs incidental to Board meetings, including fees and expenses of
Board members; the salary and expenses of any officer, director\trustee or
employee of the Fund; costs incidental to the preparation, printing and
distribution of the Fund's registration statements and any amendments thereto
and shareholder reports; costs of typesetting and printing of prospectuses; cost
of preparation and filing of the Fund's tax returns, Form N-1A or N-2 and Form
N-SAR, and all notices, registrations and amendments associated with applicable
federal and state tax and securities laws; all applicable registration fees and
filing fees required under federal and state securities laws; fidelity bond and
directors' and officers' liability insurance; and cost of independent pricing
services used in computing the Fund's net asset value.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Fund for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the Fund for
instructions and may consult with its own legal counsel or outside counsel for
the Fund or the independent accountants for the Fund at the expense of the Fund,
with respect to any matter arising in connection with the services to be
performed by the Administrator under this Agreement. The Administrator shall not
be liable, and shall be indemnified by the Fund, for any action taken or omitted
by it in good faith in reliance upon any such
-5-
<PAGE>
instructions or advice or upon any paper or document believed by it to be
genuine and to have been signed by the proper person or persons. The
Administrator shall not be held to have notice of any change of authority of any
person until receipt of written notice thereof from the Fund. Nothing in this
paragraph shall be construed as imposing upon the Administrator any obligation
to seek such instructions or advice, or to act in accordance with such advice
when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such
duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall have
no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless solely caused by or resulting from the gross negligence or willful
misconduct of the Administrator, its officers or employees. The Administrator
shall not be liable for any special, indirect, incidental, or consequential
damages of any kind whatsoever (including, without limitation, attorneys' fees)
under any provision of this Agreement or for any such damages arising out of any
act or failure to act hereunder. In any event, the Administrator's liability
under this Agreement shall be limited to its total annual compensation earned
and fees paid hereunder during the preceding twelve months for any liability or
loss suffered by the Fund including, but not limited to, any liability relating
to qualification of the Fund as a regulated investment company or any liability
relating to the Fund's compliance with any federal or state tax or securities
statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption, nor
shall any such failure or delay give the Fund the right to terminate this
Agreement.
The Fund shall indemnify and hold the Administrator harmless from all loss,
cost, damage and expense, including reasonable fees and expenses for counsel,
incurred by the Administrator resulting from any claim, demand, action or suit
in connection with the Administrator's acceptance of this Agreement, any action
or omission by it in the performance of its duties hereunder, or as a result of
acting upon any instructions reasonably believed by it to have been duly
authorized by the Fund, provided that this indemnification shall not apply to
actions or omissions of the Administrator, its officers or employees in cases of
its or their own gross negligence or willful misconduct.
The Fund will be entitled to participate at its own expense in the defense,
or, if it so elects, to assume the defense of any suit brought to enforce any
liability subject to the indemnification provided above. In the event the Fund
elects to assume the defense of any such suit and retain counsel, the
Administrator or any of its affiliated persons, named as defendant or defendants
in the suit, may retain additional counsel but shall bear the fees and expenses
of such counsel unless (i) the Fund shall have specifically authorized the
retaining of such counsel or (ii) the Administrator shall have determined in
good faith that the retention of such counsel is required as a result of a
conflict of interest.
The indemnification contained herein shall survive the termination of this
Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in
connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Fund or its shareholders or shareholders accounts and
will not disclose the same to any person except at the request or with the
written consent of the Fund.
-6-
<PAGE>
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Without derogating from obligations of the Administrator hereunder, the
Fund assumes full responsibility for complying with all securities, tax,
commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Administrator agrees that all records which it maintains for the Fund shall at
all times remain the property of the Fund, shall be readily accessible during
normal business hours, and shall be promptly surrendered upon the termination of
the Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Fund pursuant to Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under
the 1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Fund are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Fund form
time to time, have no authority to act or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall be effective as of the date first written above and
shall remain in effect until terminated in writing by either party on sixty (60)
days' prior written notice given by either party to the other party; provided,
however, that without limitation of any other remedy available at law or in
equity, upon termination of this Agreement by the Fund prior to three years from
the effective date of this Agreement, the Fund shall pay to the Administrator an
amount equal to fees waived by the Administrator under this Agreement.
Termination of this Agreement with respect to the Investment Fund shall in no
way affect the continued validity of this Agreement with respect to any other
investment fund established pursuant to Section 1. Upon termination of this
Agreement, the Fund shall pay to the Administrator such compensation and any
reimbursable expenses as may be due under the terms hereof as of the date of
such termination, including reasonable out-of-pocket expenses associated with
such termination. This Agreement may be modified or amended from time to time by
mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this Agreement
to be given to either party shall be in writing and deemed to have been given
when delivered in person or by confirmed facsimile, or posted by certified mail,
return receipt requested, to the following address (or such other address as a
party may specify by written notice to the other): if to the Fund:
___________________, Attn: ________________ fax: __________________ if to the
Administrator: American Data Services, Inc., The Hauppauge Corporate Center, 150
Motor Parkway, Hauppauge, New York 11788, Attn: ______________, fax: _________.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the
prior consent in writing of the other party, except that the Administrator may
assign this agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
-7-
<PAGE>
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the
Fund and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parities
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver nor shall it deprive
such party of the right thereafter to insist upon strict adherence to that term
or any term of this Agreement. Any waiver must be in writing signed by the
waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance
of the Agreement shall remain in effect, and if any provision is inapplicable to
any person or circumstance it shall nevertheless remain applicable to all other
persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process. The parties hereto all/each
agree that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
ORBITEX GROUP OF FUNDS
By:
-------------------------------------
Name:
Title:
AMERICAN DATA SERVICES, INC.
By: /s/
-------------------------------------
Name:
Title:
-9-
<PAGE>
SCHEDULE A
FEES AND EXPENSES
B-1
<PAGE>
SCHEDULE B
NOTICE FILING WITH
STATE SECURITIES ADMINISTRATORS
AT THE SPECIFIC DIRECTION OF THE FUND, THE ADMINISTRATOR WILL PREPARE REQUIRED
DOCUMENTATION AND MAKE NOTICE FILINGS IN ACCORDANCE WITH THE SECURITIES LAWS OF
EACH JURISDICTION IN WHICH FUND SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO
INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE FUND.
THE FUND SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (i) OF THOSE
JURISDICTIONS IN WHICH NOTICE FILINGS ARE TO BE SUBMITTED AND (ii) THE NUMBER OF
FUND SHARES TO BE PERMITTED TO BE SOLD IN EACH SUCH JURISDICTION. IN THE EVENT
THAT THE ADMINISTRATOR BECOMES AWARE OF (a) THE SALE OF FUND SHARES IN A
JURISDICTION IN WHICH NO NOTICE FILING HAS BEEN MADE OR (b) THE SALE OF FUND
SHARES IN EXCESS OF THE NUMBER OF FUND SHARES PERMITTED TO BE SOLD IN SUCH
JURISDICTION, THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE FUND, AND
IT SHALL BE THE FUND'S RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE ACTION
AND INSTRUCT THE ADMINISTRATOR WITH RESPECT THERETO.
The Blue Sky services shall consist of the following:
1. Filing of Fund's Initial Notice Filings, as directed by the Fund;
2. Filing of Fund's renewals and amendments as required;
3. Filing of amendments to the Fund's registration statement where
required;
4. Filing Fund sales reports where required;
5. Payment at the expense of the Fund of all Fund Notice Filing fees;
6. Filing the Prospectuses and Statements of Additional Information and
any amendments or supplements thereto where required;
7. Filing of annual reports and proxy statements where required; and
8. The performance of such additional services as the Administrator and
the Fund may agree in writing.
Unless otherwise specified in writing by the Administrator, Blue Sky services by
the Administrator shall not include determining the availability of exemptions
under a jurisdiction's blue sky law. Any such determination shall be made by the
Fund or its legal counsel. In connection with the services described herein, the
Fund shall issue in favor of the Administrator a power of attorney to submit
Notice Filings on behalf of the Fund, which power of attorney shall be
substantially in the form of Exhibit I attached hereto.
C-1
<PAGE>
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of ________, 1999 that the undersigned
Orbitex Group of Funds with principal offices at 660 Madison Avenue, New York,
NY (the "Fund") makes, constitutes, and appoints AMERICAN DATA SERVICES, INC.
(the "Administrator") with principal offices at The Hauppauge Corporate Center,
150 Motor Parkway, Hauppauge, New York 11788, its lawful attorney-in-fact for it
to do as if it were itself acting, the following:
1. REGISTRATION OF FUND SHARES. The power to register shares of the Fund in
each jurisdiction in which Fund shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Fund applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgment of the Administrator in connection with the
registration of Fund shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals
holding the titles of Officer, Blue Sky Manager, or Senior Blue Sky
Administrator at the Administrator shall have authority to act on behalf of
the Fund with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, director or employee of the Fund.
IN WITNESS WHEREOF, the Fund has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
ORBITEX GROUP OF FUNDS
By:
----------------------------------
Name:
Title:
I-1
EXHIBIT 6
TRANSFER AGENCY AND SERVICE AGREEMENT
between
ORBITEX GROUP OF FUNDS
and
AMERICAN DATA SERVICES, INC.
1C-Domestice Trust/Series
<PAGE>
TABLE OF CONTENTS
Page
1. TERMS AND APPOINTMENT; DUTIES OF ADS......................................1
2. FEES AND EXPENSES.........................................................3
3. REPRESENTATIONS AND WARRANTIES OF ADS.....................................3
4. REPRESENATIONS AND WARRANTIES OF THE FUND.................................4
5. DATA ACCESS AND PROPRIETARY INFORMATION...................................4
6. INDEMNIFICATION...........................................................5
7. STANDARD OF CARE..........................................................6
8. COVENANTS OF THE FUND AND ADS.............................................6
9. TERMINATION OF AGREEMENT..................................................7
10. ADDITIONAL FUNDS..........................................................7
11. ASSIGNMENT................................................................7
12. AMENDMENT.................................................................8
13. MASSACHUSETTS LAW TO APPLY................................................8
14. FORCE MAJEURE.............................................................8
15. CONSEQUENTIAL DAMAGES.....................................................8
16. MERGER OF AGREEMENT.......................................................8
17. COUNTERPARTS..............................................................8
-i-
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the _______, 1999, by and between Orbitex
Group of Funds, a Delaware business trust, having its principal office and place
of business at 660 Madison Avenue, New York, New York 10021 (the "Fund"), and
AMERICAN DATA SERVICES, INC., a New York company having its principal office
and place of business at The Hauppauge Corporate Center, 150 Motor Parkway,
Hauppauge, New York 11788 ("ADS").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to offer shares in Orbitex Focus 30 Fund (the
"Portfolio");
WHEREAS, the Fund on behalf of the Portfolio desires to appoint ADS as
its transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities, and ADS desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS AND APPOINTMENT; DUTIES OF ADS
1.1 Subject to the terms and conditions set forth in this Agreement,
the Fund, on behalf of the Portfolio, hereby employs and appoints
ADS to act as, and ADS agrees to act as its transfer agent for the
Fund's authorized and issued shares of beneficial interest
("Shares") and dividend disbursing agent and agent in connection
with any accumulation, open-account or similar plans provided to
the shareholders of the Portfolio ("Shareholders") and set out in
the currently effective prospectus and statement of additional
information ("prospectus") of the Fund on behalf of the Portfolio,
including without limitation any periodic investment plan or
periodic withdrawal program.
1.2 ADS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund, on behalf of the Portfolio,
and ADS, ADS shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii)
and (iii) above, ADS shall execute transactions
directly with broker-dealers authorized by the fund
who shall thereby be deemed to be acting on behalf
of the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the redeeming Shareholders;
<PAGE>
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
Portfolio;
(viii) Issue replacement certificates for those
certificates alleged to have been lost, stolen or
destroyed upon receipt by ADS of indemnification
satisfactory to ADS and protecting ADS and the Fund,
and ADS at its option, may issue replacement
certificates in place of mutilated stock
certificates upon presentation thereof and without
such indemnity;
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of shares of the Fund which are
authorized, based upon data provided to it by the
Fund, and issued and outstanding. ADS shall also
provide the Fund on a regular basis with the total
number of shares which are authorized and issued and
outstanding and shall have no obligation, when
recording the issuance of shares, to monitor the
issuance of such shares or to take cognizance of any
laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of
the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), ADS
shall: (i) perform the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and
nonresident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholders
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Fund to
monitor the total number of Shares sold in each State.
(c) In addition, the fund shall (i) identify to ADS in writing
those transactions and assets to be treated as exempt from
blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system
prior to activation and thereafter monitor the daily
activity for each State. The responsibility of ADS for the
Fund's blue sky State registration status is solely limited
to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these
services in Section 1 may be established from time to time
by agreement between the Fund on behalf of the Portfolio
and ADS per the attached service responsibility schedule.
ADS may at
2
<PAGE>
times perform only a portion of these services and the Fund
or its agent may perform these services on the Fund's
behalf.
(e) ADS shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in
writing between the Fund and ADS.
2. FEES AND EXPENSES
2.1 For the performance by ADS pursuant to this Agreement, the Fund
agrees on behalf of the Portfolio to pay ADS an annual maintenance
fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from
time to time subject to mutual written agreement between the Fund
and ADS.
2.2 In addition to the fee paid under Section 2.1 above, the Fund
agrees on behalf of the Portfolio to reimburse ADS for
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche,
tabulating proxies, records storage, or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In
addition, any other expenses incurred by ADS at the request or
with the consent of the Fund, will be reimbursed by the Fund on
behalf of the Portfolio.
2.3 The Fund agrees on behalf of the Portfolio to pay all fees and
reimbursable expenses within five days following the receipt of
the respective billing notice. Postage for mailing of dividends,
proxies, Fund reports and other mailings to all shareholder
accounts shall be advanced to ADS by the Fund at least seven (7)
days prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
4. REPRESENATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that:
4.1 It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
4.2 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
3
<PAGE>
4.3 All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.4 It is an open-end management investment company registered under
the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as
amended on behalf of the Portfolio is currently effective and will
remain effective, and appropriate state securities law filings
have been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, compute programs,
screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by ADS as part of the
Fund's ability to access certain Fund-related data ("Customer
Data") maintained by ADS on data bases under the control and
ownership of ADS or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary
information (collectively, "Proprietary Information") of
substantial value to ADS or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees
to treat all Proprietary Information as proprietary to ADS and
further agrees that it shall not divulge any Proprietary
Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund
agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by ADS and solely in accordance with
ADS's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any
portion of the Proprietary Information, and if such access
is inadvertently obtained, to inform in a timely manner of
such fact and dispose of such information in accordance
with ADS's instructions;
(d) to refrain from causing or allowing the data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of ADS;
(e) that the fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by ADS to
protect at ADS's expense the rights of ADS in Proprietary
Information at common law, under federal copyright law and
under other federal or state law.
Each party shall take reasonable efforts to advise its employees
of their obligations pursuant to this Section 5. The obligations
of this Section shall survive any earlier termination of this
Agreement.
5.2 If the Fund notifies ADS that any of the Data Access Services do
not operate in material compliance with the most recently issued
user documentation for such services, ADS shall endeavor in a
timely manner to correct such failure. Organization from which ADS
may obtain certain data included in the Data Access Services are
solely responsible for the contents of such data and the Fund
agrees to make no claim against ADS arising out
4
<PAGE>
of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION
THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. ADS
EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to
originate electronic instructions to ADS in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information, then in such event
ADS shall be entitled to rely on the validity and authenticity of
such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security
procedures established by ADS from time to time.
6. INDEMNIFICATION
6.1 ADS shall not be responsible for, and the Fund shall on behalf of
the Portfolio indemnify and hold ADS harmless from and against,
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or
willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by ADS or its agents or
subcontractors of information, records, documents or
services which (i) are received by ADS or its agents or
subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous
transfer agent or registrar.
(d) The reliance on, or the carrying out by ADS or its agents
or subcontractors of any instructions or requests of the
Fund on behalf of the Portfolio.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such
Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of
such Shares in such state.
(f) The negotiation and processing by ADS of checks not made
payable to the order of ADS, the Fund, the Fund's
management company, transfer agent or distributor or the
retirement account custodian or trustee for a plan account
investing in Shares, which checks are tendered to ADS for
the purchase of Shares (i.e., checks made payable to
prospective or existing Shareholders, such checks are
commonly known as "third party checks").
6.2 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed
by ADS under this Agreement, and ADS and its agents or
subcontractors shall not be liable and shall be indemnified by the
Fund on behalf of the Portfolio for any
5
<PAGE>
action taken or omitted by it in reliance upon such instructions
or upon the opinion of such counsel. ADS, its agents and
subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information,
data, records or documents provided ADS or its agents or
subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held
to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. ADS, its agents
and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer
agent or former registrar, or of a cotransfer agent or
coregistrar.
6.3 In order that the indemnification provisions contained in this
Section 6 shall apply, upon the assertion of a claim for which the
Fund may be required to indemnify ADS, ADS shall promptly notify
the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall
have the option to participate with ADS in the defense of such
claim or to defend against said claim in its own name or in the
name of ADS. ADS shall in no case confess any claim or make any
compromise in any case in which the Fund may be required to
indemnify ADS except with the Fund's prior written consent.
7. STANDARD OF CARE
ADS shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith,
or willful misconduct or that of its employees.
8. COVENANTS OF THE FUND AND ADS
8.1 The Fund shall on behalf of the Portfolio promptly furnish to ADS
the following:
(a) A certified copy of the resolution of the Board of Trustees
of the Fund authorizing the appointment of ADS and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
8.2 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signatures
imprinting devices, if any; and for the preparation or use, and
for keeping account of, such certificates, forms and devices.
8.3 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of
1940, as amended, and the Rules thereunder, ADS agrees that all
such records prepared or maintained by ADS relating to the
services to be performed by ADS hereunder are the property of the
Fund and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered
promptly to the Fund on and in accordance with its request.
6
<PAGE>
8.4 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying
out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be
required by law.
8.5 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the
Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. ADS reserves the right, however, to
exhibit the Shareholder records to any person whenever it is
advised by its counsel that it may be held liable for the failure
to exhibit the Shareholder records to such person.
9. TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will
be borne by the Fund on behalf of the Portfolio. Additionally, ADS
reserves the right to charge for any other reasonable expenses
associated with such termination and/or a charge equivalent to the
average of three (3) months' fees.
10. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of
Shares in addition to Orbitex Focus 30 Fund with respect to which
it desires to have ADS render services as transfer agent under the
terms hereof, it shall so notify ADS in writing, and if ADS agrees
in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
11. ASSIGNMENT
11.1 Except as provided in Section 11.3 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
11.3 ADS may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial
Data Services, Inc., a Massachusetts corporation ("BFDS") which is
duly registered as a transfer agent pursuant to Section 17A(c)(2)
of the Securities Exchange Age of 1934, as amended ("Section
17A(c)(2)"), (ii) a BFDS subsidiary duly registered as a transfer
agent pursuant to Section 17A(c)(2) or (iii) a BFDS affiliate;
provided, however, that ADS shall be as fully responsible to the
Fund for the acts and omissions of any subcontractors as it is for
its own acts and omissions.
12. AMENDMENT
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
13. MASSACHUSETTS LAW TO APPLY
7
<PAGE>
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
14. FORCE MAJEURE
In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such
causes.
15. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to
act hereunder.
16. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
17. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number
of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ORBITEX GROUP OF FUNDS
By:
------------------------------
ATTEST:
- -------------------------------
AMERICAN DATA SERVICES, INC.
By: /s/
------------------------------
ATTEST:
/s/
- -------------------------------
9
<PAGE>
AMERICAN DATA SERVICES, INC.
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
Bank Fund
1. Receives orders for the purchase of Shares.
2. Issue Shares and hold Shares in Shareholders
accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above directly with
broker-dealers.
5. Pay over monies to redeeming Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep current and accurate control book
for each issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current Shareholders.
15. Withhold taxes on U.S. resident and nonresident alien
accounts.
16. Prepare and file U.S. Treasury Department forms.
17. Prepare and mail account and confirmation statements
for Shareholders.
18. Provide Shareholder account information.
19. Blue sky reporting.
* Such services are more fully described in Section 1.2 (a),
(b) and (c) of the Agreement.
ORBITEX GROUP OF FUNDS
By:
-----------------------------
<PAGE>
ATTEST:
- -------------------------------------
AMERICAN DATA SERVICES, INC.
By:
-----------------------------
ATTEST:
- -------------------------------------
EXHIBIT 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement/Prospectus constituting part
of this registration statement on Form N-14 (the "Registration Statement") of
our report dated June 12, 1998, relating to the financial statements and
financial highlights (the "Financial Statements") appearing in the April 30,
1998 Annual Report to the Shareholders of Strategic Natural Resources Fund,
Info-Tech & Communications Fund, Growth Fund, Asian High Yield Fund, and Asian
Select Advisors Fund, each a series of Orbitex Group of Funds, which appears in
Appendix D to the Proxy Statement/Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 26, 1999
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
ASM Index 30 Fund, Inc.
In connection with the proposed reorganixation of ASM Index 30 Fund, Inc. (the
"Fund"), we hereby consent to the incorporation by reference in the Registration
Statement of Orbitex Group of Funds on Form N-14 (the "Registration Sttement")
of our report dated December 30, 1998, except for Note 6 and Note 7 as to which
the date is March 9, 1999, on our audit of the financial statements and
financial highlights of the Fund, which report is included in the Fund's Annual
Report to Shareholders for the year ended October 31, 1998 and which is
incorporated by reference as part of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
Miami, Florida
May 28, 1999
