<PAGE>
[LOGO]
PROSPECTUS JANUARY 19, 2000
-----------------------------
ORBITEX(R)
GROUP OF FUNDS
ORBITEX GROWTH FUND
ORBITEX INFO-TECH &
COMMUNICATIONS FUND
ORBITEX STRATEGIC
NATURAL RESOURCES FUND
ORBITEX FOCUS 30 FUND
ORBITEX HEALTH &
BIOTECHNOLOGY FUND
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TABLE OF CONTENTS
<TABLE>
<S> <C>
FUNDS AT A GLANCE........................................... 3
Key Investment Concepts............................. 3
Orbitex Growth Fund................................. 4
Orbitex Info-Tech & Communications Fund............. 10
Orbitex Strategic Natural Resources Fund............ 16
Orbitex Focus 30 Fund............................... 22
Orbitex Health & Biotechnology Fund................. 28
FUND DETAILS................................................ 32
Orbitex Growth Fund................................. 32
Orbitex Info-Tech & Communications Fund............. 33
Orbitex Strategic Natural Resources Fund............ 34
Orbitex Focus 30 Fund............................... 35
Orbitex Health & Biotechnology Fund................. 36
MORE INFORMATION ABOUT RISKS................................ 37
YOUR ACCOUNT................................................ 40
Types of Accounts................................... 40
Choosing a Class.................................... 40
Classes in Detail................................... 42
Rule 12b-1 Plans in Detail.......................... 46
Purchasing Shares................................... 46
Redeeming Shares.................................... 49
Exchanging Shares................................... 52
PRICING OF FUND SHARES...................................... 53
DISTRIBUTIONS............................................... 53
FEDERAL TAX CONSIDERATIONS.................................. 54
Taxes on Distributions.............................. 54
Taxes on Sales or Exchanges......................... 54
"Buying a Dividend"................................. 54
Tax Withholding..................................... 54
MANAGEMENT.................................................. 55
Investment Adviser.................................. 55
Other Service Providers............................. 55
FINANCIAL HIGHLIGHTS........................................ 56
</TABLE>
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
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FUNDS AT A GLANCE - KEY INVESTMENT CONCEPTS
This Prospectus describes each Funds' investment objectives, principal
investment strategies, principal investments and risks. You may find the
following definitions of these terms useful as you read the description of the
Orbitex Group of Funds.
[LOGO]
INVESTMENT OBJECTIVE
A fund's investment objective is its ultimate, overriding goal. It
is the way in which the fund defines itself amongst all other mutual funds.
There is a wide range of different potential investment objectives. There can be
no assurance that any given fund will attain its investment objective. You
should think carefully about whether a fund's investment objective is consistent
with your own objective for the money that you are contemplating investing in
that fund. If not, you should consider another fund.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
A fund's principal investment strategies are the primary means by
which the investment adviser for the fund (the "Adviser") seeks to
attain its investment objective. A strategy may, among other things, take the
form of an intention on the part of the Adviser to invest primarily in certain
types of securities such as stocks, bonds, or money market instruments, or to
concentrate investments in a particular industry (e.g. technology, healthcare,
energy) or group of industries. Your financial consultant can assist you in
understanding these strategies.
[LOGO]
PRINCIPAL INVESTMENTS
In order to implement its investment strategies, a fund will invest
principally in certain types of securities. These securities may
include equity securities, such as common stocks, preferred stocks, convertible
securities and warrants, or debt securities, such as corporate bonds, government
securities and mortgage and other asset-backed securities.
[LOGO]
PRINCIPAL RISKS
The principal risks of a fund are those potential occurrences that, in the
judgement of the Adviser, have the greatest likelihood of disrupting,
interfering with, or preventing a fund from attaining its investment objective.
Your financial consultant can assist you in understanding these risks.
Prospectus - 3
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FUNDS AT A GLANCE - ORBITEX GROWTH FUND
This section briefly describes the Orbitex Growth Fund's goals, principal
investment strategies, risks, expenses and performance. For further information
on how this Fund is managed, please read the section entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Growth Fund is to provide long-term
growth of capital through selective investment in securities of companies of all
sizes that offer potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Under normal market conditions, investing at least 65% of its total assets in
equity securities such as common and preferred stock and securities
convertible into stock.
- - Composing a portfolio based upon a "bottom-up" growth-oriented strategy for
selecting investments with a secondary focus on value stocks. The Adviser
seeks to identify companies that are undervalued by the stock market and less
expensive than comparable companies. To do so, the Adviser employs measures
of intrinsic value, such as the company's price-to-earnings ratio (the price
of a stock divided by its earnings per share), historical stock prices and
cash flows (earnings before depreciation and non-cash charges). The Adviser
also employs criteria to identify companies it believes will experience
earnings growth. Finally, the Adviser attempts to identify investment and
economic themes that can drive profits. Finally, the Fund may sell those
holdings that the Adviser has identified as having exceeded their fair market
value and may also sell the securities of a company that has experienced a
fundamental shift in its core business processes and objectives. The Fund may
also sell the securities of a company when the industry in which the company
operates has undergone a shift in focus or industry dynamics.
- - Investing in equity securities of domestic and foreign issuers.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political or
market conditions, as well as company-specific factors (see "Issuer-Specific
Risk" below). Consequently, the value of your investment in the Fund will go
up and down, which means that you could lose money.
- - ISSUER-SPECIFIC RISK: The price of an individual security or particular type
of security can be more volatile than the market as a whole and can fluctuate
differently than the market as a whole. An individual issuer's securities can
rise or fall dramatically with little or no warning based upon such things as
a better (or worse) than expected earnings report, news about the development
of a promising product, or the loss of key management personnel. There is
also a risk that the price of a security may never reach a level that the
Adviser believes is representative of its full value or that it may even go
down in price.
- - RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be riskier
than U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign controls on
investment and currency exchange, withholding taxes, a lack of adequate
company information,
Prospectus - 4
<PAGE>
less liquid and more volatile markets, and a lack of governmental regulation.
Consequently, there is a risk that a foreign security may never reach the
price that the Adviser believes is representative of its full value or that
it may even go down in price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX GROWTH FUND
We designed the ORBITEX GROWTH FUND for investors who seek one or more of the
following:
- high long-term growth
- a stock fund to serve as a core holding in an investor's portfolio
- a stock fund to complement a portfolio of more conservative investments
- a stock fund that uses a blend of value and growth investment styles
- a stock fund that invests in domestic and foreign companies
Prospectus - 5
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FUNDS AT A GLANCE - ORBITEX GROWTH FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of Class A Shares of the
Orbitex Growth Fund during the last year. The information in the table gives
some indication of the risks of an investment in the Fund by comparing the
Fund's performance with a broad measure of market performance. Past performance
does not necessarily indicate how the Fund will perform in the future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ORBITEX GROWTH FUND -- CLASS A SHARES
<S> <C>
TOTAL RETURN FOR THE YEAR ENDED DECEMBER 31
1998 7.55%
1999 98.39%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
66.34% (quarter ended 12-31-99) and the lowest return for a quarter was (16.96)%
(quarter ended 9-30-98).
Prospectus - 6
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1999)
The returns in the following table include the effect of Class A Shares' maximum
applicable front-end sales charge and Class B Shares' maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
PAST 1 YEAR LIFE OF FUND
<S> <C> <C>
Orbitex Growth Fund Class A* 86.99% 44.71%
Orbitex Growth Fund Class B** 92.98% 79.54%
S&P 500-Registered Trademark- Index*** 21.04% 26.21%+
Lipper Multi-Cap Core Funds Index**** 20.79% 16.54%++
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 22, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 16, 1998. CLASS B'S RETURNS
PRIOR TO SEPTEMBER 16, 1998 THROUGH OCTOBER 22, 1997 ARE THOSE OF CLASS A,
WHICH REFLECT A 12b-1 FEE OF 0.40%. IF CLASS B'S 12b-1 FEE HAD BEEN
REFLECTED, TOTAL RETURNS PRIOR TO SEPTEMBER 16, 1998 WOULD HAVE BEEN LOWER.
*** THE S&P 500-REGISTERED TRADEMARK- INDEX is an unmanaged index. Index returns
assume reinvestment of dividends; unlike the Fund's returns, however, they
do not reflect any fees or expenses.
****THE LIPPER MULTI-CAP CORE FUNDS INDEX is an equal-weighted performance
index, adjusted for capital-gain distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper, Inc.
+ From October 31, 1997.
++ From October 22, 1997.
Prospectus - 7
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FUNDS AT A GLANCE - ORBITEX GROWTH FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares or Class B Shares of the Orbitex Growth Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
SHARES SHARES
------ ------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %
of offering price) 5.75%(1) None
Maximum Deferred Sales Charge (Load) (as a % of lower of
original purchase price or redemption proceeds) None 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends Distributions None None
Redemption Fee (as a % of amount redeemed, if applicable) None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.75% 0.75%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(4)
Other Expenses 16.88% 16.88%
------ ------
Total Annual Operating Expenses 18.03% 18.63%
Fee Waiver and Reimbursement 16.03%(5) 16.03%(5)
------ ------
Net Expenses 2.00% 2.60%
====== ======
</TABLE>
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(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B Shares declines over time.
(4) Including a 0.25% shareholder servicing fee.
(5) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary or non-recurring
expenses, so that the expense ratio of Class A Shares' and Class B
Shares does not exceed 2.00% and 2.60%, respectively. This arrangement
will remain in effect until at least December 31, 2000. The information
contained in the table above and the example below reflects the expenses
of each class of the Fund taking into account any applicable fee waivers
and or reimbursements.
Prospectus - 8
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Growth Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your investment
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C>
CLASS A CLASS B
------ ------
1 $ 766 $ 763
3 $3,826 $3,876
5 $6,140 $6,248
10 $9,749 $9,761
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C>
CLASS A CLASS B
------ ------
1 $ 766 $ 263
3 $3,826 $3,576
5 $6,140 $6,048
10 $9,749 $9,761
</TABLE>
Prospectus - 9
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FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
This section briefly describes the Orbitex Info-Tech & Communications Fund's
goals, principal investment strategies, risks, expenses and performance. For
further information on how this Fund is managed, please read the section
entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
- - The objective of the Orbitex Info-Tech & Communications Fund is long-term
growth of capital through selective investment in the securities of
communications, information and related technology companies.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Investing at least 65% of its total assets in equity securities issued by
communications, information and related technology companies (see description
of communications and information companies in "Fund Details" section on
page 33).
- - The Adviser will attempt to modify portfolio composition to benefit from
changing relative performance among various sub-sectors of the
communications, information and related technology industries. The Fund may
sell those holdings that the Adviser has identified as having exceeded their
fair market value and may also sell the securities of a company that has
experienced a fundamental shift in its core business processes and
objectives. The Fund may also sell the securities of a company when the
industry in which the company operates has undergone a shift in focus or
industry dynamics.
- - Investing primarily in common stocks.
- - Investing in equity securities of both domestic and foreign issuers.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political or
market conditions, as well as company-specific factors (see "Issuer-Specific
Risk" below). Consequently, the value of your investment in the Fund will go
up and down, which means that you could lose money.
- - RISKS OF INFORMATION AND COMMUNICATIONS SECTOR: Because of its specific
focus, the Fund's performance is closely tied to, and affected by, events
occurring in the information, communications, and related technology
industries. Companies in the same industry often face similar obstacles,
issues and regulatory burdens. As a result, the securities owned by the Fund
may react similarly to and move in unison with one another. Because
technology continues to advance at an accelerated rate, and the number of
companies and product offerings continues to expand, these companies could
become increasingly sensitive to short product cycles, aggressive pricing and
intense competition. Many technology companies sell stock before they have a
commercially viable product, and may be acutely susceptible to problems
relating to bringing their products to market. Additionally, many technology
companies have very high price/earnings ratios, high price volatility, and
high personnel turnover due to severe labor shortages for skilled technology
professionals.
Prospectus - 10
<PAGE>
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular type
of security can be more volatile than the market as a whole and can fluctuate
differently than the market as a whole. An individual issuer's securities can
rise or fall dramatically with little or no warning based upon such things as
a better (or worse) than expected earnings report, news about the development
of a promising product, or the loss of key management personnel. There is
also a risk that the price of a security may never reach a level that the
Adviser believes is representative of its full value or that it may even go
down in price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
- - RISKS OF FOREIGN SECURITIES: Foreign securities may be riskier than U.S.
investments because of factors such as unstable international political and
economic conditions, currency fluctuations, foreign controls on investment
and currency exchange, withholding taxes, a lack of adequate company
information, less liquid and more volatile markets, and a lack of
governmental regulation. Consequently, there is a risk that a foreign
security may never reach the price that the Adviser believes is
representative of its full value or that it may even go down in price.
WHO MAY WANT TO INVEST IN THE ORBITEX INFO-TECH & COMMUNICATIONS FUND?
We designed the ORBITEX INFO-TECH & COMMUNICATIONS FUND for investors who want
to capitalize on potential opportunities in telecommunications and information
industries and who seek one or more of the following:
- high long-term growth
- a stock fund to complement a portfolio of more conservative investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in foreign and domestic companies
Prospectus - 11
<PAGE>
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FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of the Class A Shares of the
Orbitex Info-Tech & Communications Fund during the last year. The information in
the table gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance.
Past performance does not necessarily indicate how the Fund will perform in the
future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ORBITEX INFO-TECH & COMMUNICATIONS
FUND -- CLASS A SHARES
<S> <C>
TOTAL RETURN FOR THE YEAR ENDED DECEMBER 31
1998 43.43%
1999 167.86%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
62.60% (quarter ended 12-31-99) and the lowest return for a quarter was (19.17)%
(quarter ended 9-30-98).
Prospectus - 12
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1999)
The returns in the following table include the effect of Class A Shares' maximum
applicable front-end sales charge and Class B Shares' maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C>
PAST 1 YEAR LIFE OF FUND
Orbitex Info-Tech & Communications Fund Class A* 152.43% 79.50%
Orbitex Info-Tech & Communications Fund Class B** 161.40% 139.07%
S&P 500-Registered Trademark- Index*** 21.04% 26.21%+
Lipper Science and Technology Funds Index**** 113.92% 57.03%++
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 22, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 16, 1998.
*** THE S&P 500-REGISTERED TRADEMARK- INDEX is an unmanaged index. Index returns
assume reinvestment of dividends; unlike the Fund's returns, however, they
do not reflect any fees or expenses.
****THE LIPPER SCIENCE AND TECHNOLOGY FUNDS INDEX is an equal-weighted
performance index, adjusted for capital-gain distributions and income
dividends, of the largest qualifying funds in this investment objective, and
is compiled by Lipper, Inc.
+ From October 31, 1997.
++ From October 22, 1997.
Prospectus - 13
<PAGE>
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FUNDS AT A GLANCE - ORBITEX INFO-TECH & COMMUNICATIONS FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares, Class B Shares or Class C Shares of the Orbitex Info-Tech &
Communications Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHARES SHARES SHARES
------- ------- -------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %
of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as a % of lower of
original purchase price or redemption proceeds) None(2) 5.00%(3) 1.00%(4)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses 2.63% 2.63% 2.63%(6)
------- ------- -------
Total Annual Operating Expenses 4.28% 4.88% 4.88%(6)
Fee Waiver and Expense Reimbursement 2.28%(7) 2.28%(7) 2.28%(7)
------- ------- -------
Net Expenses 2.00% 2.60% 2.60%
======= ======= =======
</TABLE>
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(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B Shares declines over time.
(4) The CDSC applies to redemptions of Class C Shares within eighteen months
of purchase.
(5) Including a 0.25% shareholder servicing fee.
(6) Other Expenses and Total Annual Operating Expenses are estimated.
(7) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary or non-recurring
expenses, so that the expense ratio of Class A Shares, Class B Shares
and Class C Shares does not exceed 2.00%, 2.60% and 2.60%, respectively.
This arrangement will remain in effect until at least December 31, 2000.
The information contained in the table above and the example below
reflects the expenses of each class of the Fund taking into account any
applicable fee waivers and or reimbursements.
Prospectus - 14
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Info-Tech & Communications Fund with the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS C
------ ------ ------
1 $766 $763 $363
3 $1,603 $1,564 $1,264
5 $2,452 $2,467 $2,267
10 $4,629 $4,558 $4,785
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS C
------ ------ ------
1 $766 $263 $263
3 $1,603 $1,264 $1,264
5 $2,452 $2,267 $2,267
10 $4,629 $4,558 $4,785
</TABLE>
Prospectus - 15
<PAGE>
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FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
This section describes the Orbitex Strategic Natural Resources Fund's goals,
principal investment strategies, risks, expenses and performance. For further
information on how this Fund is managed, please read the section entitled "Fund
Details."
[LOGO]
INVESTMENT OBJECTIVE
- - The objective of the Orbitex Strategic Natural Resources Fund is long-term
growth of capital through selective investment in the securities of companies
engaged in natural resources industries and industries supportive to natural
resources industries.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in securities of companies that the Adviser
believes are positioned to benefit from increasing worldwide
demand for natural resources. The Fund may sell those holdings that it has
identified as having exceeded their fair market value and may also sell the
securities of a company that has experienced a fundamental shift in its core
business processes and objectives. The Fund may also sell the securities of a
company when the industry in which the company operates has undergone a shift in
focus or industry dynamics.
The Fund's principal investment strategies include:
- - Investing at least 65% of its total assets in equity securities issued by
natural resources companies (see description of natural resources companies
in "Fund Details" section on page 34).
- - Investing primarily in common stocks.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
- - Investing up to 15% of total assets in securities of foreign companies (with
no limit on the percentage the Fund may invest in Canadian issuers).
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political or
market conditions, as well as company-specific factors (see "Issuer-Specific
Risks" below). Consequently, the value of your investment in the Fund will go
up and down, which means that you could lose money.
- - RISKS OF NATURAL RESOURCES SECTOR: Because of its specific focus, the Fund's
performance is closely tied to and affected by events occurring in the
natural resources industries. Companies in the same industry often face
similar obstacles, issues and regulatory burdens. As a result, the securities
owned by the Fund may react similarly to and move in unison with one another.
Companies in the natural resources sector are subject to swift fluctuations
in supply and demand. These fluctuations may be caused by events relating to
international political and economic developments, energy conservation, the
success of exploration projects, and tax and other governmental regulatory
policies. Consequently, the Fund's performance may sometimes be significantly
better or worse than that of other types of funds.
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular type
of security can be more volatile than the market as a whole and can fluctuate
differently than the value of the market as a whole. An individual issuer's
securities can rise or fall dramatically with little
Prospectus - 16
<PAGE>
or no warning based upon such things as a better (or worse) than expected
earnings report, news about the development of a promising product, or the
loss of key management personnel. There is also a risk that the price of a
security may never reach the level that the Adviser believes is
representative of its full value or that it may even go down in price.
- - RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be riskier
than U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign controls on
investment and currency exchange, withholding taxes, a lack of adequate
company information, less liquid and more volatile markets, and a lack of
governmental regulation. Consequently, there is a risk that a foreign
security may never reach the price that the Adviser believes is
representative of its full value or that it may even go down in price.
WHO MAY WANT TO INVEST IN THE ORBITEX STRATEGIC NATURAL RESOURCES FUND?
We designed the ORBITEX STRATEGIC NATURAL RESOURCES FUND for investors who see
strong economic trends as an indicator of future natural resource demand and who
seek one or more of the following:
- high long-term growth
- a stock fund to complement a portfolio of more conservative investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in foreign and domestic companies
Prospectus - 17
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
PERFORMANCE AND VOLATILITY
The bar chart and table below show the performance of the Class A Shares of the
Orbitex Strategic Natural Resources Fund during the last year. The information
in the table gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance.
Past performance does not necessarily indicate how the Fund will perform in the
future.
The returns in the chart do not include the effect of the Fund's front-end sales
charge for Class A Shares, but do include the effect of fee waivers and expense
reimbursements by the Adviser. If the effect of the sales charge were reflected
or if the fee waivers and expense reimbursements had not been in effect, returns
would be lower than those shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ORBITEX STRATEGIC
NATURAL RESOURCES FUND -- CLASS A SHARES
<S> <C>
TOTAL RETURN FOR THE YEAR ENDED DECEMBER 31
1998 (23.90)%
1999 38.54%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
17.36% (quarter ended 6-30-99) and the lowest return for a quarter was (21.77)%
(quarter ended 9-30-98).
Prospectus - 18
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1999)
The returns in the following table include the effect of Class A Shares' maximum
applicable front-end sales charge and Class B Shares' maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C>
PAST 1 YEAR LIFE OF FUND
Orbitex Strategic Natural Resources Fund Class A* 30.61% 1.79%
Orbitex Strategic Natural Resources Fund Class B** 34.15% 23.66%
S&P 500-Registered Trademark- Index*** 21.04% 26.21%+
Lipper Natural Resources Funds Index**** 31.40% (2.71)%++
</TABLE>
* CLASS A SHARES COMMENCED OPERATIONS ON OCTOBER 23, 1997.
** CLASS B SHARES COMMENCED OPERATIONS ON SEPTEMBER 21, 1998.
*** THE S&P 500-REGISTERED TRADEMARK- INDEX IS AN UNMANAGED INDEX. Index returns
assume reinvestment of dividends; unlike the Fund's returns, however, they
do not reflect any fees or expenses.
****THE LIPPER NATURAL RESOURCES FUNDS INDEX is an equal-weighted performance
index, adjusted for capital-gain distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper, Inc.
+ From October 31, 1997.
++ From October 23, 1997.
Prospectus - 19
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX STRATEGIC NATURAL RESOURCES FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares or Class B Shares of the Orbitex Strategic Natural Resources
Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
SHARES SHARES
------- -------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %
of offering price) 5.75%(1) None
Maximum Deferred Sales Charge (Load) (as a % of lower of
original purchase price or redemption proceeds) None(2) 5.00%(3)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends Distributions None None
Redemption Fee (as a % of amount redeemed, if applicable) None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(4)
Other Expenses 5.53% 5.53%
------- -------
Total Annual Operating Expenses 7.18% 7.78%
Fee Waiver and Expense Reimbursement 5.18%(5) 5.18%(5)
------- -------
Net Expenses 2.00% 2.60%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B Shares declines over time.
(4) Including a 0.25% shareholder servicing fee.
(5) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary or non-recurring
expenses, so that the expense ratio of Class A Shares and Class B Shares
does not exceed 2.00% and 2.60%, respectively. This arrangement will
remain in effect until at least December 31, 2000. The information
contained in the table above and the example below reflects the expenses
of each class of the Fund taking into account any applicable fee waivers
and or reimbursements.
Prospectus - 20
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Strategic Natural Resources Fund with the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B
------ ------
1 $766 $763
3 $2,130 $2,112
5 $3,435 $3,477
10 $6,457 $6,424
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B
------ ------
1 $766 $263
3 $2,130 $1,812
5 $3,435 $3,277
10 $6,457 $6,424
</TABLE>
Prospectus - 21
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
This section describes the Orbitex Focus 30 Fund's goals, principal investment
strategies, risks, expenses and performance. For further information on how this
Fund is managed, please read the section entitled "Fund Details."
[LOGO]
INVESTMENT OBJECTIVE
- - The objective of the Orbitex Focus 30 Fund is long-term growth of capital and
current income through focused investment in the securities of some or all of
the 30 companies listed on the New York Stock Exchange that make up the Dow
Jones Industrial Average. The Fund is not an index fund.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Investing at least 90% of its total assets in the common stock of some or all
of the 30 companies that make up the Dow Jones Industrial Average ("DJIA").*
The stocks of these widely known companies are all listed on the New York
Stock Exchange and represent major American corporations engaged in a variety
of industries. The Adviser will weight the Fund's investments toward the DJIA
companies that it believes will perform better than other DJIA companies.
AND
- - Investing up to 10% of its assets in common stocks of companies included in
the S&P 500-Registered Trademark- Index.**
- - The Fund may sell those holdings that the Adviser has identified as having
exceeded their fair market value and may also sell the securities of a
company that has experienced a fundamental shift in its core business
processes and objectives. The Fund may also sell the securities of a company
when the industry in which it operates has undergone a shift in focus or
industry dynamics.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political or
market conditions, as well as company-specific factors (see "Issuer-Specific
Risks" below). Consequently, the value of your investment in the Fund will go
up and down, which means that you could lose money.
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular type
of security can be more volatile than the market as a whole and can fluctuate
differently than the value of the market as a whole. An individual issuer's
securities can rise or fall dramatically with little or no warning based upon
such things as a better (or worse) than expected earnings report, news about
the development of a promising product, or the loss of key management
personnel. There is also a risk that the price of a security may never reach
the level that the Adviser believes is representative of its full value or
that it may even go down in price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
- ------------------------
* "Dow Jones Industrial Average" and "DJIA" are the property of Dow Jones &
Company. The Orbitex Focus 30 Fund is neither affiliated with, nor endorsed by,
Dow Jones & Company.
- ------------------------
** "S&P 500 Index" is a registered trademark of McGraw-Hill Co., Inc. The
Orbitex Focus 30 Fund is neither affiliated with, nor endorsed by, McGraw- Hill
Co., Inc.
Prospectus - 22
<PAGE>
WHO MAY WANT TO INVEST IN THE ORBITEX FOCUS 30 FUND?
We designed the ORBITEX FOCUS 30 FUND for investors who seek one or more of the
following:
- high long-term growth
- a stock fund that focuses its investments in the 30 companies included in
the Dow Jones Industrial Average
- a stock fund to complement a portfolio of more conservative investments
- a stock fund that uses primarily a blend of value and growth oriented
investment strategies
Prospectus - 23
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
PERFORMANCE AND VOLATILITY
Before the close of business on July 9, 1999, the Fund operated as a separate
fund called the ASM Index 30 Fund ("ASM Fund"). On July 12, 1999, the Fund was
reorganized as a new Fund of the Orbitex Group of Funds. In connection with this
reorganization, Class A Shares and Class B Shares were added to the Fund, while
existing shareholders of the ASM Fund received Class D Shares in exchange for
their ASM Fund shares. Upon the effectiveness of the reorganization, the
investment policy of the Fund changed from the "passive" investment in an equal
number of shares of each of the companies in the DJIA to the "active" investment
in some or all of those companies based on the Adviser's assessment of the
prospects for those companies. In addition, the Fund may now invest up to 10% of
its assets in other companies included in the S&P 500-Registered Trademark-
Index. Moreover, the ASM Fund was subject to a different level of fees than are
applied to the Fund.
The bar chart and table below show the performance of Class D Shares of the
Orbitex Focus 30 Fund during the last year end until July 9, 1999 when it
operated as the ASM Fund. The bar chart and table below also show the
performance of Class D Shares of the Orbitex Focus 30 Fund after the
reorganization of the Fund on July 12, 1999. The information gives some
indication of the risks of an investment in the Fund by comparing the Fund's
performance with a broad measure of market performance. Past performance does
not necessarily indicate how the Fund will perform in the future. Furthermore,
because of the change in investment policy and a different fee level, the
performance shown below, which reflects the Fund's previous "passive" investment
policy, should not be considered indicative of the performance of the Fund as an
actively managed Fund. In addition, the performance of the ASM Fund would have
been lower had it been subject to the higher level of expenses for the Fund.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ORBITEX FOCUS 30 FUND -- CLASS D SHARES
<S> <C>
TOTAL RETURN FOR THE YEARS ENDED DECEMBER 31
1992 5.70%
1993 13.33%
1994 1.04%
1995 29.05%
1996 24.78%
1997 24.51%
1998 16.78%
1999 27.68%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
17.08% (quarter ended 3-31-97) and the lowest return for a quarter was (11.72%)
(quarter ended 9-30-98).
Prospectus - 24
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1999)
The returns in the following table include the effect of Class A Shares maximum
applicable front-end sales charge and Class B Shares maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
Orbitex Focus 30 Fund Class A* 21.46% 18.27% 8.25%
Orbitex Focus 30 Fund Class B* 21.21% 22.02% 13.00%
Orbitex Focus 30 Fund Class D** 27.68% 24.49% 14.47%
Dow Jones Industrial Average*** 27.21% 27.04% 19.85%+
Lipper Large Cap Value Funds Index**** 10.78% 22.11% (0.20)%++
</TABLE>
* CLASS A SHARES AND CLASS B SHARES COMMENCED OPERATIONS ON JULY 12, 1999.
CLASS A'S AND CLASS B'S RETURNS PRIOR TO JULY 12, 1999 ARE THOSE OF
CLASS D, WHICH REFLECT NO 12b-1 FEE. IF CLASS A'S AND B'S 12b-1 FEE HAD BEEN
REFLECTED, TOTAL RETURNS PRIOR TO JULY 12, 1999 WOULD HAVE BEEN LOWER.
** CLASS D RETURNS PRIOR TO JULY 12, 1999 ARE THOSE OF ASM FUND.
*** THE DOW JONES INDUSTRIAL AVERAGE is an unmanaged index. Index returns assume
reinvestment of dividends; unlike the Fund's returns, however, they do not
reflect any fees or expenses.
****THE LIPPER LARGE CAP VALUE FUNDS INDEX is an equal-weighted performance
index, adjusted for capital-gain distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper, Inc.
+ From February 28, 1991.
++ From March 3, 1991.
Prospectus - 25
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX FOCUS 30 FUND
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares, Class B Shares or Class D Shares of the Orbitex Focus 30 Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
SHARES SHARES SHARES
----- ----- -----
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %
of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as a % of lower of
original purchase price or redemption proceeds) None (2) 5.00%(3) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(4) 0.00%
Other Expenses 4.47% 4.47% 4.47%
----- ----- -----
Total Annual Operating Expenses 5.62%(5) 6.22%(5) 5.22%(6)
Fee Waiver and Expense Reimbursement 4.22%(7) 4.22%(7) 4.22%(7)
----- ----- -----
Net Expenses 1.40%(7) 2.00%(7) 1.00%(7)
===== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B Shares declines over time.
(4) Including a 0.25% shareholder servicing fee.
(5) Ratio includes amounts relating to the general reserve expense
recognized in the period. If such expenses had not been incurred, the
ratios of expenses would be 2.99% for Class A and 3.18% for Class B.
(6) Ratio includes amounts relating to the general operating expense and
general reserve expense recognized as a result of the termination of the
investment advisory agreement with the former Adviser. If such expenses
had not been incurred, the ratio of expense would be 2.78% before
waivers and reimbursements and 1.02% after waivers and reimbursements.
(7) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary, litigation (see
"More Information About Risks - Litigation that May Affect the Focus 30
Fund") or non-recurring expenses, so that the expense ratio of Class A
Shares, Class B Shares and Class D Shares does not exceed 1.15%, 1.75%
and 0.75% until July 1, 2000, and 1.40%, 2.00% and 1.00% until at least
December 31, 2000. The information contained in the table above and the
example below reflects the expenses of each class of the Fund taking
into account any applicable fee waivers and or reimbursements.
Prospectus - 26
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Focus 30 Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your investment
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS D
------ ------ ------
1 $ 697 $ 690 $ 89
3 $1,789 $1,758 $1,174
5 $2,868 $2,894 $2,254
10 $5,506 $5,455 $4,933
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS D
------ ------ ------
1 $ 697 $ 190 $ 89
3 $1,789 $1,458 $1,174
5 $2,868 $2,694 $2,254
10 $5,506 $5,455 $4,933
</TABLE>
Prospectus - 27
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX HEALTH & BIOTECHNOLOGY FUND
This section briefly describes the Orbitex Health & Biotechnology Fund's goals,
principal investment strategies, risks, expenses and performance. For further
information on how this Fund is managed, please read the section entitled "Fund
Details."
[LOGO]
INVESTMENT OBJECTIVE
- - The objective of the Orbitex Health & Biotechnology Fund is long-term growth
of capital through selective investment in the securities of companies
engaged in the healthcare, health products, pharmaceuticals, medical research
and biotechnology research development and implementation and other areas
related to the health industry.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies include:
- - Investing at least 65% of its total assets in equity securities issued by
healthcare companies and biotechnology companies (see description of
healthcare companies and biotechnology companies in "Fund Details" section on
page 36). As a matter of fundamental policy, the Fund will concentrate
(invest at least 25% of its total assets) in securities issued by companies
in the health and biotechnology industries.
- - Composing a portfolio based upon a "bottom-up" blending of value and growth
criteria as well as identifying investment and economic themes that can drive
profits.
- - Investing primarily in common stocks.
- - Investing in companies regardless of their stock market value (or "market
capitalization").
- - Investing up to 25% of its total assets in foreign companies.
- - The Fund may sell those holdings that it has identified as having exceeded
their fair market value and may also sell the securities of a company that
has experienced a fundamental shift in its core business processes and
objectives. The Fund may also sell the securities of a company when the
industry in which the company operates has undergone a shift in focus or
industry dynamics.
[LOGO]
PRINCIPAL RISKS
The Fund is subject to the following principal risks:
- - STOCK MARKET RISK: Stock markets are volatile and there is a risk that the
price of a security will rise or fall due to changing economic, political or
market conditions, as well as company-specific factors (see "Issuer-Specific
Risks" below). Consequently, the value of your investment in the Fund will go
up and down, which means that you could lose money.
- - RISKS OF HEALTHCARE AND BIOTECHNOLOGY SECTOR: Because of its specific focus,
the Fund's performance is closely tied to and affected by events occurring in
the healthcare and biotechnology industries. Companies in the same industry
often face similar obstacles, issues and regulatory burdens. As a result, the
securities owned by the Fund may react similarly to and move in unison with
one another.
Healthcare companies are subject to government regulation and approval of
their products and services, which can have a significant effect on their
market price. Furthermore, the types of products or services produced or
provided by these companies may quickly become obsolete. Moreover, liability
for products that are later alleged to be harmful or unsafe may be
substantial, and may have a significant impact
Prospectus - 28
<PAGE>
on a healthcare company's market value and/or share price.
Biotechnology companies are affected by patent considerations, intense
competition, rapid technology change and obsolescence, and regulatory
requirements of various federal and state agencies. In addition, many of
these companies are relatively small and have thinly traded securities, may
not yet offer products or offer a single product, and may have persistent
losses during a new product's transition from development to production or
erratic revenue patterns. Moreover, stock prices of biotechnology companies
are very volatile, particularly when their products are up for regulatory
approval and/or under regulatory scrutiny. Consequently, the Fund's
performance may sometimes be significantly better or worse than that of other
types of funds.
- - ISSUER-SPECIFIC RISKS: The price of an individual security or particular type
of security can be more volatile than the market as a whole and can fluctuate
differently than the value of the market as a whole. An individual issuer's
securities can rise or fall dramatically with little or no warning based upon
such things as a better (or worse) than expected earnings report, news about
the development of a promising product, or the loss of key management
personnel. There is also a risk that the price of a security may never reach
the level that the Adviser believes is representative of its full value or
that it may even go down in price.
- - RISKS OF INVESTING IN FOREIGN SECURITIES. Foreign securities may be riskier
than U.S. investments because of factors such as unstable international
political and economic conditions, currency fluctuations, foreign controls on
investment and currency exchange, withholding taxes, a lack of adequate
company information, less liquid and more volatile markets, and a lack of
governmental regulation. Consequently, there is a risk that a foreign
security may never reach the price that the Adviser believes is
representative of its full value or that it may even go down in price.
- - RISKS OF NON-DIVERSIFICATION: Because the Orbitex Health & Biotechnology Fund
is non-diversified, it may have greater exposure to volatility than other
funds. Because a non-diversified fund may invest a larger percentage of its
assets in the securities of a single company than diversified funds, the
performance of that company can have a substantial impact on the fund's share
price.
- - INFLATION RISK: There is a possibility that rising prices of goods and
services may have the effect of offsetting the Fund's total return.
WHO MAY WANT TO INVEST IN THE ORBITEX HEALTH & BIOTECHNOLOGY FUND?
We designed the ORBITEX HEALTH & BIOTECHNOLOGY FUND for investors who want to
capitalize on potential opportunities in the health and biotechnology industries
and who seek one or more of the following:
- high long-term growth
- a stock fund that invests in companies that are involved in the
healthcare and biotechnology industries
- a stock fund to complement a portfolio of more conservative investments
- a stock fund that uses primarily a growth-oriented investment strategy
- a stock fund that invests in domestic and foreign companies
Prospectus - 29
<PAGE>
- --------------------------------------------------------------------------------
FUNDS AT A GLANCE - ORBITEX HEALTH & BIOTECHNOLOGY FUND
PERFORMANCE AND VOLATILITY
No performance information is included because, as of December 31, 1999, the
Orbitex Health & Biotechnology Fund did not have a full calendar year of
operations.
INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares, Class B Shares or Class C Shares of the Orbitex Health &
Biotechnology Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHARES SHARES SHARES
------- ------- -------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchase (as a %
of offering price) 5.75%(1) None None
Maximum Deferred Sales Charge (Load) (as a % of lower of
original purchase price or redemption proceeds) None(2) 5.00%(3) 1.00%(4)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends Distributions None None None
Redemption Fee (as a % of amount redeemed, if applicable) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 1.25% 1.25% 1.25%
Distribution and/or Service (12b-1) Fees 0.40% 1.00%(5) 1.00%(5)
Other Expenses 1.61%(6) 1.61%(6) 1.61%(6)
------- ------- -------
Total Annual Operating Expenses 3.26%(6) 3.86%(6) 3.86%(6)
Fee Waiver and Reimbursement 1.26%(7) 1.26%(7) 1.26%(7)
------- ------- -------
Net Expenses 2.00% 2.60% 2.60%
======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Reduced for purchases of $50,000 or more by certain investors. See "Your
Account - Classes in Detail - Class A - Reduced Sales Charge."
(2) Purchases of Class A Shares of $1 million or more by certain investors
are not subject to any sales load at the time of purchase, but a 1%
contingent deferred sales charge applies on amounts redeemed within one
year of purchase. See "Your Account - Classes in Detail - Class A -
Reduced Sales Charge."
(3) The CDSC payable upon redemption of Class B Shares declines over time.
(4) The CDSC applies to redemptions of Class C Shares within eighteen months
of purchase.
(5) Including a 0.25% shareholder servicing fee.
(6) Other Expenses and Total Annual Operating Expenses are estimated.
(7) Orbitex Management has agreed contractually to waive its management fee
and to reimburse expenses, other than extraordinary or non-recurring
expenses, so that the expense ratio of Class A Shares, Class B Shares
and Class C Shares does not exceed 2.00%, 2.60% and 2.60%, respectively.
This arrangement will remain in effect until at least December 31, 2000.
The information contained in the table above and the
Prospectus - 30
<PAGE>
example below reflects the expenses of each class of the Fund taking
into account any applicable fee waivers and or reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Orbitex Health & Biotechnology Fund with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, that you reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS C
------ ------ ------
1 $ 766 $ 763 $ 363
3 $1,410 $1,363 $1,063
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C> <C> <C>
CLASS A CLASS B CLASS C
------ ------ ------
1 $ 766 $ 263 $ 263
3 $1,410 $1,063 $1,063
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1999)
The returns in the following table include the effect of Class A Shares maximum
applicable front-end sales charge and Class B Shares maximum applicable
contingent deferred sales charge (CDSC) and the effect of fee waivers and
expense reimbursements by the Adviser. If those waivers and reimbursements had
not been in effect, the returns would have been lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PAST 1 YEAR LIFE OF FUND+
Orbitex Health & Biotechnology Fund Class A* N/A 29.50%
Orbitex Health & Biotechnology Fund Class B* N/A 32.20%
S&P 500-Registered Trademark- Index** N/A 4.83%
Lipper Health & Biotechnology Funds Index*** N/A 5.36%
</TABLE>
* CLASS A SHARES AND B SHARES COMMENCED OPERATIONS ON JULY 15, 1999.
** THE S&P 500-REGISTERED TRADEMARK- INDEX is an unmanaged index. Index returns
assume reinvestment of dividends; unlike the Fund's returns, however, they
do not reflect any fees or expenses.
*** THE LIPPER HEALTH & BIOTECHNOLOGY FUNDS INDEX is an equal-weighted
performance index, adjusted for capital-gain distributions and income
dividends, of the largest qualifying funds in this investment objective, and
is compiled by Lipper, Inc.
+ Not Annualized.
Prospectus - 31
<PAGE>
- --------------------------------------------------------------------------------
FUND DETAILS - ORBITEX GROWTH FUND
INVESTMENT DETAILS OF THE ORBITEX GROWTH FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Growth Fund seeks to provide long-term growth of capital
through selective investment in securities of companies of all sizes that offer
potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund strives to provide a high return through a unique
multi-factor selection process. The Adviser generally screens
first for "value stocks." These stocks tend to trade at below market
price/earnings, price/cash flow, and price/book value ratios. The Adviser looks
for stocks that are at the low end of their historical range within those same
categories.
Next, the Adviser screens for stocks with strong cash flow or earnings momentum.
In particular, the Adviser seeks out stocks that it expects to grow cash flow or
earnings by at least 20% per year over the next several years.
Finally, the Adviser screens stocks that show positive price momentum. In other
words, the Adviser seeks stocks that it believes have a strong fundamental case
for purchase but generally defers purchasing those stocks until the market
begins to perceive the positive fundamentals.
The Adviser believes that this combination of searching for stocks having the
attributes of value, growth, and price momentum will provide superior
performance. However, if the Adviser's strategies do not work as intended, the
Fund may not achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund may invest in the securities of any issuer, including U.S.
and foreign companies, governments and government agencies. The Fund
expects to invest primarily in U.S. common stocks, but may also invest in other
types of equity securities and debt securities of any quality.
PORTFOLIO MANAGER
Richard A. Begun is the portfolio manager for the Growth Fund. Mr. Begun joined
Orbitex in 1999 and brings with him 11 years of investment management
experience. Formerly, he was with the Bank of New York from 1995 to 1999 where
he co-managed the bank's institutional small cap growth fund and its
institutional large cap growth fund. Prior to joining the Bank, Mr. Begun was an
Investment Management Consultant at Evaluation Associates, Inc. from 1993 to
1995.
Prospectus - 32
<PAGE>
- --------------------------------------------------------------------------------
FUND DETAILS - ORBITEX INFO-TECH & COMMUNICATIONS FUND
INVESTMENT DETAILS OF THE ORBITEX
INFO-TECH & COMMUNICATIONS FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Info-Tech & Communications Fund seeks long-term growth
of capital through selective investment in the securities of communications,
information and related technology companies.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to
capitalize on emerging changes in the global communications and
information technology industries.
The Fund defines a "communications company" as an entity in which:
- - at least 50% of the company's revenues or earnings were derived from
communications activities; or
- - at least 50% of the company's assets were devoted to such activities, based
upon the company's most recent fiscal year.
The Fund defines an "information company" as an entity in which:
- - at least 50% of the company's revenues or earnings were derived from
information activities; or
- - at least 50% of the company's assets were devoted to such activities, based
upon the company's most recent fiscal year.
Communications, information and related technology companies may include, among
others, those engaged primarily in designing, developing or providing the
following products and services: communications, electronic components and
equipment, broadcasting, computer software and hardware, semiconductors,
internet and network equipment and services.
In buying and selling securities for the Fund, the Adviser relies on fundamental
analysis of each issuer and its potential for success in light of its current
financial condition, its industry position and economic and market conditions.
Factors considered include growth potential, earnings estimates and management.
However, if the Adviser's strategies do not work as intended, the Fund may not
achieve its objective.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in
equity securities issued by communications, information and related
technology companies. The Fund expects to invest primarily in U.S. and foreign
common stocks but may also invest in other types of equity securities,
investment grade debt securities and in securities of companies outside the
communications, information and technology industries.
PORTFOLIO MANAGER
Craig W. Ellis is the portfolio manager for the Info-Tech & Communications Fund.
Mr. Ellis joined Orbitex Management, Inc. in 1998. Formerly he was with Alliance
Capital Management Corporation where he was a senior vice president from 1997 to
1998. At Alliance, Mr. Ellis was responsible for the firm's investments in the
global communications technology area. Prior to joining Alliance, Mr. Ellis was
a managing director at Wheat First Union where he served as a telecommunications
services analyst from 1992 to 1997.
Prospectus - 33
<PAGE>
- --------------------------------------------------------------------------------
FUND DETAILS - ORBITEX STRATEGIC NATURAL RESOURCES FUND
INVESTMENT DETAILS OF THE ORBITEX
STRATEGIC NATURAL RESOURCES FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Strategic Natural Resources Fund seeks to provide
long-term growth of capital through selective investment in the securities of
companies engaged in natural resources industries and industries supportive to
natural resources industries.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in securities of companies that the Adviser
believes are positioned to benefit from increasing worldwide
demand for natural resources. There is no guarantee, however, that the Adviser's
strategies will work as intended.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund will normally invest at least 65% of its total assets in
equity securities issued by natural resources companies. The Fund
expects to invest primarily in U.S. common stocks but may also invest in other
types of equity securities, debt securities of any quality and in securities of
companies outside of the natural resources industries.
The Fund defines a "natural resources company" as an entity in which:
- - at least 50% of the company's revenues or earnings were derived from natural
resource activities; or
- - at least 50% of the company's assets were devoted to such activities, based
upon the company's most recent fiscal year.
Natural resources companies include service companies that provide services to
producers and refiners of natural resources or provide other products and
services, which the Adviser believes are significant to the ownership and
development of natural resources and companies that develop energy efficient
technologies, such as systems for energy conversion, conservation, and pollution
control. Natural resource companies also include companies that own, explore,
develop or produce:
- - precious metals (e.g., gold, platinum and silver),
- - ferrous and non-ferrous metals (e.g., iron, aluminum and copper),
- - strategic metals (e.g., uranium and titanium),
- - hydrocarbons (e.g., coal, oil and natural gases),
- - forest products,
- - other basic commodities (such as foodstuffs),
- - refined products (such as chemicals and steel)
PORTFOLIO MANAGER
The Strategic Natural Resources Fund is managed by a team of investment
professionals at Orbitex Management, Inc. who are primarily responsible for
day-to-day decisions regarding the Fund's investments.
Prospectus - 34
<PAGE>
- --------------------------------------------------------------------------------
FUND DETAILS - ORBITEX FOCUS 30 FUND
INVESTMENT DETAILS OF THE ORBITEX
FOCUS 30 FUND
[LOGO]
INVESTMENT OBJECTIVE
The objective of the Orbitex Focus 30 Fund is long-term growth of
capital and current income through focused investment in the securities of some
or all of the 30 companies listed on the New York Stock Exchange that make up
the Dow Jones Industrial Average.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Orbitex Focus 30 Fund seeks to achieve its investment
objective principally by investing in companies with large market
capitalizations and well-established earnings and dividend histories. The market
capitalization of a company is the company's stock price multiplied by the total
number of shares of its stock outstanding; in other words, the value placed on
the company by the stock markets. The companies in which the Fund invests
represent dominant, key firms in their respective industries, and almost all of
the equity securities held by the Fund trade on the New York Stock Exchange.
[LOGO]
PRINCIPAL INVESTMENTS
The Fund invests at least 90% of its assets in the common stock of
some or all of the 30 companies that make up the Dow Jones
Industrial Average ("DJIA"). The Adviser will weight the Fund's investments
toward the DJIA companies that its believes will perform better than other DJIA
companies.
The Fund also invests up to 10% of its assets in common stocks of "large
capitalization" companies included in the S&P 500-Registered Trademark- Index.
PORTFOLIO MANAGER
Richard A. Begun is the portfolio manager for the Focus 30 Fund. Mr. Begun
joined Orbitex in 1999 and brings with him 11 years of investment management
experience. Formerly, he was with the Bank of New York from 1995 to 1999 where
he co-managed the bank's institutional small cap growth fund and its
institutional large cap growth fund. Prior to joining the Bank, Mr. Begun was an
Investment Management Consultant at Evaluation Associates, Inc. from 1993 to
1995.
Prospectus - 35
<PAGE>
- --------------------------------------------------------------------------------
FUND DETAILS - ORBITEX HEALTH & BIOTECHNOLOGY FUND
INVESTMENT DETAILS OF THE ORBITEX
HEALTH & BIOTECHNOLOGY FUND
[LOGO]
INVESTMENT OBJECTIVE
The Orbitex Health & Biotechnology Fund seeks to provide long-term
growth of capital through selective investment in securities of healthcare and
biotechnology companies of all sizes that offer potential for growth.
[LOGO]
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest in companies that the Adviser expects to
capitalize on emerging changes in the healthcare and biotechnology
industries.
The Fund defines a "healthcare company" as an entity that is principally engaged
in:
- the design, manufacture or sale of products or services used for or in
connection with health care, medicine, personal care or cosmetics.
- research and development of pharmaceutical products and services.
- the operation of healthcare facilities.
- design, manufacture, or sale of healthcare-related products and services.
The Fund defines a "biotechnology company" as an entity that is principally
engaged in:
- research, development, manufacture or distribution of products and
services relating to human health care, pharmaceuticals, agricultural and
veterinary applications, and the environment.
- manufacturing and/or distributing biotechnological and biomedical
products, including devices, instruments and/or drug delivery systems.
The Fund also defines a "healthcare or biotechnology company" as an entity that
is principally engaged in providing materials, products or services to a
healthcare or biotechnology company.
The Fund considers a company to be "principally engaged" in one of the above
activities if at least 50% of its revenues or profits come from those
activities.
[LOGO]
PRINCIPAL INVESTMENTS
Under normal market conditions, the Fund intends to invest at least
65% of its total assets in equity, equity-related or debt securities
of healthcare and biotechnology companies.
The Fund expects to invest primarily in U.S. common stocks, but may also invest
in other types of equity securities and investment grade debt securities. The
Fund may invest up to 25% of its assets in the securities of foreign issuers,
however.
PORTFOLIO MANAGER
Timothy F. Bepler, CFA is the portfolio manager for the Health & Biotechnology
Fund. Mr. Bepler joined Orbitex in 1999 and brings with him eight years of
investment analysis and management experience in the Healthcare industry.
Formerly, he was a vice president at Merrill Lynch Asset Management from 1996 to
1999 where he was a Healthcare analyst for a Growth and Income fund. Prior to
joining Merrill Lynch, he was the sole Healthcare analyst for a division of
Credit Suisse from 1995 to 1996 and he was a senior analyst at Value Line, Inc.
from 1994-1995.
Prospectus - 36
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISKS
[LOGO]
Many factors affect the Funds' performance. The Funds' share prices
change daily based on changes in market conditions in response to
economic, political and financial developments. The direction and
extent of those price changes will be affected by the financial condition,
industry and economic sector, and geographic location of the companies in which
the Funds invest, and the Funds' level of investment in the securities of those
companies. WHEN YOU REDEEM YOUR SHARES OF THE FUNDS, THEY COULD BE WORTH MORE OR
LESS THAN WHAT YOU PAID FOR THEM.
The Orbitex Group of Funds' Statement of Additional Information includes
additional information regarding the risks associated with the Funds'
investments.
The following factors may significantly affect each Fund's performance. Stock
market volatility is a principal risk for each Fund, as are the risks of foreign
securities for all Funds within the Orbitex Group of Funds, except for the Focus
30 Fund. The other factors set forth below are not considered principal risks
for any of the Funds.
STOCK MARKET VOLATILITY: The value of equity securities fluctuates in response
to issuer, political, market and economic developments. Equity prices can
fluctuate dramatically in response to these developments. Different parts of the
market can react differently to these developments. For example, large cap
stocks can react differently than small cap stocks, and "growth" stocks can
react differently than "value" stocks. Political or economic developments can
affect a single issuer, issuers within an industry or economic sector or
geographic region, or the market as a whole. All Funds within the Orbitex Group
of Funds are subject to stock market volatility.
INTEREST RATE CHANGES: Debt securities have varying levels of sensitivity to
changes in interest rates. In general, the price of a debt security may fall
when interest rates rise and may rise when interest rates fall. Securities with
longer maturities may be more sensitive to interest rate changes. All Funds
within the Orbitex Group of Funds are subject to interest rate changes.
DEFENSIVE STRATEGIES: In response to market, economic, political or other
conditions, the Adviser may temporarily use a different investment strategy for
a Fund for defensive purposes. Such a strategy could include investing up to
100% of the Fund's assets in cash or cash equivalent securities. If the Adviser
does so, it could affect a Fund's performance and the Fund might not achieve its
investment objective. All Funds within the Orbitex Group of Funds, except for
the Focus 30 Fund, expect to employ defensive strategies.
RISKS OF FOREIGN SECURITIES: Foreign securities may be riskier than U.S.
investments because of factors such as unstable international political and
economic conditions, currency fluctuations, foreign controls on investment and
currency exchange, withholding taxes, a lack of adequate company information,
less liquid and more volatile markets, and a lack of governmental regulation.
All Funds within the Orbitex Group of Funds, except for the Focus 30 Fund, are
subject to risks of foreign securities.
LOWER-QUALITY DEBT SECURITIES: The Orbitex Growth Fund, Orbitex Info-Tech &
Communications Fund, Orbitex Strategic Natural Resources Fund and Orbitex
Health & Biotechnology Fund may each invest up to 35% of their assets in
lower-quality debt securities, otherwise known as "junk bonds." Junk bonds are
debt securities that are rated below investment-grade (investment grade
securities are rated BBB or better by Standard & Poor's Rating Service or Baa or
better by Moody's Investors Service) by Standard & Poor's Rating Service or
Moody's Investors Service, Inc. These securities are generally considered to be
speculative and involve greater risk of loss or price changes due to changes in
the issuer's capacity to pay.
DERIVATIVES AND OTHER STRATEGIES: The Funds may invest in options, futures,
foreign securities, foreign currencies, and other derivatives (collectively,
"Derivative Transactions"), and may enter into certain types of short sales.
Prospectus - 37
<PAGE>
If these practices are used by the Funds, the intent would be primarily to hedge
the Funds' portfolios. For example, a Fund may purchase or sell options
contracts on equity securities to hedge against the risk of fluctuations in the
prices of securities held by the Fund. Or, a Fund may purchase or sell stock
index futures contracts and would purchase put options or write call options on
such futures contracts to protect against a general stock market decline or
decline in a specific market sector that could adversely affect the Fund's
holdings.
Investing for hedging purposes may result in certain transaction costs, which
may reduce a Fund's performance. In addition, no assurances can be given that
hedging will be implemented or that each derivative position will achieve a
perfect correlation with the security or currency being hedged against. All
Funds within the Orbitex Group of Funds are subject to risks from Derivative
Transactions.
PORTFOLIO TURNOVER RATES. The portfolio turnover rates for the fiscal year ended
April 30, 1999, of the Growth Fund, the Info-Tech & Communications Fund and the
Strategic Natural Resources Fund were 957%, 360% and 921%, respectively. These
turnover rates are higher than the average of many mutual funds, and are the
result of the focused and specialized nature of the Funds and the resulting need
for the Funds to seek out investment opportunities to achieve each Fund's
investment objectives. Controlling risk in each of the funds is critical. The
Growth Fund experienced high turnover as a result of the sharp drop in the
market for this sector which required that positions be reduced to protect
client assets. In addition, there was a period of extreme sector rotation in
early 1999 which led to higher than normal turnover. The turnover was higher as
a result of protective measures taken during each of these periods. The turnover
rate for the Strategic Natural Resources Fund was impacted by the overall size
of the Fund and the Fund's need for liquidity. In addition, natural resources
securities have been trading in a narrow range without direction. As a result,
the manager of the Fund traded positions in the Fund to capture investment
profit. The Info-Tech and Communications Fund's turnover rate was primarily
driven by the introduction and heightened market interest in the internet
sector; and the Fund's turnover is consistent with the trading market for this
sector.
High portfolio turnover (i.e., 100% or greater) involves additional brokerage
expense and may increase realized capital gains distributions, with adverse tax
consequences for the Fund's shareholders. See "Taxation of the Fund" on
page 54.
Prospectus - 38
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISKS
YEAR 2000: The Funds' operations depend on the seamless functioning of computer
systems in the financial service industry, including those of the Adviser,
Administrator, Sub-Administrator, Custodian, Distributor and the Transfer Agent.
Many computer software systems in use today cannot properly process date-related
information after December 31, 1999. The "Year 2000" issue stems from the use of
a two-digit format to define the year in certain date-sensitive application
systems rather than the use of a four-digit format. As a result, date-sensitive
software programs could recognize a date using "00" as the year 1900 rather than
the year 2000. This could have resulted and may result in major systems or
process failures or the generation of erroneous data, which would lead to
disruptions in the Funds' business operations.
The Adviser has made compliance with the Year 2000 issue a high priority and is
taking steps to address the issue with respect to its computer systems. The
Funds' major service providers have informed the Adviser that they are taking
comparable steps. The Adviser does not currently believe that the Year 2000
issue will have a material impact on its ability to continue to fulfill its
duties as investment adviser. In addition, the issuers of securities the Funds
own could have Year 2000 computer problems. These problems could negatively
affect the value of their securities, which, in turn, could impact the Funds'
performance. An issuer's Year 2000 readiness is only one of many factors the
Adviser may consider when making investment decisions, and other factors may
receive greater weight.
LITIGATION THAT MAY AFFECT THE FOCUS 30 FUND: On February 8 and June 2, 1999,
suits were filed against a former director and officer of the ASM Index 30 Fund
(the "ASM Fund"), the former investment adviser Vector Investment
Advisors, Inc. (Vector) of the ASM Fund, and the ASM Fund itself alleging that
the former officer of the ASM failed to invest in the ASM Fund amounts
purportedly paid by the plaintiffs to the ASM Fund's investment adviser. One
suit also alleged improper and unauthorized redemptions of ASM Fund Shares owned
by the plaintiffs. The relief sought in one suit is the recovery of the
investment amounts and interest thereon, additional general, consequential and
incidental damages, legal costs and disbursements, and declaratory and
injunctive relief to preclude the ASM Fund from transferring or permitting the
dissipation of its assets. The relief sought in the other suit is recovery of
the investment amounts and amounts derived from the alleged improper
redemptions. With the possible exception of Steven H. Adler, a former officer
and director of the ASM Fund, that fund had no knowledge that the amounts
purportedly paid by the plaintiffs to the former investment adviser were, as the
plaintiffs have alleged to be invested in the Fund. The Orbitex Focus 30 Fund
has succeeded to the obligations, if any, of the ASM Fund with respect to these
suits including obligations of the ASM Fund to indemnify its officers and
directors. At the present time, the liability of the Orbitex Focus 30 Fund, if
any, is not readily determinable.
Prospectus - 39
<PAGE>
- --------------------------------------------------------------------------------
YOUR ACCOUNT
[LOGO]
This section describes the services that are available to shareholders.
TYPES OF ACCOUNTS
If you are making an initial investment in the Funds, you will need to open an
account. You may establish the following types of accounts:
- - INDIVIDUAL OR JOINT OWNERSHIP. One person owns an individual account while
two or more people own a joint account. We will treat each individual owner
of a joint account as authorized to give instructions on purchases, sales and
exchanges of shares without notice to the other owners. However, we will
require each owner's signature guarantee for any transaction requiring a
signature guarantee.
- - GIFT OR TRANSFER TO MINORS. A Custodian maintains a Uniform Gifts to Minors
Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account for the benefit
of a minor. To open an UGMA or UTMA account, you must include the minor's
social security number on the application.
- - TRUST. A trust can open an account. You must include the name of each
trustee, the name of the trust and the date of the trust agreement on the
application.
- - CORPORATIONS, PARTNERSHIPS AND OTHER LEGAL ENTITIES. Corporations,
partnerships and other legal entities may also open an account. A general
partner of the partnership or an authorized officer of the corporation or
other legal entity must sign the application and resolution form.
- - RETIREMENT. If you are eligible, you may set up your account under a
tax-sheltered retirement plan, such as an Individual Retirement Account. Your
financial consultant can help you determine if you are eligible.
CHOOSING A CLASS
After deciding which type of account to open, you must select a class of shares.
All the Funds offer two classes of shares (Class A and Class B). The
Info-Tech & Communications Fund and Health & Biotechnology Fund offer a third
class of shares (Class C). The Focus 30 Fund also offers a third class of shares
(Class D). Class D Shares are only available to: 1) shareholders who previously
were shareholders of the ASM Index 30 Fund at the time of the reorganization;
2) employees, and certain related accounts of employees, of Orbitex Financial
Services Group, Inc. ("OFSG") and its affiliates; and 3) certain institutional
investors.
Each share class has its own sales charge and expense structure, including
different 12b-1 fees (see "Classes in Detail" below and "Rule 12b-1 Plans in
Detail" on page 46 for additional information). The Class A Shares have an
initial sales charge while the Class B Shares have a contingent deferred sales
charge if you redeem shares held for six years or less. Class C Shares have a
deferred sales charge that is lower than Class B, but higher 12b-1 fees than
Class A. There are no sales charges, 12b-1 fees or shareholder services fees for
Class D Shares.
Each class represents an interest in the same portfolio of securities and each
has the same rights with one exception. Pursuant to the Investment Company Act
of 1940, you will have exclusive voting rights with respect to the Distribution
Plan and Agreement pursuant to Rule 12b-1, if any, for the class you choose.
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
Prospectus - 40
<PAGE>
make better sense. Your financial consultant can assist you in determining which
class is best for you. Because all future investments in your account will be
made in the share class you designate when opening the account, you should make
your decision carefully.
<TABLE>
<S> <C>
COMPARISON OF CLASSES
CLASS A--INITIAL SALES CHARGE CLASS B--CONTINGENT DEFERRED SALES CHARGE
- Initial sales charge of 5.75% or less (see - No initial sales charge. This allows 100%
chart on page 42). of your purchase price to be invested in
- Lower sales charges for larger investments the Fund.
(see page 42). - Deferred sales charge of 5% or less on
- Lower annual expenses than Class B Shares shares you redeem within six years (see
due to lower marketing and service chart on page 44).
(12b-1) fee of 0.40%. - An annual fee of 1.00% under each Fund's
rule 12b-1 plan, 0.75% of which is for
marketing and 0.25% of which is for
shareholder services. This will result in a
lower total return than comparable Class A
Shares.
- Automatic conversion to Class A Shares
after six years, thereby reducing future
annual expenses.
CLASS C--LEVEL LOAD CLASS D--NO SALES CHARGE
(INFO-TECH & COMMUNICATIONS FUND AND (FOCUS 30 FUND ONLY)
HEALTH & BIOTECHNOLOGY FUND ONLY) Note: Class D Shares are only available to
- Deferred sales charge of 1.00% paid only shareholders who were shareholders of the ASM
on shares redeemed within 18 months of Index 30 Fund and certain Institutional
purchase. investors, and individuals specified on page
- An annual fee of 1.00% under each Fund's 45.
rule 12b-1 plan, 0.75% of which is for - No initial or contingent deferred sales
marketing and 0.25% of which is for charge.
shareholder services. This will result in a - No annual marketing and service (12b-1)
lower total return than comparable Class A fee.
Shares. - Lower annual expenses than Class A and
- Class C shares do not convert to another Class B.
class.
</TABLE>
Prospectus - 41
<PAGE>
CLASSES IN DETAIL
CLASS A--INITIAL SALES CHARGE
The sales charge for Class A Shares of all Funds is 5.75% of the offering price.
However, the Adviser may reduce or waive this sales charge as described in
"Reduced Sales Charge."
REDUCED SALES CHARGE
You can qualify for a reduction or waiver of this sales charge by investing one
lump sum in a particular class of a Fund. You can also qualify for a sales
charge reduction or waiver through a right of accumulation or a letter of intent
if you are a United States resident. See the discussions of "Right of
Accumulation" and "Letter of Intent" on page 43."
If you are a United States resident and are investing more than $50,000, the
Adviser will reduce the sales charge you pay. The chart at the bottom of this
page shows the sales charge you will pay based on the amount of your purchase.
You can purchase Class A Shares without any initial sales charge if you are a
United States resident and invest $1 million or more in Class A shares. However,
if you redeem those shares within one year of the purchase, you must pay a
contingent deferred sales charge of 1%. We will waive the contingent deferred
sales charge only in the following situations:
- - If the Fund involuntarily redeems your shares; or
- - If you reinvest the proceeds from your redemption in the Funds within 90 days
of your redemption.
REDUCED SALES CHARGE FOR U.S. RESIDENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SALES CHARGE AS A
SALES CHARGE AS A PERCENTAGE OF BROKER REALLOWANCE AS A
PERCENTAGE OF NET INVESTMENT PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE (NET ASSET VALUE) OFFERING PRICE(1)
- --------------------------------------- ---------------------- ------------------------ ------------------------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50% 4.71% 3.75%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None (See below)(2) None (See below)(2) (See below)(2)
</TABLE>
1 At the discretion of the Orbitex Group of Funds, however, the entire sales
charge may at times be reallowed to dealers. The Staff of the Securities and
Exchange Commission has indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
2 The distributor will pay certain commissions to Selling Group Members (See
page 47) 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.
Prospectus - 42
<PAGE>
RIGHT OF ACCUMULATION
For the purposes of determining the sales charge, the right of accumulation
allows you to include prior purchases of Class A Shares of any Orbitex Fund as
part of your current investment. To qualify for this option, you must be either:
- - an individual;
- - an individual and spouse purchasing shares for your own account or trust or
custodial accounts for your minor children; or
- - a fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code, including related plans of the same employer.
If you plan to rely on this right of accumulation, you must notify the
Distributor at the time of your purchase. You will need to give the Distributor
your account numbers. If applicable, you will need to provide the account
numbers of your spouse and your minor children as well as the ages of your minor
children.
LETTER OF INTENT
The letter of intent allows you to count all investments within a 13-month
period in a Fund as if you were making them all at once for the purposes of
calculating the sales charges. The minimum initial investment under a letter of
intent is 5% of the total letter of intent amount. You may include a purchase
not originally made pursuant to a letter of intent under a letter of intent
entered into within 90 days of the original purchase.
EXCHANGES OF CLASS D SHARES OF THE ORBITEX FOCUS 30 FUND INTO CLASS A SHARES OF
OTHER ORBITEX FUNDS
You may exchange your Class D Shares for Class A Shares of another Orbitex Fund
without paying any sales charge. If you close your Class D account in the
Focus 30 Fund (either by redeeming or by exchanging all of your Class D Shares),
however, you may not later reopen your account with Class D Shares of the Focus
30 Fund.
OTHER CIRCUMSTANCES
We also offer Class A Shares with low or no sales charges through various other
special arrangements. Your financial consultant can help you determine if any of
these programs is appropriate for you.
Class A Shares issued pursuant to the automatic reinvestment of income dividends
and capital gains distributions are not subject to any sales charges.
Prospectus - 43
<PAGE>
CLASS B--CONTINGENT DEFERRED SALES CHARGE
You will not pay an initial sales charge if you choose to invest in Class B
Shares. However, if you redeem your shares within six years, you will pay a
contingent deferred sales charge as described in the table below. The amount of
this charge is based on your original purchase price, or the current net asset
value of the shares you redeem, whichever is less.
We will waive the contingent deferred sales charge under the following
circumstances:
- - redemptions made within one year after the death of a shareholder or
registered joint owner;
- - redemptions made to facilitate minimum required distributions made from an
IRA or other retirement plan account after age 70 1/2; and
- - involuntary redemptions made by a Fund.
Class B Shares issued pursuant to the automatic reinvestment of income dividends
and capital gains distributions are not subject to any contingent deferred or
other sales charges.
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
<TABLE>
<CAPTION>
<S> <C>
YEARS AFTER PURCHASE THAT YOU REDEEM YOUR SHARES CONTINGENT DEFERRED SALES CHARGE(1)
- -------------------------------------------------- -------------------------------------------
1(st) Year 5.00%
2(nd) Year 4.00%
3(rd) Year 3.00%
4(th) Year 3.00%
5(th) Year 2.00%
6(th) Year 1.00%
After 6 Years None(2)
</TABLE>
1 The contingent deferred sales charge will be the lesser of (1) the original
purchase price or (2) the net asset value of the shares being redeemed.
2 Class B Shares will automatically convert to Class A Shares after six years
after you purchase them. This conversion relieves Class B shareholders who have
held their shares for more than six years of the higher asset-based distribution
charge that applies to Class B Shares under the 12b-1 Plan described in the
section entitled "Rule 12b-1 Plans in Detail."
Prospectus - 44
<PAGE>
CLASS C--LEVEL LOAD
If you redeem your shares within eighteen months of the date of purchase, you
will pay a 1.00% deferred sales charge. The amount of this charge is based on
your original purchase price, or the current net asset value of the shares you
redeem, whichever is less.
CLASS C SHARES ARE ONLY BEING MADE AVAILABLE FOR THE INFO-TECH & COMMUNICATIONS
FUND AND THE HEALTH & BIOTECHNOLOGY FUND.
CLASS D
Class D Shares are offered without any sale charges, and are not subject to any
12b-1 or shareholder servicing fees.
CLASS D SHARES ARE ONLY AVAILABLE TO SHAREHOLDERS WHO HELD SHARES OF THE ASM
INDEX 30 FUND ON THE DATE THE ASM FUND WAS REORGANIZED AS THE ORBITEX FOCUS 30
FUND, TO EMPLOYEES OF THE OFSG OR ITS AFFILIATES (AND CERTAIN RELATED ACCOUNTS)
AND TO CERTAIN INSTITUTIONAL INVESTORS.
If you held shares of the ASM Index 30 Fund, you may purchase additional
Class D Shares of the Orbitex Focus 30 Fund for the account that was established
when your received shares of the Focus 30 Fund in exchange for your ASM Fund
Shares.
In addition, if you held shares of the ASM Fund on the date of reorganization,
you may purchase Class D Shares of the Orbitex Focus 30 Fund for a new account
established for:
- - you
- - one of your immediate family members
- - a trust or individual retirement account or self-employed retirement plan for
the benefit of you or any of your immediate family members
- - your or an immediate family member's estate.
Prospectus - 45
<PAGE>
RULE 12b-1 PLANS IN DETAIL
The Board of Trustees of the Orbitex Group of Funds has adopted for Class A
Shares, Class B Shares, and Class C Shares separate Distribution Plans and
Agreements pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Plans").
CLASS A. The Plan adopted for Class A Shares allows each Fund to use part of its
assets for the sale and distribution of its Class A Shares, including
advertising, marketing and other promotional activities. Under this Plan, each
Fund pays Orbitex Funds Distributor, Inc. (the "Distributor"), an amount equal
to 0.40% of average net assets attributable to Class A Shares of that Fund on an
annualized basis.
CLASS B AND CLASS C. The Plans adopted for Class B and Class C Shares also allow
each Fund to use part of its assets for the sale and distribution of these
Shares, including advertising, marketing and other promotional activities. For
these services, under each Plan, each Fund pays the Distributor an amount equal
to 0.75% of average net assets attributable to Class B or Class C Shares, as
applicable, of that Fund on an annualized basis. The Class B and Class C Plans
also allow each Fund to pay the Distributor for certain shareholder services
provided to Class B and Class C shareholders or other service providers that
have entered into agreements with the Distributor to provide these services. For
these services, each Fund pays a shareholder service fee equal to 0.25% of
average net assets attributable to Class B or Class C Shares, as applicable, of
that Fund on an annualized basis.
BECAUSE THESE DISTRIBUTION AND SHAREHOLDER SERVICE FEES ARE PAID OUT OF A FUND'S
ASSETS ON AN ONGOING BASIS, THE FEES MAY, OVER TIME, INCREASE THE COST OF
INVESTING IN A FUND AND COST INVESTORS MORE THAN OTHER TYPES OF SALES LOADS.
PURCHASING SHARES
Once you have chosen the type of account and a class of shares, you are ready to
establish an account. Class A and B Shares of each Fund, and Class C Shares of
Info-Tech & Communications and Health & Biotechnology Fund are available to
investors making a minimum initial investment of $2,500 per Fund for regular
accounts and $2,000 for individual retirement accounts. The minimum for
subsequent investments is $250.
Class D shares of the Focus 30 Fund are available only to (1) shareholders who
previously were shareholders of the ASM Index 30 Fund at the time of the
reorganization, (2) employees of OFSG, its affiliates and certain related
accounts, and (3) certain institutional investors. The minimum for subsequent
investments in Class D Shares of the Focus 30 Fund by individual investors is
$100.
The Trust or Adviser may waive or lower these minimums in certain cases. YOU
MUST COMPLETE AND SIGN AN APPLICATION FOR EACH ACCOUNT YOU OPEN WITH EACH FUND.
The price for Fund shares is the Fund's net asset value per share (NAV) plus any
applicable sales charge. We determine the NAV as of the close of trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern time) every day that the
Exchange is open. We will price your order at the next NAV calculated after the
Fund receives your order. For more information on how we price shares, see
"Pricing of Fund Shares" on page 53.
The Funds and the Distributor each reserve the right to reject any purchase for
any reason and to cancel any purchase due to non-payment. You must make all
purchases in United States dollars and draw all checks on United States banks.
If we cancel your purchase due to non-payment, you will be responsible for any
loss the Funds incur. We will not accept cash or third-party checks for the
purchase of shares.
Prospectus - 46
<PAGE>
<TABLE>
<S> <C>
METHOD OF PURCHASE PROCEDURES
PURCHASE
- -------------------------------------------------------------------------------
THROUGH A Contact your financial consultant.
FINANCIAL
PROFESSIONAL
[LOGO]
- -------------------------------------------------------------------------------
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:
[LOGO] - you must place your order with the Selling Group Member
before the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time); and
- the Selling Group Member must transmit the order to the
Funds before 5:00 p.m. Eastern time on that same day.
- -------------------------------------------------------------------------------
BY MAIL To purchase Shares of the ORBITEX GROWTH FUND, ORBITEX
INFO-TECH & COMMUNICATIONS FUND, or the ORBITEX STRATEGIC
[LOGO] NATURAL RESOURCES FUND, send your completed application to:
Orbitex Group of Funds
P.O. Box 8069
Boston, Massachusetts 02266-8069
To purchase Shares of the ORBITEX FOCUS 30 FUND, or the
ORBITEX HEALTH & BIOTECHNOLOGY FUND, send your completed
application to:
Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
Include with your application your check, payable to
"Orbitex Group of Funds - (Name of Fund)." If you are
purchasing Shares of more than one Orbitex Fund, you must
include a separate application and a separate check for each
Fund.
</TABLE>
Prospectus - 47
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
BY WIRE - INITIAL PURCHASE: For the ORBITEX GROWTH FUND, ORBITEX
INFO-TECH & COMMUNICATIONS FUND or the ORBITEX STRATEGIC
[LOGO] NATURAL RESOURCES FUND, call us at 1-888-ORBITEX for
instructions and to receive an account number. You will
need to instruct a Federal Reserve System member bank to
wire funds to: State Street Bank and Trust Company, ABA
No. 011000028, Attn.: Custody & Shareholder Services,
Credit: Name of Fund, DDA No. 9905-295-3, FBO:
Shareholder Name, Name of Fund, Shareholder Account
Number. You must also complete and mail an application to
the address shown above under "By Mail."
- INITIAL PURCHASE: For the ORBITEX FOCUS 30 FUND or the
ORBITEX HEALTH & BIOTECHNOLOGY FUND, call us at
1-888-ORBITEX for instructions and to receive an account
number. You will need to instruct a Federal Reserve
System member bank to wire funds to: State Street Bank
and Trust Company, ABA No. 011000028, Attn.: Custody,
Credit: Name of Fund, DDA No. 51815926, FBO: Shareholder
Name, Name of Fund, Shareholder Account Number. You must
also complete and mail an application to the address
shown above under "By Mail."
- SUBSEQUENT PURCHASE: Wire funds to the designated bank
account for each Fund.
You may wire funds between 8:00 a.m. and 4:00 p.m. Eastern
time. To make a same-day wire investment, please call
1-888-ORBITEX by 12:00 noon to notify us of your intention
to wire funds, and make sure your wire arrives by 4:00 p.m.
Eastern time. Please note that your bank may charge a fee
for the wire. WIRE TRANSACTIONS ARE NOT AVAILABLE FOR
RETIREMENT ACCOUNTS.
- -------------------------------------------------------------------------------
BY EXCHANGE You may exchange your shares for the same class of shares of
another Fund by written request sent to the Funds at:
[LOGO] Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
- -------------------------------------------------------------------------------
BY TELEPHONE You may make subsequent purchases in your account by
telephoning 1-888-ORBITEX between 8:30 a.m. and 4:00 p.m.
[LOGO] Eastern time on any day the Funds are 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" on
page 50.
- -------------------------------------------------------------------------------
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.
[LOGO]
</TABLE>
Prospectus - 48
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
IMPORTANT NOTES Once you have requested a telephone transaction, and a
confirmation number has been assigned, the transaction
cannot be revoked. We reserve the right to refuse any
purchase request.
You can redeem shares that you purchased by check. However,
while we will process your redemption request at the
next-determined net asset value after we receive it, your
redemption proceeds will not be available until your check
clears. This could take up to ten calendar days.
</TABLE>
REDEEMING SHARES
You have the right to sell ("redeem") all or any part of your shares subject to
certain restrictions. Selling your shares in a Fund is referred to as a
"redemption" because the Fund buys back its shares. We will redeem your shares
at the net asset value next computed following receipt of your redemption
request in good order. See "Redemption Procedures - Request in "Good Order"' on
page 51.
We will mail your redemption proceeds to your current address or transmit them
electronically to your designated bank account. Except under certain emergency
conditions, we will send your redemption to you within seven days after we
receive your redemption request.
The Funds cannot accept requests that specify a certain date for redemption or
which specify any other special conditions. Please call 1-888-ORBITEX for
further information. WE WILL NOT PROCESS YOUR REDEMPTION REQUEST IF IT IS NOT IN
PROPER FORM (SEE CHART ON PAGE 50). WE WILL NOTIFY YOU IF YOUR REDEMPTION
REQUEST IS NOT IN PROPER FORM.
If, as a result of your redemption, your account value drops below $1,000, we
may redeem the remaining shares in your account. We will notify you in writing
of our intent to redeem your shares. We will allow at least sixty days
thereafter for you to make an additional investment to bring your account value
up to at least $1,000 before we will process the redemption.
If you purchased your Class A Shares without any sales charge because your
initial investment was $1 million or more, you will pay a redemption fee equal
to 1.00% of the proceeds from the redemption of your Shares you are redeeming if
you purchased those Shares within one year of the date of your purchase. See the
discussion of "Reduced Sales Charges" on page 42.
SIGNATURE GUARANTEES
Your redemption request must be accompanied by a "signature guarantee" under
certain circumstances, such as if you are redeeming shares valued at $50,000 or
greater or if you ask us to send the redemption proceeds to an address other
than the address of record or to a person other than the registered
shareholder(s) for the account.
CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES. There are no deferred charges for the sale of Class A Shares,
except that investors who paid no initial sales charge on their purchase of
Class A Shares by investing $1 million or more will pay a 1% contingent deferred
sales charge on any Class A Shares redeemed within one year of purchase.
CLASS B SHARES. If you redeem your Class B Shares within six years of the date
you purchased the Shares, you will pay a contingent deferred sales charge as
described on page 44.
CLASS C SHARES. If you redeem your Class C Shares within eighteen months of the
date you purchased the Shares, you will pay a contingent deferred sales charge
equal to 1.00% of the lesser of (1) the original purchase price or (2) the net
asset value of the shares being redeemed.
CLASS D SHARES. There are no contingent deferred sales charges imposed on
redemptions of Class D Shares of the Orbitex Focus 30 Fund.
Prospectus - 49
<PAGE>
THIRD PARTY TRANSACTIONS
If you buy and redeem shares of the Funds through a member of the National
Association of Securities Dealers, Inc., that member may charge a fee for that
service.
The Orbitex Group of Funds has authorized one or more brokers to accept on its
behalf purchase and redemption orders. Such brokers are authorized to designate
intermediaries to accept orders on the Fund's behalf. The 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 Funds' net asset
value next computed after it is received by the authorized broker or broker
authorized designee.
REDEMPTION-IN-KIND
The Funds reserve the right to honor requests for redemption or repurchase
orders by making payment in whole or in part in readily marketable securities
("redemption in kind") if the amount of such a request is large enough to affect
operations (for example, if the request is greater than $250,000 or 1% of a
Fund's assets). The securities will be chosen by the Fund and valued at the
Fund's net asset value. A shareholder may incur transaction expenses in
converting these securities to cash.
<TABLE>
<S> <C>
METHOD OF REDEMPTION PROCEDURES
REDEMPTION
- -------------------------------------------------------------------------------
BY TELEPHONE You may authorize redemption of some or all shares in your
account with the Funds by telephoning the Funds at
[LOGO] 1-888-ORBITEX between 8:30 a.m. and 4:00 p.m. Eastern time
on any day the Funds are open. You will NOT be eligible to
use the telephone redemption service if you:
- have declined or canceled your telephone investment
privilege;
- wish to redeem less than $1,500;
- must provide supporting legal documents such as a
signature guarantee, or if necessary, for redemption
requests by corporations, trusts and partnerships; and
- wish to redeem from a retirement account.
- -------------------------------------------------------------------------------
BY MAIL If you are redeeming Shares of the ORBITEX GROWTH FUND,
ORBITEX INFO-TECH & COMMUNICATIONS FUND, or the ORBITEX
[LOGO] STRATEGIC NATURAL RESOURCES FUND, you may send your
redemption request to:
Orbitex Group of Funds
P.O. Box 8069
Boston, Massachusetts 02266-8069
If you are redeeming Shares of the ORBITEX FOCUS 30 FUND or
the ORBITEX HEALTH & BIOTECHNOLOGY FUND, you may send your
redemption request to:
Orbitex Group of Funds
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, New York 11788-0786
</TABLE>
Prospectus - 50
<PAGE>
<TABLE>
<S> <C>
You must include the following information in your written
request:
- a letter of instruction stating the name of the Fund,
the number of shares you are redeeming, the names in
which the account is registered and your account number;
- other supporting legal documents, if necessary, for
redemption requests by corporations, trusts and
partnerships;
- a signature guarantee, if necessary
- -------------------------------------------------------------------------------
BY WIRE You may request your redemption proceeds be wired directly
to the bank account designated on your application. The
[LOGO] 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 and signature guarantees, if
required (signature guarantees can be obtained at most
banks, credit unions, and licensed brokers
- any supporting legal documentation that may be required
YOUR REDEMPTION REQUEST WILL BE PROCESSED AT THE
NEXT-DETERMINED SHARE PRICE AFTER WE HAVE RECEIVED ALL
REQUIRED INFORMATION.
- -------------------------------------------------------------------------------
IMPORTANT NOTE Once we have processed your redemption request, and a
confirmation number has been given, the transaction CANNOT
be revoked.
</TABLE>
OPTIONS FOR REDEMPTION PROCEEDS
You may receive your redemption proceeds by check or by wire.
CHECK REDEMPTIONS. Normally we will mail your check within two business days of
a redemption.
WIRE REDEMPTIONS. Before you can receive redemption proceeds by wire, you must
establish this option by completing a special form or the appropriate section of
your account application.
You may request that your redemption proceeds be wired directly to your bank
account. The Trust's transfer agent imposes a $10.00 fee for each wire
redemption and deducts the fee directly from your account. Your bank may also
impose a fee for the incoming wire. The redemption proceeds must be paid to the
same bank and account as designated on the Application or in written
instructions in proper form subsequently received by the Trust.
TELEPHONE REDEMPTIONS AND EXCHANGES.
We will automatically establish the telephone redemption option for your
account, unless you instruct us otherwise in writing. Telephone redemptions are
easy and convenient, but this account option involves a risk of loss from
unauthorized or fraudulent transactions. We will take reasonable precautions to
protect your account from fraud. You should do the same by keeping your account
information private and by reviewing immediately any account statements and
confirmations that you receive. Please contact us
Prospectus - 51
<PAGE>
immediately about any transaction you believe to be unauthorized.
Orbitex reserves the right to refuse a telephone redemption or exchange if the
caller cannot provide:
- - the account number
- - the name and address exactly as registered on the account
- - the primary social security or employer identification number as registered
on the account
We may also require a password from the caller.
Orbitex will not be responsible for any account losses due to telephone fraud,
so long as we have taken reasonable steps to verify the caller's identity. If
you wish to cancel the telephone redemption feature for your account, please
notify us in writing.
EXCHANGING SHARES
The exchange privilege is a convenient way to buy shares in each Fund in order
to respond to changes in your investment goals or in market conditions. You may
exchange your shares for shares of the same class of another Fund at no cost to
you (or, if you hold D Class Shares of the Orbitex Focus 30 Fund, you may
exchange them for Class A Shares of another Orbitex Fund). If you establish a
new account by exchange, the exchanged shares must have a minimum value of
$2,500. All subsequent exchanges must have a minimum value of $250 per Fund. You
may exchange shares either by telephone, if you have not canceled your telephone
privilege, or in writing. Written requests for exchange must provide the
following:
- - current Fund's name;
- - account names and numbers;
- - name of the Fund you wish to exchange your shares into;
- - the amount you wish to exchange;
- - specify the shareholder privileges you wish to retain (e.g., Telephone
Privileges); and
- - signatures of all registered owners.
To exchange shares by telephone, you should call 1-888-ORBITEX between
8:30 a.m. and 4:00 p.m. Eastern time on any day the Funds are open. We will
process telephone requests made after 4:00 p.m. Eastern Time at the close of
business on the next business day. You should notify the Funds in writing of all
shareholder service privileges you wish to continue in any new account opened by
a telephone exchange request.
Please note that we will only accept exchanges if your ownership registrations
in both accounts are identical.
We will value your exchanged shares at their respective net asset value next
determined after the receipt of the exchange request. We will not impose an
initial sales charge, redemption fee or penalty on exchanges. Please note that
an exchange may have tax consequences for you. We reserve the right to modify or
terminate the exchange privilege upon sixty days' written notice to you.
TRANSFERRING REGISTRATION
You can transfer the registration of your shares in an Orbitex Fund to another
owner by completing a transfer form and sending it to American Data
Services, Inc., P.O. Box 5786, Hauppauge, New York 11788-0786.
Prospectus - 52
<PAGE>
- --------------------------------------------------------------------------------
PRICING OF FUND SHARES
Each Fund's net asset value for each class of shares or NAV is calculated on
each day that the New York Stock Exchange is open. The NAV is the value of a
single share of a Fund. The administrator and sub-administrator calculate the
NAV for each Fund they administer at the close of business of the New York Stock
Exchange, normally 4:00 p.m. Eastern time. The NAV is determined by subtracting
the total of the Fund's liabilities from its total assets and dividing the
remainder by the number of shares outstanding. The value of each Fund's total
assets is generally based on the market value of the securities that the Fund
holds. If market values are not available, we will determine the fair value of
securities using procedures that the Board of Trustees has approved. We will
also fair value securities whose values are materially affected by events
occurring after the closing of a foreign market. In those circumstances where a
security's price is not considered to be market indicative, the security's
valuation may differ from an available market quotation. Foreign securities may
be traded in their primary markets on weekends or other days when the Fund does
not price its shares. Therefore, the NAV of Funds holding foreign securities may
change on days when shareholders will not be able to buy or redeem their Fund
shares.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
As a shareholder, you are entitled to your share of a Fund's net income and
capital gains on its investments. Each Fund passes substantially all of its
earnings along to its investors as distributions. When a Fund earns dividends
from stocks and interest from bonds and other debt securities and distributes
these earnings to shareholders, it is called a dividend distribution. A Fund
realizes capital gains when it sells securities for a higher price than it paid.
When net long-term capital gains are distributed to shareholders, it is called a
capital gain distribution. Net short-term capital gains are considered ordinary
income and are included in dividend distributions.
<TABLE>
<CAPTION>
<S> <C>
Long-term vs. Short-term capital gains:
- Long-term capital gains are realized on
securities held for more than one year and are
part of your capital gain distribution.
- Short-term capital gains are realized on
securities held less then one year and are part
of your dividend distributions.
</TABLE>
The Orbitex Focus 30 Fund distributes dividends quarterly, and capital gains
annually. The capital gain distributions will typically be declared and paid in
December.
The other Orbitex Funds distribute dividends and capital gains annually. These
distributions will typically be declared and paid in December.
You will receive distributions from a Fund in additional shares of the Fund
unless you choose to receive your distributions in cash. If you wish to change
the way in which you receive distributions, you should call 1-888-ORBITEX for
instructions.
If you have elected to receive distributions in cash, and the postal or other
delivery service returns your check to the Funds as undeliverable, you will not
receive interest on amounts represented by the uncashed checks.
Prospectus - 53
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
Your investment will have tax consequences that you should consider. Some of the
more common federal tax consequences are described here but you should consult
your tax consultant about your particular situation. ALTHOUGH IT IS NOT AN
INVESTMENT OBJECTIVE, THE FUNDS' ADVISER WILL ATTEMPT TO TAKE INTO ACCOUNT THE
TAX CONSEQUENCES OF ITS INVESTMENT DECISIONS. However, there may be occasions
when the Adviser's investment decisions will result in a negative tax
consequence for the Funds' shareholders.
TAXES ON DISTRIBUTIONS
You will generally be subject to pay federal income tax and possibly state taxes
on all Fund distributions. Your distributions will be taxed in the same manner
whether you receive the distributions in cash or additional shares of the Fund.
Distributions that are derived from net long-term capital gains will generally
be taxed as long-term capital gains. The rate of tax will depend on how long the
Fund held the securities on which it realized the gains. In general, for
individual shareholders, the maximum capital gain rate is 20 percent. All other
distributions, including short-term capital gains, will be taxed as ordinary
income. The Fund sends detailed tax information to its shareholders about the
amount and type of its distributions by January 31 for the prior calendar year.
TAXES ON SALES OR EXCHANGES
If you redeem your shares of a Fund, or exchange them for shares of another
Fund, you will be subject to tax on any taxable gain. Your taxable gain or loss
is computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should keep your account statements so that you or your tax preparer will be
able to determine whether a sale or exchange will result in a taxable gain or
loss.
"BUYING A DIVIDEND"
Unless your investment is in a tax-deferred account, you may want to avoid
investing in a Fund close to the date of a distribution because you pay the full
pre-distribution price for your shares and then receive part of your investment
back as a taxable distribution.
TAX WITHHOLDING
The Funds may be required to withhold U.S. federal income tax at the rate of 31%
from all taxable distributions and from proceeds from certain sales and
exchanges payable to shareholders who fail to provide the Funds with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Any such withheld amounts may be credited against the shareholder's U.S. federal
income tax liability.
Prospectus - 54
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
INVESTMENT ADVISER
Orbitex Management, Inc., is the Funds' investment adviser (the "Adviser"). The
Adviser's address is 410 Park Avenue, New York, NY 10022. The Adviser is an
affiliate of Orbitex Management Ltd., an investment adviser that provides
investment services to individuals and institutions including Canadian unit
trusts.
Under the terms of an investment advisory agreement, the Adviser is responsible
for formulating the Funds' investment programs and for making day-to-day
investment decisions and engaging in portfolio transactions. The Adviser also
furnishes corporate officers, provides office space, services and equipment and
supervises all matters relating to the Fund's operations.
As compensation for its services, each of the following Funds paid the Adviser a
fee for the fiscal year ended April 30, 1999, at the annualized rate (expressed
as a percentage of average daily net assets) of 0% for the Growth Fund, 0% for
the Info-Tech & Communications Fund, and 0% for the Strategic Natural Resources
Fund. The Focus 30 Fund paid the Adviser a fee for the fiscal year ended
October 31, 1999, at the annualized rate (expressed as a percentage of average
daily net assets) of 0%. As of July 15, 1999, the Health & Biotechnology Fund
commenced operations.
OTHER SERVICE PROVIDERS
The Funds rely on other companies to provide necessary services for their
day-to-day operations. Below is a list of these service providers. American Data
Services, Inc. became an affiliate of Orbitex Management, Inc.
ADMINISTRATOR FOR THE TRUST
American Data Services, Inc.
Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
SUB-ADMINISTRATOR FOR THE GROWTH FUND,
INFO-TECH & COMMUNICATIONS FUND AND
STRATEGIC NATURAL RESOURCES FUND
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN FOR TRUST
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR
Orbitex Funds Distributor, Inc.
410 Park Avenue
New York, New York 10022
TRANSFER AND DIVIDEND DISBURSING AGENT FOR
THE GROWTH FUND, INFO-TECH & COMMUNICATIONS
FUND AND STRATEGIC NATURAL RESOURCES FUND
Boston Financial Data Service, Inc.
Two Heritage Drive
North Quincy, Massachusetts 02171
TRANSFER AND DIVIDEND DISBURSING AGENT FOR THE
FOCUS 30 FUND AND HEALTH & BIOTECHNOLOGY FUND
American Data Services, Inc.
Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Prospectus - 55
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[LOGO]
FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended to help you understand the Funds'
financial performance for the fiscal periods presented. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose reports, along with the Funds' financial statements, are included in the
Funds' annual reports, which are available upon request.
FINANCIAL HIGHLIGHTS
Financial Highlights For a Fund Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
ORBITEX GROWTH FUND
-----------------------------------------------------------------
CLASS A SHARES CLASS A SHARES CLASS B SHARES
------------------ ------------------ ---------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999 (B) APRIL 30, 1998 (A) APRIL 30, 1999 (A)(B)
------------------ ------------------ ---------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $17.93 $15.00 $16.46
------ ------ ------
Income (Loss) from investment operations:
Net investment income (loss)............................ (0.15) 0.26(e) (0.12)
Net realized and unrealized gain on investments and
foreign currency related transactions.............. 1.70 2.67 3.11
------ ------ ------
Total income from investment operations................. 1.55 2.93 2.99
------ ------ ------
Less distributions from net investment income............... (0.19) -- (0.21)
Less distributions from net realized gains.................. (0.63) -- (0.63)
------ ------ ------
Total distributions from net investment income and net
realized gains..................................... (0.82) -- (0.84)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $18.66 $17.93 $18.61
====== ====== ======
TOTAL RETURN(c)............................................. 9.07% 19.53% 18.61%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $1,422 $ 891 $ 54
Ratio of expenses to average net assets(d).............. 1.93% 2.11% 2.03%
Ratio of net expenses to average net assets (net of
custodial credits)(d).............................. 1.88% 1.60% 2.00%
Ratio of total expenses to average net assets before
waivers, reimbursements and custodial credits(d)... 23.92% 50.13% 18.75%
Ratio of net investment income (loss) to average net
assets(d).......................................... (0.85)% 4.41%(e) (1.05)%
Portfolio turnover rate................................. 957% 448% 957%
</TABLE>
- ------------------------------
<TABLE>
<C> <S>
(a) The commencement of investment operations was October 22,
1997 and September 16, 1998 for Growth Fund Class A Shares
and Class B Shares, respectively.
(b) Per share numbers have been calculated using the average
shares method, which more appropriately presents the per
share data for the period.
(c) Total returns are historical and assume changes in share
price, reinvestment of dividends and capital gains
distributions, and assume no sales charge. Had the Adviser,
Administrator, Custodian and Distributor not absorbed a
portion of the expenses, total returns would have been
lower. Total returns for periods less than one year are not
annualized.
(d) Annualized for periods less than one year.
(e) Net investment income per share and the net investment
income ratio would have been lower without a certain
investment strategy followed by the Adviser during the
current fiscal year.
</TABLE>
Prospectus - 56
<PAGE>
<TABLE>
<CAPTION>
ORBITEX INFO-TECH &
COMMUNICATIONS FUND
----------------------------------------------------------
CLASS A SHARES CLASS A SHARES CLASS B SHARES
-------------- ------------------ ------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999 APRIL 30, 1998 (A) APRIL 30, 1999 (A)
-------------- ------------------ ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 19.62 $15.00 $ 18.23
------- ------ -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:...................
Net investment loss..................................... (0.08) 0.00 (0.08)
Net realized and unrealized gain on investments and
foreign currency related transactions.............. 11.26 4.62 12.51
------- ------ -------
Total income from investment operations................. 11.18 4.62 12.43
------- ------ -------
Less distributions from net investment income............... -- -- --
Less distributions from net realized gains.................. (0.18) -- (0.18)
------- ------ -------
Total distributions from net investment income and net
realized gains..................................... (0.18) -- (0.18)
------- ------ -------
NET ASSET VALUE, END OF PERIOD.............................. $ 30.62 $19.62 $ 30.48
======= ====== =======
TOTAL RETURN(b)............................................. 57.43% 30.80% 68.67%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $34,335 $2,440 $18,904
Ratio of expenses to average net assets(c).............. 2.07% 2.88% 2.41%
Ratio of net expenses to average net assets (net of
custodial credits)(c).............................. 2.07% 2.40% 2.40%
Ratio of total expenses to average net assets before
waivers, reimbursements and custodial credits(c)... 4.04% 39.06% 4.41%
Ratio of net investment loss to average net assets(c)... (0.70)% (1.27)% (1.40)%
Portfolio turnover rate................................. 360% 76% 360%
</TABLE>
- ------------------------------
<TABLE>
<C> <S>
(a) The commencement of investment operations was October 22,
1997 and September 16, 1998 for Info-Tech & Communications
Fund Class A Shares and Class B Shares, respectively.
(b) Total returns are historical and assume changes in share
price, reinvestment of dividends and capital gains
distributions, and assume no sales charge. Had the Adviser,
Administrator, Custodian and Distributor not absorbed a
portion of the expenses, total returns would have been
lower. Total returns for periods less than one year are not
annualized.
(c) Annualized for periods less than one year.
</TABLE>
Prospectus - 57
<PAGE>
<TABLE>
<CAPTION>
ORBITEX STRATEGIC NATURAL RESOURCES FUND
----------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES CLASS A SHARES CLASS B SHARES
------ ------ ------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
APRIL 30, 1999 APRIL 30, 1998 APRIL 30, 1999
(b) (a) (a)(b)
------ ------ ------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $16.54 $15.00 $12.22
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment gain (loss).............................. 0.00 0.38(e) (0.05)
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions.......... (1.25) 1.22 3.21(g)
------ ------ ------
Total income (loss) from investment operations.......... (1.25) 1.60 3.16
------ ------ ------
Less distributions from net investment income............... (0.37) (0.03) (0.40)
Less distributions from net realized gains.................. 0.00(f) (0.03) 0.00(f)
------ ------ ------
Total distributions from net investment income and net
realized gains..................................... (0.37) (0.06) (0.40)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $14.92 $16.54 $14.98
====== ====== ======
TOTAL RETURN(c)............................................. (6.86)% 10.74% 26.92%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $4,286 $5,698 $ 408
Ratio of expenses to average net assets(d).............. 2.19% 2.45% 2.40%
Ratio of net expenses to average net assets (net of
custodial credits)(d).............................. 2.17% 2.40% 2.40%
Ratio of total expenses to average net assets before
waivers, reimbursements and custodial credits(d)... 8.76% 9.27% 8.49%
Ratio of net investment income (loss) to average net
assets(d).......................................... 0.00% 6.12%(e) (0.66)%
Portfolio turnover rate................................. 921% 519% 921%
</TABLE>
- ------------------------------
<TABLE>
<C> <S>
(a) The commencement of investment operations was October 23,
1997 and September 21, 1998 for Strategic Natural Resources
Fund Class A Shares and Class B Shares, respectively.
(b) Per share numbers have been calculated using the average
shares method, which more appropriately presents the per
share data for the period.
(c) Total returns are historical and assume changes in share
price, reinvestment of dividends and capital gains
distributions, and assume no sales charge. Had the Adviser,
Administrator, Custodian and Distributor not absorbed a
portion of the expenses, total returns would have been
lower. Total returns for periods less than one year are not
annualized.
(d) Annualized for periods less than one year.
(e) Net investment income per share and the net investment
income ratio would have been lower without a certain
investment strategy followed by the Adviser during the
current fiscal year.
(f) Amount represents less than $0.01 per share.
(g) The amount shown may not accord with the change in aggregate
gains and losses of portfolio securities due to the timing
of sales and redemptions of Fund shares.
</TABLE>
Prospectus - 58
<PAGE>
<TABLE>
<CAPTION>
ORBITEX FOCUS 30 FUND
----------------------------------------
<S> <C> <C>
CLASS A SHARES CLASS B SHARES
------ ------
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1999 (A) 1999 (A)
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $22.76 $22.76
------ ------
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss..................................... (0.08) (0.10)
Net realized and unrealized loss on investments......... (0.72) (0.72)
------ ------
Total loss from investment operations................... (0.80) (0.82)
------ ------
Less distributions from net investment income............... -- --
Less distributions in excess of net income.................. -- --
Less distributions from net realized gains.................. -- --
------ ------
Total distributions from net investment income and net
realized gains....................................... -- --
------ ------
NET ASSET VALUE, END OF PERIOD.............................. $21.96 $21.94
====== ======
TOTAL RETURN(B)............................................. (3.51)% (3.60)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $ 60 $ 10
Ratio of expenses to average net assets(c)(d)........... 3.58% 4.58%
Ratio of total expenses to average net assets before
waivers and reimbursements(c)........................ 6.22% 7.28%
Ratio of net investment loss to average net assets(c)... (2.60)% (3.53)%
Portfolio turnover rate................................. 61% 61%
</TABLE>
- ------------------------------
<TABLE>
<C> <S>
(a) The commencement of investment operations was July 12, 1999
for Class A and B shares.
(b) Total returns are historical and assume changes in share
price, reinvestment of dividends and capital gains
distributions, and assume no sales charge. Had the Adviser
and Administrator 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.
(d) Ratio includes amounts relating to the general reserve
expense recognized in the period (see Notes 2 and 3). If
such expenses had not been incurred, the ratios of expenses
to average net assets for Classes A and B would be 1.00% and
1.60%, respectively.
</TABLE>
Prospectus - 59
<PAGE>
<TABLE>
<CAPTION>
ORBITEX FOCUS 30 FUND
-----------------------------------------------------------
CLASS D SHARES (A)
-----------------------------------------------------------
YEAR ENDED OCTOBER 31
-----------------------------------------------------------
1999 1998 1997 1996 1995 (E)
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 19.02 $ 17.21 $ 14.13 $11.37 $ 9.78
------- ------- ------- ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................ (0.27) 0.32 0.18 0.08 --
Net realized and unrealized gain on investments......... 4.62 2.54 3.34 2.76 1.77
------- ------- ------- ------ ------
Total income from investment operations................. 4.35 2.86 3.52 2.84 1.77
------- ------- ------- ------ ------
Less distributions from net investment income............... -- (0.27) (0.18) (0.07) (0.05)
Less distributions in excess of net income.................. -- -- (0.11) (0.01) (0.13)
Less distributions from net realized gains.................. (1.40) (0.78) (0.15) -- --
------- ------- ------- ------ ------
Total distributions from net investment income and net
realized gains..................................... (1.40) (1.05) (0.44) (0.08) (0.18)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ 21.97 $ 19.02 $ 17.21 $14.13 $11.37
======= ======= ======= ====== ======
TOTAL RETURN(B)............................................. 24.08% 17.13% 25.18% 25.01% 18.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $18,429 $29,535 $21,127 $9,315 $9,704
Ratio of expenses to average net assets(c).............. 3.11% 0.18% 0.42% 1.86% 3.01%(d)
Ratio of total expenses to average net assets before
waivers and reimbursements(c)...................... 4.41% 0.91% 1.05% 2.59% 5.77%
Ratio of net investment income (loss) to average net
assets............................................. (1.41)% 1.60% 1.51% 0.53% 0.04%
Portfolio turnover rate................................. 61% 196% 265% 391% 340%
</TABLE>
- ------------------------------
<TABLE>
<C> <S>
(a) This information prior to July 12, 1999 reflects the
operations of the ASM Index 30 Fund, Inc., which was
reorganized into Class D shares of the Orbitex Focus 30
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 Adviser
and Administrator not absorbed a portion of the expenses,
total returns would have been lower.
(c) Ratio includes amounts relating to the general operating
expense and general reserve expense recognized as a result
of the termination of the investment advisory agreement with
the former Adviser (see Note 3). If such expenses had not
been incurred, the ratio of expense to average net assets
would be 1.97% before waivers and reimbursements and 1.03%
after waivers and reimbursements.
(d) Includes $50,460 of interest expense not subject to expense
reimbursement agreement.
(e) Audited by predecessor auditor.
</TABLE>
Prospectus - 60
<PAGE>
WHERE TO GO FOR MORE INFORMATION:
You will find more information about the Orbitex Group of Funds in the following
documents:
- ANNUAL AND SEMI-ANNUAL REPORTS: Our annual and semi-annual reports list
the holdings in each Fund, describe each Fund's performance, include
financial statements for the Funds, and discuss the market conditions and
strategies that significantly affected the Funds' performance during
their last fiscal year.
- STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The Statement of Additional
Information contains additional and more detailed information about each
Fund.
The SAI and the financial statements included in the current annual and
semi-annual reports are incorporated by reference into (and are thus a part of)
this Prospectus.
THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS:
1. Call or write for one, and a copy will be sent without charge.
ORBITEX GROUP OF FUNDS
C/O AMERICAN DATA SERVICES, INC.
P.O. BOX 5786
HAUPPAUGE, NEW YORK 11788-0786
1-888-ORBITEX (OR 1-888-672-4839)
WWW.ORBITEXUSA.COM
2. Call or write the Public Reference Room of the Securities and Exchange
Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee for
this service. You can also go to the Public Reference Room and copy the
documents while you are there. Information about the Public Reference Room may
be obtained by calling the number below.
PUBLIC REFERENCE ROOM OF THE SEC
WASHINGTON, D.C. 20549-6009
1-800-SEC-0330
3. Go to the SEC's website (www.sec.gov) and download a free text-only version.
IF YOU ARE A CURRENT FUND SHAREHOLDER WOULD LIKE INFORMATION ABOUT YOUR ACCOUNT,
ACCOUNT TRANSACTIONS, OR ACCOUNT STATEMENTS, PLEASE CALL US AT 1-888-ORBITEX (OR
1-888-672-4839)
IF YOU PURCHASED YOUR SHARES THROUGH A FINANCIAL INSTITUTION, YOU MAY CONTACT
THAT INSTITUTION FOR MORE INFORMATION.
The Orbitex Group of Funds' Investment Company Act File Number is 811-8037.
Prospectus - 61
<PAGE>
[LOGO]
1-888-ORBITEX (1-888-672-4839)
www.orbitexusa.com
ORB-PRO1-OGF-0100
<PAGE>
ORBITEX GROUP OF FUNDS
Orbitex Growth Fund
Orbitex Info-Tech & Communications Fund
Orbitex Strategic Natural Resources Fund
Orbitex Focus 30 Fund
Orbitex Health & Biotechnology Fund
STATEMENT OF ADDITIONAL INFORMATION
January 19, 2000
---------------------------------
This Statement of Additional Information is not a Prospectus, but is an
incorporated part of the Prospectus and should be read in conjunction with the
Prospectus of the Orbitex Group of Funds (the "Trust") dated January 19, 2000.
To obtain a free copy of the Prospectus or an annual report, please call the
Trust at 1-888-ORBITEX.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History.............................................2
Investment Restrictions.....................................................2
Description of Securities, Other Investment Policies
and Risk Considerations.....................................................4
Management of the Trust.....................................................25
Principal Holders of Securities.............................................26
Investment Management and Other Services....................................29
Administrator...............................................................31
Sub-administrator...........................................................32
Custodian...................................................................33
Transfer Agent Services.....................................................33
Distribution of Shares......................................................33
Brokerage Allocation and Other Practices....................................37
Purchase and Redemption of Securities Being Offered.........................38
Shareholder Services........................................................41
Determination of Net Asset Value............................................42
Taxes.......................................................................43
Organization of the Trust...................................................45
Performance Information About the Funds.....................................45
Independent Accountants.....................................................47
Legal Matters...............................................................47
Financial Statements........................................................48
</TABLE>
For more information on any Orbitex Fund, including charges and expenses, call
Orbitex at the number indicated above for a free prospectus. Read it carefully
before you invest or send money.
<PAGE>
GENERAL INFORMATION AND HISTORY
The Trust is an open-end management investment company, commonly known as
"mutual fund," and sells and redeems shares every day that it is open for
business. The Trust was organized as a Delaware business trust by a Declaration
of Trust dated December 13, 1996, and is registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940 (the
"1940 Act").
The Trust currently consists of five portfolios: Orbitex Growth Fund ("Growth
Fund"), Orbitex Info-Tech & Communications Fund ("Info-Tech & Communications
Fund"), Orbitex Strategic Natural Resources Fund ("Strategic Natural Resources
Fund"), Orbitex Focus 30 Fund ("Focus 30 Fund"), and Orbitex Health &
Biotechnology Fund ("Health & Biotechnology Fund") (individually a "Fund" and
collectively the "Funds"). Each Fund other than the Health & Biotechnology
Fund is diversified. Each Fund represents a separate series of beneficial
interest in the Trust having different investment objectives, investment
programs, policies and restrictions.
<TABLE>
<CAPTION>
The Funds offer the following classes of shares:
<S> <C>
CLASS FUNDS OFFERING CLASS
Class A All Funds
Class B All Funds
Class C Info-Tech & Communications Fund and Health & Biotechnology Fund only
Class D Focus 30 Fund only
</TABLE>
Each Fund is managed by Orbitex Management, Inc. (the "Adviser"), which directs
the day-to-day operations and the investment of assets of each Fund. American
Data Services, Inc. ("ADS") is the administrator for each of the Funds, and the
accounting agent, transfer agent and dividend disbursing agent for Focus 30 Fund
and Health & Biotechnology Fund. State Street Bank and Trust Company ("State
Street") is the sub-administrator, accounting agent, transfer agent and dividend
disbursing agent for the Growth Fund, the Info-Tech & Communications Fund and
the Strategic Natural Resources Fund. State Street is the custodian for each of
the Funds. Funds Distributor, Inc. (the "Distributor") distributes the shares of
the Funds.
INVESTMENT RESTRICTIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever a policy or limitation states a
maximum percentage of a Fund's assets that may be invested in any security or
other asset, or sets forth a policy regarding quality standards, such
standard or percentage limitations will be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with a Fund's investment policies and limitations.
A Fund's fundamental investment policies and limitations may be changed only
with the consent of a "majority of the outstanding voting securities" of the
particular Fund. As used in this Statement of Additional Information, the term
"majority of the outstanding voting securities" means the lesser of (1) 67% of
the shares of a Fund present at a meeting where the holders of more than 50% of
the outstanding shares of a Fund are present in person or by proxy, or (2) more
than 50% of the outstanding shares of a Fund. Shares of each Fund will be voted
separately on matters affecting only that Fund, including approval of changes in
the fundamental investment policies of that Fund. Except for the fundamental
investment limitations listed below, the investment policies and
- 2 -
<PAGE>
limitations described in this Statement of Additional Information are not
fundamental and may be changed without shareholder approval.
THE FOLLOWING ARE THE FUNDS' FUNDAMENTAL INVESTMENT LIMITATIONS. A FUND WILL
NOT:
(1) Purchase securities on margin, except a Fund may make margin deposits
in connection with permissible options and futures transactions subject to
(5) below and may obtain short-term credits as may be necessary for
clearance of transactions.
(2) Issue any class of securities senior to any other class of securities
except in compliance with the 1940 Act.
(3) Borrow money for investment purposes in excess of 33-1/3% of the value
of its total assets, including any amount borrowed less its liabilities not
including any such borrowings. Any borrowings, which come to exceed this
amount, will be reduced in accordance with applicable law. Additionally,
each Fund may borrow up to 5% of its total assets (not including the amount
borrowed) for temporary or emergency purposes.
(4) Purchase or sell real estate, or invest in real estate limited
partnerships, except each Fund may, as appropriate and consistent with its
respective investment objective, policies and other investment
restrictions, buy securities of issuers that engage in real estate
operations and securities that are secured by interests in real estate
(including shares of real estate mortgage investment conduits, mortgage
pass-through securities, mortgage-backed securities and collateralized
mortgage obligations) and may hold and sell real estate acquired as a
result of ownership of such securities.
(5) Purchase or sell physical commodities or contracts thereon, except that
each Fund may enter into financial futures contracts and options thereon.
(6) Underwrite securities issued by other persons, except to the extent
that a Fund may be deemed to be an underwriter, within the meaning of the
Securities Act of 1933, in connection with the purchase of securities
directly from an issuer in accordance with each Fund's investment
objective, policies and restrictions.
(7) Make loans, except that each Fund in accordance with that Fund's
investment objective, policies and restrictions may: (i) invest in all or a
portion of an issue of publicly issued or privately placed bonds,
debentures, notes, other debt securities and loan participation interests
for investment purposes; (ii) purchase money market securities and enter
into repurchase agreements; and (iii) lend its portfolio securities in an
amount not exceeding one-third of the value of that Fund's total assets.
(8) Other than the Health & Biotechnology Fund, make an investment
unless 75% of the value of that Fund's total assets is represented by
cash, cash items, U.S. government securities, securities of other
investment companies and "other securities." For purposes of this
restriction, the term "other securities" means securities as to which
the Fund invests no more than 5% of the value of its total assets in any
one issuer or purchases no more than 10% of the outstanding voting
securities of any one issuer. As a matter of operating policy, each Fund
will not consider repurchase agreements to be subject to the
above-stated 5% limitation if all of the collateral underlying the
repurchase agreements are U.S. government securities and such repurchase
agreements are fully collateralized.
(9) Invest 25% or more of the value of its total assets in any one
industry, except that: (i) the Info-Tech & Communications Fund will
invest at least 25% of its total assets in the securities of companies
in the communications, information and related technology industries;
(ii) the Strategic Natural Resources Fund will invest at least 25% of
its total assets in securities of companies in natural
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resource industries and industries supportive to natural resource
industries; and (iii) the Health & Biotechnology Fund will invest at
least 25% of its total assets in the securities of companies in health,
biotechnology and related industries. This limitation (9) does not apply
to securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities or repurchase agreements secured by U.S. government
securities.
THE FOLLOWING RESTRICTIONS ARE DESIGNATED AS NON-FUNDAMENTAL AND MAY BE CHANGED
BY THE BOARD OF TRUSTEES OF THE TRUST WITHOUT THE APPROVAL OF SHAREHOLDERS. A
FUND MAY NOT:
(1) Invest in portfolio companies for the purpose of acquiring or
exercising control of such companies.
(2) Invest in the securities of other investment companies except in
compliance with the 1940 Act.
(3) Invest in puts, calls, straddles, spreads or any combination thereof,
except to the extent permitted by the Prospectus and Statement of
Additional Information.
(4) Purchase or otherwise acquire any security or invest in a repurchase
agreement if, as a result, more than 15% of the net assets of the Fund
would be invested in securities that are illiquid or not readily
marketable, including repurchase agreements maturing in more than seven
days and non-negotiable fixed time deposits with maturities over seven
days. Each Fund may invest without limitation in restricted securities
provided such securities are considered to be liquid. If, through a
change in values, net assets or other circumstances, a Fund were in a
position where more than 15% of its net assets was invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
(5) Mortgage, pledge, or hypothecate in any other manner, or transfer as
security for indebtedness any security owned by a Fund, except as may be
necessary in connection with permissible borrowings and then only if such
mortgaging, pledging or hypothecating does not exceed 33 1/3% of such
Fund's total assets. Collateral arrangements with respect to margin, option
and other risk management and when-issued and forward commitment
transactions are not deemed to be pledges or other encumbrances for
purposes of this restriction.
DESCRIPTION OF SECURITIES, OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following pages contain more detailed information about the types of
instruments in which a Fund may invest, strategies the Adviser, or Sub-Adviser,
as the case may be, may employ in pursuit of a Fund's investment objective and a
summary of related risks. The Adviser or Sub-Adviser, as the case may be) may
not buy all of these instruments or use all of these techniques unless it
believes that doing so will help a Fund achieve its investment objectives.
ADJUSTABLE RATE SECURITIES (ALL FUNDS). Adjustable rate securities (i.e.,
variable rate and floating rate instruments) are securities that have interest
rates that are adjusted periodically, according to a set formula. The maturity
of some adjustable rate securities may be shortened under certain special
conditions described more fully below.
Variable rate instruments are obligations that provide for the adjustment of
their interest rates on predetermined dates or whenever a specific interest rate
changes. A variable rate instrument whose principal amount is scheduled to be
paid in 397 days or less is considered to have a maturity equal to the period
remaining until the next readjustment of the interest rate. Many variable rate
instruments are subject to demand features which entitle the purchaser to resell
such securities to the issuer or another designated party, either (1) at any
time upon notice of usually 397 days or less, or (2) at specified intervals, not
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exceeding 397 days, and upon 30 days notice. A variable rate instrument subject
to a demand feature is considered to have a maturity equal to the longer of the
period remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand, if final
maturity exceeds 397 days or the shorter of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand if final maturity is within 397 days.
Floating rate instruments have interest rate reset provisions similar to those
for variable rate instruments and may be subject to demand features like those
for variable rate instruments. The interest rate is adjusted, periodically
(e.g., daily, monthly, semi-annually), to the prevailing interest rate in the
marketplace. The interest rate on floating rate securities is ordinarily
determined by reference to the 90-day U.S. Treasury bill rate, the rate of
return on commercial paper or bank certificates of deposit or an index of
short-term interest rates. The maturity of a floating rate instrument is
considered to be the period remaining until the principal amount can be
recovered through demand.
BELOW-INVESTMENT-GRADE DEBT SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND). Each
Fund may invest up to 35% of its net assets in debt securities that are rated
below "investment grade" by Standard and Poor's Rating Group ("S&P") or
Moody's Investors Services, Inc. ("Moody's") or, if unrated, are deemed by
the Advisers to be of comparable quality. Securities rated less than Baa by
Moody's or BBB by S&P are classified as below investment grade securities and
are commonly referred to as "junk bonds" or high yield, high risk securities.
Debt rated BB, B, CCC, CC and C and debt rated Ba, B, Caa, Ca, C is regarded
by S&P and Moody's, respectively, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation and C the highest degree of speculation. For Moody's,
Ba indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Similarly, debt rated Ba or BB and below is
regarded by the relevant rating agency as speculative. Debt rated C by
Moody's or S&P is the lowest rated debt that is not in default as to
principal or interest, and such issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing. Such
securities are also generally considered to be subject to greater risk than
securities with higher ratings with regard to a deterioration of general
economic conditions. Excerpts from S&P's and Moody's descriptions of their
bond ratings are contained in the Appendix to this SAI.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, since rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, the Adviser
continuously monitor the issuers of high yield bonds in the portfolios of the
Funds to determine if the issuers will have sufficient cash flows and profits to
meet required principal and interest payments. The achievement of a Fund's
investment objective may be more dependent on the Adviser's own credit analysis
than might be the case for a fund which invests in higher quality bonds. A Fund
may retain a security whose rating has been changed. The market values of lower
quality debt securities tend to reflect individual developments of the issuer to
a greater extent than do higher quality securities, which react primarily to
fluctuations in the general level of interest rates. In addition, lower quality
debt securities tend to be more sensitive to economic conditions and generally
have more volatile prices than higher quality securities. Issuers of lower
quality securities are often highly leveraged and may not have available to them
more traditional methods of financing. For example, during an economic downturn
or a sustained period of rising interest rates, highly leveraged issuers of
lower quality securities may experience financial stress. During such periods,
such issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service debt obligations may also be
adversely affected by specific developments affecting the issuer, such as the
issuer's inability to meet specific projected business forecasts or the
unavailability of additional financing. Similarly, certain emerging market
governments that issue lower quality debt securities are among the largest
debtors to commercial banks, foreign governments and supranational organizations
such as the World Bank and may not be able or willing to make principal and/or
interest repayments as they come due. The risk of loss due to default by the
issuer is significantly greater for the holders of lower quality securities
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<PAGE>
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer. Lower quality debt securities frequently have
call or buy-back features which would permit an issuer to call or repurchase the
security from a Fund. In addition, a Fund may have difficulty disposing of lower
quality securities because they may have a thin trading market. There may be no
established retail secondary market for many of these securities, and each Fund
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market also
may have an adverse impact on market prices of such instruments and may make it
more difficult for a Fund to obtain accurate market quotations for purposes of
valuing the Fund's portfolios. A Fund may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Funds may invest,
include: (i) potential adverse publicity, (ii) heightened sensitivity to general
economic or political conditions and (iii) the likely adverse impact of a major
economic recession. A Fund may also incur additional expenses to the extent the
Fund is required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings, and the Fund may have limited legal recourse
in the event of a default. Debt securities issued by governments in emerging
markets can differ from debt obligations issued by private entities in that
remedies for defaults generally must be pursued in the courts of the defaulting
government, and legal recourse is therefore somewhat diminished. Political
conditions, in terms of a government's willingness to meet the terms of its debt
obligations, also are of considerable significance. There can be no assurance
that the holders of commercial bank debt may not contest payments to the holders
of debt securities issued by governments in emerging markets in the event of
default by the governments under commercial bank loan agreements. The Adviser
attempts to minimize the speculative risks associated with investments in lower
quality securities through credit analysis and by carefully monitoring current
trends in interest rates, political developments and other factors. Nonetheless,
investors should carefully review the investment objective and policies of the
Fund and consider their ability to assume the investment risks involved before
making an investment. Each Fund may also invest in unrated debt securities.
Unrated debt securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Because of the size and perceived
demand for an issue, among other factors, certain issuers may decide not to pay
the cost of obtaining a rating for their bonds. The Adviser will analyze the
creditworthiness of the issuer of an unrated security, as well as any financial
institution or other party responsible for payments on the security.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES (ALL FUNDS). Each Fund may
invest in certificates of deposit and bankers' acceptances which are considered
to be short-term money market instruments.
Certificates of deposit are receipts issued by a depository institution in
exchange for the deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified on the
certificate. The certificate usually can be traded in the secondary market prior
to maturity. Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
COMMERCIAL PAPER (ALL FUNDS). Each Fund may purchase commercial paper.
Commercial paper consists of short-term (usually from 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations.
DEALER (OVER-THE-COUNTER) OPTIONS (ALL FUNDS). Each Fund may engage in
transactions involving dealer options. Certain risks are specific to dealer
options. While the Fund would look to a clearing corporation to exercise
exchange-traded options, if the Fund were to purchase a dealer option, it
would rely on the dealer from whom it purchased the option to perform if the
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<PAGE>
option were exercised. Failure by the dealer to do so would result in the loss
of the premium paid by the Fund as well as loss of the expected benefit of the
transaction.
Exchange-traded options generally have a continuous liquid market while dealer
options have none. Consequently, the Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when the Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. While the Fund will seek to enter into dealer
options only with dealers who will agree to and which are expected to be capable
of entering into closing transactions with the Fund, there can be no assurance
that the Fund will be able to liquidate a dealer option at a favorable price at
any time prior to expiration. Until the Fund, as a covered dealer call option
writer, is able to effect a closing purchase transaction, it will not be able to
liquidate securities (or other assets) or currencies used as cover until the
option expires or is exercised. In the event of insolvency of the contra party,
the Fund may be unable to liquidate a dealer option. With respect to options
written by the Fund, the inability to enter into a closing transaction may
result in material losses to the Fund. For example, since the Fund must maintain
a secured position with respect to any call option on a security it writes, the
Fund may not sell the assets which it has segregated to secure the position
while it is obligated under the option. This requirement may impair a Fund's
ability to sell portfolio securities or currencies at a time when such sale
might be advantageous.
The Staff of the SEC has taken the position that purchased dealer options and
the assets used to secure the written dealer options are illiquid securities. A
Fund may treat the cover used for written OTC options as liquid if the dealer
agrees that the Fund may repurchase the OTC option it has written for a maximum
price to be calculated by a predetermined formula. In such cases, the OTC option
would be considered illiquid only to the extent the maximum repurchase price
under the formula exceeds the intrinsic value of the option. Accordingly, the
Fund will treat dealer options as subject to the Fund's limitation on
unmarketable securities. If the SEC changes its position on the liquidity of
dealer options, the Fund will change its treatment of such instrument
accordingly.
EXPOSURE TO FOREIGN MARKETS (ALL FUNDS EXCEPT FOCUS 30 FUND). Foreign
securities, foreign currencies, and securities issued by U.S. entities with
substantial foreign operations may involve significant risks in addition to
the risks inherent in U.S. investments. The value of securities denominated
in foreign currencies, and of dividends and interest paid with respect to
such securities will fluctuate based on the relative strength of the U.S.
dollar.
There may be less publicly available information about foreign securities and
issuers than is available about domestic securities and issuers. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. Securities of some foreign companies are less
liquid and their prices may be more volatile than securities of comparable
domestic companies. The Funds' interest and dividends from foreign issuers maybe
subject to non-U.S. withholding taxes, thereby reducing the Funds' net
investment income.
Currency exchange rates may fluctuate significantly over short periods and can
be subject to unpredictable change based on such factors as political
developments and currency controls by foreign governments. Because the Funds may
invest in securities denominated in foreign currencies, they may seek to hedge
foreign currency risks by engaging in foreign currency exchange transactions.
These may include buying or selling foreign currencies on a spot basis, entering
into foreign currency forward contracts, and buying and selling foreign currency
options, foreign currency futures, and options on foreign currency futures. Many
of these activities constitute "derivatives" transactions. See "Derivatives",
above.
Each Fund may invest in issuers domiciled in "emerging markets," those countries
determined by the Adviser to have developing or emerging economies and markets.
Emerging market investing involves risks in addition to those risks involved in
foreign investing. For example, many emerging market countries have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. In addition, economies in emerging markets generally are dependent
heavily upon international trade and, accordingly, have been and continue to be
affected adversely by trade barriers, exchange controls, managed adjustments
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in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. The securities markets of
emerging countries are substantially smaller, less developed, less liquid and
more volatile than the securities markets of the United States and other more
developed countries. Brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States, particularly with respect to emerging markets. In addition,
some emerging market countries impose transfer taxes or fees on a capital market
transaction.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments, and
may be affected by actions of foreign governments adverse to the interests of
U.S. investors. Such actions may include the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There is no assurance that the
Adviser will be able to anticipate these potential events or counter their
effects. These risks are magnified for investments in developing countries,
which may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. Foreign markets may offer
less protection to investors than U.S. markets. It is anticipated that in most
cases the best available market for foreign securities will be on an exchange or
in over-the-counter markets located outside the United States. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. issuers. Foreign security trading
practices, including those involving securities settlement where Fund assets may
be released prior to receipt of payment, may result in increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer, and may
involve substantial delays. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions and custodial costs, are
generally higher than for U.S. investors. In general, there is less overall
governmental supervision and regulation of securities exchanges, brokers, and
listed companies than in the United States. It may also be difficult to enforce
legal rights in foreign countries. Foreign issuers are generally not bound by
uniform accounting, auditing, and financial reporting requirements and standards
of practice comparable to those applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the United States
or to U.S. persons. Although securities subject to such transfer restrictions
may be marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions. American Depositary
Receipts (ADRs), as well as other "hybrid" forms of ADRs, including European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), are
certificates evidencing ownership of shares of a foreign issuer. These
certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares are
held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest and corporate actions. ADRs are
alternatives to directly purchasing the underlying foreign securities in their
national markets and currencies. However, ADRs continue to be subject to many of
the risks associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks of the
underlying issuer's country.
Investments in emerging markets can be subject to a number of types of taxes
that vary by country, change frequently, and are sometime defined by custom
rather than written regulation. Emerging countries can tax interest, dividends,
and capital gains through the application of a withholding tax. The local
custodian normally withholds the tax upon receipt of a payment and forwards such
tax payment to the foreign government on behalf of the Fund. Certain foreign
governments can also require a foreign investor to file an income tax return and
pay the local tax through estimated tax payments, or pay with the tax return.
Although not frequently used, some emerging markets have attempted to slow
conversion of their currency by imposing a repatriation tax. Generally, this tax
is applied to amounts which are converted from the foreign currency to the
investor's currency and withdrawn from the local bank account. Transfer taxes or
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fees, such as stamp duties, security transfer taxes, and registration and script
fees, are generally imposed by emerging markets as a tax or fee on a capital
market transaction. Each emerging country may impose a tax or fee at a different
point in time as the foreign investor perfects his interest in the securities
acquired in the local market. A stamp duty is generally a tax on the official
recording of a capital market transaction. Payment of such duty is generally a
condition of the transfer of assets and failure to pay such duty can result in a
loss of title to such asset as well as loss of benefit from any corporate
actions. A stamp duty is generally determined based on a percentage of the value
of the transaction conducted and can be charged against the buyer (e.g., Cyprus,
India, Israel, Jordan, Malaysia, Pakistan, and the Philippines), against the
seller (e.g., Argentina, Australia, China, Egypt, Indonesia, Kenya, Portugal,
South Korea, Trinidad, Tobago, and Zimbabwe). Although such a fee does not
generally exceeded 100 basis points, certain emerging markets have assessed a
stamp duty as high as 750 basis points (e.g., Pakistan). A security transfer tax
is similar to a stamp duty and is generally applied to the purchase, sale or
exchange of securities which occur in a particular foreign market. These taxes
are based on the value of the trade and similar to stamp taxes, can be assessed
against the buyer, seller or both. Although the securities transfer tax may be
assessed in lieu of a stamp duty, such tax can be assessed in addition to a
stamp duty in certain foreign markets (e.g., Switzerland, South Korea,
Indonesia). Upon purchasing a security in an emerging market, such security must
often be submitted to a registration process in order to record the purchaser as
a legal owner of such security interest. Often foreign countries will charge a
registration or script fee to record the change in ownership and, where physical
securities are issued, issue a new security certificate. In addition to
assessing this fee upon the acquisition of a security, some markets also assess
registration charges upon the registration of local shares to foreign shares.
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND FORWARD FOREIGN EXCHANGE
CONTRACTS. Each Fund may enter into certain option, futures, and forward foreign
exchange contracts, including options and futures on currencies, which are
Section 1256 contracts and may result in the Fund entering into straddles.
Open Section 1256 contracts at fiscal year end will be considered to have been
closed at the end of the Fund's fiscal year and any gains or losses will be
recognized for tax purposes at that time. Such gains or losses from the normal
closing or settlement of such transactions will be characterized as 60%
long-term capital gain or loss and 40% short-term capital gain or loss
regardless of the holding period of the instrument. The Fund will be required to
distribute net gains on such transactions to shareholders even though it may not
have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options and
futures on currencies, which offset a security or currency position may be
considered straddles for tax purposes, in which case a loss on any position in a
straddle will be subject to deferral to the extent of unrealized gain in an
offsetting position. The holding period of the securities or currencies
comprising the straddle may be deemed not to begin until the straddle is
terminated. The holding period of the security offsetting an "in-the-money
qualified covered call" option will not include the period of time the option is
outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options, may be long-term capital loss, if the
security covering the option was held for more than twelve months prior to the
writing of the option.
In order for each Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, interest,
income derived from loans of securities, and gains from the sale of securities
or currencies.
FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS EXCEPT FOCUS 30 FUND). A forward
foreign currency exchange contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are principally traded in the
interbank market conducted directly between currency traders (usually large,
commercial
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banks) and their customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.
Each Fund may enter into forward contracts for a variety of purposes in
connection with the management of the foreign currency exposure of its
portfolio. The Fund's use of such contracts would include, but not be limited
to, the following: First, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security. By entering into a forward contract
for the purchase or sale, for a fixed amount of dollars of the amount of foreign
currency involved in the underlying security transactions, the Fund will be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the subject foreign currency during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
Second, when the Adviser believes that one currency may experience a substantial
movement against another currency, including the U.S. dollar, or it wishes to
alter the Fund's exposure to the currencies of the countries in its investment
universe, it may enter into a forward contract to sell or buy foreign currency
in exchange for the U.S. dollar or another foreign currency. Alternatively,
where appropriate, a Fund may manage all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy currency where
such currency or currencies act as an effective proxy for other currencies. In
such a case, the Fund may enter into a forward contract where the amount of the
foreign currency to be sold exceeds the value of the securities denominated in
such currency. The use of this basket hedging technique may be more efficient
and economical than entering into separate forward contracts for each currency
held in the Fund. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible since the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the longer-term investment decisions made with regard to overall diversification
strategies. However, the Adviser believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of a Fund will be served.
Each Fund may enter into forward contacts for any other purpose consistent with
the Fund's investment objective and program. However, the Fund will not enter
into a forward contract, or maintain exposure to any such contract(s), if the
amount of foreign currency required to be delivered thereunder would exceed the
Fund's holdings of liquid securities and currency available for cover of the
forward contract(s). In determining the amount to be delivered under a contract,
the Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell the portfolio security
and make delivery of the foreign currency, or it may retain the security and
either extend the maturity of the forward contract (by "rolling" that contract
forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent of the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
Each Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, each Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is not
required to enter into forward contracts with regard to its foreign currency
denominated securities and will not do so
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unless deemed appropriate by the Adviser. It also should be realized that this
method of hedging against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any potential gain which
might result from an increase in the value of that currency.
Although each Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
FOREIGN FUTURES AND OPTIONS (ALL FUNDS EXCEPT FOCUS 30 FUND AND CASH RESERVES
FUND). Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of a
foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade, including
the execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable foreign
law. This is true even if the exchange is formally linked to a domestic market
so that a position taken on the market may be liquidated by a transaction on
another market. Moreover, such laws or regulations will vary depending on the
foreign country in which the foreign futures or foreign options transaction
occurs. For these reasons, customers who trade foreign futures or foreign
options contracts may not be afforded certain of the protective measures
provided by the Commodity Exchange Act, the CFTC's regulations and the rules of
the National Futures Association and any domestic exchange, including the right
to use reparations proceedings before the Commission and arbitration proceedings
provided by the National Futures Association or any domestic futures exchange.
In particular, funds received from a Fund for foreign futures or foreign options
transactions may not be provided the same protections as funds received in
respect of transactions on United States futures exchanges. In addition, the
price of any foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance in the foreign
exchange rate between the time the Fund's order is placed and the time it is
liquidated, offset or exercised.
FUTURES CONTRACTS (ALL FUNDS). Transactions in Futures. Each Fund may enter
into futures contracts, including stock index, interest rate and currency
futures ("futures or futures contracts").
Stock index futures contracts may be used to provide a hedge for a portion of
the Fund's portfolio, as a cash management tool, or as an efficient way for the
Adviser to implement either an increase or decrease in portfolio market exposure
in response to changing market conditions. A Fund may, purchase or sell futures
contracts with respect to any stock index. Nevertheless, to hedge the Fund's
portfolio successfully, the Fund must sell futures contacts with respect to
indices or sub-indices whose movements will have a significant correlation with
movements in the prices of the Fund's portfolio securities.
Interest rate or currency futures contracts may be used to manage a Fund's
exposure to changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund. In this regard, the
Fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange rates and
purchase such futures as an offset against the effect of expected declines in
interest rates or currency exchange rates.
A Fund will enter into futures contracts which are traded on national or foreign
futures exchanges, and are standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading in the United States are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are traded in London at the London International
Financial Futures Exchange in Paris at the MATIF and in Tokyo at the Tokyo Stock
Exchange. Although techniques other than the sale and purchase of futures
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contracts could be used for the above-referenced purposes, futures contracts
offer an effective and relatively low cost means of implementing the Fund's
objectives in these areas.
Although the Funds have no current intention of engaging in futures or options
transactions other than those described above, they reserve the right to do so.
Such futures and options trading might involve risks which differ from those
involved in the futures and options described in this Statement of Additional
Information.
HEDGING RISK. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or market or interest rate trends. There
are several risks in connection with the use by a Fund of futures contracts as a
hedging device. One risk arises because of the possible imperfect correlation
between movements in the prices of the futures contracts and movements in the
prices of the underlying instruments which are the subject of the hedge. The
Adviser (or Sub-Adviser) will, however, attempt to reduce this risk by entering
into futures contracts whose movements, in its judgment, will have a significant
correlation with movements in the prices of the Fund's underlying instruments
sought to be hedged.
Successful use of futures contracts by the Fund for hedging purposes is also
subject to the Adviser's (or Sub-Adviser) ability to correctly predict movements
in the direction of the market. It is possible that, when the Fund has sold
futures to hedge its portfolio against a decline in the market, the index,
indices, or instruments underlying futures might advance and the value of the
underlying instruments held in the Fund's portfolio might decline. If this were
to occur, the Fund would lose money on the futures and also would experience a
decline in value in its underlying instruments. However, while this might occur
to a certain degree, the Adviser and each Sub-Adviser believe that over time the
value of the Fund's portfolio will tend to move in the same direction as the
market indices used to hedge the portfolio. It is also possible that if a Fund
were to hedge against the possibility of a decline in the market (adversely
affecting the underlying instruments held in its portfolio) and prices instead
increased, the Fund would lose part or all of the benefit of increased value of
those underlying instruments that it has hedged, because it would have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund had insufficient cash, it might have to sell underlying instruments to
meet daily variation margin requirements. Such sales of underlying instruments
might be, but would not necessarily be, at increased prices (which would reflect
the rising market). The Fund might have to sell underlying instruments at a time
when it would be disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation, or
no correlation at all, between price movements in the futures contracts and the
portion of the portfolio being hedged, the price movements of futures contracts
might not correlate perfectly with price movements in the underlying instruments
due to certain market distortions. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors might close futures contracts
through offsetting transactions, which could distort the normal relationship
between the underlying instruments and futures markets. Second, the margin
requirements in the futures market are less onerous than margin requirements in
the securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and also
because of the imperfect correlation between price movements in the underlying
instruments and movements in the prices of futures contracts, even a correct
forecast of general market trends by the Adviser (or Sub-Adviser) might not
result in a successful hedging transaction over a very short time period.
ILLIQUID OR RESTRICTED SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND). Restricted
securities may be sold only in privately negotiated transactions or in a public
offering with respect to which a registration statement is in effect under the
Securities Act of 1933 (the "1933 Act"). Where registration is required, a Fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted
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securities will be priced at fair value as determined in accordance with
procedures prescribed by the Board of Trustees of the Trust. If through the
appreciation of illiquid securities or the depreciation of liquid securities,
the Fund should be in a position where more than 15% (or, in the case of the
Cash Reserves Fund, 10%) of the value of its net assets are invested in illiquid
assets, including restricted securities, the Fund will take appropriate steps to
protect liquidity.
Notwithstanding the above, each Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under the
1933 Act. This rule permits certain qualified institutional buyers to trade in
privately placed securities even though such securities are not registered under
the 1933 Act. The Adviser under the supervision of the Board of Trustees of the
Trust, will consider whether securities purchased under Rule 144A are illiquid
and thus subject to the Fund's restriction of investing no more than 15% of its
net assets in illiquid securities. A determination of whether a Rule 144A
security is liquid or not is a question of fact. In making this determination,
the Adviser will consider the trading markets for the specific security taking
into account the unregistered nature of a Rule 144A security. In addition, the
Adviser could consider (1) the frequency of trades and quotes, (2) the number of
dealers and potential purchases, (3) any dealer undertakings to make a market,
and (4) the nature of the security and of marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be
monitored, and if as a result of changed conditions it is determined that a Rule
144A security is no longer liquid, the Fund's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to assure that
the Fund does not invest more than 15% of its net assets in illiquid securities.
Investing in Rule 144A securities could have the effect of increasing the amount
of the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS (ALL FUNDS EXCEPT FOCUS 30 FUND). Direct
debt instruments are interests in amounts owed by a corporate, governmental, or
other borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each Fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protections than an unsecured
loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidations of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks and may be highly speculative. Borrowers that are in
bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities responsible for
the repayment of the debt may be unable, or unwilling, to pay interest and repay
principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, the Fund could be held liable as a
co-lender. Direct debt instruments may also involve a risk of insolvency of the
lending bank or other intermediary. Direct debt instruments that are not in the
form of securities may offer less legal protection to a Fund in the event of
fraud or misrepresentation. In the absence of definitive regulatory guidance,
each Fund relies on the Adviser's research in an attempt to avoid situations
where fraud or misrepresentation could adversely affect the Fund.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent
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to apply appropriate credit remedies against a borrower. If assets held by the
agent for the benefit of a Fund were determined to be subject to the claims of
the agent's general creditors, the Fund might incur certain costs and delays in
realizing payment on the loan or loan participation and could suffer a loss of
principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating the Fund to
pay additional cash on demand. These commitments may have the effect of
requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. A Fund will set aside appropriate
liquid assets in a custodial account to cover its potential obligations under
standby financing commitments.
Each Fund limits the amount of total assets that it will invest in any one
issuer or, except for the Financial Services Fund, Health & Biotechnology Fund,
and the Utilities Fund, in issuers within the same industry (see each Fund's
investment limitations). For purposes of these limitations, a Fund generally
will treat the borrower as the "issuer" of indebtedness held by the Fund. In the
case of loan participations where a bank or other lending institution serves as
financial intermediary between a Fund and the borrower, if the participation
does not shift to the Fund the direct debtor-creditor relationship with the
borrower, SEC interpretations require the Fund, in appropriate circumstances, to
treat both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an issuer of
indebtedness may restrict a Fund's ability to invest in indebtedness related to
a single financial intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
MATURITY OF DEBT SECURITIES. The maturity of debt securities may be considered
long (10 years or more), intermediate (3 to 10 years), or short-term (less than
3 years). In general, the principal values of longer-term securities fluctuate
more widely in response to changes in interest rates than those of shorter-term
securities, providing greater opportunity for capital gain or risk of capital
loss. A decline in interest rates usually produces an increase in the value of
debt securities, while an increase in interest rates generally reduces their
value.
MORTGAGE PASS-THROUGH SECURITIES (ALL FUNDS EXCEPT FOCUS 30 FUND). Interests
in pools of mortgage pass-through securities differ from other forms of debt
securities (which normally provide periodic payments of interest in fixed
amounts and the payment of principal in a lump sum at maturity or on
specified call dates). Instead, mortgage pass-through securities provide
monthly payments consisting of both interest and principal payments. In
effect, these payments are a "pass-through" of the monthly payments made by
the individual borrowers on the underlying residential mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Unscheduled
payments of principal may be made if the underlying mortgage loans are repaid
or refinanced or the underlying properties are foreclosed, thereby shortening
the securities' weighted average life. Some mortgage pass-through securities
(such as securities guaranteed by GNMA) are described as "modified
pass-through securities." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain
fees, on the scheduled payment dates regardless of whether the mortgagor
actually makes the payment.
The principal governmental guarantor of mortgage pass-through securities is
GNMA. GNMA is authorized to guarantee, with the full faith and credit of the
U.S. Treasury, the timely payment of principal and interest on securities issued
by lending institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of mortgage loans.
These mortgage loans are either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgage
loans is assembled and after being approved by GNMA, is offered to investors
through securities dealers.
Government-related guarantors of mortgage pass-through securities (i.e., not
backed by the full faith and credit of the U.S. Treasury) include FNMA and
FHLMC. FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
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and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved sellers/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Mortgage pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA but are not
backed by the full faith and credit of the U.S. Treasury.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a U.S.
government-sponsored corporation formerly owned by the twelve Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the U.S. Treasury.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage pass-through securities. The
Funds do not purchase interests in pools created by such non-governmental
issuers.
Resets. The interest rates paid on the Adjustable Rate Mortgage Securities
("ARMs") in which a Fund may invest generally are readjusted or reset at
intervals of one year or less to an increment over some predetermined interest
rate index. There are two main categories of indices: those based on U.S.
Treasury securities and those derived from a calculated measure, such as a cost
of funds index or a moving average of mortgage rates. Commonly utilized indices
include the one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the National Median Cost of Funds, the
one-month or three-month London Interbank Offered Rate (LIBOR), the prime rate
of a specific bank, or commercial paper rates. Some indices, such as the
one-year constant maturity Treasury Note rate, closely mirror changes in market
interest rate levels. Others tend to lag changes in market rate levels and tend
to be somewhat less volatile.
Caps and Floors. The underlying mortgages which collateralize the ARMs in which
a Fund invests will frequently have caps and floors which limit the maximum
amount by which the loan rate to the residential borrower may change up or down:
(1) per reset or adjustment interval and (2) over the life of the loan. Some
residential mortgage loans restrict periodic adjustments by limiting changes in
the borrower's monthly principal and interest payments rather than limiting
interest rate changes. These payment caps may result in negative amortization.
The value of mortgage securities in which a Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable caps or
floors on the underlying residential mortgage loans. Additionally, even though
the interest rates on the underlying residential mortgages are adjustable,
amortization and prepayments may occur, thereby causing the effective maturities
of the mortgage securities in which the Fund invests to be shorter than the
maturities stated in the underlying mortgages.
OPTIONS (ALL FUNDS). Writing Covered Call Options. Each Fund may write (sell)
American or European style "covered" call options and purchase options to
close out options previously written by the Fund. In writing covered call
options, the Fund expects to generate additional premium income which should
serve to enhance the Fund's total return and reduce the effect of any price
decline of the security or currency involved in the option. Covered call
options will generally be written on securities or currencies which, in the
Adviser's opinion, are not expected to have any major price increases or
moves in the near future but which, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at expiration of the option
(European style) or at any time until a certain date (the expiration date)
(American style). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to deliver the underlying security or
currency against payment of the exercise price. This obligation terminates
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upon the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing an option identical to
that previously sold. To secure his obligation to deliver the underlying
security or currency in the case of a call option, a writer is required to
deposit in escrow the underlying security or currency or other assets in
accordance with the rules of a clearing corporation.
Each Fund will write only covered call options. This means that the Fund will
own the security or currency subject to the option or an option to purchase the
same underlying security or currency, having an exercise price equal to or less
than the exercise price of the "covered" option, or will establish and maintain
with its custodian for the term of the option, an account consisting of cash,
U.S. government securities or other liquid securities having a value equal to
the fluctuating market value of the securities or currencies on which the Fund
holds a covered call position.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered options, which the Funds will not
do), but capable of enhancing the Fund's total return. When writing a covered
call option, a Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security or currency above the
exercise price, but conversely retains the risk of loss should the price of the
security or currency decline. Unlike one who owns securities or currencies not
subject to an option, the Fund has no control over when it may be required to
sell the underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its obligation as a
writer. If a call option which the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency. The Fund does not
consider a security or currency covered by a call to be "pledged" as that term
is used in the Fund's policy which limits the pledging or mortgaging of its
assets.
The premium received is the market value of an option. The premium the Fund will
receive from writing a call option will reflect, among other things, the current
market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security or currency, and the length of the option period. Once the
decision to write a call option has been made, the Adviser, in determining
whether a particular call option should be written on a particular security or
currency, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The
premium received by the Fund for writing covered call options will be recorded
as a liability of the Fund. This liability will be adjusted daily to the
option's current market value, which will be the latest sale price at the time
at which the net asset value per share of the Fund is computed (close of the New
York Stock Exchange), or, in the absence of such sale, the latest asked price.
The option will be terminated upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or, to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option, or purchased a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security or
currency. There is, of course, no assurance that the Fund will be able to effect
such closing transactions at favorable prices. If the Fund cannot enter into
such a transaction, it may be required to hold a security or currency that it
might otherwise have sold. When the Fund writes a covered call option, it runs
the risk of not being able to participate in the appreciation of the underlying
securities or currencies above the exercise price, as well as the risk of being
required to hold on to securities or currencies that are depreciating in value.
This could result in higher transaction costs. The Fund will pay transaction
costs in connection with the writing of options to close out previously written
options. Such transaction costs are normally higher than those applicable to
purchases and sales of portfolio securities.
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Call options written by a Fund will normally have expiration dates of less than
nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
or currencies at the time the options are written. From time to time, a Fund may
purchase an underlying security or currency for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering such
security or currency from its portfolio. In such cases, additional costs may be
incurred.
A Fund will realize a profit or loss from a closing purchase transaction if the
cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund.
OPTIONS ON FUTURES CONTRACTS (ALL FUNDS). Each Fund may purchase and sell
options on the same types of futures in which it may invest. Options on
futures are similar to options on underlying instruments except that options
on futures give the purchaser the right, in return for the premium paid, to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put), rather than to purchase or
sell the futures contract, at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the delivery of the
futures position by the writer of the option to the holder of the option will
be accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price
of the futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the
futures contract. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on stock index
futures, each Fund may write or purchase call and put options on stock indices.
Such options would be used in a manner similar to the use of options on futures
contracts.
PURCHASING CALL OPTIONS (ALL FUNDS). Each Fund may purchase American or
European style call options. As the holder of a call option, the Fund has the
right to purchase the underlying security or currency at the exercise price
at any time during the option period (American style) or at the expiration of
the option (European style). The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire. The Fund may purchase call options for the purpose of increasing its
current return or avoiding tax consequences which could reduce its current
return. The Fund may also purchase call options in order to acquire the
underlying securities or currencies. Examples of such uses of call options
are provided below.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this fashion,
the purchase of call options enables the Fund to acquire the securities or
currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to the Fund in purchasing a large block of
securities or currencies that would be more difficult to acquire by direct
market purchases. So long as it holds such a call option rather than the
underlying security or currency itself, the Fund is partially protected from any
unexpected decline in the market price of the underlying security or currency
and in such event could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
PURCHASING PUT OPTIONS (ALL FUNDS). Each Fund may purchase American or
European style put options. As the holder of a put option, the Fund has the
right to sell the underlying security or currency at the exercise price at
any time during the option period (American style) or at the expiration of
the option (European style). The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire. The Fund may purchase put options for defensive purposes in order to
protect against an anticipated decline in the value of its securities or
currencies. An example of such use of put options is provided below.
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Each Fund may purchase a put option on an underlying security or currency (a
"protective put") owned by the Fund as a defensive technique in order to protect
against an anticipated decline in the value of the security or currency. Such
hedge protection is provided only during the life of the put option when the
Fund, as the holder of the put option, is able to sell the underlying security
or currency at the put exercise price regardless of any decline in the
underlying security's market price or currency's exchange value. For example, a
put option may be purchased in order to protect unrealized appreciation of a
security or currency where the Adviser deems it desirable to continue to hold
the security or currency because of tax considerations. The premium paid for the
put option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is eventually sold.
Each Fund may also purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
REGULATORY LIMITATIONS. A Fund will engage in futures contracts and options
thereon only for bona fide hedging, yield enhancement, and risk management
purposes, in each case in accordance with rules and regulations of the CFTC.
A Fund may not purchase or sell futures contracts or related options if, with
respect to positions which do not qualify as bona fide hedging under applicable
CFTC rules, the sum of the amounts of initial margin deposits and premiums paid
on those portions would exceed 5% of the net asset value of the Fund after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into; provided, however, that in the case of an option
that is in-the money at the time of purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. For purposes of this policy options
on futures contracts and foreign currency options traded on a commodities
exchange will be considered "related options." This policy may be modified by
the Board of Trustees without a shareholder vote and does not limit the
percentage of the Fund's assets at risk to 5%.
A Fund's use of futures contracts may result in leverage. Therefore, to the
extent necessary, in instances involving the purchase of futures contracts or
the writing of call or put options thereon by the Fund, an amount of cash, U.S.
government securities or other appropriate liquid securities, equal to the
market value of the futures contracts and options thereon (less any related
margin deposits), will be identified in an account with the Fund's custodian to
cover (such as owning an offsetting position) the position, or alternative cover
will be employed. Assets used as cover or held in an identified account cannot
be sold while the position in the corresponding option or future is open, unless
they are replaced with similar assets. As a result, the commitment of a large
portion of a Fund's assets to cover or identified accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, each Fund would comply with such new
restrictions.
OTHER INVESTMENT COMPANIES. Each Fund may invest up to 10% of its total assets
in other investment companies, but only up to 5% of its assets in any one other
investment company. In addition, a Fund may not purchase more than 3% of the
securities of any one investment company. As a shareholder in an investment
company, that Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time, the
Fund would continue to pay its own management fees and other expenses.
MASTER/FEEDER STRUCTURE. Notwithstanding these limitations, each Fund reserves
the right to convert to a "master/feeder" structure at a future date. Under such
a structure, one or more "feeder" funds,
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such as the Funds, invest all of their assets in a "master" fund, which, in
turn, invests directly in a portfolio of securities. If required by applicable
law, the Funds will seek shareholder approval before converting to a
master/feeder structure. If the requisite regulatory authorities determine that
such approval is not required, shareholders will be deemed, by purchasing
shares, to have consented to such a conversion and no further shareholder
approval will be sought. Such a conversion is expressly permitted under the
investment objective and fundamental policies of each Fund.
REPURCHASE AGREEMENTS (ALL FUNDS). The Funds may invest in repurchase
agreements. A repurchase agreement is an instrument under which the investor
(such as the Fund) acquires ownership of a security (known as the "underlying
security") and the seller (i.e., a bank or primary dealer) agrees, at the time
of the sale, to repurchase the underlying security at a mutually agreed upon
time and price, thereby determining the yield during the term of the agreement.
This results in a fixed rate of return insulated from market fluctuations during
such period, unless the seller defaults on its repurchase obligations. A Fund
will only enter into repurchase agreements where (i) the underlying securities
are of the type (excluding maturity limitations) which the Fund's investment
guidelines would allow it to purchase directly, (ii) the market value of the
underlying security, including interest accrued, will be at all times at least
equal to the value of the repurchase agreement, and (iii) payment for the
underlying security is made only upon physical delivery or evidence of
book-entry transfer to the account of the Fund's custodian. Repurchase
agreements usually are for short periods, often under one week, and will not be
entered into by a Fund for a duration of more than seven days if, as a result,
more than 15% (or, in the case of the Cash Reserves Fund, 10%) of the net asset
value of the Fund would be invested in such agreements or other securities which
are not readily marketable.
The Funds will assure that the amount of collateral with respect to any
repurchase agreement is adequate. As with a true extension of credit, however,
there is risk of delay in recovery or the possibility of inadequacy of the
collateral should the seller of the repurchase agreement fail financially. In
addition, a Fund could incur costs in connection with the disposition of the
collateral if the seller were to default. The Funds will enter into repurchase
agreements only with sellers deemed to be creditworthy by, or pursuant to
guidelines established by, the Board of Trustees of the Trust and only when the
economic benefit to the Funds is believed to justify the attendant risks. The
Funds have adopted standards for the sellers with whom they will enter into
repurchase agreements. The Board of Trustees of the Trust believe these
standards are designed to reasonably assure that such sellers present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase agreement. The Funds may enter into repurchase
agreements only with well-established securities dealers or with member banks of
the Federal Reserve System.
SHORT SALES (ALL FUNDS). The Funds may sell securities short as part of their
overall portfolio management strategies involving the use of derivative
instruments and to offset potential declines in long positions in similar
securities. A short sale is a transaction in which a Fund sells a security it
does not own or have the right to acquire (or that it owns but does not wish
to deliver) in anticipation that the market price of that security will
decline.
When a Fund makes a short sale, the broker-dealer through which the short sale
is made must borrow the security sold short and deliver it to the party
purchasing the security. The Fund is required to make a margin deposit in
connection with such short sales; the Fund may have to pay a fee to borrow
particular securities and will often be obligated to pay over any dividends and
accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the short
sale and the time the Fund covers its short position, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. The successful use of short selling may be adversely affected
by imperfect correlation between movements in the price of the security sold
short and the securities being hedged.
To the extent a Fund sells securities short, it will provide collateral to the
broker-dealer and (except in the case of short sales "against the box") will
maintain additional asset coverage in the form of cash, U.S. government
securities or other liquid securities with its custodian in a segregated account
in an amount at
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<PAGE>
least equal to the difference between the current market value of the securities
sold short and any amounts required to be deposited as collateral with the
selling broker (not including the proceeds of the short sale). The Funds do not
intend to enter into short sales (other than short sales "against the box") if
immediately after such sales the aggregate of the value of all collateral plus
the amount in such segregated account exceeds 10% of the value of the Fund's net
assets. This percentage may be varied by action of the Board of Trustees. A
short sale is "against the box" to the extent the Fund contemporaneously owns,
or has the right to obtain at no added cost, securities identical to those sold
short.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. Volatility and Leverage. The
prices of futures contracts are volatile and are influenced, among other things,
by actual and anticipated changes in the market and interest rates, which in
turn are affected by fiscal and monetary policies and national and international
political and economic events. Most United States futures exchanges limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount of margin deposited to maintain the futures contract. However, a Fund
would presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline. Furthermore, in the case of a futures contract purchase, in
order to be certain that the Fund has sufficient assets to satisfy its
obligations under a futures contract, the Fund earmarks to the futures contract
money market instruments or other liquid securities equal in value to the
current value of the underlying instrument less the margin deposit.
Liquidity. A Fund may elect to close some or all of its futures positions at any
time prior to their expiration. The Fund would do so to reduce exposure
represented by long futures positions or short futures positions. The Fund may
close its positions by taking opposite positions which would operate to
terminate the Fund's position in the futures contracts. Final determinations of
variation margin would then be made, additional cash would be required to be
paid by or released to the Fund, and the Fund would realize a loss or a gain.
Futures contracts may be closed out only on the exchange or board of trade where
the contracts were initially traded. Although each Fund intends to purchase or
sell futures contracts only on exchanges or boards of trade where there appears
to be an active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract at any
particular time. The reasons for the absence of a liquid secondary market on an
exchange are substantially the same as those discussed under "Special Risks of
Transactions in Options on Futures Contracts." In the event that a liquid market
does not exist, it might not be possible to close out a futures contract, and in
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. However, in the event futures
contracts have been used to hedge the underlying instruments, the Fund would
continue to hold the underlying instruments subject to the hedge until the
futures contracts could be terminated. In such circumstances, an increase in the
price of underlying instruments, if any, might partially or completely offset
losses on the futures contract. However, as described below, there is no
guarantee that the price of the underlying instruments will, in fact, correlate
with the price movements in the futures contract and thus provide an offset to
losses on a futures contract.
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<PAGE>
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS. The risks
described under "Special Risks of Transactions on Futures Contracts" are
substantially the same as the risks of using options on futures. In addition,
where a Fund seeks to close out an option position by writing or buying an
offsetting option covering the same underlying instrument, index or contract and
having the same exercise price and expiration date, its ability to establish and
close out positions on such options will be subject to the maintenance of a
liquid secondary market. Reasons for the absence of a liquid secondary market on
an exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options, or underlying instruments; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in the class or series
of options) would cease to exist, although outstanding options on the exchange
that had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms. There
is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of any
of the clearing corporations inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.
SWAP AGREEMENTS (ALL FUNDS EXCEPT FOCUS 30 FUND). Each of the Funds may enter
into interest rate, index and currency exchange rate swap agreements in
attempts to obtain a particular desired return at a lower cost to the Fund
than if the Fund has invested directly in an instrument that yielded that
desired return. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a few weeks to
more than one year. In a standard "swap" transaction, two parties agree to
exchange the returns (or differentials in rates of returns) earned or
realized on particular predetermined investments or instruments. The gross
returns to be exchanged or "swapped" between the parties are calculated with
respect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. The "notional amount" of the swap agreement is only a
fictive basis on which to calculate the obligations the parties to a swap
agreement have agreed to exchange. A Fund's obligations (or rights) under a
swap agreement will generally be equal only to the amount to be paid or
received under the agreement based on the relative values of the positions
held by each party to the agreement (the "net amount"). A Fund's obligations
under a swap agreement will be accrued daily (offset against any amounts
owing to the Fund) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of cash, U.S. government securities, or other liquid securities,
to avoid leveraging of the Fund's portfolio. A Fund will not enter into a
swap agreement with any single party if the net amount owed or to be received
under existing contracts with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements enhance the Fund's total return will
depend on the Adviser's ability correctly to predict whether certain types of
investments are likely to produce greater returns than other investments.
Because they are two-party contracts and may have terms of greater than seven
days, swap agreements may be considered to be illiquid. Moreover, a Fund bears
the risk of loss of the amount expected to be received under a swap agreement in
the event of the default or bankruptcy of a swap agreement counterparty. The
Adviser will cause a Fund to enter into swap agreements only with counterparties
that would be eligible for consideration as repurchase agreement counterparties
under the Funds' repurchase agreement guidelines. The swap market is a
relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Fund's ability to terminate existing swap agreements or
to realize amounts to be received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations of the CFTC. To
qualify for this exemption, a swap agreement must be entered into by "eligible
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<PAGE>
participants," which include the following, provided the participants' total
assets exceed established levels: a bank or trust company, savings association
or credit union, insurance company, investment company subject to regulation
under the 1940 Act, commodity pool, corporation, partnership, proprietorship,
organization, trust or other entity, employee benefit plan, governmental entity,
broker-dealer, futures commission merchant, natural person, or regulated foreign
person. To be eligible, natural persons and most other entities must have total
assets exceeding $10 million; commodity pools and employees benefit plans must
have assets exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a fungible
class of agreements that are standardized as to their material economic terms.
Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or
determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.
TRADING IN FUTURES CONTRACTS (ALL FUNDS). A futures contract provides for the
future sale by one party and purchase by another party of a specified amount
of a specific financial instrument (e.g., units of a stock index) for a
specified price, date, time and place designated at the time the contract is
made. Brokerage fees are incurred when a futures contract is bought or sold
and margin deposits must be maintained. Entering into a contract to buy is
commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling
a contract or holding a short position.
Unlike when a Fund purchases or sells a security, no price would be paid or
received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions in
futures contracts, the Fund would be required to deposit with its custodian or
futures broker in a segregated account in the name of the futures broker an
amount of cash, U.S. government securities, suitable money market instruments,
or other liquid securities, known as "initial margin." The margin required for a
particular futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by the exchange
during the term of the contract. Futures contracts are customarily purchased and
sold on margins that may range upward from less than 5% of the value of the
contract being traded.
If the price of an open futures contract changes (by increase in underlying
instrument or index in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a point at which the
margin on deposit does not satisfy margin requirements, the broker will require
an increase in the margin. However, if the value of a position increases because
of favorable price changes in the futures contract so that the margin deposit
exceeds the required margin, the broker will pay the excess to the Fund.
These subsequent payments, called "variation margin," to and from the futures
broker, are made on a daily basis as the price of the underlying assets
fluctuate making the long and short positions in the futures contract more or
less valuable, a process known as "marking to the market." Each Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most futures
contracts are usually closed out before the delivery date. Closing out an open
futures contract purchase or sale is effected by entering into an offsetting
futures contract sale or purchase, respectively, for the same aggregate amount
of the identical underlying instrument or index and the same delivery date. If
the offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction costs
must also be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect
to a particular futures contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue to be required
to maintain the margin deposits on the futures contract.
For example, one contract in the Financial Times Stock Exchange 100 Index future
is a contract to buy 25 pounds sterling multiplied by the level of the UK
Financial Times 100 Share Index on a given future date.
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<PAGE>
Settlement of a stock index futures contract may or may not be in the underlying
instrument or index. If not in the underlying instrument or index, then
settlement will be made in cash, equivalent over time to the difference between
the contract price and the actual price of the underlying asset at the time the
stock index futures contract expires.
WARRANTS (ALL FUNDS). Each Fund may invest in warrants. Warrants are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options
in that warrants are issued by the issuer of the security which may be
purchased on their exercise, whereas call options may be written or issued by
anyone. The prices of warrants do not necessarily move parallel to the prices
of the underlying securities.
WHEN-ISSUED SECURITIES (ALL FUNDS). Each Fund may, from time to time, purchase
securities on a "when-issued" or delayed delivery basis. The price for such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase, but may take up to three months. During the
period between purchases and settlement, no payment is made by a Fund to the
issuer and no interest accrues to a Fund. At the time a Fund makes the
commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the value of the security in determining its net asset
value. Each Fund will maintain, in a segregated account with the custodian, cash
or appropriate liquid securities equal in value to commitments for when-issued
securities.
WRITING COVERED PUT OPTIONS (ALL FUNDS). Each Fund may write American or
European style covered put options and purchase options to close out options
previously written by the Fund. A put option gives the purchaser of the
option the right to sell and the writer (seller) has the obligation to buy,
the underlying security or currency at the exercise price during the option
period (American style) or at the expiration of the option (European style).
So long as the obligation of the writer continues, he may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring him to make payment of the exercise price against delivery of the
underlying security or currency. The operation of put options in other
respects, including their related risks and rewards, is substantially
identical to that of call options.
A Fund would write put options only on a covered basis, which means that the
Fund would maintain in a segregated account cash, U.S. government securities or
other liquid appropriate securities in an amount not less than the exercise
price or the Fund will own an option to sell the underlying security or currency
subject to the option having an exercise price equal to or greater than the
exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such
assets be deposited in escrow to secure payment of the exercise price.) The Fund
would generally write covered put options in circumstances where the Adviser
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event the Fund would write a put option at an exercise price which, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received. Such
a decline could be substantial and result in a significant loss to the Fund. In
addition, the Fund, because it does not own the specific securities or
currencies which it may be required to purchase in exercise of the put, cannot
benefit from appreciation, if any, with respect to such specific securities or
currencies.
UNITED STATES GOVERNMENT OBLIGATIONS (ALL FUNDS). These consist of various types
of marketable securities issued by the United States Treasury, i.e., bills,
notes and bonds. Such securities are direct obligations of the United States
government and differ mainly in the length of their maturity.
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Treasury bills, the most frequently issued marketable government security, have
a maturity of up to one year and are issued on a discount basis.
UNITED STATES GOVERNMENT AGENCY SECURITIES (ALL FUNDS). These consist of debt
securities issued by agencies and instrumentalities of the United States
government, including the various types of instruments currently outstanding or
which may be offered in the future. Agencies include, among others, the Federal
Housing Administration, government National Mortgage Association ("GNMA"),
Farmer's Home Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation ("FHLMC"), the Farm
Credit Banks, the Federal National Mortgage Association ("FNMA"), and the United
States Postal Service. These securities are either: (i) backed by the full faith
and credit of the United States government (e.g., United States Treasury Bills);
(ii) guaranteed by the United States Treasury (e.g., GNMA mortgage-backed
securities); (iii) supported by the issuing agency's or instrumentality's right
to borrow from the United States Treasury (e.g., FNMA Discount Notes); or (iv)
supported only by the issuing agency's or instrumentality's own credit (e.g.,
Tennessee Valley Association).
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada is a confederation of 10 provinces with a parliamentary system of
government. The area, the world's second largest nation by landmass, is
inhabited by 30.2 million people, most of whom are decedents of France, the
United Kingdom and indigenous peoples. The country has a work force of over 15
million people in various industries such as trade, manufacturing, mining,
finance, construction and government. As an affluent, high-tech industrial
society, Canada today closely resembles the US in its market-oriented economic
system, pattern of production, and high living standards. Since World War II,
the impressive growth of the manufacturing, mining, and service sectors has
transformed the nation from a largely rural economy into one primarily
industrial and urban. While the country has many institutions which closely
parallel the United States, such as a transparent stock market and similar
accounting practices, it differs from the United States in that it has an
extensive social welfare system, much more akin to European welfare states.
Canada is endowed with extensive energy resources, and is a large producer and
net exporter of natural gas, coal, hydropower and uranium. Within this sector,
Canada is a major supplier of electric power and natural gas to the United
States. In addition, Canada's other particularly strong commodities are forest
products, mining, metals, and agricultural products such as grains. Accordingly,
the Canadian stock market is strongly represented by such basic materials
stocks, and movements in the supply and demand of industrial materials,
agriculture, and energy, both domestically and internationally, can have a
strong effect on market performance.
The United States is Canada's biggest trading partner, representing over 80% of
total trade in 1997. Automobiles and auto parts accounted for the largest export
items followed by energy, mining and forest products. Canada is the largest
energy supplier to the United States, while the United States is Canada's
largest foreign investor. The United States investment has been largely focused
on financial, energy, metals, and mining industries. The expanding economic and
financial integration of the United States and Canada will likely make the
Canadian economy and securities markets increasingly sensitive to U.S. economic
and market events.
For United States investors in Canadian markets, currency has become an
important determinant of investment return. Since Canada let its dollar float in
1970, its value has been in a steady decline against its United States
counterpart. While the decline has enabled Canada to stay competitive with its
more efficient southern neighbor, which buys four-fifths of its exports, United
States investors have seen their investment returns eroded by the impact of the
currency conversion.
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<PAGE>
MANAGEMENT OF THE TRUST
Trustees and Officers
Because Orbitex Group of Funds is a Delaware business trust, there are Trustees
appointed to run the Trust. These Trustees are responsible for overseeing the
general operations of the Adviser and the general operations of the Trust. These
responsibilities include approving the arrangements with companies that provide
necessary services to the Funds, ensuring the Funds' compliance with applicable
securities laws and that dividends and capital gains are distributed to
shareholders. The Trustees have appointed officers to provide many of the
functions necessary for day-to-day operations.
Trustees and officers of the Trust, together with information as to their
principal business occupations during the last five years, are shown below. Each
Trustee who is considered an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act) is indicated by an asterisk next to his name.
<TABLE>
<CAPTION>
POSITION WITH THE TRUST AND PRINCIPAL OCCUPATION
NAME, AGE AND BUSINESS ADDRESS DATE OF BIRTH WITHIN THE PAST FIVE YEARS
<S> <C> <C>
Ronald S. Altbach 12/24/46 Trustee of the Trust.
1540 West Park Avenue Chairman, Paul Sebastian, Inc. (1994 - present)
Ocean, New Jersey07712 (Perfume distributor); President, Olcott Corporation
(1992 -- 1994) (Perfume distributor).
*Thomas T. Bachman 5/21/46 Trustee of the Trust.
410 Park Avenue Co-Chairman of the Board of Trustees of Orbitex
New York, New York 10022 Management (1996 -- Present) (Investment
management); Chairman, Orbitex Management Ltd. (1986
- Present) (Investment management)
*Otto J. Felber 11/11/32 Trustee of the Trust.
130 Adeleide Street West President, Felcom CapitlCorp. (1985-Present)
Suite 3205 (Investment management); President and Vice
Toronto, Ontario M5H3P5 Chairman, Altamira Management, Ltd. (1987 - 1997)
(Investment management)
*James L. Nelson 7/30/49 Trustee of the Trust.
410 Park Avenue Chief Executive Officer and President, Orbit Capital
New York, New York 10022 Corp. (1998 - present) (Business development);
Director and Chief Executive Officer, Orbitex
Management, Inc. (1995-1998) (Investment
management); Chief Executive Officer and President,
Orbitex, Inc. (1995 - 1998) (Investment management);
President, AVIC Group International
(1993 - 1995) (Communications); President,
Eaglescliff Corporation (1986 - present) (Consulting)
*Richard E. Stierwalt 9/25/54 Chairman, Trustee President and Assistant Secretary
410 Park Avenue of the Trust. Chairman and President, Orbitex Financial
New York, New York 10022 Services Group, Inc. (1999 - Present) (Financial
Services); President, Chief Executive Officer and
Director, Orbitex Management, Inc. (1998 - 1999)
(Investment management); Consultant, Bisys Management,
Inc. (1996-1998 (Mutual fund distributor); Chairman of
the Board and Chief Executive Officer, Concord
Financial Group (1987 - 1996) (Administrator and
distributor of mutual funds)
Stephen J. Hamrick 4/1/52 Carey Financial Corporation (1995 - present)
Carey Financial Corp. (Broker-dealer); Chief Executive Officer, Wall
50 Rockfeller Plaza Street Investors Services (1994 - 1995) (Retail
New York, New York 10020 brokerage firm); Senior Vice President, PaineWebber,
Inc. (1998 - 1994) (Investment Services)
John D. Morgan 8/16/30 Trustee of the Trust.
32 Edgehill Road Chairman and Director, CIBC Trust Company (1997 -
Westmount, Quebec present) (Trust management); Vice President, Midland
Canada H3Y1E9 Walwyn (1990 - 1997) (Investment banking)
M. Fyzul Khan 8/27/71 Secretary of the Trust.
410 Park Avenue Legal Counsel, Orbitex Mangement, Inc. (1998 -
New York, New York 10022 present); Attorney, CIBC Oppenheimer (1997 - 1998);
Law student,, Widener University School of Law (1994
- 1997)
Kimberly Ratz Treasurer of the Trust
410 Park Avenue Chief Financial Officer, Orbitex Management, Inc.
New York, New York (1998 - present) (Investment management); America's
10022 Mortgage Source (1996 - 1997) (mortgage banking);
Finance Management, Chase Manhattan Mortgage (1988 -
1998) (mortgage banking).
</TABLE>
- 25 -
<PAGE>
Each Trustee of the Trust who is not an interested person of the Trust or
Adviser receives a fee of $1,250 for each regular and special meeting of the
Board that the Trustee attends. The Trust also reimburses each such Trustee for
travel and other expenses incurred in attending meetings of the Board.
<TABLE>
<CAPTION>
COMPENSATION TABLE*
PENSION OR TOTAL COMPENSATION FROM
RETIREMENT BENEFITS ESTIMATED ANNUAL REGISTRANT AND FUND
AGGREGATE COMPENSATION ACCRUED AS PART OF BENEFITS UPON COMPLEX PAID
NAME OF PERSON FROM FUND FUND EXPENSES RETIREMENT TO TRUSTEES
<S> <C> <C> <C> <C>
Ronald S. Altbach $5,000 N/A N/A $5,000
Thomas T. Bachmann $0 N/A N/A $0
Otto J. Felber $0 N/A N/A $0
Stephen H. Hamrick $3,750 N/A N/A $3,750
John D. Morgan $5,413 N/A N/A $5,413
James L. Nelson $0 N/A N/A $0
Richard E. Stierwalt $0 N/A N/A $0
</TABLE>
* The compensation table covers the period May 1, 1998 through April 30, 1999.
As of December 31, 1999, Trustees and officers of the Trust, as a group,
owned less than 1% of each of the Funds.
PRINCIPAL HOLDERS OF SECURITIES
As of December 31, 1999, the following shareholders were beneficial owners of
5% or more of the outstanding shares of the Funds listed because they
possessed voting or investment power with respect to such shares:
<TABLE>
<CAPTION>
ORBITEX GROWTH FUND - CLASS A% HELD
<S> <C>
None
ORBITEX GROWTH FUND - CLASS B
Painewebber for the Benefit of 16.46%
Dr. Emilio Del Toro Agrelot
P. O. Box 5300
Ponce, PR 00733
Painewebber for the Benefit of 5.83%
Olga Del Valle Yordan
URB Pradera
AM-31 Calle 19
Toja Baja, PR
San Juan PR 00949
ORBITEX INFO-TECH & COMMUNICATIONS FUND - CLASS A
None
- 26 -
<PAGE>
ORBITEX INFO-TECH & COMMUNICATIONS FUND - CLASS B
None
ORBITEX STRATEGIC NATURAL RESOURCES FUND - CLASS A
Sidney Kimmel 35.78%
Arista Group
1 Rockefeller Plaza Rm. 1010
New York, NY 10020-2002
First Clearin Corporation 9.60%
Peter DePaul Irrevocable Family Trust
Trust #1 Andrea Naticchione
1750 Walton Rd.
Blue Bell, PA 19422-2303
Daniel A. McAloon 5.64%
Clare M. McAloon Ten Comm
132 Green Ave.
Madison, NJ 07940-2300
ORBITEX STRATEGIC NATURAL RESOURCES FUND - CLASS B
MSB Investment Trust 8.38%
Special Escrow Account P
28222 Agoura Rd #200
Agoura Hills CA 91301
ORBITEX FOCUS 30 FUND CLASS A
Donaldson Lufkin Jenrette Securities Corp. 37.84%
P.O. Box 2052
Jersey City, NJ 07303-99982
National Financial Services Corp. 6.16%
FBO Susan K. Gage
6191 Gale Rd.
Pataskala, OH 43062
National Financial Services Corp. 5.83%
E.B Alphin
325 Lakeview Ridge West
Roswell, GA 30076
National Financial Services Corp. 7.42%
FBO Bruce E. Smith
1836 Cedar Willow Dr.
Columbus, OH 43229
National Financial Services Corp. 19.20%
FBO Randall L. Dougherty
3110 Walden Ravines
Columbus, OH 43221
ORBITEX FOCUS 30 FUND CLASS B
- 27 -
<PAGE>
Dr. David Berndt 13.70%
5930 SW 64th Ave.
Davie, FL 33314-7116
Donaldson Lufkin Jenrette Securities Corp. 18.21%
P.O. Box 2052
Jersey City, NJ 07303-99982
Guarantee & Trust Co. 5.49%
FBO Kathryn H. Bowles
P.O. Box 8963
Wilmington, DE 19899
John M. Landry & Teresa H. Landry JTWROS 30.04%
2420 Cotesworth Dr.
Wake Forest, NC 25758
National Financial Services Corp. 11.77%
FBO James R. Bergandy
1017 Harvest Court
Coraopolis, PA 15108
National Financial Services Corp. 9.57%
FBO Patricia Dellovade
190 Ros Common Pl.
McMurry, PA 15317
Mark E. Winston, M.D. & Janice T. Winston, JTRS 11.20%
9610 Melvin Ave.Northridge, CA 91324
ORBITEX FOCUS 30 FUND CLASS D
National Financial Services Corp. 18.49%
Church Street Station
P O Box 3908 New York, NY 10008-3908
National Investor Services 8.32%
For the Exclusive Benefit
Of Our Customers
55 Water Street
New York, NY 10041
ORBITEX HEALTH & BIOTECHNOLOGY FUND CLASS A
None
ORBITEX HEALTH & BIOTECHNOLOGY FUND CLASS B
CIBC World Markets Corp 8.72%
FBO 092-45360-14
P.O. Box 3484
Church Street Station
New York, NY 10008-3484
- 28 -
<PAGE>
Painewebber 7.63%
FBO Victor A. Peralta
1750 Ave. Fernandez Juncos
San Juan, PR 00909-2900
</TABLE>
A shareholder owning of record or beneficially more than 25% of a Fund's
outstanding shares may be considered a controlling person. That shareholder's
vote could have more significant effect on matters presented at a shareholder's
meeting than votes of other shareholders.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT ADVISER. Orbitex Management, Inc., located at 410 Park Avenue, New
York, NY 10022, serves as the Adviser of each Fund pursuant to Investment
Advisory Agreements that have been approved by the Board, including a majority
of the independent Trustees. The initial term of each Investment Advisory
Agreement is two years. However, the Investment Advisory Agreements may continue
in effect from year to year if approved at least annually by a vote of a
majority of the Board (including a majority of the Trustees who are not parties
to the Investment Advisory Agreements or interested persons of any such parties)
cast in person at a meeting called for the purpose of voting on such renewal, or
by the vote of a majority of the outstanding shares of the particular Fund. The
Advisory Agreement for the Growth, Info-Tech & Communications and Strategic
Natural Resources Funds was last renewed by the Board of Trustees on March 9,
1999. The Advisory Agreements for the Focus 30, Health & Biotechnology, and Cash
Reserves Funds was initially approved by the Board of Trustees on June 29, 1999.
The Advisory Agreements for the Financial Services Fund and the Utilities Fund
was approved by the Board of Trustees on September 22, 1999. The portfolio
managers are supervised by John W. Davidson, CFA, President and Chief
Investment Officer of the Adviser.
The directors and the principal executive officers of the Adviser are: Thomas
T. Bachmann, Co-Chairman; Richard E. Stierwalt, Co-Chairman; John W.
Davidson, President; Kevin S. Beatson, Director; M. Fyzul Khan, Secretary and
Legal Counsel; and Vali Nasr, Chief Financial Officer. The Adviser is a
subsidiary of Orbitex Financial Services Group, Inc., a financial services
holding company.
In addition to the duties set forth in the Prospectus under the section entitled
"Management," the Adviser, in furtherance of such duties and responsibilities,
is authorized in its discretion to engage in the following activities or to
cause or permit (Sub-Advisers) to engage in the following activities on behalf
of the Trust: (i) develop a continuing program for the management of the assets
of each Fund; (ii) buy, sell, exchange, convert, lend, or otherwise trade in
portfolio securities and other assets; (iii) place orders and negotiate the
commissions for the execution of transactions in securities with or through
broker-dealers, underwriters, or issuers; (iv) prepare and supervise the
preparation of shareholder reports and other shareholder communications; and (v)
obtain and evaluate business and financial information in connection with the
exercise of its duties.
Subject to policies established by the Board of Trustees of the Trust, which has
overall responsibility for the business and affairs of each Fund, the Adviser
manages the operations of the Funds. In addition to providing advisory services,
the Adviser furnishes the Funds with office space and certain facilities and
personnel required for conducting the business of the Funds.
For the advisory services provided and expenses assumed by it, the Adviser has
agreed to a fee from each Fund, computed daily and payable monthly at an annual
rate of 1.25% for the Financial Services Fund, 0.75% for the Growth Fund, 1.25%
for the Info-Tech & Communications Fund, 1.25% for the Strategic Natural
Resources Fund, 0.75% for the Focus 30 Fund, 1.25% for the Health &
Biotechnology Fund, 1.25% for the Utilities Fund, and 0.15% for the Cash
Reserves Fund.
The following table shows the amount of advisory fees paid by each Fund to the
Adviser and the amount of the advisory fees waived by the Adviser for the past
two fiscal years.
- 29 -
<PAGE>
<TABLE>
<CAPTION>
ADVISORY FEES ADVISORYFEES WAIVED
PAID BY FUND BY THE ADVISER
------------ --------------
<S> <C> <C>
Growth Fund
April 30, 1998* 0 $2,423
April 30, 1999 0 $8,089
Info-Tech & Communications Fund
April 30, 1998* 0 $5,113
April 30, 1999 0 $211,268
Strategic Natural Resources Fund
April 30, 1998** 0 $25,989
April 30, 1999 0 $46,098
Focus 30 Fund
October 31, 1999 0 $53,750
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998
** Fiscal period October 23, 1997 through April 30, 1998
The Adviser has contractually agreed to fee waivers and/or expense
reimbursements on the following funds for the contractual periods stated in the
chart below and in its sole discretion thereafter.
<TABLE>
<CAPTION>
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
Contractual
Fund Class A Class B Class C Class D Period
- ---- ------- ------- ------- ------- ------
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Growth Fund 2.00% 2.60% 2.60% N/A 12/31/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
Info-Tech & Communications Fund 2.00% 2.60% 2.60% N/A 12/31/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
Strategic Natural Resources Fund 2.00% 2.60% 2.60% N/A 12/31/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
Focus 30 Fund 1.15% 1.75% N/A 0.75% Until 7/1/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
1.40% 2.00% N/A 1.00% 7/1 to 12/31/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
Health & Biotechnology Fund 2.00% 2.60% 2.60% N/A 12/31/2000
- ------------------------------------------- --------- ------------- -------- --------------- -----------------
</TABLE>
The following table shows the amount of fee waivers and/or reimbursements by the
Adviser for the last three fiscal years. The Focus 30 Fund and Health &
Biotechnology Fund commenced operations on July 12, 1999, and July 15, 1999,
respectively.
<TABLE>
<CAPTION>
Amount of Reimbursed
Fund Expenses by the Adviser
-----------------------
<S> <C>
Growth Fund - Class A
April 30, 1998* $80,890
April 30, 1999 $203,594
Growth Fund - Class B
April 30, 1999** $2,208
Info-Tech & Communications Fund - Class A
April 30, 1998* $74,137
April 30, 1999 $11,543
Info-Tech & Communications Fund - Class B
April 30, 1999** $3,928
Strategic Natural Resources Fund - Class A
April 30, 1998*** $55,295
April 30, 1999 $159,491
Strategic Natural Resources Fund - Class B
- 30 -
<PAGE>
April 30, 1999**** $2,832
Focus 30 Fund - Class A
October 31, 1999***** $226
Focus 30 Fund - Class B
October 31, 1999***** $33
Focus 30 Fund - Class D
October 31, 1999****** $284,697
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period September 16, 1998 through April 30, 1999.
*** Fiscal period October 23, 1998 through April 30, 1998.
**** Fiscal period September 21, 1998 through April 30, 1999.
***** Fiscal period July 12, 1999 through October 31, 1999.
****** Before the close of business on July 9, 1999, the Class D
shares of the Orbitex Focus 30 Fund operated as a separate
fund called the ASM Index 30 Fund ("ASM Fund"). From March
1, 1999, until it was reorganized as the Orbitex Focus 30
Fund, the ASM Fund was managed by Orbitex Management, Inc.
Before March 1, 1999, the ASM Fund was managed by Vector
Index Advisors, Inc. ("Vector"). For the period November 1,
1998 through February 28, 1999, Vector waived fees and
expenses of the ASM Fund of approximately $155,000 which
were determined to be uncollectible from Vector and were
written off, net of management fees due Vector. For the
year ended October 31, 1998, Vector waived fees and
reimbursed the ASM Fund for expenses in the amount of
$242,280 which included management fees of $26,302. For the
fiscal year ended October 31, 1997, Vector was not entitled
to any fees, and reimbursed the ASM Fund for expenses in
the amount of $180,781.
ADMINISTRATOR
The Administrator for the Funds is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.
Pursuant to an Administrative Service Agreement with the Funds, the
Administrator provides all administrative services necessary for the Fund,
subject to the supervision of the Board of Trustees. The Administrator may
provide persons to serve as officers of the Fund. Such officers may be
directors, officers or employees of the Administrator or its affiliates.
The Administration Agreement was initially approved by the Board of Trustees at
a meeting on June 29, 1999. The Agreement shall remain in effect for two years
from the date of its initial approval, and subject to annual approval of the
Board of Trustees for one-year periods thereafter. The Administrative Service
Agreement is terminable by the Board of Trustees or the Administrator on sixty
days' written notice and may be assigned provided the non-assigning party
provides prior written consent. The Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence on the part of the
Administrator or reckless disregard of its obligations thereunder, the
Administrator shall not be liable for any action or failure to act in accordance
with its duties thereunder.
Under the Administrative Service Agreement, the Administrator provides all
administrative services, including, without limitation: (i) providing services
of persons competent to perform such administrative and clerical functions as
are necessary to provide effective administration of the Funds; (ii) overseeing
the performance of administrative and professional services to the Funds by
others, including the Funds' Custodian; (iii) preparing, but not paying for, the
periodic updating of the Funds' Registration Statement, Prospectus and Statement
of Additional Information in conjunction with Fund counsel, including the
printing of such documents for the purpose of filings with the Securities and
Exchange Commission and state securities administrators, preparing the Funds'
tax returns, and preparing reports to the Funds' shareholders and the Securities
and Exchange Commission; (iv) preparing in conjunction with Fund counsel, but
not paying for, all filings under the securities or "Blue Sky" laws of such
states or countries as are designated by the Distributor, which may be required
to register or qualify, or continue the registration or qualification, of the
Funds and/or its shares under such laws; (v) preparing notices and agendas for
meetings of the Board of Trustees and minutes of such meetings in all matters
required by the 1940 Act to be acted upon by the Board; and (vi) monitoring
daily and periodic compliance with respect to all requirements and restrictions
of the Investment Company Act, the Internal Revenue Code and the Prospectus.
- 31 -
<PAGE>
The Administrator, pursuant to the Fund Accounting Service Agreement, provides
the Funds with all accounting services, including, without limitation: (i) daily
computation of net asset value; (ii) maintenance of security ledgers and books
and records as required by the Investment Company Act; (iii) production of the
Funds' listing of portfolio securities and general ledger reports; (iv)
reconciliation of accounting records; (v) calculation of yield and total return
for the Funds; (vi) maintaining certain books and records described in Rule
31a-1 under the 1940 Act, and reconciling account information and balances among
the Funds' custodian and Advisers; and (vii) monitoring and evaluating daily
income and expense accruals, and sales and redemptions of shares of the Funds.
For the services rendered to the Funds by the Administrator, the Funds pay the
Administrator a fee, computed daily and payable monthly at annual rate of 0.10%
on assets up to $100 million; 0.08% on assets from $100 million to $250 million;
0.05% on assets from $250 million to $500 million; and 0.03% on assets greater
than $500 million, or a minimum fee of $40,000 per Fund per year of each Fund's
average daily net assets. The Cash Reserves Fund pays the Administrator a fee
equal to 0.02% based upon prior months' average net assets. The Funds also pay
the Administrator for any out-of-pocket expenses.
In return for providing the Funds with all accounting related services, the
Funds pays the Administrator a monthly fee based on the Funds' average net
assets, plus any out-of-pocket expenses for such services.
For fiscal year ended October 31, 1999, fees of ADS accrued were: $23,958 for
the Focus 30 Fund.
SUB-ADMINISTRATOR
State Street is the sub-administrator of the Growth Fund, the Info-Tech &
Communications Fund and the Strategic Natural Resources Fund. State Street is a
Massachusetts trust company with a principal office at 225 Franklin Street,
Boston, Massachusetts 02110. State Street serves as administrator for other
mutual funds.
Pursuant to a Sub-Administration Agreement for the benefit of the Trust, State
Street provides all administrative services reasonably necessary for the Growth
Fund, the Info-Tech & Communications Fund and the Strategic Natural Resources
Fund, other than those provided by the Adviser and/or ADS, subject to the
supervision of the Administrator.
Under the Sub-Administration Agreement for the benefit of the Trust, State
Street, assists the Administrator with certain of its responsibilities under the
administration agreement, including providing, without limitation: (i) services
of personnel competent to perform such administrative and clerical functions as
are necessary to provide effective administration of the Growth Fund, the
Info-Tech & Communications Fund and the Strategic Natural Resources Fund; (ii)
maintaining the books and records of the Growth Fund, the Info-Tech &
Communications Fund and the Strategic Natural Resources Fund (other than
financial and accounting books and records and records maintained by the Trust's
custodian or transfer agent); (iii) overseeing the insurance relationships of
the Growth Fund, the Info-Tech & Communications Fund and the Strategic Natural
Resources Fund; (iv) preparing or assisting in the preparation of all required
tax returns, proxy statements and reports to shareholders of the Growth Fund,
the Info-Tech & Communications Fund and the Strategic Natural Resources Fund,
and the Board of Trustees and reports to and filings with the SEC and any other
governmental agency; (v) preparing or assisting in the preparation of such
notices and reports as may be necessary to offer and sell shares of the Growth
Fund, the Info-Tech & Communications Fund and the Strategic Natural Resources
Fund under applicable state securities laws; (vi) preparing or assisting in the
preparation of, and coordinating the distribution of all materials for meetings
of the Board of Trustees of the Trust; (vii) monitoring daily and periodic
compliance of the Growth Fund, the Info-Tech & Communications Fund and the
Strategic Natural Resources Fund with respect to all requirements and
restrictions of the 1940 Act, the Internal Revenue Code and the Prospectus;
(viii) monitoring the calculation of all income and expense accruals, sales and
redemptions of capital shares outstanding with respect to the Growth Fund, the
Info-Tech & Communications Fund and the Strategic Natural Resources Fund by the
Trust's custodian; (ix) evaluating expenses, projecting future expenses, and
processing payments of expenses; and (x) monitoring and evaluating performance
of accounting and related services
- 32 -
<PAGE>
provided to the Growth Fund, the Info-Tech & Communications Fund and the
Strategic Natural Resources Fund, by the Trust's custodian.
The Sub-Administration Agreement is terminable at any time by the parties
thereto on sixty days' written notice. If a party other that State Street
terminates the original agreement within three years of its effective date, the
Fund must reimburse State Street for any fees waived by State Street. A
modification of the original administrative services agreement with State Street
shall not cause a termination of that agreement.
For the period September 16, 1997 through April 30, 1998, fees of State Street
accrued were: $43,750 for the Growth Fund, $43,750 for the Info-Tech &
Communications Fund and $43,750 for the Strategic Natural Resources Fund.
For fiscal year ended April 30, 1999, fees of State Street accrued were: $62,711
for the Growth Fund, $62,711 for the Info-Tech & Communications Fund and $62,858
for the Strategic Natural Resources Fund.
CUSTODIAN
State Street serves as the custodian of the Trust's assets pursuant to a
Custodian Contract by and between State Street and the Trust. State Street's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments. Pursuant to the Custodian
Contract, State Street also provides certain accounting and pricing services to
the Trust; maintaining original entry documents and books of record and general
ledgers; posting cash receipts and disbursements; reconciling bank account
balances monthly; recording purchases and sales based upon communications from
the Adviser; and preparing monthly and annual summaries to assist in the
preparation of financial statements of, and regulatory reports for, the Trust.
The Trust may employ foreign sub-custodians that are approved by the Board of
Trustees to hold foreign assets.
TRANSFER AGENT SERVICES
ADS provides transfer agent and dividend disbursing services to the Financial
Services Fund, Focus 30 Fund, Health & Biotechnology Fund, Utilities Fund, and
the Cash Reserves Fund.
State Street provides transfer agent and dividend disbursing services to the
Growth Fund, the Info-Tech & Communications Fund and the Strategic Natural
Resources Fund.
DISTRIBUTION OF SHARES
Funds Distributor, Inc. (the "Distributor" or "FDI") serves as the distributor
of the shares of each class of each Fund pursuant to a Distribution Agreement
between the FDI and the Trust. FDI's principal business address is 60 State
Street, Boston, Massachusetts 02109.
Under the terms of the Class A, Class B and Class C Distribution Plans and
Agreements pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Rule 12b-1 Plans"), the Distributor receives front-end, contingent deferred
sales commissions and a level load on Class A, Class B, and Class C Shares,
respectively, and fees for providing services to the Class A, Class B and Class
C Shares of each Fund, other than the Cash Reserves Fund, under the Distribution
Agreements. In addition, pursuant to the Rule 12b-1 Plans, each of the Funds are
authorized to use a portion of their assets attributable to the Class A, Class B
and Class C Shares to finance certain activities relating to the distribution of
their shares to investors.
The Plan adopted for Class A Shares, allows each Fund, other than the Cash
Reserves Fund, to pay the Distributor quarterly at a rate equal to an annualized
rate of 0.40% of the average daily net assets attributable to the Class A Shares
of that Fund. The Plan adopted for Class B Shares allows each Fund, other than
the Cash Reserves Fund, to pay the Distributor quarterly at a rate equal to
0.75% of the average daily net assets attributable to the Class B Shares of that
Fund during that quarter. The Class B Plan also allows each Fund to pay the
Distributor for certain shareholder services provided to Class B shareholders or
other service providers that have entered into agreements with the Distributor
to provide these services. For these services, each Fund pays a shareholder
service fee equal to 0.25% of average net assets attributable to Class B Shares
of the Fund on an annualized basis. The Plan adopted for Class C Shares allows
each Fund, other than the Cash Reserves Fund, to pay the Distributor quarterly
at a rate equal to 0.75% of the average daily net assets attributable to the
Class C Shares of that Fund during that quarter. The Class C Plan also allows
each Fund to pay the Distributor for certain shareholder services provided to
Class C shareholders or other service providers that have entered into
agreements with the Distributor to provide these services. For
- 33 -
<PAGE>
these services, each Fund pays a shareholder service fee equal to 0.25% of
average net assets attributable to Class C Shares of the Fund on an annualized
basis. A Fund may pay fees to the Distributor at a lesser rate, as agreed upon
by the Board of Trustees of the Trust and the Distributor. The Rule 12b-1 Plans
authorize payments to the Distributor as compensation for providing account
maintenance services to investors in the Class A, Class B and Class C Shares of
the Fund, including arranging for certain securities dealers or brokers,
administrators and others ("Recipients") to provide these services and paying
compensation for these services. Each Fund will bear its own costs of
distribution with respect to its Shares.
The services to be provided by Recipients may include, but are not limited to,
the following: assistance in the offering and sale of the Class A, Class B and
Class C Shares of the Funds and in other aspects of the marketing of the shares
to clients or prospective clients of the respective recipients; answering
routine inquiries concerning a Fund; assisting in the establishment and
maintenance of accounts or sub-accounts in a Fund and in processing purchase and
redemption transactions; making a Fund's investment plans and shareholder
services available; and providing such other information and services to
investors in shares of a Fund as the Distributor or the Trust, on behalf of a
Fund, may reasonably request. The distribution services shall also include any
advertising and marketing services provided by or arranged by the Distributor
with respect to the Funds.
The Distributor is required to provide a written report, at least quarterly to
the Board of Trustees of the Trust, specifying in reasonable detail the amounts
expended pursuant to the Rule 12b-1 Plans and the purposes for which such
expenditures were made. Further, the Distributor will inform the Board of any
Rule 12b-1 fees to be paid by the Distributor to Recipients.
The initial term of the Rule 12b-1 Plans is one year and this will continue in
effect from year to year thereafter, provided such continuance is specifically
approved at least annually by a majority of the Board of Trustees of the Trust
and a majority of the Trustees who are not "interested persons" of the Trust and
do not have a direct or indirect financial interest in the Rule 12b-1 Plans
("Rule 12b-1 Trustees") by votes cast in person at a meeting called for the
purpose of voting on the Rule 12b-1 Plans. The Rule 12b-1 Plans and Agreements
may be terminated at any time by the Trust or any Fund by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting Class
A or B Shares of the Trust or the affected Fund. The Rule 12b-1 Plans will
terminate automatically in the event of their assignment (as defined in the 1940
Act).
The Rule 12b-1 Plans may not be amended to increase materially the amount of the
Distributor's compensation to be paid by a Fund, unless such amendment is
approved by the vote of a majority of the outstanding voting securities of the
Fund (as defined in the 1940 Act). All material amendments must be approved by a
majority of the Board of Trustees of the Trust and a majority of the Rule 12b- 1
Trustees by votes cast in person at a meeting called for the purpose of voting
on a Rule 12b-1 Plan. During the term of the Rule 12b-1 Plans, the selection and
nomination of non-interested Trustees of the Trust will be committed to the
discretion of current non-interested Trustees. The Distributor will preserve
copies of the Rule 12b-1 Plans, any related agreements, and all reports, for a
period of not less than six years from the date of such document and for at
least the first two years in an easily accessible place.
Any agreement related to a Rule 12b-1 Plan will be in writing and provide that:
(a) it may be terminated by the Trust or a Fund at any time upon sixty days'
written notice, without the payment of any penalty, by vote of a majority of the
respective Rule 12b-1 Trustees, or by vote of a majority of the outstanding
voting securities of the Trust or the affected Fund; (b) it will automatically
terminate in the event of its assignment (as defined in the 1940 Act); and (c)
it will continue in effect for a period of more than one year from the date of
its execution or adoption only so long as such continuance is specifically
approved at least annually
- 34 -
<PAGE>
by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes
cast in person at a meeting called for the purpose of voting on such agreement.
The following table shows the distribution fees paid for Class A shares of the
Funds for the fiscal years ended April 30, 1998 and April 30, 1999. Class A
shares of the Focus 30 Fund and Health & Biotechnology Fund commenced
operations on July 12, 1999 and July 15, 1999 respectively.
<TABLE>
<CAPTION>
Class A Distribution Fees
Paid to Investment
Fund Professionals Retained by FDI
------------- ---------------
<S> <C> <C>
Growth Fund
April 30, 1998* $549.20 $487.28
April 30, 1999 $2,656.81 $1,595.25
Info-Tech & Communications Fund
April 30, 1998* $809.40 $620.63
April 30, 1999 $33,787.95 $20,190.48
Strategic Natural Resources Fund
April 30, 1998** $3,625.67 $3,149.26
April 30, 1999 $8,942.34 $5,429.90
Focus 30 Fund
October 31, 1999*** $26.47 $15.89
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period October 23, 1997 through April 30, 1998.
*** Fiscal period July 12, 1999 through October 31, 1999.
The following table shows the distribution fees paid and retained by FDI for
Class B shares of the Funds for the fiscal years ended April 30, 1998 and
April 30, 1999. Class B shares of the Focus 30 Fund and Health & Biotechnology
Fund commenced operations July 12, 1999 and July 15, 1999, respectively.
<TABLE>
<CAPTION>
Class B Distribution and Services Fees
Distribution Fees Paid
to Investment Distribution Fees Shareholder Service
Fund Professionals Retained by FDI Fees Retained by FDI
------------- --------------- ---- ---------------
<S> <C> <C> <C> <C>
Growth Fund
April 30, 1999* $0 $111.13 $20.27 $0
Info-Tech & Communications Fund
April 30, 1999* $0 $26,078.91 $1,940.14 $0
Strategic Natural Resources Fund
April 30, 1999** $0 $475.52 $158.50 $0
Focus 30 Fund
October 31, 1999*** $0 $9.30 $3.10 $0
</TABLE>
* Fiscal period September 16, 1998 through April 30, 1999.
** Fiscal period September 21, 1998 through April 30, 1999.
*** Fiscal period July 12, 1999 through October 31, 1999.
- 35 -
<PAGE>
The following table shows the sales charge revenues collected, and retained by
FDI for the past two fiscal years.
<TABLE>
<CAPTION>
Sales Charge CDSC Revenue
Revenue
Amount Amount Amount Amount
Paid Retained Paid Retained
Fund to FDI by FDI to FDI by FDI
------ ------ ------ ------
<S> <C> <C> <C> <C>
Growth Fund - Class A
April 30, 1998* $5,000 $0 $0 $0
April 30, 1999 $27,000 $0 $0 $0
Growth Fund - Class B
April 30, 1999** $2,472.10 $0 $228.91 $0
Info-Tech & Communications Fund -
<CAPTION>
Sales Charge CDSC Revenue
Revenue
Amount Amount Amount Amount
Paid Retained Paid Retained
Fund to FDI by FDI to FDI by FDI
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A
April 30, 1998* $48,000 $0 $0 $0
April 30, 1999 $1,872,000 $0 $0 $0
Info-Tech & Communications Fund -
Class B
April 30, 1999** $589,551 $0 $3,770.57 $0
Strategic Natural Resources Fund -
Class A
April 30, 1998*** $39,000 $0 $0 $0
April 30, 1999 $113,000 $0 $0 $0
Strategic Natural Resources Fund -
Class B
April 30, 1999**** $13,768.29 $0 $975.50 $0
Focus 30 Fund - Class A
October 31, 1999***** $200.00 $0 $0 $0
Focus 30 Fund - Class B
October 31, 1999***** $400.00 $0 $0 $0
</TABLE>
* Fiscal period October 22, 1997 through April 30, 1998.
** Fiscal period September 16, 1998 through April 30, 1999.
*** Fiscal period October 23, 1997 through April 30, 1998.
*** Fiscal period September 21, 1998 through April 30, 1999.
**** Fiscal period July 12, 1999 through October 31, 1999.
The following table shows amounts paid by each Fund under its Class A 12b-1
Plans during the fiscal year ended April 30, 1999. Class A shares of the
Focus 30 Fund and Health & Biotechnology Fund commenced operations July 12,
1999 and July 15, 1999, respectively.
<TABLE>
<CAPTION>
Compensation to Compensation to
Fund Underwriters Dealers
------------ -------
<S> <C> <C>
Growth Fund $1,595 $2,657
- 36 -
<PAGE>
Info-Tech & $20,190 $33,788
Communications Fund
Strategic Natural $5,430 $8,942
Resources Fund
</TABLE>
The following table shows amounts paid by each Fund under its Class B 12b-1
Plans during the fiscal year ended April 30, 1999. Class B shares of the
Focus 30 Fund and Health & Biotechnology Fund commenced operations July 12,
1999 and July 15, 1999, respectively.
<TABLE>
<CAPTION>
Interest
Carrying or
other
Compensation to Financing
Fund Sales Personnel Charges
--------------- -------
<S> <C> <C>
Growth Fund $20 $111
Info-Tech & $1,940 $26,079
Communications Fund
Strategic Natural $13 $475
Resources Fund
</TABLE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Subject to the general supervision of the Board of Trustees of the Trust, the
Adviser is responsible for making decisions with respect to the purchase and
sale of portfolio securities on behalf of the Funds. The Adviser is also
responsible for the implementation of those decisions, including the selection
of broker-dealers to effect portfolio transactions, the negotiation of
commissions, and the allocation of principal business and portfolio brokerage.
In purchasing and selling each Fund's portfolio securities, it is the Adviser's
policy to obtain quality execution at the most favorable prices through
responsible broker-dealers and, in the case of agency transactions, at
competitive commission rates where such rates are negotiable. However, under
certain conditions, a Fund may pay higher brokerage commissions in return for
brokerage and research services. In selecting broker-dealers to execute a Fund's
portfolio transactions, consideration is given to such factors as the price of
the security, the rate of the commission, the size and difficulty of the order,
the reliability, integrity, financial condition, general execution and
operational capabilities of competing brokers and dealers, their expertise in
particular markets and the brokerage and research services they provide to the
Adviser or the Funds. It is not the policy of the Adviser to seek the lowest
available commission rate where it is believed that a broker or dealer charging
a higher commission rate would offer greater reliability or provide better price
or execution.
Transactions on stock exchanges involve the payment of brokerage commissions. In
transactions on stock exchanges in the United States, these commissions are
negotiated. Traditionally, commission rates have generally not been negotiated
on stock markets outside the United States. In recent years, however, an
increasing number of overseas stock markets have adopted a system of negotiated
rates, although a number of markets continue to be subject to an established
schedule of minimum commission rates. It is expected that equity securities will
ordinarily be purchased in the primary markets, whether over-the-counter or
listed, and that listed securities may be purchased in the over-the-counter
market if such market is deemed the primary market. In the case of securities
traded on the over-the-counter markets, there is generally no stated commission,
but the price usually includes an undisclosed commission or markup. In
underwritten offerings, the price includes a disclosed, fixed commission or
discount.
For fixed income securities, it is expected that purchases and sales will
ordinarily be transacted with the issuer, the issuer's underwriter, or with a
primary market maker acting as principal on a net basis, with no brokerage
commission being paid by the Fund. However, the price of the securities
generally includes
- 37 -
<PAGE>
compensation which is not disclosed separately. Transactions placed through
dealers who are serving as primary market makers reflect the spread between the
bid and asked prices.
With respect to equity and fixed income securities, the Adviser may effect
principal transactions on behalf of the Funds with a broker or dealer who
furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts or other allowances or
otherwise deal with any such broker or dealer in connection with the acquisition
of securities in underwritings. The prices the Funds pay to underwriters of
newly-issued securities usually include a concession paid by the issuer to the
underwriter. The Adviser may receive research services in connection with
brokerage transactions, including designations in fixed price offerings.
The Adviser (and Sub-Adviser) receive a wide range of research services from
brokers and dealers covering investment opportunities throughout the world,
including information on the economies, industries, groups of securities,
individual companies, statistics, political developments, technical market
action, pricing and appraisal services, and performance analyses of all the
countries in which a Fund's portfolio is likely to be invested. The Adviser (or
Sub-Adviser) cannot readily determine the extent to which commissions charged by
brokers reflect the value of their research services, but brokers occasionally
suggest a level of business they would like to receive in return for the
brokerage and research services they provide. To the extent that research
services of value are provided by brokers, the Adviser (or Sub-Adviser) may be
relieved of expenses which it might otherwise bear. In some cases, research
services are generated by third parties but are provided to the Adviser (and
Sub-Adviser) by or through brokers.
Certain broker-dealers which provide quality execution services also furnish
research services to the Adviser (and Sub-Adviser). The Adviser (and
Sub-Adviser) have adopted brokerage allocation policies embodying the concepts
of Section 28(e) of the Securities Exchange Act of 1934, which permits an
investment adviser to cause its clients to pay a broker which furnishes
brokerage or research services a higher commission than that which might be
charged by another broker which does not furnish brokerage or research services,
or which furnishes brokerage or research services deemed to be of lesser value,
if such commission is deemed reasonable in relation to the brokerage and
research services provided by the broker, viewed in terms of either that
particular transaction or the overall responsibilities of the adviser with
respect to the accounts as to which it exercises investment discretion.
Accordingly, the Adviser (or Sub-Adviser) may assess the reasonableness of
commissions in light of the total brokerage and research services provided by
each particular broker. The Adviser (or Sub-Adviser) may also consider sales of
the Funds' Shares as a factor in the selection of broker-dealers.
Portfolio securities will not be purchased from or sold to the Adviser (or
Sub-Adviser), or the Distributor, or any affiliated person of any of them acting
as principal, except to the extent permitted by rule or order of the SEC.
For the fiscal period October 16, 1997 through April 30, 1998, the Funds paid
brokerage commissions as follows: $9,293 for the Growth Fund, $1,801 for the
Info-Tech & Communications Fund and $81,999 for the Strategic Natural Resources
Fund.
For the fiscal year ended April 30, 1999, the Funds paid brokerage commissions
as follows: $21,022 for the Growth Fund, $102,306 for the Info-Tech &
Communications Fund and $137,895 for the Strategic Natural Resources Fund. For
the fiscal year ended October 31, 1999, the Focus 30 Fund paid brokerage
commissions of $12,228.
PURCHASE AND REDEMPTION OF SECURITIES BEING OFFERED
WAIVERS OF INITIAL SALES CHARGE FOR CLASS A SHARES. The initial sales charge
Class A Shares of the Funds is waived on the following types of purchases: (1)
purchases by investors who have invested $1 million or more in one Fund alone or
in any combination of Funds; (2) purchases by the officers, directors/trustees,
and employees of the Trust, the Advisor or the Distributor; the immediate family
members of any such person; any trust or individual retirement account or
self-employed retirement plan for the benefit of any such person or family
- 38 -
<PAGE>
members; or the estate of any such person or family members; (3) purchases by
Selling Group Members, for their own accounts, or for retirement plans for their
employees or sold to registered representatives or full time employees (and
their immediate families) that certify to the Distributor at the time of
purchase that such purchase is for their own account (or for the benefit of
their immediate families); (4) purchases by a charitable organization (as
defined in Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more; (5) purchases by a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code); (6) purchases with trust assets; (7)
purchases in accounts as to which a Selling Group Member charges an account
management fee; (8) purchases by any state, county, or city, or any governmental
instrumentality, department, authority or agency; (9) purchases with redemption
proceeds from another mutual fund (which is not a series of the Trust) on which
the investor has paid a front-end sales charge only; (10) purchases of Class A
Shares by clients of certain securities dealers offering programs in which the
client pays a separate fee to an advisor providing financial management or
consulting services, including WRAP fee programs; (11) purchases of Class A
Shares by certain fee paid investment advisers purchasing on behalf of their
clients; (12) purchases of Class A Shares made through certain fee-waived
programs sponsored by third parties; (13) Class A Shares issued in plans of
reorganization such as mergers, asset acquisitions and exchange offers to which
a Fund is a party; and, (14) purchases made through a broker-dealer or financial
intermediary which maintains a net asset value purchase program that enables the
Funds to realize certain economies of scale.
In addition, purchases may be made at net asset value by the following:
Investment Advisors or Financial Planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of such investment
advisors or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment advisor or
financial planner on the books and records of the broker or agent.
Retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in section 401(a), 403(b), or 457
of the Internal Revenue Code and "rabbi trusts".
The securities dealers offering WRAP fees or similar programs may charge a
separate fee for purchases and redemptions of Class A Shares. Neither the Fund,
the Advisor, nor the Distributor receives any part of the fees charged clients
of such securities dealers or financial advisors. To qualify for the purchase of
such Class A Shares, Fund Employees and other persons listed in section (2) must
provide the Transfer Agent with a letter stating that the purchase is for their
own investment purposes only and that the shares will not be resold except to
the Funds.
LETTER OF INTENT. In submitting a Letter of Intent to purchase Class A Shares of
the Funds at a reduced sales charge, the investor agrees to the terms of the
Prospectus, the Applications used to buy such shares, and the language in this
Statement of Additional Information as to Letters of Intent, as they may be
amended from time to time by the Trust. Such amendments will apply automatically
to existing Letters of Intent.
A Letter of Intent ("Letter") is the investor's statement of intention to
purchase Class A Shares of one or more of the Funds during the 13-month period
from the investor's first purchase pursuant to the Letter (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up to 90
days prior to the date of the Letter. The investor states the intention to make
the aggregate amount of purchases (excluding any reinvestment of dividends or
distributions or purchases made at net asset value without sales charge), which
together with the investor's holdings of such funds (calculated at their
respective public offering prices calculated on the date of the Letter) will
equal or exceed the amount specified in the Letter to obtain the reduced sales
charge rate (as set forth in "How To Purchase Shares" in the Prospectus)
applicable to purchases of shares in that amount (the "intended amount"). Each
purchase under the Letter will be made at the public offering price applicable
to a single lump-sum purchase of shares in the intended amount, as described in
the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase Class A
Shares, but if the investor's purchases of Class A Shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of such Fund shares on the last day of that period, do not equal or
exceed the
- 39 -
<PAGE>
intended amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below,
as those terms may be amended from time to time.
The investor agrees that shares equal in value to 5% of the intended amount will
be held in escrow by the Trust's transfer agent subject to the Terms of Escrow.
If the total eligible purchases made during the Letter of Intent period do not
equal or exceed the intended amount, the commissions previously paid to the
dealer of record for the account and the amount of sales charge retained by the
Distributor will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter of Intent period exceed the
intended amount and exceed the amount needed to qualify for the next sales
charge rate reduction set forth in the applicable prospectus, the sales charges
paid will be adjusted to the lower rate, but only if and when the dealer returns
to the Distributor the excess of the amount of commissions allowed or paid to
the dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be used to
purchase additional shares for the investor's account at the net asset value per
share in effect on the date of such purchase, promptly after the Distributor's
receipt thereof.
In determining the total amount of purchases made under a Letter, Class A Shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to refer to the Letter in placing any purchase orders for the investor
during the Letter of Intent period. All of such purchases must be made through
the Distributor.
Terms of Escrow
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, Class A Shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the Fund's
transfer agent. For example, if the intended amount specified under the Letter
is $50,000, the escrow shall be shares valued in the amount of $2,500 (computed
at the public offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended amount specified in
the Letter, the investor must remit to the Distributor an amount equal to the
difference between the dollar amount of sales charges actually paid and the
amount of sales charges which would have been paid if the total amount purchased
had been made at a single time. Such sales charge adjustment will apply to any
shares redeemed prior to the completion of the Letter. If such difference in
sales charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints the
transfer agent of the Trust as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. Shares held in escrow hereunder will automatically be exchanged for shares of
another Fund to which an exchange is requested, and the escrow will be
transferred to that other Fund.
In-Kind. Each Fund intends to pay all redemptions of its shares in cash.
However, each Fund may make full or partial payment of any redemption request by
the payment to shareholders of portfolio securities of the applicable Fund
(i.e., by redemption-in-kind), at the value of such securities used in
determining the redemption price. The Funds, nevertheless, pursuant to Rule
18f-1 under the 1940 Act, have filed a notification of election under which each
Fund is committed to pay in cash to any shareholder of record, all
- 40 -
<PAGE>
such shareholder's requests for redemption made during any 90-day period, up to
the lesser of $250,000 or 1% of the applicable Fund's net asset value at the
beginning of such period. The securities to be paid in-kind to any shareholders
will be readily marketable securities selected in such manner as the Board of
Trustees of the Trust deems fair and equitable. If shareholders were to receive
redemptions-in-kind, they would incur brokerage costs should they wish to
liquidate the portfolio securities received in such payment of their redemption
request. The Trust does not anticipate making redemptions-in-kind.
The right to redeem shares or to receive payment with respect to any redemption
of shares of the Funds may only be suspended (1) for any period during which
trading on the New York Stock Exchange ("NYSE") is restricted or such Exchange
is closed, other than customary weekend and holiday closings, (2) for any period
during which an emergency exists as a result of which disposal of securities or
determination of the net asset value of the Fund is not reasonably practicable,
or (3) for such other periods as the SEC may by order permit for protection of
shareholders of the Funds.
WAIVERS FOR CLASS C SHARES. Each fund may waive, where applicable, the CDSC on
redemption: (1) following the death of a shareholder, (2) if a shareholder
becomes unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in death or be of long-continued and indefinite duration, or (3) when a
total or partial redemption is made in connection with a distribution from IRAs
or other qualified retirement plans after attaining age 59-1/2.
The Distributor may waive the CDSC on the redemption of Class C shares of each
Fund owned by directors, trustees, officers and full-time employees of the
Trust, the Adviser, or the Distributor, including members of the immediate
families of such individuals and employee benefit plans established by such
entities. The funds may also waive the CDSC on the redemption of Class C shares
of each fund owned by banks, bank trust departments, savings and loan
associations, federal and state credit unions, trust companies, investment
advisers and broker-dealers, either in their fiduciary capacities or for their
own accounts. These institutions may charge fees to clients for whose accounts
they purchase shares at net asset value or for which the CDSC has been waived.
All CDSC's imposed on redemptions of each fund are paid to the distributor.
CLASS D SHARES OF THE FOCUS 30 FUND. Class D Shares of the Focus 30 Fund are
available for purchase by the following persons: (1) shareholders who were
shareholders of the ASM Index 30 Fund at the time of the reorganization of the
ASM Fund into the Focus 30 Fund and certain related accounts of those
shareholders, (2) employees, and certain related accounts of employees, of
Orbitex Financial Services Group, Inc. ("OFSG") and its affiliates; and (3)
certain institutional investors. "Related accounts" include: the shareholder,
one of the shareholder's immediate family members, a trust or individual
retirement account or self-employed retirement plan for the benefit of the
shareholder or the shareholder's immediate family members, and the estate of the
shareholder or the shareholder's immediate family.
SHAREHOLDER SERVICES
Systematic Withdrawal Program. A shareholder owning or purchasing shares of any
Fund having a total value of $10,000 or more may participate in a systematic
withdrawal program providing regular monthly or quarterly payments. An
application form containing details of the Systematic Withdrawal Program is
available upon request from the Funds' transfer agent. The Program is voluntary
and may be terminated at any time by the shareholders.
Income dividends and capital gain distributions on shares of the Funds held in a
Systematic Withdrawal Program are automatically reinvested in additional shares
of the relevant Fund at net asset value. A Systematic Withdrawal Program is not
an annuity and does not and cannot protect against loss in declining markets.
Amounts paid to a shareholder from the Systematic Withdrawal Program represent
the proceeds from redemptions of Fund shares, and the value of the shareholder's
investment in a Fund will be reduced to the extent that the payments exceed any
increase in the aggregate value of the shareholder's shares (including shares
purchased through reinvestment of dividends and distributions). If a shareholder
receives
- 41 -
<PAGE>
payments that are greater than the appreciation in value of his or her shares,
plus the income earned on the shares, the shareholder may eventually withdraw
his or her entire account balance. This will occur more rapidly in a declining
market. For tax purposes, depending upon the shareholder's cost basis and date
of purchase, each withdrawal will result in a capital gain or loss. See
"Dividends, Distributions and Taxes" in this SAI and in the Funds' Prospectus.
The Funds offer certain shareholder services, which are designed to facilitate
investment in their shares. Each of the options is described in the Funds'
Prospectus. All of these special services may be terminated by either the Funds
or the shareholder without any prior written notice.
Systematic Exchange Program. The Systematic Exchange Program allows you to make
regular, systematic exchanges from one Orbitex Fund account into another Orbitex
Fund account. By setting up the program, you authorize the Fund and its agents
to redeem a set dollar amount or number of shares from the first account and
purchase shares of a second Fund. An exchange transaction is a sale and a
purchase of shares for federal income tax purposes and may result in a capital
gain or loss.
To participate in the Systematic Exchange Program, you must have an initial
account balance of $10,000 in the first account and at least $1,000 in the
second account. Exchanges may be made on any day or days of your choice. If the
amount remaining in the first account is less than the exchange amount you
requested, then the remaining amount will be exchanged. At such time as the
first account has a zero balance, your participation in the program will be
terminated. You may also terminate the program by calling or writing the Fund.
Once participation in the program has been terminated for any reason, to
reinstate the program you must do so in writing; simply investing additional
funds will not reinstate the program.
Automatic Account Builder. An investor may arrange to have a fixed amount of
$100 or more automatically invested in shares of a Fund monthly by authorizing
his or her bank account to be debited to invest specified dollar amounts in
shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to Automatic Account
Builder participants.
Further information about these programs and an application form can be obtained
from the Transfer Agent.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of a Fund will be determined for each class of
shares. The net asset value per share of a given class of shares of a Fund is
determined by calculating the total value of the Fund's assets attributable to
such class of shares, deducting its total liabilities attributable to such class
of shares in conformance with the provisions of the plan adopted by the Fund in
accordance with Rule 18f-3 under the 1940 Act., and dividing the result by the
number of shares of such class outstanding. The net asset value of shares of
each class of each Fund is normally calculated as of the close of regular
trading on the NYSE on every day the NYSE is open for trading. The NYSE is open
Monday through Friday except on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value of the
Cash Reserves Fund is normally calculated at 3:00 p.m. Eastern time on each day
that the Federal Reserve Bank of New York is open. The Federal Reserve Bank of
New York is open Monday through Friday except on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the different classes of a fund's shares is
expected to be substantially the same; from time to time, however, the per share
net asset value of the different classes of shares may differ.
In determining each Fund's NAV per share, equity securities for which market
quotations are readily available are valued at current market value using the
last reported sales price. If no sale price is reported, the average of the last
bid and ask price is used. If no average price is available, the last bid price
is used. If market quotations are not readily available, then securities are
valued at fair value as determined by the
- 42 -
<PAGE>
Board (or its delegate). Short-term debt instruments with a remaining maturity
of more than 60 days, intermediate and long-term bonds, convertible bonds, and
other debt securities are generally valued on the basis of dealer supplied
quotations or by pricing system selected by the Adviser and approved by the
Board of Trustees of the Trust. Where such prices are not available, valuations
will be obtained from brokers who are market makers for such securities.
However, in circumstances where the Adviser (or a Sub-Adviser) deems it
appropriate to do so, the mean of the bid and asked prices for over- the-counter
securities or the last available sale price for exchange-traded debt securities
may be used. Where no last sale price for exchange traded debt securities is
available, the mean of the bid and asked prices may be used. Short-term debt
securities with a remaining maturity of 60 days or less are amortized to
maturity, provided such valuations represent par value.
Other securities and assets for which market quotations are not readily
available or for which valuation cannot be provided, as described above, are
valued as determined in good faith in accordance with procedures approved by the
Board of Trustees of the Trust.
Trading in securities on Far Eastern securities exchanges and over-the-counter
markets is normally completed well before the close of business on each business
day in New York (i.e., a day on which the NYSE is open). In addition, Far
Eastern securities trading generally or in a particular country or countries may
not take place on all business days in New York. Furthermore, trading takes
place in Japanese markets on certain Saturdays in various foreign markets on
days which are not business days in New York and on which a Fund's net asset
value is not calculated. Each Fund calculates net asset value per share, and
therefore effects sales, redemptions and repurchases of its shares, as of the
close of regular trading on the NYSE once on each day on which the NYSE is open.
Such calculation may not take place contemporaneously with the determination of
the prices of the majority of the portfolio securities used in such calculation.
If events materially affecting the value of such securities occur between the
time when their price is determined and the time when the Fund's net asset value
is calculated, such securities will be valued at fair value as determined in
good faith in accordance with procedures approved by the Board of Trustees of
the Trust.
TAXES
Each Fund intends to qualify as a "regulated investment company" ("RIC") under
Subchapter M of the Internal Revenue Code. In general, to qualify as a RIC: (a)
at least 90% of the gross income of a Fund for the taxable year must be derived
from dividends, interest, payments with respect to loans of securities, gains
from the sale or other disposition of securities, or other income derived with
respect to its business of investing in securities; (b) a Fund must distribute
to its shareholders 90% of its ordinary income and net short-term capital gains;
and (c) a Fund must diversity its assets so that, at the close of each quarter
of its taxable year, (i) at least 50% of the fair market value of its total
(gross) assets is comprised of cash, cash items, U.S. government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to no more than 5% of the fair market value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer
and (ii) no more than 25% of the fair market value of its total assets is
invested in the securities of any one issuer (other than U.S. government
securities and securities of other regulated investment companies) or of two or
more issuers controlled by the Fund and engaged in the same, similar, or related
trades or businesses.
In addition, each Fund must declare and distribute dividends equal to at least
98% of its ordinary income (as of the twelve months ended December 31) and at
least 98% of its net capital gain (as of the twelve months ended October 31), in
order to avoid a federal excise tax. Each Fund intends to make the required
distributions, but they cannot guarantee that they will do so. Dividends
attributable to a Fund's ordinary income and net capital gain are taxable as
such to shareholders in the year in which they are received except dividends
declared in October, November and December to the shareholders of record on a
specified date in such a month and paid in January of the following year are
taxable in the previous year.
A corporate shareholder may be entitled to take a deduction for income dividends
received by it that are attributable to dividends received from a domestic
corporation, provided that both the corporate shareholder retains its shares in
the applicable Fund for more than 45 days and the Fund retains its shares in
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the issuer from whom it received the income dividends for more than 45 days. A
distribution of net capital gain reflects a Fund's excess of net long-term gains
over its net short-term losses. Each Fund must designate distributions of net
capital gain and must notify shareholders of this designation within sixty days
after the close of the Trust's taxable year. A corporate shareholder of a Fund
cannot use a dividends-received deduction for distributions of net capital gain.
Foreign currency gains and losses, including the portion of gain or loss on the
sale of debt securities attributable to foreign exchange rate fluctuations are
taxable as ordinary income. If the net effect of these transactions is a gain,
the dividend paid by the Fund will be increased; if the result is a loss, the
income dividend paid by the Fund will be decreased. Adjustments to reflect these
gains and losses will be made at the end of each Fund's taxable year.
At the time of purchase, each Fund's net asset value may reflect undistributed
income or net capital gains. A subsequent distribution to shareholders of such
amounts, although constituting a return of their investment, would be taxable
either as dividends or capital gain distributions. For federal income tax
purposes, each Fund is permitted to carry forward its net realized capital
losses, if any, for eight years, and realize net capital gains up to the amount
of such losses without being required to pay taxes on, or distribute such gains.
Income received by each Fund from sources within various foreign countries may
be subject to foreign income taxes withheld at the source. Under the Internal
Revenue Code, if more than 50% of the value of a Fund's total assets at the
close of its taxable year comprise securities issued by foreign corporations,
the Fund may file an election with the Internal Revenue Service to "pass
through" to the Fund's shareholders the amount of any foreign income taxes paid
by the Fund. Pursuant to this election, shareholders will be required to: (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) either deduct their pro rata share of
foreign taxes in computing their taxable income, or use it as a foreign tax
credit against U.S. income taxes (but not both). No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions.
The Strategic Natural Resources Fund intends to meet the requirements of the
Internal Revenue Code to "pass through" to its shareholders foreign income taxes
paid, but there can be no assurance that it will be able to do so. Shareholders
of the Strategic Natural Resources Fund will be notified within 60 days after
the close of each taxable year of a Fund, if that Fund will "pass through"
foreign taxes paid for that year, and, if so, the amount of each shareholder's
pro rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's
gross income from foreign sources. Of course, shareholders who are not liable
for federal income taxes, such as retirement plans qualified under Section 401
of the Internal Revenue Code, will not be affected by any such "pass through" of
foreign tax credits.
If, in any taxable year, a Fund should not qualify as a RIC under the Internal
Revenue Code: (1) that Fund would be taxed at normal corporate rates on the
entire amount of its taxable income without deduction for dividends paid or
other distributions to its shareholders, and (2) that Fund's distributions to
the extent made out of that Fund's current or accumulated earnings and profits
would be taxable to its shareholders (other than shareholders in tax deferred
accounts) as ordinary dividends (regardless of whether they would otherwise have
been considered capital gain dividends), and may qualify for the deduction for
dividends received by corporations.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Fund may invest in the stock of
foreign companies that may be treated as "passive foreign investment companies"
("PFICs") under the Internal Revenue Code. Certain other foreign corporations,
not operated as investment companies, may also satisfy the PFIC definition. A
portion of the income and gains that a Fund derives may be subject to a
non-deductible federal income tax unless the Fund makes a mark-to-market
election. Because it is not always possible to identify a foreign issuer as a
PFIC in advance of making the investment, the Funds will elect to
mark-to-market an identified PFIC to avoid the PFIC tax.
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If a Fund purchases shares in certain foreign passive investment entities
described in the Internal Revenue Code as passive foreign investment companies
("PFIC"), the Fund will be subject to U.S. federal income tax on a portion of
any "excess distribution" (the Fund's ratable share of distributions in any year
that exceeds 125% of the average annual distribution received by the Fund in the
three preceding years or the Fund's holding period, if shorter, and any gain
from the disposition of such shares) even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund in respect of deferred taxes
arising from such "excess distributions." If the Fund were to invest in a PFIC
and elect to treat the PFIC as a "qualified electing fund" under the Internal
Revenue Code (and if the PFIC were to comply with certain reporting
requirements), in lieu of the foregoing requirements the Fund would be required
to include in income each year its pro rata share of the PFIC's ordinary
earnings and net realized capital gains, whether or not such amounts were
actually distributed to the Fund.
Pursuant to legislation enacted on August 5, 1997 any taxpayer holding shares of
"marketable" PFICs may make an election to mark that stock to market at the
close of the taxpayer's taxable year. A Fund making an irrevocable election will
mark its PFICs to market at taxable year-end for income tax purposes and at
October 31 for purposes of the excise tax minimum distribution requirements of
Code Section 4982. This provision is effective for taxable years of U.S. persons
beginning after December 31, 1997.
ORGANIZATION OF THE TRUST
As a Delaware business trust entity, the Trust need not hold regular annual
shareholder meetings and, in the normal course, does not expect to hold such
meetings. The Trust, however, must hold shareholder meetings for such purposes
as, for example: (1) approving certain agreements as required by the 1940 Act;
(2) changing fundamental investment objectives, policies, and restrictions of
the Funds; and (3) filling vacancies on the Board of Trustees of the Trust in
the event that less than a majority of the Trustees were elected by
shareholders. The Trust expects that there will be no meetings of shareholders
for the purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders. At
such time, the Trustees then in office will call a shareholders meeting for the
election of Trustees. In addition, holders of record of not less than two-thirds
of the outstanding shares of the Trust may remove a Trustee from office by a
vote cast in person or by proxy at a shareholder meeting called for that purpose
at the request of holders of 10% or more of the outstanding shares of the Trust.
The Funds have the obligation to assist in such shareholder communications.
Except as set forth above, Trustees will continue in office and may appoint
successor Trustees.
Costs incurred by the Growth Fund, Info-Tech & Communications Fund and Strategic
Natural Resources Fund in connection with their organization, estimated at
$15,000, are being amortized on a straight line basis over a five year period
beginning at the commencement of operations of each Fund. In the event that any
of the initial shares of the Funds are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of initial shares outstanding at the time
of such redemption. Costs for all other funds will not be amortized.
PERFORMANCE INFORMATION ABOUT THE FUNDS
Total Return Calculations
Each Fund may provide average annual total return information calculated
according to a formula prescribed by the SEC. Average annual total return will
be calculated separately for Class A, Class B and Class D Shares. According to
that formula, average annual total return figures represent the average annual
compounded rate of return for the stated period. Average annual total return
quotations reflect the percentage change between the beginning value of a static
account in the Fund and the ending value of that account measured by then
current net asset value of that Fund assuming that all dividends and capital
gains distributions during the stated period were reinvested in shares of the
Fund when paid. Total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment that would equate the
initial amount invested to the ending redeemable value of such investment,
according to the following formula:
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1/n
T=(ERV/P)-1
Where:
T = average annual total return.
P = a hypothetical initial payment of $1,000.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1,5, or 10
year periods at the end of the1, 5, or 10 year
periods (or fractional portion).
Each Fund, from time to time, also may advertise its cumulative total return
figures. Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in shares of that Fund. Cumulative total return is calculated by
finding the compound rates of a hypothetical investment over such period,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value; ERV is the
value, at the end of the applicable period,
of a hypothetical $1,000 investment made at
the beginning of the applicable period.
Yield Calculations.
In addition to providing cumulative total return information, the Cash Reserves
Fund may also illustrate its performance by providing information concerning its
yield and effective yield. Yield and effective yield will be calculated
separately for each class of shares of the Fund.
The Cash Reserve Fund's yield is computed by (a) determining the net change in
the value of a hypothetical pre-existing account in the Fund having a balance of
one share at the beginning of a seven calendar day period for which yield is to
be quoted; (b) dividing the net change by the value of the account at the
beginning of the period to obtain the base period return; and (c) annualizing
the results (I.E., multiplying the base period return by 365/7).
In addition, the Cash Reserves Fund may calculate a compound effective
annualized yield by determining the net change in the value of a hypothetical
pre-existing account in the Fund having a balance of one share at the beginning
of a seven calendar day period for which yield is to be quoted according to the
following formula:
365/7
Effective Yield = [(Base Period return + 1) - 1
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The net change in the value of the account reflects the value of additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation.
Yield fluctuations may reflect changes in the Fund's net income, and portfolio
changes resulting from net purchases or net redemptions of the Fund's shares may
affect its yield. Accordingly, the Fund's yield may vary from day to day, and
the yield stated for a particular past period is not necessarily representative
of the Fund's future yield. The Fund's yield is not guaranteed, and its
principal is not insured.
From time to time, in reports and promotional literature, each Fund's
performance may be compared to: (1) other groups of mutual funds tracked by: (A)
Lipper Analytical Services, a widely-used independent research firm which ranks
mutual funds by overall performance, investment objectives, and asset size; (B)
Forbes Magazine's Annual Mutual Funds Survey and Mutual Fund Honor Roll; or (C)
other financial or business publications, such as Business Week, Money Magazine,
and Barron's, which provide similar information; (2) the Consumer Price Index
(measure for inflation), which may be used to assess the real rate of return
from an investment in each Fund; (3) other government statistics such as GNP,
and net import and export figures derived from governmental publications, e.g.,
The Survey of Current Business, which may be used to illustrate investment
attributes of each Fund or the general economic, business, investment, or
financial environment in which each Fund operates; (4) Alexander Steele's Mutual
Fund Expert, a tracking service which ranks various mutual funds according to
their performance; and (5) Morningstar, Inc. which ranks mutual funds on the
basis of historical risk and total return. Morningstar's rankings are calculated
using the mutual fund's average annual returns for a certain period and a risk
factor that reflects the mutual fund's performance relative to three-month
Treasury bill monthly returns. Morningstar's rankings range from five star
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a mutual fund as a weighted average
for 3, 5, and 10-year periods. In each category, Morningstar limits its five
star rankings to 10% of the funds it follows and its four star rankings to 22.5%
of the funds it follows. Rankings are not absolute or necessarily predictive of
future performance.
In addition, the performance of the Funds may be compared to indices of broad
groups of similar but unmanaged securities or other benchmarks considered to be
representative of a Fund's holdings.
The performance of the indices that may be used as benchmarks for each Fund's
performance, unlike the returns of the Funds, do not include the effect of
paying brokerage costs (for equity securities) and other transaction costs that
investors normally incur when investing directly in the securities in those
indices.
The Trust may also illustrate a particular Fund's investment returns or returns
in general by graphs and charts, that compare, at various points in time, the
return from an investment in the particular Fund (or returns in general) on a
tax-deferred basis (assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the same return on a taxable basis.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP whose address is 160 Federal Street, Boston,
Massachusetts 02110 serves as the Trust's Independent Accountants providing
services including (1) audit of annual financial statements, (2) assistance and
consultation in connection with SEC filings and (3) review of the annual federal
income tax returns filed on behalf of the Funds.
LEGAL MATTERS
Legal advice regarding certain matters relating to the federal securities laws
applicable to the Trust and the offer and sale of its shares has been provided
by Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166, which serves
as Counsel to the Trust.
The Trust has agreed that the word "Orbitex" in its name is derived from the
name of the Adviser; that such name is the property of the Adviser for
copyrights and/or other purposes; and that therefore, such name may freely be
used by the Adviser for other investment companies, entities or products. The
Trust has
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further agreed that in the event that for any reason, the Adviser ceases to be
its investment adviser, the Trust will, unless the Adviser otherwise consents,
promptly take all steps necessary to change its name to one which does not
include "Orbitex."
FINANCIAL STATEMENTS
The financial statements of the Orbitex Growth Fund, Orbitex Info-Tech &
Communications Fund, Orbitex Strategic Natural Resources Fund, and Orbitex
Health & Biotechnology Fund (the "Funds") for the year ended April 30, 1999,
which are included in the Funds' Annual Report to Shareholders dated April 30,
1999, and the financial statements of the Orbitex Focus 30 Fund (the "Fund"),
for the year ended October 31, 1999, which are included in the Fund's Annual
Report to Shareholders dated October 31, 1999, are incorporated herein by
reference. These financial statements include the schedules of investments,
statements of assets and liabilities, statements of operations, statements of
changes in net assets, financial highlights, notes and independent auditors'
reports.
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ORBITEX GROUP OF FUNDS
Supplement to
Prospectus dated January 19, 2000
Until February 29, 2000, Funds Distributor, Inc. will serve as the distributor
of the Funds. On March 1, 2000, Orbitex Funds Distributor, Inc. will assume the
duties of the distributor of the Funds. Accordingly, until close of business on
February 29, 2000, the references to Orbitex Funds Distributor, Inc. on pages 46
and 55 should read:
Funds Distributor, Inc.
60 State Street
Boston, Massachusetts 02109
