(As filed with the Securities and Exchange Commission on _______, 2000)
Securities Act File No. 333-
Investment Company Act File No. 811-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM N-2
Registration Statement Under The Securities Act of 1933
Pre-Effective Amendment No. __ | |
Post-Effective Amendment No. __ |_|
and/or
Registration Statement Under The Investment Company Act of 1940
Amendment No. __ |_|
(check appropriate box or boxes)
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ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Orbitex Management, Inc.
410 Park Avenue, 18th Floor
New York, New York 10022
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 891-7900
------------
M. Fyzul Khan, Orbitex Management, Inc.
410 Park Avenue, 18th Floor
New York, New York 10022
(Name and Address of Agent for Service)
With copies to:
------------
Max Berueffy, Esq Leonard B. Mackey, Jr., Esq.
American Data Services, Inc. Clifford Chance Rogers & Wells LLP
150 Motor Parkway 200 Park Avenue
Hauppauge, NY 11788-0132 New York, New York 10166
------------
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
------------
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. |_|
If appropriate, check the following box:
|_| This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].
|_| This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities
Act registration statement number of the earlier effective
registration statement or the same offering is - ______.
------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
==========================================================================================
Proposed Maximum
Aggregate Amount Of Registration
Title of Securities Being Registered Offering Price Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock $.01 Par Value $100,000 $26.40
- ------------------------------------------------------------------------------------------
</TABLE>
------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
CROSS-REFERENCE SHEET
Parts A and B of the Prospectus
<TABLE>
<CAPTION>
Caption Location in Prospectus
------- ----------------------
<S> <C> <C>
1. Outside Front Cover Outside Front Cover Page
2. Inside Front and Outside Back Cover Page Inside Front and Outside Back Cover Page
3. Fee Table and Synopsis Summary of Fund Expenses
4. Financial Highlights Not Applicable
5. Plan of Distribution Outside Front Cover Page; Investment Objective and
Principal Strategies
6. Selling Stockholders Not Applicable
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant Outside Front Cover Page; Investment Objective and
Principal Strategies; Risk Factors; General Information
9. Management Management of the Fund; Use of Proceeds
10. Capital Stock, Long-Term Debt, and Other
Securities Capital Stock; Distribution Policy; Taxes
11. Defaults and Arrears on Senior Securities Not Applicable
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement of
Additional Information Table of Contents of Statement of Additional Information
14. Cover Page of SAI Cover Page (SAI)
15. Table of Contents of SAI Table of Contents (SAI)
16. General Information and History Appendix A (SAI)
17. Investment Objective and Policies Additional Investment Policies (SAI)
18. Management Directors and Officers (SAI); Investment Advisory and
Other Services (SAI)
19. Control Persons and Principal Holders of
Securities Not Applicable
20. Investment Advisory and Other Services Investment Advisory and Other Services (SAI)
21. Brokerage Allocation and Other Practices Brokerage Commissions (SAI)
22. Tax Status Not Applicable
23. Financial Statements Financial Statements (SAI)
</TABLE>
<PAGE>
------------
Subject to Completion, Dated __________, 2000
PROSPECTUS
Orbitex Life Sciences & Biotechnology Fund, Inc.
---------------------
_____ Shares of Common Stock
$__ Per Share
---------------------
Investment Objective. The Fund is a newly organized, non-diversified,
closed-end management investment company. The Fund's investment objective is to
seek long-term growth of capital through selective investment in the securities
life sciences and biotechnology companies of all sizes that offer potential for
growth.
Investment Strategies. The Fund will invest primarily in the securities of
companies, both U.S. and foreign, engaged in life sciences, pharmaceuticals,
medical research and biotechnology research, development and implementation, and
other areas related to the life sciences and biotechnology industry. Under
normal circumstances, the Fund will invest at least 65% of its total assets in
equity securities issued by life sciences companies and biotechnology companies.
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 life sciences
and biotechnology industries. The Fund will invest primarily in U.S. common
stocks, but also may invest in other types of equity securities and debt
securities. The Fund may invest up to 35% of its total assets in debt securities
rated below investment grade or unrated securities of equivalent quality
(commonly referred to as "junk bonds"). The Fund may invest in companies of any
size, but generally expects to invest a majority of its assets in small and
medium-sized companies. The Fund may invest a significant portion of its total
assets in equity securities of privately owned life sciences and biotechnology
companies that plan to conduct an initial public offering or IPO. These are
referred to as venture capital companies. There will be no public market for the
shares of a venture capital company at the time of the Fund's investment, and
there can be no assurance that a planned IPO will ever be completed.
Manager. The Fund's investment manager is Orbitex Management, Inc.
Lack of Trading Market. The Fund's shares will not be listed on any
securities exchange, and there is no assurance that any secondary market will
develop for the Fund's shares. You may not be able to sell your shares. Shares
may be held only through brokers and dealers that have entered into shareholder
servicing agreements with the Fund.
------------------
Investing in the Fund's shares involves a high degree of risk. See "Risk
Factors" beginning on page __.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------
Per Share Total
--------- -----
Offering Price(1)............ $_____ $
Sales Load(1)................ $_____ $
Proceeds to Fund............. $_____ $
(1) Offering Price and Sales Load will be reduced for purchases of ______
shares or more.
------------------
The underwriters are offering the shares subject to various conditions.
The underwriters expect to deliver the shares to the purchasers on or about
_____, 2000. The Fund will pay a shareholder servicing fee to each broker or
dealer that is not affiliated with the Fund or Orbitex and that has entered into
a shareholder servicing agreement with the Fund at the annual rate of 0.25% of
the net asset value of the outstanding shares owned by customers of such brokers
or dealers. Orbitex will make payments of 0.25% to such brokers or dealers from
its own resources. The Fund will pay organizational and offering expenses
estimated at $_____________ from the proceeds of the offering.
[UNDERWRITERS]
_____ , 2000
<PAGE>
Repurchase Offers. In order to provide a limited degree of liquidity to
shareholders, the Fund will make quarterly offers to repurchase 5% of its
outstanding shares at their net asset value. Tendering shareholders may not have
all of their tendered shares repurchased by the Fund. The Fund intends to make
its first quarterly repurchase offer in March 2001. See "Repurchase Offers."
Management Fee. The Fund will pay Orbitex a management fee at an annual
rate of 1.75% of the Fund's average daily net assets. The overall fees payable
by the Fund and its shareholders will be higher than those paid by most other
funds.
Minimum Investment. The minimum investment in the Fund is $25,000.
------------------
This prospectus concisely provides the information that a prospective
investor should know about the Fund before investing. You are advised to read
this prospectus carefully and to retain it for future reference. Additional
information about the Fund, including a statement of additional information
("SAI") dated _________ , 2000, has been filed with the Securities and Exchange
Commission. The SAI is available upon request and without charge by writing the
Fund at the address above or by calling 1(888) ORBITEX. The SAI is incorporated
by reference into this prospectus in its entirety. The SAI and other information
about the Fund also is available on the SEC's website (http://www.sec.gov).
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.
You should rely only on the information contained in this prospectus. The
Fund has not authorized anyone to provide you with different information. The
Fund is not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information provided by this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY
SUMMARY OF FUND EXPENSES
RISK FACTORS
USE OF PROCEEDS
MANAGEMENT OF THE FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
REPURCHASE OFFERS
CALCULATION OF NET ASSET VALUE
CAPITAL STOCK
DISTRIBUTION POLICY
TAXES
UNDERWRITING
GENERAL INFORMATION
TABLE OF CONTENTS OF SAI
Until __________, 2000 (90 calendar days after the commencement of the
offering), all dealers that buy, sell or trade the shares, whether or not
participating in the offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriter and with respect to their unsold allotments or subscription.
<PAGE>
PROSPECTUS SUMMARY
This is only a summary. This summary may not contain all of the information that
you should consider before investing in the Fund. You should review the more
detailed information contained in this prospectus and in the statement of
additional information.
The Fund Orbitex Life Sciences & Biotechnology Fund, Inc.
(the "Fund") is a newly organized,
non-diversified, closed-end management investment
company registered under the Investment Company
Act of 1940, as amended (the "Investment Company
Act"). The Fund's investment manager is Orbitex
Management, Inc. ("Orbitex"). See "General
Information."
Investment Objective and The objective of the Fund is long-term growth of
Principal Strategies capital through selective investment in the
securities of life sciences and biotechnology
companies of all sizes that offer potential for
growth.
The Fund will invest primarily in the securities
of companies, both U.S. and foreign, engaged in
life sciences, pharmaceuticals, medical research
and biotechnology research, development and
implementation, and other areas related to the
life sciences industry. Under normal
circumstances, the Fund will invest at least 65%
of its total assets in equity securities issued by
life sciences and biotechnology companies. 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
life sciences and biotechnology industries. The
Fund will invest primarily in U.S. common stocks,
but also may invest in other types of equity
securities and debt securities. The Fund may
invest up to 35% of its total assets in debt
securities rated below investment grade or unrated
securities of equivalent quality (commonly
referred to as "junk bonds"). The Fund may invest
in companies of any size, but generally expects to
invest a majority of its assets in small and
medium-sized companies. The Fund may invest a
significant portion of its total assets in equity
securities of privately owned healthcare and
biotechnology companies that plan to conduct an
initial public offering or IPO. These are referred
to as venture capital companies. There will be no
public market for the shares of a venture capital
company at the time of the Fund's investment, and
there can be no assurance that a planned IPO will
ever be completed. The Fund also may invest in
private venture capital funds that specialize in
investing in life sciences and biotechnology
companies. See "Investment Objective and Principal
Strategies."
The Fund may use various investment techniques to
hedge a portion of its investment portfolio
against certain risks or to pursue its investment
objective. In this regard, the Fund may use
leverage, sell securities short, purchase and sell
options on securities and stock indexes and other
derivatives, and enter into foreign currency
transactions, subject to certain limitations
described elsewhere in this Prospectus. The use of
some of these investment techniques and
instruments will be an integral part of the Fund's
investment programs, and involves certain risks.
See "Risk Factors."
<PAGE>
The Manager Orbitex, the manager of the Fund, has substantial
experience in life sciences and biotechnology
investing.
Timothy F. Bepler, CFA is the portfolio manager
for the 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
was a senior analyst at Value Line, Inc. from
1989-1995. See "Management of the Fund."
Investment Adviser Fees The Fund will pay to Orbitex a management fee at
an annual rate of 1.75% of the Fund's average
daily net assets. The management fee is higher
than the advisory fees paid by most U.S.
investment companies.
Borrowing The Fund is authorized to borrow money to fund the
purchase of portfolio securities (including
additional investments in venture capital
companies in its portfolio), to meet repurchase
requests and for cash management purposes. The use
of borrowings for financial leverage involves a
high degree of risk. The Fund generally intends to
borrow money only in limited circumstances when
attractive investment opportunities are available
that would further the Fund's investment objective
and sufficient cash or other liquid resources are
not otherwise available, or where Orbitex believes
it would not be prudent to sell existing portfolio
holdings. The Fund will not, in any event, borrow
money until the proceeds of the offering are
substantially invested in furtherance of the
Fund's investment objective. The Fund is not
permitted to borrow to make additional investments
at any time that borrowings exceed 20% of its
total assets, and it is not permitted to borrow
for any purpose if, immediately after such
borrowing, it would have an asset coverage (as
defined in the Investment Company Act) of less
than 300%. The Fund will seek to repay borrowings
used to meet repurchase requests and for cash
management purposes within one year of their
incurrence. See "Risk Factors--Leverage;
Borrowing" and "Investment Objective and Principal
Strategies - Borrowing; Use of Leverage."
Hedging The Fund may use derivative instruments to hedge
portfolio risks and for cash management purposes.
Hedging activity may relate to a specific security
or to the Fund's portfolio as a whole. The Fund
may not use derivative instruments to seek
increased returns on its investments.
<PAGE>
Investor Suitability An investment in the Fund involves a considerable
amount of risk. Because it is possible that you
may lose some or all of your investment, you
should not invest in the Fund unless you can
afford a total loss of your investment. Prior to
making your investment decision, you should (i)
consider the suitability of this investment with
respect to your investment objectives and personal
situation, (ii) consider factors such as your
personal net worth, income, age, risk tolerance
and liquidity needs, and (iii) consult your broker
and financial adviser to determine whether your
risk profile is suitable for this investment.
The Offering The Fund is offering ______ shares of common stock
at $__ per share (subject to reduction as set
forth below) through a group of underwriters led
by _________. You must purchase at least _____
shares ($______). The per share purchase price and
sales charge will be reduced for purchases of
_________shares or more. See "Underwriting." The
Fund will pay each broker or dealer of record that
enters into a shareholder servicing agreement with
the Fund a shareholder servicing fee at the annual
rate of 0.25% of the net asset value of the
outstanding shares beneficially owned by customers
of the brokers or dealers. Orbitex will make
payments of 0.25% to those brokers or dealers from
its own resources.
Distribution Policy The Fund will pay dividends on the shares annually
in amounts representing substantially all of the
net investment income, if any, earned each year.
It is likely that many of the companies in which
the Fund invests will not pay any dividends, and
this, together with the Fund's expenses, means
that the Fund is unlikely to have net investment
income to pay dividends.
The Fund will pay substantially all of any taxable
net capital gain realized on investments to
shareholders at least annually.
Under the Fund's automatic reinvestment plan,
dividends and/or capital gain distributions paid
by the Fund will be reinvested in additional
shares of the Fund unless a shareholder "opts out"
(elects not to participate). Shares will be issued
under the plan at their net asset value on the
ex-dividend date. There is no sales charge or
other charge for reinvestment. The Fund reserves
the right to suspend or limit the automatic
reinvestment plan at any time.
<PAGE>
Unlisted Closed-End The Fund has been organized as a closed-end
Structure; Limited management investment company. Closed-end funds
Liquidity differ from open-end management investment
companies (commonly known as mutual funds) in that
shareholders of a closed-end fund do not have the
right to redeem their shares on a daily basis. In
order to meet daily redemption requests, mutual
funds are subject to more stringent regulatory
limitations than closed-end funds. In particular,
a mutual fund generally may not invest more than
15% of its assets in illiquid securities. The Fund
believes that unique investment opportunities
exist in the market for venture capital life
sciences and biotechnology companies and in
private funds that invest in venture capital life
sciences and biotechnology companies. However,
these venture capital investments are often
illiquid, and an open-end fund's ability to make
illiquid investments is limited. For this reason,
the Fund is organized as a closed-end fund.
The Fund will not list its shares on any
securities exchange, and there is no assurance
that any secondary market will develop for the
Fund's shares. You will not be able to redeem your
shares on a daily basis because the Fund is a
closed-end fund. Shares may be held only through a
broker or dealer that has entered into a
shareholder servicing agreement with the Fund.
Shares of the Fund may not be exchanged for shares
of any other fund. As described below, however, in
order to provide a limited degree of liquidity,
the Fund will conduct quarterly repurchase offers
for 5% of its outstanding shares. An investment in
the Fund is suitable only for investors who can
bear the risks associated with the limited
liquidity of the shares and should be viewed as a
long-term investment.
Quarterly Repurchase Offers In order to provide a limited degree of liquidity
to shareholders, the Fund will conduct quarterly
repurchase offers. The Fund intends to commence
the first repurchase offer in March 2001. In each
repurchase offer, the Fund will offer to
repurchase 5% of its outstanding shares at their
net asset value. The Fund may offer to repurchase
more than 5% of its shares in any quarter with the
approval of the board of directors. If the number
of shares tendered for repurchase exceeds the
number the Fund intends to repurchase, the Fund
will repurchase shares on a pro-rata basis, and
tendering shareholders will not have all of their
tendered shares repurchased by the Fund. See
"Repurchase Offers."
<PAGE>
Risk Factors An investment in the Fund involves a high degree
of risk. These include the risks of:
investing in life sciences and biotechnology
companies
investing in venture capital companies and private
venture capital funds
investing in securities that are illiquid and
volatile
investing in illiquid shares of an unlisted
closed-end fund
investing in a fund that may employ substantial
leverage
concentration in a small number of industry
sectors and maintaining a "non-diversified"
portfolio
investing in small companies
investing in debt securities rated below
investment grade
investing in securities of non-U.S. issuers
Accordingly, the Fund should be considered a
speculative investment, and you should invest in
the Fund only if you can sustain a complete loss
of your investment. See "Risk Factors."
<PAGE>
SUMMARY OF FUND EXPENSES
The following table illustrates the expenses and fees that the fund
expects to incur and that shareholders can expect to bear.
Shareholder Transaction Expenses:
Maximum Sales Load (as a percentage of offering price) 3.00%
Automatic Reinvestment Plan Fees none
Maximum Redemption Fees none
Annual Expenses (except for interest expense, as a percentage of net assets
attributable to common shares):
Management Fee 1.75%
Shareholder Servicing Fees 0.25%
Other Expenses ___%
Total Annual Expenses (other than interest expense) ___%
The purpose of the table above is to assist you in understanding the
various costs and expenses you would bear directly or indirectly as a
shareholder of the Fund. The annual "Other Expenses" shown above are estimated,
based on net assets of the Fund of $___ million. The Fund also will pay
organizational and offering expenses estimated to be $_________, which will be
charged to the Fund's capital at commencement of operations and are not included
in "Total Annual Expenses" above. For a more complete description of the various
costs and expenses of the Fund, see "Management of the Fund."
Example:
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following expenses
on a $1,000 investment,
assuming a 5% annual return $___ $____ $____ $____
The example does not present actual expenses and should not be considered
a representation of future expenses. Actual expenses may be greater or less than
those shown. Moreover, the Fund's actual rate of return may be greater or less
than the hypothetical 5% return shown in the example. The Fund's organizational
and offering expenses are not reflected in the example.
<PAGE>
RISK FACTORS
General
Stock prices fluctuate. Apart from the specific risks identified below,
the Fund's investments may be negatively affected by the broad investment
environment in the U.S. and international securities markets. That investment
environment is influenced by, among other things, interest rates, inflation,
politics, fiscal policy, current events, competition, productivity and
technological and regulatory change. Therefore, as with any fund that invests in
stocks, the Fund's net asset value will fluctuate. You may experience a
significant decline in the value of your investment and could lose your entire
investment. The Fund should be considered a speculative investment, and you
should invest in the Fund only if you can sustain a complete loss of your
investment.
Risks of Life Sciences and Biotechnology Sectors
Because of its specific focus, the Fund's performance is closely tied to
and affected by events occurring in the life sciences 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. Life sciences companies are
subject to government regulation and approval of their products and services,
which can have a significant effect on their market price. Changes in
governmental policies may have a material effect on the demand for particular
products and services. Regulatory approvals (often entailing lengthy application
and testing procedures) may be required before new drugs and certain medical
devices and procedures can be introduced. Furthermore, the types of products or
services produced or provided by these companies may quickly become obsolete.
Moreover, liability for products that are later alleged to be harmful or unsafe
may be substantial, and may have a significant impact on a life sciences
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.
The enforcement of patent, trademark and other intellectual property laws will
affect the value of many of these companies. 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. While the Fund generally will make its investments based on a belief
that actual or anticipated products or services will produce future earnings, if
an anticipated event is delayed or does not occur, or if investor perceptions
about a company change, the company's stock price may decline sharply and its
securities may become less liquid. 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.
Newly Organized Fund
The Fund is a newly organized investment company with no previous
operating history. Although Orbitex and the Fund's portfolio managers have
considerable experience managing other funds with investment objectives similar
to the Fund's, the Fund may not succeed in meeting its objective, and the Fund's
net asset value may decrease.
Unlisted Closed-End Fund; Limited Liquidity
The Fund is a closed-end investment company designed primarily for
long-term investors and is not intended to be a trading vehicle. The Fund does
not intend to list its shares for trading on any national securities exchange.
There is no secondary trading market for Fund shares, and there is no assurance
that a secondary market will develop. The Fund's shares are therefore not
readily marketable. Because the Fund is a closed-end investment company, shares
of the Fund may not be redeemed on a daily basis, and they may not be exchanged
for shares of any other fund. Although the Fund, as a fundamental policy, will
make quarterly repurchase offers for 5% (or more, at the discretion of the
Fund's board of directors) of its outstanding shares of common stock at net
asset value, the Fund's shares are significantly less liquid than shares of
funds that trade on a stock exchange. Also, because the common stock will not be
listed on any securities exchange, the Fund is not required, and does not
intend, to hold annual meetings of
<PAGE>
shareholders.
You may not be able to sell all the shares that you wish to sell in a
repurchase offer. In extreme cases, the Fund may not be able to complete
repurchases due to its holding of illiquid investments. In that event, you may
be able to sell your shares only if you are able to find an investor willing to
purchase your shares. Any such sale may have to be negotiated at unfavorable
prices.
Leverage; Borrowing
The Fund is authorized to borrow money to fund the purchase of portfolio
securities, to meet repurchase requests and for cash management purposes. The
Fund may not borrow for the purpose of purchasing additional portfolio
securities at any time that borrowings exceed 20% of its total assets. The Fund
will seek to repay borrowings used to meet repurchase requests and for cash
management purposes within one year of their incurrence. The use of borrowings
for financial leverage involves a high degree of risk.
To the extent that the Fund uses leverage, the value of its net assets
will tend to increase or decrease at a greater rate than if no leverage were
employed. If the Fund's investments decline in value, your loss will be
magnified if the Fund has borrowed money to make its investments.
If the Fund does not generate sufficient cash flow from operations, it may
not be able to repay borrowings within one year of their incurrence, or it may
be forced to sell investments at disadvantageous times in order to repay
borrowings. The Fund's performance may be adversely affected if it is not able
to repay borrowings (because of the continuing interest expense) or if it is
forced to sell investments at disadvantageous times in order to repay
borrowings.
The Investment Company Act provides that the Fund may not declare
dividends or distributions, or purchase its stock (including in repurchase
offers) unless, immediately after doing so, it will have an "asset coverage" of
at least 300%. This could prevent the Fund from completing its repurchase
offers. For this purpose, an "asset coverage" of 300% means that the Fund's
total assets equal 300% of the total outstanding principal balance of
indebtedness. Lenders may require the Fund to agree to more restrictive asset
coverage requirements as a condition to providing credit to the Fund, and may
also limit the extent to which the Fund may hold illiquid securities, reducing
the Fund's investment flexibility. If the Fund is unable to make distributions
as a result of these requirements, it may no longer qualify as a regulated
investment company and could be required to pay additional taxes. The Fund may
also be forced to sell investments on unfavorable terms if market fluctuations
or other factors reduce its asset level below what is required by the Investment
Company Act or the Fund's loan agreements.
Successful use of borrowing for financial leverage purposes (that is, to
acquire portfolio securities) will depend on Orbitex's ability to predict
correctly interest rates and market movements, and there is no assurance that a
borrowing strategy will be successful during any period in which it is employed.
The rights of any lenders to the Fund to receive payments of interest or
repayments of principal will be senior to those of the holders of the Fund's
shares, and the terms of any borrowings may contain provisions that limit
certain activities of the Fund, including the payment of dividends (if any) to
holders of shares under certain circumstances. Interest payments and fees
incurred in connection with borrowings will increase the Fund's expense ratio
and will reduce any income the Fund otherwise has available for the payment of
dividends. The Fund's obligation to make interest or principal payments on
borrowings may prevent the Fund from taking advantage of attractive investment
opportunities.
Short Sales
The Fund may sell securities short as part of its overall portfolio
management strategy 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.
Repurchase Offers
The Fund will offer to purchase only a small portion of its shares each
quarter, and there is no guarantee that you will be able to sell all of your
Fund shares that you desire to sell in any particular repurchase offer. If a
repurchase
<PAGE>
offer is oversubscribed by shareholders, the Fund will repurchase only a pro
rata portion of the shares tendered by each shareholder. The potential for
pro-ration may cause some investors to tender more shares for repurchase than
they wish to have repurchased.
The Fund's repurchase policy will have the effect of decreasing the size
of the Fund over time from what it otherwise would have been. It may therefore
force the Fund to sell assets it would not otherwise sell. It may also reduce
the investment opportunities available to the Fund and cause its expense ratio
to increase. In addition, because of the limited market for the Fund's venture
capital investments, the Fund may be forced to sell its publicly traded
securities in order to meet cash requirements for repurchases. This may have the
effect of substantially increasing the Fund's ratio of illiquid venture capital
investments to liquid investments for the remaining investors.
Investments In Small Companies
The Fund plans to invest primarily in the stock of small and medium-sized
companies. These investments may present greater opportunity for growth, but
there are specific risks associated with investments in small companies, which
include:
o poor corporate performance due to less experienced management, limited
product lines, undeveloped markets and/or limited financial resources
o less predictable returns due to shorter operating histories, less publicly
available information and little or no research by the investment
community
o reduced or zero liquidity due to small market capitalizations and absence
of exchange listings or dealers willing to make a market
o increased share price volatility due to the fact that, in periods of
investor uncertainty, investor sentiment may favor large, well-known
companies over small, lesser-known companies
o reliance, in many cases, on one or two key individuals for management
Investments in Venture Capital Companies
The Fund may invest a substantial portion of its assets in securities of
venture capital companies, which present all the risks of investment in small
companies described above plus certain additional risks. Venture capital
companies represent highly speculative investments by the Fund. The risks
associated with investing in companies in the "seed" or "expansion" stages of
development are greater than those of companies in the "late" or "pre-IPO" stage
(these terms are explained under "Investment Objective and Principal Strategies
- - Investment in Life Sciences and Biotechnology Companies"), because the
concepts generally are unproven, the companies have little or no track record,
and the prospect of an initial public offering is highly contingent upon factors
that often are not in the companies' control. For example, since venture capital
companies do not file periodic reports with the Securities and Exchange
Commission, there is less publicly available information about them than there
is for other small companies, if there is any at all. The Fund must therefore
rely solely on Orbitex to obtain adequate information to evaluate the potential
returns from investing in these companies. In addition, venture capital
companies tend to rely even more heavily on the abilities of their key personnel
than more mature companies do. Competition for qualified personnel and high
turnover of personnel are particularly prevalent in venture capital companies.
The loss of one or a few key managers can substantially hinder or delay a
venture capital company's implementation of its business plan. In addition,
venture capital companies may not be able to attract and retain qualified
managers and personnel.
The Fund's ability to realize value from an investment in a venture
capital company is to a large degree dependent upon the successful completion of
the company's IPO or the sale of the venture capital company to another company,
which may not occur for a period of several years after the date of the Fund's
investment, if ever. There can be no assurance that any of the venture capital
companies in which the Fund invests will complete public offerings or be sold,
or, if such events occur, as to the timing and values of such offerings or
sales. The Fund also may lose all or part of its entire investment if these
companies fail or their product lines fail to achieve an adequate level of
market recognition or acceptance. Conversely, there can be no assurance that the
Fund will be able to identify a sufficient number of desirable venture capital
investments.
<PAGE>
Some companies may depend upon managerial assistance or financing provided
by their investors. The Fund does not intend to provide any such managerial
assistance. However, the Fund may provide additional financing to the companies
in which it invests, and at times may be contractually obligated to do so (that
is, its investment agreement may require follow-on investments in certain
circumstances) or may determine that it is necessary to do so to protect its
economic interests. Therefore, the value of its investments may depend upon the
quality of managerial assistance provided by other investors and their ability
and willingness to provide financial support.
Depending on the specific facts and circumstances of a venture capital
investment, there may not be a reasonable basis to revalue it for a substantial
period of time after the Fund's investment. If a venture capital company does
not complete an IPO or a sale to or merger with a public company, there may
never be a public market benchmark for valuing the investment and it may be very
difficult for the Fund to dispose of its investment, or it may be possible to
dispose of the investment only at a substantial loss. The Fund's net asset value
per share may change substantially in a short time as a result of developments
at the companies in which the Fund invests. Changes in the Fund's net asset
value may be more pronounced and more rapid than with other funds because of the
Fund's emphasis on venture capital companies that are not publicly traded. The
Fund's net asset value per share may change materially from day to day,
including during the time between the date a repurchase offer is mailed and the
due date for tendering shares, and during the period immediately after a
repurchase is completed.
Investments in Venture Capital Funds
Venture capital funds involve all the risks of investing in small
companies and venture capital companies described in this prospectus, plus
certain additional risks. In particular, the Fund must rely upon the judgment of
the general partner or other manager of a venture capital fund in selecting the
companies in which the venture capital fund invests and in deciding when to sell
its investments. A venture capital fund may employ a high degree of leverage,
which can magnify any losses incurred by its investors, including the Fund. A
venture capital fund also will require the Fund to pay management fees and/or
performance fees or allocations to its general partner or manager, which can
reduce the return to investors, including the Fund and its shareholders. These
fees are in addition to the management fee paid by the Fund. A venture capital
fund also may incur certain costs associated with the evaluation of venture
capital investments, including fees of outside legal counsel, which may reduce
the Fund's return. Investments in venture capital funds may be highly illiquid.
The Fund may not be able to dispose of a venture capital fund holding when it
wishes to, or may be able to do so only at a substantial loss
Concentration; Non-Diversified Status
The assets of the Fund will consist almost entirely of companies within or
related to various sectors of the life sciences and biotechnology industries.
Since the Fund's portfolio will be concentrated in securities of a small number
of companies or in securities of companies in a small number of industries, the
risk of any investment decision is increased. Orbitex will seek to reduce the
company-specific risk, as opposed to sector-specific risk, of the Fund's
portfolio by investing in more than one company in a particular sector, but this
may not always be practicable.
The Fund is classified as a "non-diversified" management investment
company under the Investment Company Act. This means that the Fund may invest a
greater portion of its assets in a limited number of issuers than would be the
case if the Fund were classified as a "diversified" management investment
company. Accordingly, the Fund may be subject to greater risk with respect to
its portfolio securities than a "diversified" fund because changes in the
financial condition or market assessment of a single issuer may cause greater
fluctuation in the net asset value of the Fund's shares.
Restricted and Illiquid Securities
The Fund intends to invest a substantial portion of its assets on an
ongoing basis in restricted securities and other investments which are illiquid.
Restricted securities are securities that may not be resold to the public
without an effective registration statement under the Securities Act of 1933 or,
if they are unregistered, may be sold only in a privately negotiated transaction
or pursuant to an exemption from registration.
Restricted and other illiquid investments involve the risk that the
securities can not be sold at the time desired by the Fund or at prices
approximating the value the Fund has determined. Difficulty in selling illiquid
investments could impair the Fund's ability to meet repurchase requests or to
pay its fees and expenses (including the management
<PAGE>
fee).
Investments in Lower-Rated Securities
The Fund's investments in non-investment grade debt securities are
considered to be predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal. Non-investment grade securities in the
lowest rating categories may involve a substantial risk of default or may be in
default. Adverse changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuers of non-investment grade securities to make principal and
interest payments than is the case for higher grade securities. In addition, the
market for lower grade securities may be thinner and less liquid than for higher
grade securities.
Investments in Foreign Securities
The Fund plans to invest in the securities of foreign life sciences and
biotechnology companies. Investments in foreign securities face specific risks,
which include:
o unfavorable changes in currency rates and exchange control regulations
o restrictions on, and costs associated with, the exchange of currencies and
the repatriation of capital invested abroad
o reduced availability of information regarding foreign companies
o foreign companies may be subject to different accounting, auditing and
financial standards and to less stringent reporting standards and
requirements
o reduced liquidity as a result of inadequate trading volume and
government-imposed trading restrictions
o the difficulty in obtaining or enforcing a judgment abroad
o increased market risk due to regional economic and political instability
o increased brokerage commissions and custody fees
o securities markets which are subject to a lesser degree of supervision and
regulation by competent authorities
o foreign withholding taxes
o the threat of nationalization and expropriation
o an increased potential for corrupt business practices in certain foreign
countries
Use of Derivatives for Hedging Purposes
The Fund may use derivative instruments to hedge portfolio risk and for
cash management purposes. Investing in derivative investments involves numerous
risks. For example:
o the underlying investment or security might not perform in the manner that
Orbitex expects it to perform, which could make the effort to hedge
unsuccessful
o the company issuing the instrument may be unable to pay the amount due on
the maturity of the instrument
o certain derivative investments held by the Fund may trade only in the
over-the-counter markets or not at all, and can be illiquid
o derivatives may change rapidly in value because of their inherent leverage
All of this can mean that the Fund's net asset value may change more often
and to a greater degree than it otherwise would. The Fund has no obligation to
enter into any hedging transactions.
<PAGE>
Lending of Securities
The Fund may lend securities from its portfolio to brokers, dealers, and
other financial institutions needing to borrow securities to complete certain
transactions. Although the Fund will receive collateral in connection with all
loans of portfolio securities, and such collateral will be marked to market, the
Fund will be exposed to the risk of loss should a borrower default on its
obligation to return the borrowed securities. For example, loaned securities may
have appreciated beyond the value of the collateral held by the Fund at the time
of a default. In addition, the Fund will bear the risk of loss on any collateral
that it chooses to invest. Loans of portfolio securities may not exceed
one-third of the value of the Fund's total assets.
USE OF PROCEEDS
The Fund will invest the net proceeds of the offering in accordance with
the Fund's investment objective and policies and principal strategies as soon as
practicable after the closing of the offering. Market conditions permitting,
Orbitex expects the Fund will be fully invested within one year. Orbitex
believes that, under current market conditions, it would be able to invest up to
approximately $100 million in accordance with the Fund's objective, policies and
strategies in this time frame. Pending the full investment of the proceeds of
the offering in securities of life sciences and biotechnology companies, the
proceeds of the offering will be invested in short-term, high quality debt
securities.] The Fund will pay organizational and offering expenses estimated to
be $_________ from the proceeds of the offering.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Investment Objective
The Fund seeks to provide long-term growth of capital through selective
investment in the securities of life sciences and biotechnology companies of all
sizes that offer potential for growth.
Investment in Life Sciences Biotechnology Companies
The Fund will invest primarily in the securities of companies, both U.S.
and foreign, engaged in life sciences products, pharmaceuticals, medical
research and biotechnology research, development and implementation, and other
areas related to the life sciences industry. Under normal circumstances, the
Fund will invest at least 65% of its total assets in equity securities issued by
life sciences companies and biotechnology companies. 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 life sciences and biotechnology
industries. The Fund will invest primarily in U.S. common stocks, but also may
invest in other types of equity securities and debt securities. The Fund may
invest up to 35% of its total assets in debt securities rated below investment
grade or unrated securities of equivalent quality (commonly referred to as "junk
bonds"). The Fund may invest in companies of any size, but generally expects to
invest a majority of its assets in small and medium-sized companies. The Fund
may invest a significant portion of its total assets in equity securities of
privately owned life sciences and biotechnology companies that plan to conduct
an initial public offering or IPO. These are referred to as venture capital
companies. There will be no public market for the shares of a venture capital
company at the time of the Fund's investment, and there can be no assurance that
a planned IPO will ever be completed. The Fund also may invest in private
venture capital funds that specialize in investing in life sciences and
biotechnology companies.
The Fund will invest in companies that Orbitex expects to capitalize on
emerging changes in the life sciences and biotechnology industries.
The Fund defines a "life sciences company" as an entity that is
principally engaged in:
o the design, manufacture or sale of products or services used for or in
connection with medicine,
o research and development of pharmaceutical products, gene mapping and
medical services
o design, manufacture, or sale of life-science-related products and services
<PAGE>
The Fund defines a "biotechnology company" as an entity that is
principally engaged in:
o research, development, manufacture or distribution of products and
services relating to human health care, pharmaceuticals, agricultural and
veterinary applications, and the environment
o manufacturing and/or distributing biotechnological and biomedical
products, including devices, instruments and/or drug delivery systems
The Fund also defines a "life sciences or biotechnology company" as an
entity that is principally engaged in providing materials, products or services
to a life sciences 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 were derived from those activities during the company's most
recent fiscal year.
The Fund expects to invest a substantial portion of its assets in venture
capital companies that it determines to be in the "late-stage" (also referred to
as "mezzanine") or "pre-IPO" stage of development, although from time to time
the Fund may invest in companies that are in the early ("seed") or expansion
stage of development. These terms are explained below. After the proceeds from
the offering are invested, the Fund expects to continue to invest a substantial
portion of its assets in venture capital companies. It is possible, however,
that the Fund will invest only a small portion of its assets, or none at all, in
venture capital companies, as a result of market conditions, available
opportunities and other factors.
Seed financing is typically a relatively small amount of capital used to
test a concept so that start-up capital can be obtained; the term also may
extend to companies completing product development and initial marketing.
Typically, a company at the seed financing stage has not yet sold its product
commercially. Expansion financing is sought by companies that have expended
their initial capital (often in developing and market-testing a prototype) and
that require funds to initiate full-scale manufacturing and sales. Expansion
capital may also provide working capital for the initial expansion of a company
that is manufacturing and shipping its product, but that does not yet show a
profit. The Fund will participate in seed and/or expansion financing for a
company only if it has an established management team with proven track record
of building a business and, in Orbitex's judgment, an innovative product idea
with a sustainable competitive advantage. The Fund expects that companies in the
early and expansion stages will not conduct an IPO for up to five years, and
possibly substantially longer, from the time of initial investment.
The Fund considers a venture capital company to be in the late stage if it
has a developed infrastructure and has commenced earning revenues. The Fund
expects that late-stage companies will undertake an IPO within a period of one
to three years. A pre-IPO company is somewhat more developed than a late-stage
company. The Fund generally would expect to acquire equity securities of pre-IPO
companies in private placements within a year prior to their planned IPOs. The
Fund will seek late-stage and pre-IPO companies that offer reasonable
valuations, especially relative to public companies. Late-stage and pre-IPO
companies typically will have small capitalizations and limited or no liquidity;
even after an IPO, liquidity may be limited and the Fund generally will be
subject to contractual limitations on its ability to sell shares.
All venture capital investments involve substantial risks. The risks
associated with investing in companies in the seed or expansion stages of
development are greater than those of companies in the late or pre-IPO stage,
because the concepts generally are unproven, the companies have little or no
track record, and the prospect of an IPO is highly contingent upon factors that
are often not in the companies' control. See "Risk Factors--Investments in
Venture Capital Companies."
Of the Fund's venture capital investments, up to 15% of the Fund's total
assets at time of purchase, may be invested in securities of investment funds
that invest primarily in venture capital companies. These investments may
involve relatively high fees, including incentive fees (the Fund will be
indirectly paying fees to the manager of such investment funds and their other
service providers and to Orbitex and the Fund's other service providers on the
same assets), and a high degree of risk. See "Risk Factors--Venture Capital
Funds."
The Fund also will invest in small and medium-sized public companies. The
common stock of these companies may trade over-the-counter, on the Nasdaq
SmallCap Market, the Nasdaq National Market, the New York Stock Exchange, the
American Stock Exchange or on other markets. Many of these companies may have
only recently become public companies, and may have a relatively small
proportion of their outstanding common stock publicly
<PAGE>
traded.
Borrowing; Use of Leverage
The Fund is authorized to borrow money to fund the purchase of portfolio
securities to meet repurchase requests and for cash management purposes. The use
of borrowings involves a high degree of risk. See "Risk Factors--Leverage;
Borrowing." The Fund generally intends to borrow money only in limited
circumstances when attractive investment opportunities are available that would
further the Fund's investment objective and sufficient liquid resources are not
otherwise available, or where Orbitex believes it would not be prudent to sell
existing portfolio holdings. The Fund will not, in any event, borrow money until
the proceeds of the offering are substantially invested in furtherance of the
Fund's investment objective. The Fund will seek to repay borrowings used to meet
repurchase requests and for cash management purposes within one year of their
incurrence. The Fund may not borrow money to pay Fund expenses.
The Fund will not be permitted to borrow for the purpose of purchasing
additional portfolio securities at any time that borrowings exceed 20% of its
total assets. In addition, the Investment Company Act prohibits the Fund from
borrowing for any purpose if, immediately after such borrowing, it will have an
"asset coverage" of less than 300%. The Investment Company Act also provides
that the Fund may not declare dividends or distributions, or purchase its stock
(including in repurchase offers) if, immediately after doing so, it will have an
"asset coverage" of less than 300%. For this purpose, an "asset coverage" of
300% means that the Fund's total assets equal 300% of the total outstanding
principal balance of indebtedness. Lenders may require the Fund to agree to more
restrictive asset coverage requirements as a condition to providing credit to
the Fund, and may also limit the extent to which the Fund may hold illiquid
securities, reducing the Fund's investment flexibility. If the Fund is unable to
make distributions as a result of these requirements, it may no longer qualify
as a regulated investment company and could be required to pay additional taxes.
The Fund may also be forced to sell investments on unfavorable terms if market
fluctuations or other factors reduce the asset level below what is required by
the Investment Company Act or the Fund's loan agreements. If the Fund is unable
to make distributions as a result of these requirements, it may no longer
qualify as a regulated investment company and could be required to pay
additional taxes. The Fund may also be forced to sell investments on unfavorable
terms if market fluctuations or other factors reduce the asset level below what
is required.
The Fund's willingness to borrow money, and the amount it will borrow,
will depend on many factors, the most important of which are investment outlook,
market conditions and interest rates. Successful use of borrowing for financial
leverage purposes (that is, to acquire portfolio securities) will depend on
Orbitex's ability to predict correctly interest rates and market movements, and
there is no assurance that a borrowing strategy will be successful during any
period in which it is employed.
Hedging
The Fund may seek to hedge portfolio risk through the use of financial
instruments known as derivatives. A derivative is generally defined as an
instrument whose value is derived from, or based upon, some underlying index,
reference rate (such as interest rates or currency exchange rates), security,
commodity or other asset. The Fund will use a specific type of derivative only
after consideration of, among other things, how the derivative instrument serves
the Fund's investment objective and the risk associated with the instrument. The
Fund may use derivatives only for the purposes of hedging portfolio risk and
cash management.
The Fund may buy or sell put or call options on transferable securities or
indices of securities to hedge against adverse movements in the prices of
securities held in the Fund's portfolio. The Fund's options strategies may
include the purchase of puts and the simultaneous writing of calls having
different strike prices to place a "collar" on a portion of the Fund's asset
value (this strategy, which involves the sale of call options to help reduce the
price of the put options, is viewed as a hedge even though the writing of a call
without the purchase of a put would not be considered hedging). The Fund may buy
or sell these options if they are traded on options exchanges or
over-the-counter markets. However, the Fund will only enter into transactions
with broker-dealers that are reputable financial institutions which (i)
specialize in these types of transactions, (ii) make markets in these options,
or (iii) are participants in over-the-counter markets. A put option gives the
purchaser of the option the right to sell, and obligates the writer of the put
option to buy, the underlying security at a stated exercise price at any time
prior to the expiration of the option. Similarly, a call option gives the
purchaser of the option the right to buy, and obligates the writer of the call
option to
<PAGE>
sell, the underlying security at a stated exercise price at any time prior to
the expiration of the option.
Orbitex will consider changes in foreign currency exchange rates in making
investment decisions about non-U.S. securities. As one way of managing exchange
rate risk, the Fund may enter into forward currency exchange contracts
(agreements to purchase or to sell U.S. dollars or non-U.S. currencies at a
future date). A forward contract may help reduce the Fund's losses on securities
denominated in a currency other than U.S. dollars, but it may also reduce the
potential gain on the securities depending on changes in the currency's value
relative to the U.S. dollar. See "Additional Investment Policies--Other
Operating Policies--Foreign Currency Transactions" in the SAI.
Short Sales
The Fund may engage is short sales of securities. To effect a short sale,
the Fund will borrow a security from a brokerage firm, or other permissible
financial intermediary, to make delivery to the buyer. The Fund then is
obligated to replace the borrowed security by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund, which would result in a loss
or gain, respectively. The Fund may not always be able to borrow a security it
wants to sell short and thus will lose the opportunity to benefit from its
strategy. The Fund also may be unable to close out a short position at any
particular time or at an unacceptable price. If the Fund is required to replace
the borrowed security at a time when other short sellers of the same security
also are required to replace it, a "short squeeze" can occur, wherein the Fund
might be compelled, at a disadvantageous time, to replace the borrowed security,
possibly at prices significantly in excess of the proceeds received from the
short sale. Although the Fund's gain on a short sale is limited to the amount at
which it sold the security short, its potential loss can increase rapidly and is
limited only by the maximum attainable price of the security less the price at
which the security was sold. Short selling is a speculative investment technique
and, in certain circumstances, can substantially increase the impact of adverse
price movements on the Fund's portfolio.
Investment Concentration
As a non-diversified investment company, the Fund faces few regulatory
restrictions on the proportion of its total assets it may invest in the
securities of any one company, or on the proportion of its total assets it
allocates to control interests in companies. However, the Fund does not intend
to invest more than 25% of its total assets in the securities of any one
company. The Fund may own a controlling interest in one or more companies, and
it (or it and other funds managed by Orbitex) may own up to 100% of certain
companies. However, the Fund does not intend to invest more than 25% of its
total assets in controlling interests of companies. Market fluctuations could
cause these limits to be exceeded.
Investment Decisions Based Upon Extensive Research
The Fund will use a bottom-up stock selection approach that blends value
and growth criteria, as well as identifies investment and economic themes that
can drive profits. This means that Orbitex will extensively research specific
companies in the life sciences and biotechnology industries to find those
companies that Orbitex believes offer the greatest prospects for future growth.
In selecting individual securities, Orbitex will look for companies that it
believes display or are expected to display:
o robust growth prospects
o revenue-producing life sciences or biotechnological innovations
o high profit margins or return on capital
o attractive valuations relative to expected earnings or cash flow
o strong current or future cash flow
o large installed base or distribution franchise
o quality management
<PAGE>
o favorable new product cycles
o unique competitive advantages, including intellectual property
Circumstances in which the Fund Will Sell a Security
The Fund may sell those holdings that it has identified as having exceeded
the fair market value and may sell the securities of a company that has
experienced a fundamental shift in its core business processes and objectives.
The Fund also may 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 also may be forced to sell securities to meet its quarterly share
repurchase obligation. As a result, the annual portfolio turnover of the Fund
may exceed 100%. A high portfolio turnover rate will increase the Fund's
expenses. On the other hand, the Fund may invest a significant portion of its
assets in venture capital securities having very little liquidity. The Fund may
be forced to retain such assets even in circumstances where the Fund's
investment policies indicate the assets should be sold. Alternatively, it may
have to sell such securities at disadvantageous prices in order to raise cash.
See "Risk Factors--Restricted and Illiquid Securities."
Defensive Measures
The Fund may, from time to time, take temporary defensive positions in
cash or short-term debt securities that are inconsistent with its principal
strategies in an attempt to moderate extreme volatility caused by adverse
market, economic, or other conditions. This could prevent the Fund from
achieving its investment objective.
MANAGEMENT OF THE FUND
The board of directors provides broad supervision over the affairs of the
Fund.
Orbitex Management, Inc., 410 Park Avenue, New York, New York 10022, is
the manager of the Fund. Subject to the authority of the Fund's board of
directors, Orbitex is responsible for the Fund's investments and administers the
Fund's business and other affairs. Orbitex is an affiliate of Orbitex Management
Ltd, an investment adviser that provides investment services to individuals and
institutions, including Canadian unit trusts. As of March 31, 2000, Orbitex
managed approximately $664 million in five mutual fund portfolios and for
institutional and other accounts.
Management Fee
The Fund will pay a fee to Orbitex for its management services at an
annual rate of 1.75% of the Fund's average daily net assets. The fee is
calculated daily and payable monthly. This management fee is higher than the
advisory fees paid by most U.S. investment companies.
Portfolio Management
The Fund will be managed by Timothy F. Bepler, CFA. 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 was a senior analyst at Value Line, Inc. from 1989-1995.
Expenses of the Fund
The Fund pays a management fee to Orbitex plus all its expenses other than
those assumed by Orbitex. The expenses of the Fund include the shareholder
servicing fee, brokerage commissions, interest on any borrowings by the Fund,
fees and expenses of outside legal counsel (including fees and expenses
associated with review of documentation for prospective venture capital
investments by the Fund) and independent auditors, taxes and governmental fees,
custody, expenses of printing and distributing prospectuses, reports, notices
(including notices relating to the quarterly repurchase offers) and proxy
materials, expenses of printing and filing reports and other documents with
government
<PAGE>
agencies, expenses of shareholders' meetings, expenses of corporate data
processing and related services, shareholder record keeping and shareholder
account services, fees and disbursements, fees and expenses of directors of the
Fund not employed by Orbitex or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses.
American Data Services, Inc., the Fund's shareholder service agent,
provides shareholder account services to the Fund.
REPURCHASE OFFERS
The Fund expects that a substantial portion of its investments will be
illiquid and does not intend to maintain a significant cash position. For this
reason, the Fund is structured as a closed-end fund, which means that you will
not have the right to redeem your shares on a daily basis. In addition, the Fund
does not expect any trading market to develop for its shares. As a result, if
you invest in the Fund you will have limited opportunity to sell your shares.
To provide you with a degree of liquidity, and the ability to receive net
asset value on a disposition of your shares, the Fund will make quarterly offers
to repurchase its shares. The repurchase offers will be limited to a specified
percentage of the Fund's outstanding shares. Shares will be repurchased at their
net asset value; the Fund will not charge a repurchase fee. The Fund intends to
commence the first quarterly repurchase offer in March 2001. The quarterly
offers will be made pursuant to a fundamental policy of the Fund that may be
changed only with the approval of the Fund's shareholders.
The Fund Will Offer to Repurchase 5% of its Outstanding Shares Each Quarter
Each quarter, the Fund will offer to repurchase 5% of the number of shares
outstanding on the date repurchase requests are due. The Fund's board of
directors may establish a larger percentage for any quarterly repurchase offer.
However, the percentage will not be more than 25% of the shares outstanding on
the date repurchase requests are due.
The Fund intends to commence the first quarterly repurchase offer in March
2001. Thereafter, quarterly repurchase offers will commence each June,
September, December and March and will be completed in the following month.
When a repurchase offer commences, the Fund will send a notification of
the offer to shareholders via their financial intermediaries. The notification
will specify, among other things:
o the percentage of shares that the Fund is offering to repurchase, which
will ordinarily be 5%
o the date on which a shareholder's repurchase request is due, which will
ordinarily be the second Friday of the following month
o the date that will be used to determine the Fund's net asset value
applicable to the share repurchase, which is generally expected to be the
day on which requests are due
o the date by which shareholders will receive the proceeds from their share
sales
o the net asset value of the common stock of the Fund no more than seven
days prior to the date of the notification
The Fund intends to send this notification approximately 30 days before
the due date for the repurchase request. In no event will the notification be
sent less than 21 or more than 42 days in advance. Your shares of the Fund must
be held through a selected broker or dealer. Certificated shares will not be
available, and you will not be able to receive repurchase offers directly from
the Fund. Your selected broker or dealer may require additional time to mail the
repurchase offer to you, to process your request, and to credit your account
with the proceeds of any repurchased shares.
The due date for repurchase requests is a deadline that will be strictly
observed. If your intermediary fails to submit your repurchase request in good
order by the due date, you will be unable to liquidate your shares until a
subsequent quarter, and you will have to resubmit your request in that quarter.
You should be sure to advise your intermediary of your intentions in a timely
manner. You may withdraw or change your repurchase request at any point before
the due date.
<PAGE>
The Fund's Fundamental Policies with Respect to Share Repurchases
The Fund has adopted the following fundamental policies in relation to its
share repurchases which may be changed only by a majority vote of the
outstanding voting securities of the Fund:
o as stated above, the Fund will make share repurchase offers every three
months, pursuant to Rule 23c-3 under the Investment Company Act, as it may
be amended from time to time, commencing March 2001.
o 5% of the Fund's outstanding common stock will be subject to the
repurchase offer, unless the board of directors establishes a different
percentage, which must be between 5% and 25%
o the repurchase request due dates will be the second Friday of each
January, April, July and October (or the preceding business day if that
day is a New York Stock Exchange holiday)
o there will be a maximum 14 day period between the due date for each
repurchase request and the date on which the Fund's net asset value for
that repurchase is determined
Pro Rata Purchases of Shares in the Event of an Oversubscribed Repurchase Offer
There is no minimum number of shares that must be tendered before the Fund
will honor repurchase requests. However, the percentage determined by the board
of directors for each repurchase offer will set a maximum number of shares that
may be purchased by the Fund. In the event a repurchase offer by the Fund is
oversubscribed, the Fund may, but is not required to, repurchase additional
shares, but only up to a maximum amount of two percent of the outstanding shares
of the Fund. If the Fund determines not to repurchase additional shares beyond
the repurchase offer amount, or if shareholders tender an amount of shares
greater than that which the Fund is entitled to purchase, the Fund will
repurchase the shares tendered on a pro rata basis.
If pro-ration is necessary, the Fund will send a notice of pro-ration to
selected brokers and dealers on the business day following the due date. The
number of shares each investor asked to have repurchased will be reduced by the
same percentage. If any shares that you wish to have repurchased by the Fund are
not repurchased because of pro-ration, you will have to wait until the next
repurchase offer, and your repurchase request will not be given any priority
over other investors' requests at this later date. Thus, there is a risk that
the Fund may not purchase all of the shares you wish to sell in a given quarter
or in any subsequent quarter. In anticipation of the possibility of pro-ration,
some shareholders may tender more shares than they wish to have repurchased in a
particular quarter, thereby increasing the likelihood of pro-ration. There is no
assurance that you will be able to sell as many of your shares as you desire to
sell.
The Fund may suspend or postpone a repurchase offer in limited
circumstances, but only with the approval of a majority of the board of
directors, including a majority of independent directors.
Determination of Repurchase Price
The repurchase price payable in respect of a repurchased share will be
equal to the share's net asset value on the date specified in the notice. The
Fund's net asset value per share may change substantially in a short time as a
result of developments at the companies in which the Fund invests. Changes in
the Fund's net asset value may be more pronounced and more rapid than with other
funds because of the Fund's emphasis on small companies and venture capital
companies that are not publicly traded. The Fund's net asset value per share may
change materially between the date a repurchase offer is mailed and the due
date, and it also may change materially shortly after a repurchase is completed.
The method by which the Fund calculates net asset value is discussed under the
caption "Calculation of Net Asset Value."
Payment
The Fund expects to repurchase shares on the next business day after the
net asset value determination date. Proceeds will be distributed to
intermediaries as specified in the repurchase offer notification, usually on the
third business day after repurchase. In any event, the Fund will pay repurchase
proceeds no later than seven days after the net asset value determination date.
<PAGE>
Impact of Repurchase Policies on the Liquidity of the Fund
From the time the Fund distributes each repurchase offer notification
until the net asset value determination date, the Fund must maintain liquid
assets at least equal to the percentage of its shares subject to the repurchase
offer. For this purpose, liquid assets means assets that may be disposed of in
the ordinary course of business at approximately the price at which they are
valued or which mature by the repurchase payment date. The Fund also is
permitted to borrow money to meet repurchase requests. Borrowing by the Fund
involves certain risks for shareholders. See "Risk Factors--Borrowing."
In-Kind Repurchases
Under normal conditions, the Fund intends to repurchase its shares for
cash. However, the Fund reserves the right to pay for all or a portion of its
repurchased shares with an in-kind distribution of a portion of its portfolio
securities, if the value of the repurchased shares is greater than $250,000. The
Fund will not make in-kind payments with securities of venture capital companies
or with securities of private funds that invest in venture capital companies.
Consequences of Repurchase Offers
The Fund believes that repurchase offers generally will be beneficial to
the Fund's shareholders, and generally will be funded from available cash or
sales of portfolio securities. However, if the Fund borrows to finance
repurchases, interest on that borrowing will negatively affect shareholders who
do not tender their shares into a repurchase offer by increasing the Fund's
expenses and reducing any net investment income. To the extent the Fund finances
repurchase proceeds by selling Fund investments, the Fund will hold a larger
proportion of its total assets in highly illiquid securities. Also, the sale of
securities to fund repurchases could reduce the market price of those
securities, which in turn would reduce the Fund's net asset value.
Repurchase offers provide shareholders with the opportunity to dispose of
shares at net asset value. There is no assurance that any secondary market for
the Fund's shares will develop, and in the event that a secondary market does
develop, it is possible that shares would trade in that market at a discount to
net asset value. The existence of periodic repurchase offers at net asset value
may not alleviate such discount.
Repurchase of the Fund's shares will tend to reduce the number of
outstanding shares and, depending upon the Fund's investment performance, its
net assets. A reduction in the Fund's net assets will tend to increase the
Fund's expense ratio.
In addition, the repurchase of shares by the Fund will be a taxable event
to shareholders. For a discussion of these tax consequences, see "Taxes."
CALCULATION OF NET ASSET VALUE
The Fund will compute its net asset value on each business day as of the
close of regular business of the New York Stock Exchange, which is generally
4:00 p.m. New York time. Securities owned by the Fund will be valued at current
market prices. If reliable market prices are unavailable (e.g., in the case of
the Fund's venture capital investments), securities will be valued at fair value
as determined in good faith in accordance with procedures approved by the Fund's
board of directors. Venture capital investments will be valued at fair value,
which will be cost unless Orbitex determines, pursuant to the Fund's valuation
procedures, that such a valuation is no longer fair or appropriate. In such
situations, the Fund's investment will be revalued in a manner that Orbitex,
following procedures approved by the board of directors, determines best
reflects its fair value. When the Fund holds securities of a class that has been
sold to the public, fair valuation would often be market value less a discount
to reflect contractual or legal restrictions limiting resale. Fair value
represents a good faith approximation of the value of an asset and will be used
where there is no public market or possibly no market at all for a company's
securities. The fair values of one or more assets may not, in retrospect, be the
prices at which those assets could have been sold during the period in which the
particular fair values were used in determining the Fund's net asset value. As a
result, the Fund's issuance or repurchase of its shares at net asset value at a
time when it owns securities that are valued at fair value may have the effect
of diluting or increasing the economic interest of existing shareholders.
Orbitex and the board of directors will consider numerous factors in
establishing a fair value for venture
<PAGE>
capital investments. Factors that relate to the securities of a venture capital
company will include the cost of the security; the last available quoted price
or traded price, if any, for the security; fundamental analytical data relating
to transactions in comparable securities; relationships among various securities
and industry-specific indices and evaluation of the forces which influence the
market in which the security is purchased and sold; the size of the Fund's
position and the liquidity of the market for the security; recent purchases and
sales (including new issuances) of the company's securities; pricing by dealers
in similar securities; reported prices and the extent of public trading in
similar financial instruments of the issuer or comparable securities; pending
public offerings by the company; and contractual and regulatory restrictions on
the Fund's disposition of the security. Factors that relate to a venture capital
company itself will include its financial position and results of operations,
including their variance from projections; the company's business and financial
plan; its ability to obtain needed financing; changes in economic conditions
affecting the company; pending reorganization activity; changes in management;
changes in contracts with major customers and distributors; and changes in
technology affecting the company's products and services. Certain developments,
such as changes in senior management of a company or its capital structure, or
removal of legal or contractual restrictions on sale, will cause Orbitex to
review the valuation of a company's securities immediately. In addition, a
combination of developments that are individually less significant also may
cause a review of valuation.
Expenses of the Fund, including Orbitex's management fee and the costs of
any borrowings, are accrued daily and taken into account for the purpose of
determining net asset value.
The net asset value per share is computed by dividing (i) the net asset
value of the Fund by (ii) the number of shares then outstanding. The net asset
value per share will be rounded up or down to the nearest cent. You may obtain
the Fund's daily net asset value per share by calling 1(888) ORBITEX or by
visiting Orbitex's Internet website (http://www.orbitexusa.com). A listing of
the securities in the Fund's portfolio also will be posted monthly on Orbitex's
website. The Fund also intends to make the net asset value available for
publication weekly.
CAPITAL STOCK
The Fund is authorized to issue ____ million shares of capital stock, all
of one class called common stock, $0.01 par value. The board of directors is
authorized to classify and reclassify any unissued shares of capital stock from
time to time by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such shares. The board of directors is also
authorized to increase or decrease the number of shares the Fund is authorized
to issue.
The common stock is entitled to one vote per share at all meetings of
shareholders. The Fund does not intend to hold annual meetings of shareholders.
Common shareholders do not have preemptive, subscription or conversion rights,
and are not liable for further calls or assessments. Common shareholders are
entitled to receive dividends only if and to the extent declared by the board of
directors and only after the board has made provision for working capital and
reserves as it in its sole discretion deems advisable. Common stock is not
available in certificated form, and shares must be held through a selected
broker or dealer.
In general, any action requiring a vote of the holders of the common stock
of the Fund will be effective if taken or authorized by the affirmative vote of
a majority of the aggregate number of the votes entitled to vote thereon. Any
change in the Fund's fundamental policies may also be authorized by the vote of
67% of the votes present at a shareholders' meeting if the holders of a majority
of the aggregate number of votes entitled to vote are present or represented by
proxy. The Fund's charter requires the affirmative vote of 67% of the aggregate
number of votes entitled to be cast to authorize any of the following actions
unless such action has been approved by a two-thirds vote of the entire board of
directors: (i) a merger or consolidation of the Fund; (ii) certain sales of all
or substantially all of the Fund's assets; (iii) the liquidation or dissolution
of the Fund; (iv) the conversion of the Fund into an open-end fund; (v) an
increase in the maximum number of directors specified in the charter; (vi) the
removal of a director; or (vii) an amendment of the charter to reduce the
two-thirds vote required to authorize the actions listed in this sentence. In
addition, the Fund's bylaws provide, among other things, that: nominations for
directors and other stockholder proposals must be made within specified time
frames in advance of an annual or special meeting of stockholders and must be
accompanied by specified information; special meetings of stockholders may be
called at the written request of stockholders holding not less than 50% of the
votes entitled to be cast at such a meeting; and only the board of directors may
amend the bylaws. Some of the foregoing could have the effect of delaying,
deferring or preventing changes in control of the Fund.
<PAGE>
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Fund, after payment of all of the liabilities of the Fund, the
common shareholders are entitled to share ratably in all the remaining assets of
the Fund.
DISTRIBUTION POLICY
Dividends will be paid annually on the common stock in amounts
representing substantially all of the net investment income, if any, earned each
year. Payments on the common stock will vary in amount, depending on investment
income received and expenses of operation. It is likely that many of the
companies in which the Fund invests will not pay any dividends, and this,
together with the Fund's expenses, means that the Fund is unlikely to have
income or pay dividends. The Fund is not a suitable investment if you require
regular dividend income.
Substantially all of any taxable net capital gain realized on investments
will be paid to common shareholders at least annually.
In addition, depending upon the performance of the Fund's investments, the
related growth of the Fund's net assets, and the availability of attractive
investment opportunities, the Fund may from time to time make a distribution
that constitutes a return of capital for federal income tax purposes. See
"Taxes."
The net asset value of each share that you own will be reduced by the
amount of the distributions or dividends that you receive from that share.
Automatic Reinvestment Plan
The automatic reinvestment plan is available for any holder of the Fund's
common stock who wishes to purchase additional shares using dividends and/or
capital gain distributions paid by the Fund. You may elect to:
o reinvest 100% of both dividends and capital gain distributions;
o receive dividends in cash and reinvest capital gain distributions; or
o receive both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested
automatically if you do not instruct your broker or dealer otherwise. The Fund
may limit the extent to which any distributions that are returns of capital may
be reinvested in the Fund.
Shares will be issued to you at their net asset value on the ex-dividend
date; there is no sales charge or other charge for reinvestment. You are free to
change your election at any time by contacting your broker or dealer, who will
inform the Fund. Your request must be received by the Fund before the record
date to be effective for that dividend or capital gain distribution.
The Fund reserves the right to suspend the automatic reinvestment plan at
any time and require shareholders to receive all distributions in cash. The Fund
also may limit the maximum amount that may be reinvested, either as a dollar
amount or as a percentage of distributions. The Fund currently does not expect
to suspend or limit the reinvestment plan, but it may determine to do so if the
amount being reinvested by shareholders exceeds the available investment
opportunities that Orbitex considers suitable for the Fund.
Distributions in-Kind
The Fund reserves the right to make any distributions in-kind (that is, to
distribute securities from its portfolio instead of cash). However, the Fund
currently does not intend to make any in-kind distributions, and only securities
that are freely transferable will be distributed in-kind.
TAXES
The Fund intends to qualify and elect to be treated as a regulated
investment company under the Internal Revenue Code. As a regulated investment
company, the Fund will generally be exempt from federal income taxes on net
investment income and capital gain distributed to shareholders, as long as at
least 90% of the Fund's investment
<PAGE>
income and net short-term capital gains are distributed to shareholders each
year.
Dividends from net investment income and distributions from net short-term
capital gain are taxable as ordinary income and, to the extent attributable to
dividends received by the Fund from U.S. corporations, may be eligible for a 70%
dividends-received deduction for shareholders that are corporations.
Distributions from net capital gain are taxable as long-term capital gain,
regardless of how long shares in the Fund have been held by the shareholder, and
are not eligible for the dividends-received deduction. The tax treatment of
dividends and capital gain distributions is the same whether you take them in
cash or reinvest them to buy additional Fund shares.
When you sell Fund shares or have shares repurchased by the Fund, any gain
or loss you realize will generally be treated as a long-term capital gain or
loss if you held your shares for more than one year, or as a short-term capital
gain or loss if you held your shares for one year or less. However, if you sell
Fund shares on which a long-term capital gain distribution has been received and
you held the shares for six months or less, any loss you realize will be treated
as a long-term capital loss to the extent that it offsets the long-term capital
gain distribution.
The Fund does not intend to operate so as to be permitted to
"pass-through" to its shareholders credit for foreign taxes, if any, payable by
the Fund.
Each January, you will be sent information on the tax status of any
distribution made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax adviser concerning the
effect income taxes may have on your individual investment.
UNDERWRITING
Subject to the terms of conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the Fund has agreed to sell to each underwriter, the number of
shares set forth opposite its name.
NAME NUMBER OF SHARES
---- ----------------
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in the offering are subject to
delivery of specified legal opinions by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares if they purchase any
of the shares.
The underwriters, for whom ________ is acting as representative, propose
to offer some of the shares directly to Investors at the offering price of
$______ per share, subject to adjustment in the event of purchases of _______
shares or more, and to offer some of the shares to certain dealers at the
offering price less a concession not in excess of $ ______ per share. The
offering price for purchases of ________shares or more, but less than _______
shares, will be $ _____ per share. [Breakpoint schedule to be determined.] The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ ______ per share on sales to certain other dealers. If all of the shares
are not sold at the prices set forth above, the representative may change the
offering prices and other selling terms. The representative has advised the Fund
that the underwriters do not intend to confirm any sales to any accounts over
which they exercise discretionary authority. The minimum investment requirement
is _____ shares ($_______). Investors must pay for any shares purchased on or
before ____, 2000.
[Up to ____ shares have been reserved for sale [directly by the Fund],
without the imposition of any sales load or payment of any selling compensation
to any underwriter, broker or dealer, to the following persons and entities:
present and retired directors, trustees and employees, and their respective
spouses, of Orbitex and its subsidiaries, the Fund, other funds in the Orbitex
Group of Funds, and such persons' family members, including lineal descendants
and ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing; those partners and employees of
outside legal counsel to the Fund or its directors who regularly provide advice
and services to the Fund, to other funds managed by Orbitex, or to their
directors; and employees of selected brokers and dealers that offer the Fund.]
The Fund and Orbitex have each agreed that, for a period of 120 days from
the date of this prospectus, they will not, without the prior written consent of
________________ , on behalf of the underwriters, dispose of or hedge
<PAGE>
any shares of the Fund or securities convertible into or exchangeable for the
shares. ________________ in its sole discretion may release any of the
securities subject to this agreement at any time without notice.
Prior to this offering, there has been no public or private market for the
shares. Consequently, the offering prices for the shares were determined by
negotiation among the Fund, Orbitex and the representative. There can be no
assurance, however, that the price at which the shares will sell after this
offering will not be lower than the price at which they are sold by the
underwriters. No underwriter is obligated to make a market in the shares and
there can be no assurance that any trading market in the shares will develop and
continue after this offering.
The Fund will pay a shareholder servicing fee to each broker or dealer not
affiliated with the Fund or Orbitex at the annual rate of 0.25% of the net asset
value of the outstanding shares owned by customers of such brokers or dealers.
Orbitex will make payments of 0.25% to such brokers or dealers from its own
resources.
The Fund and Orbitex each have agreed to indemnify the several
underwriters or contribute to losses arising out of certain liabilities under
the Securities Act.
The underwriting agreement provides that it may be terminated in the
absolute discretion of the representative without liability on the part of any
underwriter to the Fund or Orbitex by notice to the Fund or Orbitex if, prior to
delivery of and payment for the shares, any of the following occur: trading in
securities generally on the New York Stock Exchange, American Stock Exchange,
Nasdaq National Market, Nasdaq SmallCap Market or the Nasdaq Stock Market have
been suspended or limited; additional governmental restrictions not in force on
the date of the underwriting agreement have been imposed upon trading in
securities generally or a general moratorium on commercial banking activities
shall have been declared by federal or any state's authorities; or any outbreak
or material escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions
occurs, the effect of which is such as to make it, in the judgment of the
representative, impracticable or inadvisable to commence or continue the
offering of the shares at the offering prices set forth above.
The Fund anticipates that from time to time the representative and certain
other underwriters may act as brokers or dealers in connection with the
execution of the Fund's portfolio transactions after they have ceased to be
underwriters.
Future Offerings
The Fund may from time to time in the future offer additional shares to
investors, depending upon market conditions, available investment opportunities
and other factors, but the Fund has no current plans for any future offerings.
Orbitex may sponsor other funds that are similar to the Fund in the future.
Shareholder Servicing Fee
The Fund intends to pay selected brokers and dealers that are not
affiliates of the Fund or Orbitex and that have entered into a shareholder
servicing agreement with the Fund a shareholder servicing fee to compensate them
for providing shareholder services and the maintenance of accounts. These
services include ensuring that all investors who purchase shares in the
secondary market through the broker or dealer are Investors, monitoring
compliance with transfer restrictions and obtaining required certifications and
agreements (as described under "Subscription Documentation") and providing
information and responding to shareholder questions about the structure of the
Fund, the availability of shares in any continuous offering, and repurchase
offers. The shareholder servicing fee is payable at an annual rate of 0.25% of
the value of the outstanding shares owned by customers of such broker or dealer.
This fee is accrued daily as an expense of the Fund.
GENERAL INFORMATION
The Fund is registered under the Investment Company Act as a closed-end,
non-diversified management investment company. The Fund was incorporated under
the laws of the State of Maryland on ______, 2000 and has no operating history.
The Fund's office is located at 410 Park Avenue, New York, New York 10022 and
its telephone number is (212) 891-7900. Investment advisory services are
provided to the Fund by Orbitex Management Inc. The Fund's transfer agent is
American Data Services, Inc., an affiliate of Orbitex.
<PAGE>
TABLE OF CONTENTS OF SAI
Additional Investment Policies B-2
Directors and Officers B-7
Investment Advisory and Other Services B-12
Experts B-13
Custodian, Stockholder Service Agent and Dividend Paying Agent B-13
Brokerage Commissions B-13
Financial Statements B-14
Appendix A
<PAGE>
ORBITEX
LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
410 Park Avenue, New York, New York 10022
A Management Type
Non-Diversified, Closed-End
Investment Company
-------------
COMMON STOCK
($0.01 PAR VALUE)
-------------
PROSPECTUS
__________, 2000
INVESTMENT MANAGER SHAREHOLDER SERVICE AGENT
Orbitex Management, Inc. _______________________
410 Park Avenue _______________________
New York, New York 10022 _______________________
PORTFOLIO SECURITIES CUSTODIAN COUNSEL
Clifford Chance Rogers & Wells
__________________________________ LLP
__________________________________ 200 Park Avenue
__________________________________ New York, New York 10166
<PAGE>
SUBJECT TO COMPLETION, DATED _____________, 2000
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
__________, 2000
STATEMENT OF ADDITIONAL INFORMATION
410 Park Avenue
New York, New York 10022
(212) 891-7900
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. THIS
SAI RELATES TO AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF ORBITEX
LIFE SCIENCES &BIOTECHNOLOGY FUND, INC. (THE "FUND"), DATED __________, 2000. A
COPY OF THE PROSPECTUS MAY BE OBTAINED BY CONTACTING THE FUND AT THE TELEPHONE
NUMBER OR ADDRESS SET FORTH ABOVE.
THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. THE FUND
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IS EFFECTIVE. THIS SAI IS
NOT AN OFFER TO SELL THESE SECURITIES AND THE FUND IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
TABLE OF CONTENTS
Additional Investment Policies B-2
Directors and Officers B-7
Investment Advisory and Other Services B-7
Experts B-8
Custodian, Stockholder Service Agent and Dividend Paying Agent B-8
Brokerage Commissions B-8
Additional Information B-9
Financial Statement and Report of Independent Auditor B-9
B-1
<PAGE>
ADDITIONAL INVESTMENT POLICIES
The investment objective and principal investment strategies of the Fund,
as well as the principal risks associated with the Fund's investment strategies,
are set forth in the Prospectus. Certain additional investment information is
set forth below.
FUNDAMENTAL POLICIES
The Fund's stated fundamental policies, which may only be changed by the
affirmative vote of a majority of the outstanding voting securities of the Fund,
are listed below. Within the limits of these fundamental policies, the Fund's
management has reserved freedom of action. For the purposes of this SAI,
"majority of the outstanding voting securities of the Fund" means the vote, at
an annual or special meeting of securityholders duly called, (a) of 67 percent
or more of the voting securities present at such meeting, if the holders of more
than 50 percent of the outstanding voting securities of the Fund are present or
represented by proxy; or (b) of more than 50 percent of the outstanding voting
securities of the Fund, whichever is the less. The Fund:
(1) May not purchase securities on margin, except the 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) May not issue any class of securities senior to any other
class of securities except in compliance with the Investment
Company Act of 1940, as amended (the "1940 Act").
(3) May not 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.
(4) May not purchase or sell real estate, or invest in real estate
limited partnerships.
(5) May not purchase or sell physical commodities or contracts
thereon, except that the Fund may enter into financial futures
contracts and options thereon.
(6) May not underwrite securities issued by other persons, except
to the extent that the Fund may be deemed to be an
underwriter, within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), in connection with the
purchase of securities directly from an issuer.
(7) May not make loans, except that the Fund 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 the Fund's
total assets.
(8) With respect to its share repurchases:
the Fund will make share repurchase offers every
three months (except under the circumstances described
below in "Other Operating Policies -- Share
Repurchases"), commencing March 2001, pursuant to Rule
23c-3 under the 1940 Act, as it may be amended from time
to time;
5% of the Fund's outstanding common stock will be
subject to each repurchase offer, unless the board of
directors establishes a different percentage, which must
be between 5% and 25%;
the repurchase request due dates will be the
second Friday of each January, April, July and October
(or the preceding business day if that day is a New York
Stock Exchange holiday); and
there will be a maximum 14 day period between the
due date for each
B-2
<PAGE>
repurchase request and the date on which the Fund's net
asset value for that repurchase is determined.
(9) May not invest more than 25% of its total assets in any one
industry, except that the Fund will invest at least 65% of the
value of its total assets in securities of life sciences
companies and biotechnology companies, except when investing
for temporary defensive purposes.
OTHER OPERATING POLICIES
Lending of Portfolio Securities. During the time portfolio securities are
on loan, the borrower will pay the Fund any dividends or interest paid on the
securities. The Fund may invest the collateral and earn additional income or
receive an agreed upon amount of interest income from the borrower. Loans made
by the Fund will generally be short-term. Loans are subject to termination at
the option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan, but
would terminate a loan and regain the right to vote if that were considered
important with respect to the investment. The Fund may lose money if a borrower
defaults on its obligation to return securities and the value of the collateral
held by the Fund is insufficient to replace the loaned securities. In addition,
the Fund is responsible for any loss that might result from its investment of
the borrower's collateral.
Foreign Securities. The Fund may invest in commercial paper and
certificates of deposit issued by foreign banks and may invest either directly
or through American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or Global Depositary Receipts ("GDRs") (collectively, "depositary
receipts") in other securities of foreign issuers. For a discussion of the risks
associated with investments in foreign securities, see "Risk Factors--Foreign
Securities" in the Prospectus.
Depositary receipts are instruments generally issued by domestic banks or
trust companies that represent the deposits of a security of a foreign issuer.
ADRs, which are traded in dollars on U.S. exchanges or over-the-counter, are
issued by domestic banks and evidence ownership of securities issued by foreign
corporations. EDRs are typically traded in Europe. GDRs are typically traded in
both Europe and the United States. Depositary receipts may be issued under
sponsored or unsponsored programs. In sponsored programs, the issuer has made
arrangements to have its securities traded in the form of a depositary receipt.
In unsponsored programs, the issuers may not be directly involved in the
creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored depositary receipt programs are generally similar, the
issuers of securities represented by unsponsored depositary receipts are not
obligated to disclose material information in the United States, and therefore,
the import of such information may not be reflected in the market value of such
receipts. The Fund may invest up to 25% of its total assets in foreign
securities that it holds directly (which limitation may be changed without a
shareholder vote), but this 25% limit does not apply to foreign securities held
through depositary receipts which are traded in the United States or to
commercial paper and certificates of deposit issued by foreign banks.
Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of such taxes or exemption from taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amounts of the Fund's assets to be invested within various
countries is not known.
Rights and Warrants. The Fund may invest in common stock rights and
warrants believed by Orbitex Management, Inc. ("Orbitex") to provide capital
appreciation opportunities. Common stock rights and warrants may be purchased
separately or may be received as part of a unit or attached to securities
purchased.
Derivatives. The Fund may seek to hedge portfolio risk through the use of
financial instruments known as derivatives. A derivative is generally defined as
an instrument whose value is derived from, or based upon, some underlying index,
reference rate (such as interest rates or currency exchange rates), security,
commodity or other asset. The Fund will use a specific type of derivative only
after consideration of, among other things, how the derivative instrument serves
the Fund's investment objective and the risk associated with the instrument. The
Fund
B-3
<PAGE>
may use derivatives only for the purposes of hedging portfolio risk and cash
management.
Options
The Fund may buy or sell put and call options if they are traded on
options exchanges or over-the-counter markets. However, the Fund will only enter
into transactions with broker-dealers that are reputable financial institutions
which (i) specialize in these types of transactions, (ii) make markets in these
options, or (iii) are participants in over-the-counter markets.
Purchasing a put option gives the Fund the right to sell, and obligates
the writer to buy, the underlying security at the exercise price at any time
during the option period. Purchasing a call option gives the Fund the right to
buy, and obligates the writer of the call option to sell, the underlying
security at a stated exercise price at any time prior to the expiration of the
option. Because an option gives the purchaser a right and not an obligation, the
purchaser is not required to exercise the option. The option right is available
during the life of the option.
When the Fund purchases an option, it is required to pay a premium to the
party writing the option and a commission to the broker selling the option. The
Fund's maximum financial exposure will be limited to these costs. In order for a
put option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. Conversely, a call option will be profitable if the market
price of the underlying security rises sufficiently above the exercise price to
cover the premium and transaction costs. If an option is exercised by the Fund,
the premium and the commission paid may be greater than the amount of the
brokerage commission charged if the security were to be purchased or sold
directly.
The Fund may purchase both listed and over-the-counter options. The Fund
will be exposed to the risk of counterparty nonperformance in the case of
over-the-counter options.
Options on securities may not be available to the Fund on reasonable terms
in many situations and the Fund may frequently choose not to purchase options
even when they are available. The Fund's ability to engage in option
transactions may be limited by tax considerations.
Futures
The Fund may engage in transactions in futures and options thereon.
Futures are standardized, exchange-traded contracts which obligate a purchaser
to take delivery, and a seller to make delivery, of a specific amount of a
commodity at a specified future date at a specified price. No price is paid upon
entering into a futures contract. Rather, upon purchasing or selling a futures
contract the Fund is required to deposit collateral ("margin") equal to a
percentage (generally less than 10%) of the contract value. Each day thereafter
until the futures position is closed, the Fund will pay additional margin
representing any loss experienced as a result of the futures position the prior
day or be entitled to a payment representing any profit experienced as a result
of the futures position the prior day.
The sale of a futures contract limits the Fund's risk of loss through a
decline in the market value of portfolio holdings correlated with the futures
contract prior to the futures contract's expiration date. In the event the
market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, the Fund will realize a loss on the
futures position and a lower return on the portfolio holdings than would have
been realized without the purchase of the futures contract.
The purchase of a futures contract may protect the Fund from having to pay
more for securities as a consequence of increases in the market value for such
securities during a period when the Fund was attempting to identify specific
securities in which to invest in a market the Fund believes to be attractive. In
the event that such securities decline in value or the Fund determines not to
complete an anticipatory hedge transaction relating to a futures contract,
however, the Fund may realize a loss relating to the futures position.
The Fund will limit transactions in futures and options on futures to
financial futures contracts (i.e., contracts for which the underlying commodity
is a currency or securities or interest rate index) purchased or sold for
hedging purposes (including anticipatory hedges). The Fund will further limit
transactions in futures and options on futures to the extent necessary to
prevent the Fund from being deemed a "commodity pool" under regulations of the
Commodity Futures Trading Commission.
Foreign Currency Transactions. A forward foreign currency exchange
contract is an agreement to purchase or sell a specific currency at a future
date and at a price set at the time the contract is entered into. The
B-4
<PAGE>
Fund will generally enter into forward foreign currency exchange contracts to
fix the U.S. dollar value of a security it has agreed to buy or sell for the
period between the date the trade was entered into and the date the security is
delivered and paid for, or, to hedge the U.S. dollar value of securities it
owns.
Where the Fund believes that a foreign currency may experience a
substantial movement against the U.S. dollar, the Fund may enter into a forward
contract to sell or buy an appropriate amount of that foreign currency. The
contract would approximate the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. Under normal circumstances, the
portfolio manager will limit forward currency contracts to not greater than 75%
of the Fund's portfolio position in any one country as of the date the contract
is entered into. This limitation will be measured at the point the hedging
transaction is entered into by the Fund. Under extraordinary circumstances,
Orbitex may enter into forward currency contracts in excess of 75% of the Fund's
portfolio position in any one country as of the date the contract is entered
into. The precise matching of the forward contract amounts and the value of
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movement 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 certain circumstances,
the Fund may commit up to the entire value of its assets which are denominated
in foreign currencies to the consummation of these contracts. Orbitex will
consider the effect a substantial commitment of the Fund's assets to forward
contracts would have on the investment program of the Fund and its ability to
purchase additional securities.
Except as set forth above and immediately below, the Fund will not enter
into such forward contracts or maintain a net exposure to such contracts where
the consummation of the contracts would oblige the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. The Fund, in order to avoid excess
transactions and transaction costs, may nonetheless maintain a net exposure to
forward contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency provided the excess amount is
"covered" by cash or liquid, high-grade debt securities, denominated in any
currency, at least equal at all times to the amount of such excess. 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, Orbitex believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will be served.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision
the market value of portfolio securities at the expiration of the forward
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be necessary to sell
on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. However, the Fund may use liquid, high-grade
debt securities, denominated in any currency, to cover the amount by which the
value of a forward contract exceeds the value of the securities to which it
relates.
If the Fund retains the portfolio security and engages in offsetting
transactions, 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 the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will be
limited to the transactions
B-5
<PAGE>
described above. Of course, the Fund is not required to enter into forward
contracts with regard to its foreign currency-denominated securities and will
not do so unless deemed appropriate by Orbitex. 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 a
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.
Stockholders 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.
Repurchase Agreements. The Fund may enter into repurchase agreements with
commercial banks and broker-dealers as a short-term cash management tool. A
repurchase agreement is an agreement under which the Fund acquires a security,
generally a U.S. Government obligation, subject to resale at an agreed upon
price and date. The resale price reflects an agreed upon interest rate effective
for the period of time the Fund holds the security and is unrelated to the
interest rate on the security. The Fund's repurchase agreements will at all
times be fully collateralized.
Repurchase agreements could involve certain risks in the event of
bankruptcy or other default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, a decline in
value of the underlying securities and a loss of interest. Repurchase agreements
are typically entered into for periods of one week or less. The Fund will not
enter into repurchase agreements of more than one week's duration if more than
[10%] of its total assets would be so invested.
Short Sales. The Fund may sell securities short as part of its overall portfolio
management strategy 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.
Restricted and Illiquid Securities. The Fund may invest in illiquid
securities, including restricted securities (i.e., securities not readily
marketable without registration under the Securities Act of 1933, as amended
(the "Securities Act")) and other securities that are not readily marketable.
These may include restricted securities that can be offered and sold only to
"qualified institutional buyers" under Rule 144A of the Securities Act. The
Fund's investments in venture capital companies will generally be illiquid,
although a venture capital investment may become liquid if the company completes
an IPO and any contractual restrictions on the Fund's ability to sell its shares
terminate. There is no limit to the percentage of the Fund's total assets that
may be invested in illiquid securities, but Orbitex does not expect that
illiquid securities will ordinarily exceed [50%] of the Fund's total assets. The
Fund will not make new venture capital investments at any time when its existing
venture capital investments exceed 50% of its total assets, but the Fund may, at
such times, make additional investments in venture capital companies already
represented in its portfolio.
Debt Securities. The Fund may invest up to 35% of its total assets in debt
securities which are not rated within the four highest rating categories by
Standard & Poor's Ratings Group or Moody's Investors Services, Inc.
Temporary Defensive Position. In an attempt to respond to adverse market,
economic, political, or other conditions, the Fund may invest up to 100% of its
total assets in cash or cash equivalents including, but not limited to, prime
commercial paper, bank certificates of deposit, bankers' acceptances or
repurchase agreements for such securities, and securities of the U.S. Government
and its agencies and instrumentalities, as well as cash and cash equivalents
denominated in foreign currencies. The Fund's investments in foreign cash
equivalents will be limited to those that, in the opinion of Orbitex, equate
generally to the standards established for U.S. cash equivalents. Investments in
bank obligations will be limited at the time of investment to the obligations of
the 100 largest domestic banks in terms of assets which are subject to
regulatory supervision by the U.S. Government or state governments, and the
obligations of the 100 largest foreign banks in terms of assets with branches or
agencies in the United States.
Share Repurchases. The Fund may not suspend or postpone a repurchase offer
except pursuant to a vote of a majority of the directors, including a majority
of the disinterested directors, and only:
B-6
<PAGE>
If the repurchase would cause the Fund to lose its status as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended;
For any period during which the New York Stock Exchange or any other
market in which the securities owned by the Fund are principally
traded is closed, other than customary weekend and holiday closings,
or during which trading in such market is restricted;
For any period during which an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable, or during which it is not reasonably practicable for
the Fund fairly to determine the value of its net assets; or
For such other periods as the Commission may by order permit for the
protection of securityholders of the Fund.
DIRECTORS AND OFFICERS
A listing of the directors and officers of the Fund and their business
experience for the past five years follows. An asterisk (*) indicates directors
who are "interested persons" of the Fund (as defined by the 1940 Act). Unless
otherwise noted, the address of each director and officer is 410 Park Avenue,
New York, New York 10022.
<TABLE>
<CAPTION>
Name, Age and Position(s) Held
Address with Fund Principal Occupation(s) During the Past 5 Years
<S> <C> <C>
Ronald S. Altbach (53) Director Chairman, Paul Sebastian, Inc. (1994-present) (Perfume
1540 West Park Avenue distributor); President, Olcott Corporation (1992-1994) (Perfume
Ocean, New Jersey 07712 distributor).
*Richard E. Stierwalt (45) President and President, Chief Executive Officer and Director, Orbitex
Chairman of the Financial Services Group, Inc. (1998-present) (Investment
Board 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 (48) Director Chief Executive Officer, Carey Financial Corporation
Carey Financial Corp. (1995-present) (Broker-dealer); Chief Executive Officer, Wall
50 Rockefeller Plaza Street Investors Services (1994-1995) (Retail brokerage firm);
New York, New York 10020 Senior Vice President, PaineWebber, Inc. (1988-1994) (Investment
Services).
Keith Kemp (39) Vice President Vice President, Operations, Orbitex Management, Inc.,
and Assistant (1999-present); Vice President, Fund Accounting, Bank of New York
Treasurer (1998-1999); Senior Manager, Fund Administration, Forum Financial
Group (1996-1998); Business Unit Controller, First Data Investor
Services Group (1992-1996).
M. Fyzul Khan (28) Vice President Legal Counsel, Orbitex Financial Services Group, Inc..
and Secretary (1998-present); Attorney, CIBC Oppenheimer (1997-1998).
Kevin Meehan (38) Vice President Chief Operations Officer, Orbitex Financial Services Group, Inc.
and Assistant (1998-present); Manager, Investor Services Consulting, KPMG
Secretary (1995-1998).
Vali Nasr (46) Vice President Chief Financial Officer, Orbitex Financial Services Group Inc.
and Treasurer (1999-present); Chief Financial Officer and Chief Operating
Officer, Investment Advisory Network (1998-1999) (Software
developer); Chief Financial Officer and Chief Operations Officer,
PMC International, Inc. (1992-1998) (Investment adviser,
broker-dealer, and software developer).
Catherine McCabe (33) Assistant Vice Compliance Analyst, Mutual of America Life Insurance Company
President and (1996-2000); Registered Representative, Smith Barney (1995-1996)
Assistant
Secretary
</TABLE>
B-7
<PAGE>
<TABLE>
<S> <C> <C>
Michael Wagner (49) Assistant Senior Vice President, American Data Services, Inc.
150 Motor Parkway Treasurer (1987-present).
Hauppauge, New York
11788-0132
Max Berueffy (48) Assistant General Counsel, American Data Services, Inc. (1999-present)
150 Motor Parkway Secretary (Mutual fund administrator and distributor); Self-employed
Hauppauge, New York (1998-1999) (Mutual fund consultant); Senior Counsel, Forum
11788-0132 Financial Group (1994-1998) (Mutual fund administrator and
distributor).
</TABLE>
Each Director of the Fund who is not an interested person of the Fund
receives a fee of $1,250 for each regular and special meeting of the Board that
the Director attends. The Fund also reimburses each such Director for travel and
other expenses incurred in attending meetings of the Board.
The Directors serve on the Board for terms of indefinite duration. A
Director's position in that capacity will terminate if such Director is removed,
resigns or is subject to various disabling events such as death or incapacity.
INVESTMENT ADVISORY AND OTHER SERVICES
Orbitex is authorized in its discretion to engage in the following
activities: (i) develop a continuing program for the management of the assets of
the 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 Directors of the Fund,
which has overall responsibility for the business and affairs of the Fund,
Orbitex manages the operations of the Fund. In addition to providing advisory
services, Orbitex furnishes the Fund with office space and certain facilities
and personnel required for conducting the business of the Fund.
Orbitex is located at 410 Park Avenue, New York, New York 10022, and
serves as the adviser pursuant to an Investment Advisory Agreement that has been
approved by the Board, including a majority of the Independent Directors. The
initial term of the Investment Advisory Agreement is two years. The Investment
Advisory Agreement will continue in effect from year to year if approved at
least annually by a vote of a majority of the Directors who are not parties to
the Investment Advisory Agreement or interested persons of any such parties and
by vote of a majority of the Board cast in person at a meeting called for the
purpose of voting on such renewal, or by the vote of a majority of the
outstanding shares of the Fund. The portfolio manager of the Fund is supervised
by John W. Davidson, CFA, Director, President and Chief Investment Officer of
Orbitex.
The Fund will pay to Orbitex a management fee at an annual rate of 1.75%
of the Fund's average daily net assets. The management fee is higher than the
advisory fees paid by most U.S. investment companies.
EXPERTS
acts as independent auditors for the Fund and in such capacity will audit
the Fund's annual and semi-annual financial statements and financial highlights.
CUSTODIAN, ACCOUNTING AGENT, STOCKHOLDER SERVICE AGENT AND
DIVIDEND PAYING AGENT
___________________________________, serves as custodian to the Fund.
American Data Services, Inc.---------------serves as Fund accounting agent and
is responsible for the determination of the net asset value of the Fund. It also
maintains, under the general supervision of Orbitex, the Fund's accounting
records. American Data Services, Inc., acts as the stockholder service agent and
dividend paying agent of the Fund, and performs, at cost, certain recordkeeping
functions for the Fund. In other words, American Data Services, Inc maintains
the records of shareholder accounts and furnishes dividend paying, redemption
and related services.
B-8
<PAGE>
BROKERAGE COMMISSIONS
Subject to the general supervision of the Board of Directors, Orbitex is
responsible for making decisions with respect to the purchase and sale of
portfolio securities on behalf of the Fund. Orbitex also is responsible for the
implementation of those decisions, including the selection of broker-dealers to
effect portfolio transactions, the negotiation of commissions, and the
allocation of principal business and portfolio brokerage.
In purchasing and selling the Fund's portfolio securities, it is Orbitex's
policy to obtain quality execution at the most favorable prices through
responsible broker-dealers and, in the case of agency transactions, at
competitive commission rates where such rates are negotiable. However, under
certain conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. In selecting broker-dealers to execute the
Fund's portfolio transactions, consideration is given to such factors as the
price of the security, the rate of the commission, the size and difficulty of
the order, the reliability, integrity, financial condition, general execution
and operational capabilities of competing brokers and dealers, their expertise
in particular markets and the brokerage and research services they provide to
Orbitex or the Fund. It is not the policy of Orbitex 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
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
ordinarily will be transacted with the issuer, the issuer's underwriter, or with
a primary market maker acting as principal on a net basis, with no brokerage
commission being paid by the Fund. However, the price of the securities
generally includes compensation which is not disclosed separately. Transactions
placed through dealers who are serving as primary market makers reflect the
spread between the bid and asked prices.
With respect to equity and fixed income securities, Orbitex may effect
principal transactions on behalf of the Fund 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 Fund pays to underwriters of
newly-issued securities usually include a concession paid by the issuer to the
underwriter. Orbitex may receive research services in connection with brokerage
transactions, including designations in fixed price offerings.
Orbitex receives a wide range of research services from brokers and
dealers covering investment opportunities throughout the world, including
information on the economies, industries, groups of securities, individual
companies, statistics, political developments, technical market action, pricing
and appraisal services, and analyses of all the countries in which a Fund's
portfolio is likely to be invested. Orbitex cannot readily determine the extent
to which commissions charged by brokers reflect the value of their research
services, but brokers occasionally suggest a level of business they would like
to receive in return for the brokerage and research services they provide. To
the extent that research services of value are provided by brokers, Orbitex may
be relieved of expenses which it might otherwise bear. In some cases, research
services are generated by third parties but are provided to Orbitex by or
through brokers.
Certain broker-dealers which provide quality execution services also
furnish research services to Orbitex. Orbitex has adopted brokerage allocation
polices 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
B-9
<PAGE>
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, Orbitex may assess the
reasonableness of commissions in light of the total brokerage and research
services provided by each particular broker. Orbitex may also consider sales of
the Fund's shares as a factor in the selection of broker-dealers.
ADDITIONAL INFORMATION
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of stockholders. As a result,
Fund stockholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 25% of the shares
outstanding and entitled to vote may require the Fund to hold a special meeting
of stockholders for any purpose, including to remove a Director from office.
Fund stockholders may remove a Director by the affirmative vote of a majority of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of stockholders for the purpose of electing Directors if, at any time, less than
a majority of the Directors then holding office have been elected by
stockholders.
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITOR
[To be filed by Amendment]
B-10
<PAGE>
FORM N-2
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements:
Part A: Financial Highlights (not applicable).
Part B: Statement of Assets and Liabilities and
Independent Auditors' Report
2. Exhibits:
a. Charter of Registrant.
b. Bylaws of Registrant.
c. Not Applicable.
d. Not Applicable.
e. Not Applicable.
f. Not Applicable.
g. Investment Advisory Agreement between Registrant and Orbitex
Management, Inc.*
h. Underwriting Agreement between Registrant and
___________________________.*
i. Not Applicable.
j. Custody Agreement.*
k. Not Applicable.
l. Opinion and Consent of Counsel.*
m. Not Applicable.
n. Consent of Independent Auditors.*
o. Not Applicable.
p. Not Applicable.
q. Not Applicable.
r. Not Applicable.
* To be filed by amendment
Item 25. Marketing Arrangements: Not Applicable.
Item 26. Other Expenses of Issuance and Distribution:*
Registration fees $______
Legal fees $______
Accounting fees $______
Miscellaneous (mailing, etc.) $______
Total $______
C-1
<PAGE>
* To be filed by amendment
Item 27. Persons Controlled by or Under Common Control with Registrant: None.
Item 28. Number of Holders of Securities as of April 7, 2000:
Title of Class Number of Recordholders
Common Stock 1
Item 29. Indemnification:
Reference is made to the provisions of Article SEVENTH of the
Registrant's Charter and Article VII of the Registrant's Bylaws,
each filed as an exhibit to this Registration Statement. Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised by the Securities and
Exchange Commission that such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser:
Certain information pertaining to business and other connections of
the Registrant's Adviser, Orbitex Management, Inc., is hereby
incorporated herein by reference to the section of the Prospectus
captioned "Management of the Fund" and to the section of the
Statement of Additional Information captioned "Investment Advisory
and Other Services." The information required by this Item 30 with
respect to each director, officer or partner of Orbitex Management,
Inc. is incorporated by reference to Form ADV with the Securities
and Exchange Commission pursuant to the Investment Advisers Act of
1940, as amended (File No. 801-52312).
Item 31. Location of Accounts and Records:
Custodian: ______________________________
______________________________
______________________________
and
Orbitex Life Sciences & Biotechnology Fund, Inc.
c/o Orbitex Management, Inc.
410 Park Avenue, 18th Floor
New York, New York 10022
Item 32. Management Services: Not Applicable.
Item 33. Undertakings:
I. The Registrant undertakes to suspend the offering of shares
until the prospectus is amended
C-2
<PAGE>
if subsequent to the effective date of its registration
statement, the net asset value declines more than ten percent
from its net asset value as of the effective date of the
registration statement.
II. The Registrant undertakes that:
(a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
III. The Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery within two
business days of receipt of a written or oral request, the
Registrant's Statement of Additional Information.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, its duly authorized
representative, in the City of New York, State of New York, on the 7th day of
April, 2000.
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY
FUND, INC.
By: /s/ Richard E. Stierwalt
-------------------------
Richard E. Stierwalt
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities indicated, on April 7, 2000.
Name Title
---- -----
/s/ Richard E. Stierwalt Chairman of the Board
- ------------------------------- (Principal executive officer and Director)
(Richard E. Stierwalt)
/s/ Vali Nasr Treasurer
- ------------------------------- (Principal financial and accounting
(Vali Nasr) officer)
/s/ M. Fyzul Khan Director
- -------------------------------
(M. Fyzul Khan)
/s/ Catherine McCabe Director
- -------------------------------
(Catherine McCabe)
C-4
<PAGE>
FORM N-2
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
EXHIBIT INDEX
(a) Charter of Registrant
(b) Bylaws of Registrant
C-5
EXHIBIT A
articles of incorporation
of
orbitex Life sciences & biotechnology fund, inc.
THE UNDERSIGNED, Richard Horowitz, whose post office address is c/o
Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166,
being at least eighteen years of age, does hereby act as an incorporator, under
and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.
First: The name of the corporation (hereinafter called the "Corporation") is
Orbitex Life Sciences & Biotechnology Fund, Inc.
Second: The Corporation was formed for the following purposes:
(1) To act as a closed-end investment company of the management type
registered as such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold all or part of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(4) To enter into management, supervisory, advisory, administrative,
underwriting and other contracts and otherwise do business with other
corporations, and subsidiaries or affiliates thereof, or any other firm or
organization, notwithstanding that the Board of Directors
<PAGE>
of the Corporation may be composed in part of officers, directors or employees
of such corporation, firm or organization and, in the absence of fraud, the
Corporation and such corporation, firm or organization may deal freely with each
other and neither such management, supervisory, advisory, administrative or
underwriting contract nor any other contract or transaction between the
Corporation and such corporation, firm or organization shall be invalidated or
in any way affected thereby.
(5) To do any and all additional acts and exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and generally to
enjoy all of the powers, rights and privileges granted to, or conferred upon,
corporations by the General Laws of the State of Maryland now or hereafter in
force.
Third: The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o The Corporation Trust
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is the Corporation
Trust Incorporated, and its post office address is 300 East Lombard Street,
Baltimore, Maryland 21202. Said resident agent is a corporation of the State of
Maryland.
Fourth: Section 1. (1) The total number of shares of capital stock that the
Corporation has authority to issue is 100,000,000 shares of capital stock of the
par value of $0.01 each, having an aggregate par value of $1,000,000, all of
which 100,000,000 shares are initially classified as "Common Stock."
(2) The following is a description of the preferences, conversion
and other rights,
<PAGE>
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Common Stock of the Corporation:
(a) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter
classified or reclassified, the exclusive voting power for all
purposes shall be vested in the holders of the Common Stock.
(b) Subject to the provisions of law and any preferences of any
class of stock hereafter classified or reclassified, dividends,
including dividends payable in shares of another class of the
Corporation's stock, may be paid on the Common Stock of the
Corporation at such time and in such amounts as the Board of
Directors may deem advisable.
(c) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
the Common Stock shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation and
the amount to which the holders of any class of stock hereafter
classified or reclassified having a preference on distributions in
the liquidation, dissolution or winding up of the Corporation shall
be entitled, together with the holders of any other class of stock
hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation, to share ratably in the remaining net assets of the
Corporation.
Section 2. (1) Without the assent or vote of the stockholders, the
Board of Directors shall have the authority by resolution to classify or
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock.
(2) The foregoing powers of the Board of Directors to classify or
reclassify any of the shares of capital stock shall include, without limitation,
subject to the provisions of the Charter, authority to classify or reclassify
any unissued shares of such stock into a class or classes of preferred stock,
preference stock, special stock or other stock, and to divide and classify
shares of any class into one or more series of such class, by determining,
fixing, or altering one or more of
<PAGE>
the following:
(a) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that,
unless otherwise prohibited by the terms of such or any other class
or series, the number of shares of any class or series may be
decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the number
of shares of such class or series may be increased by the Board of
Directors in connection with any such classification or
reclassification, and any shares of any class or series which have
been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become
part of the authorized capital stock and be subject to
classification and reclassification as provided in this
subparagraph;
(b) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be payable on
shares of such class or series, whether any such dividends shall
rank senior or junior to or on a parity with the dividends payable
on any other class or series of stock, and the status of any such
dividends as cumulative, cumulative to a limited extent or
non-cumulative and as participating or nonparticipating;
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so,
the terms of such voting rights;
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and
conditions thereof, including provisions for adjustment of the
conversion or exchange rate in such events or at such times as the
Board of Directors shall determine;
(e) Whether or not shares of such class or series shall be subject
to redemption and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates; and whether or not there shall be any
sinking fund or purchase account in respect thereof, and if so, the
terms thereof;
(f) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which
rights may vary depending upon whether such liquidation, dissolution
or winding up is voluntary or involuntary and, if voluntary, may
vary at different dates, and whether such rights shall rank senior
or junior to or on a parity with such rights of any other class or
series of stock;
(g) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or
the use of moneys for purchase or redemption of, any stock of the
Corporation, or upon any other action of the
<PAGE>
Corporation, including action under this subparagraph, and, if so,
the terms and conditions thereof; and
(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of
such class or series, not inconsistent with law and the Charter of
the Corporation.
(3) For the purposes hereof and of any Articles Supplementary to the
Charter providing for the classification or reclassification of any Shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding up, as the case may be, in
preference or priority to holders of such other class or series;
(b) on a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation price per share thereof
be different from those of such others, if the holders of such class
or series of stock shall be entitled to receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in proportion to their respective dividend rates
or redemption or liquidation prices, without preference or priority
over the holders of such other class or series; and
(c) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series
shall be subject or subordinate to the rights of the holders of such
other class or series in respect of the receipt of dividends or the
amounts distributable upon liquidation, dissolution or winding up,
as the case may be.
(4) The provisions of Section 2 of this Article Fourth may not be
amended, altered or repealed except by vote of three-fourths of the shares of
capital stock of the Corporation outstanding and entitled to vote thereupon.
Section 3. The Board of Directors, without any action by the
stockholders of the Corporation, may amend these Articles of Incorporation from
time to time to increase or decrease the aggregate number of shares of stock or
the number of shares of stock of any class or series
<PAGE>
that the Corporation has authority to issue.
Section 4. The Board of Directors is hereby empowered to authorize
the issuance from time to time of shares of any class of the Corporation's
capital stock, whether now or hereafter authorized, or securities convertible
into shares of any class or classes of its capital stock, whether now or
hereafter authorized.
Section 5. The Board of Directors is hereby empowered to authorize
the repurchase by the Corporation from time to time of shares of any class of
its capital stock, whether now or hereafter authorized, or securities
convertible into shares of any class or classes of its capital stock, whether
now or hereafter authorized, upon such terms, at such prices (which may be
determined by formula) and subject to such conditions (which may include
proration of shares tendered for repurchase) as the Board of Directors may
determine.
Section 6. The presence in person or by proxy of the holders of
record of a majority of the aggregate number of shares of capital stock issued
and outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of any business at all meetings of the stockholders except as
otherwise provided by law or in these Articles of Incorporation.
Section 7. Notwithstanding any provision of the General Laws of the
State of Maryland requiring action to be taken or authorized by the affirmative
vote of the holders of a designated proportion greater than a majority of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon, such action shall, except as otherwise provided in these Articles of
Incorporation, be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of shares of capital stock
of the Corporation outstanding and entitled to vote thereupon voting together as
a single class.
<PAGE>
Section 8. No holder of shares of capital stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe for
any part of any new or additional issue of stock of any class, or of rights or
options to purchase any stock, or of securities convertible into, or carrying
rights or options to purchase, stock of any class, whether now or hereafter
authorized or whether issued for money, for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby waived by each
holder of capital stock and of any other class of stock or securities which may
hereafter be created.
Section 9. All persons who shall acquire capital stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation.
Section 10. (1) Except as otherwise provided in subsection 2 of this
Section 10 of this Article Fourth, the affirmative vote of at least
three-fourths of the shares of capital stock of the Corporation outstanding and
entitled to vote thereupon voting together as a single class shall be necessary
to authorize any of the following actions:
(a) the conversion of the Corporation to an "open-end company" or
any amendment to these Articles of Incorporation to make the
Corporation's common stock a "redeemable security" (as such terms
are defined in the Investment Company Act of 1940);
(b) the merger or consolidation of the Corporation with or into any
other company (including, without limitation, a partnership,
corporation, joint venture, business trust, common law trust or any
other business organization) or share exchange in which the
Corporation is not the successor corporation;
(c) the dissolution or liquidation of the Corporation
notwithstanding any other provision in these Articles of
Incorporation;
(d) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) of all
or substantially all of the assets of the Corporation other than in
the ordinary course of the Corporation's business;
(e) a change in the nature of the business of the Corporation so
that it would cease to be an investment company registered under the
Investment Company Act of 1940; or
<PAGE>
(f) the issuance or transfer by the Corporation (in one transaction
or a series of transactions) of any securities of the Corporation to
any other person in exchange for cash, securities or other property
having an aggregate fair market value of $1,000,000 or more
excluding (i) sales of any securities of the Corporation in
connection with a public offering thereof, (ii) issuances of any
securities of the Corporation pursuant to a dividend reinvestment
plan adopted by the Corporation or pursuant to a stock dividend and
(iii) issuances of any securities of the Corporation upon the
exercise of any stock subscription rights distributed by the
Corporation.
(2) If the Board of Directors approves, by a vote of at least
seventy percent of the entire Board of Directors, any action listed in
subsection (1) of this Section 10 of this Article Fourth other than the action
described in clause (1)(f), the affirmative vote of only a majority of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class shall be necessary to authorize such
action. If the Board of Directors approves, by a vote of at least seventy
percent of the entire Board of Directors, an action described in clause (1)(f)
of this Section 10 of this Article Fourth, no shareholder vote shall be required
to authorize such action.
(3) The provisions of this Section 10 of this Article Fourth may not
be amended, altered or repealed except by the approval of at least three-fourths
of the shares of capital stock of the Corporation outstanding and entitled to
vote thereupon voting together as a single class.
Fifth: The initial number of directors of the Corporation is three (3), and the
names of the directors who shall act as such until the first annual meeting or
until their successor or successors are duly elected and qualified are Richard
E. Stierwalt, M. Fyzul Khan and Catherine McCabe. The By-Laws of the Corporation
may fix the number of directors at a number other than three and may authorize
the Board of Directors, by the vote of a majority of the entire Board of
Directors, to increase or decrease the number of directors within a limit
specified in the By-Laws,
<PAGE>
provided that in no case shall the number of directors be less than the number
prescribed by law, and to fill the vacancies created by any such increase in the
number of directors. Unless otherwise provided by the By-Laws of the
Corporation, the directors of the Corporation need not be stockholders.
A director may be removed only with cause, and any such removal may be
made only by the stockholders of the Corporation.
The provisions of this Article Fifth may not be amended, altered or
repealed except by a vote of three-fourths of the shares of common stock of the
Corporation outstanding and entitled to vote thereupon.
Sixth: Section 1. All corporate powers and authority of the Corporation (except
as at the time otherwise provided by statute, by these Articles of Incorporation
or by the By-Laws) shall be vested in and exercised by the Board of Directors.
Section 2. The Board of Directors shall have the sole power to
adopt, alter or repeal the By-Laws of the Corporation except to the extent that
the By-Laws otherwise provide. The provisions of this Section 2 of this Article
Sixth may not be amended, altered or repealed except by vote of three-fourths of
the shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
Section 3. The Board of Directors shall have the power from time to
time to determine whether and to what extent, and at what times and places and
under what conditions and regulations, the accounts and books of the Corporation
(other than the stock ledger) or any of them shall be open to the inspection of
stockholders; and no stockholder shall have any right to inspect any account,
book or document of the Corporation except to the extent permitted by
<PAGE>
statute or the By-Laws.
Section 4. The Board of Directors shall have the power to determine,
as provided herein, or if a provision is not made herein, in accordance with
generally accepted accounting principles, what constitutes net income, total
assets and the net asset value of the shares of capital stock of the
Corporation.
Section 5. The Board of Directors shall have the power to distribute
dividends from the funds legally available therefor in such amounts, if any, and
in such manner to the stockholders of record as of a date, as the Board of
Directors may determine.
Section 6. Without the assent or vote of the stockholders, the Board
of Directors shall have the power to authorize the issuance from time to time of
shares of the capital stock of any class of the Corporation, whether now or
hereafter authorized, and securities convertible into shares of capital stock of
the Corporation of any class or classes, whether now or hereafter authorized,
for such consideration as the Board of Directors may deem advisable.
Section 7. Without the assent or vote of the stockholders, the Board
of Directors shall have the power to authorize and issue obligations of the
Corporation, secured or unsecured, as the Board of Directors may determine, and
to authorize and cause to be executed mortgages and liens upon the real or
personal property of the Corporation.
Section 8. The provisions of Sections 6 and 7 of this Article Sixth
may not be amended, altered or repealed except by vote of three-fourths of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
Seventh: Section 1. To the fullest extent permitted by Maryland statutory or
decisional law, subject to the requirements of the Investment Company Act of
1940, as amended, no director or officer of
<PAGE>
the Corporation shall be personally liable to the Corporation or its security
holders for money damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time of
any proceeding in which such liability is asserted. No amendment of these
Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.
Section 2. The Corporation shall indemnify, to the fullest extent
permitted by law (including the Investment Company Act of 1940) as currently in
effect or as the same may hereafter be amended, any person made or threatened to
be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of the
Corporation or serves or served at the request of the Corporation any other
enterprises as a director or officer. To the fullest extent permitted by law
(including the Investment Company Act of 1940) as currently in effect or as the
same may hereafter be amended, expenses incurred by any such person in defending
any such action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such person to
repay such expenses if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any person
by this Section 2 of this Article Seventh shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director or officer as provided above. No
amendment of this Section 2 of this Article Seventh shall impair the rights of
any person arising at any time with respect to
<PAGE>
events occurring prior to such amendment. For purposes of this Section 2 of this
Article Seventh, the term "Corporation" shall include any predecessor of the
Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation, partnership, joint venture,
trust or employee benefit plan; service "at the request of the Corporation"
shall include service as a director or officer of the Corporation which imposes
duties on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan shall be deemed to
be indemnifiable expenses; and action by a person with respect to any employee
benefit plan which such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be action not
opposed to the best interests of the Corporation. The provisions of this Section
2 of this Article Seventh shall be in addition to the other provisions of this
Article Seventh.
Section 3. Nothing in this Article Seventh protects or purports to
protect any director or officer against any liability to the Corporation or its
security holders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Section 4. Each section or portion thereof of this Article Seventh
shall be deemed severable from the remainder, and the invalidity of any such
section or portion shall not affect the validity of the remainder of this
Article.
Eighth: The duration of the Corporation shall be perpetual.
Ninth: From time to time, any of the provisions of these Articles of
Incorporation may be
<PAGE>
amended, altered or repealed (including any amendment that changes the terms of
any of the outstanding stock by classification, reclassification or otherwise),
and other provisions that may, under the statutes of the State of Maryland at
the time in force, be lawfully contained in articles of incorporation may be
added or inserted, upon the vote of the holders of a majority of the shares of
common stock of the Corporation outstanding and entitled to vote thereupon. If
these Articles of Incorporation specifically so provide, however, any such
amendment, alteration, repeal, addition or insertion may be affected only upon
the vote of three-fourths of the shares of common stock of the Corporation
outstanding and entitled to vote thereupon. The provisions of the prior sentence
may not be amended, altered or repealed except by vote of three-fourths of the
shares of common stock of the corporation outstanding and entitled to vote
thereupon. All rights at any time conferred upon the stockholders of the
Corporation by these Articles of Incorporation are subject to the provisions of
this Article Ninth.
<PAGE>
IN WITNESS WHEREOF, I have executed these Articles of Incorporation
acknowledging the same to be my act, on April __, 2000.
-----------------------------------
Incorporator
Witness:
- ------------------------
EXHIBIT B
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
A Maryland corporation
BY-LAWS
April 6, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I STOCKHOLDERS 1
Section 1.1. Place of Meeting 1
Section 1.2. Annual Meetings 1
Section 1.3. Special Meetings 1
Section 1.4. Notice of Meetings of Stockholders 2
Section 1.5. Record Dates 2
Section 1.6. Quorum; Adjournment of Meetings 3
Section 1.7. Voting and Inspectors 4
Section 1.8. Conduct of Stockholders' Meetings 4
Section 1.9. Concerning Validity of Proxies, Ballots, etc 5
Section 1.10. Action Without Meeting 5
Section 1.11. Advance Notice of Stockholder Nominees for Director
and Other Stockholder Proposals 5
ARTICLE II BOARD OF DIRECTORS 9
Section 2.1. Function of Directors 9
Section 2.2. Number of Directors 9
Section 2.3. Vacancies 10
Section 2.4. Increase or Decrease in Number of Directors 10
Section 2.5. Place of Meeting 10
Section 2.6. Regular Meetings 10
Section 2.7. Special Meetings 11
Section 2.8. Notices 11
Section 2.9. Quorum 11
Section 2.10. Executive Committee 11
<PAGE>
Section 2.11. Other Committees 12
Section 2.12. Telephone Meetings 12
Section 2.13. Action Without a Meeting 13
Section 2.14. Compensation of Directors 13
Section 2.15. Selection and Nomination of Non-Interested Directors 13
ARTICLE III OFFICERS 13
Section 3.1. Executive Officers 14
Section 3.2. Term of Office 14
Section 3.3. Powers and Duties 14
Section 3.4. Surety Bonds 15
ARTICLE IV CAPITAL STOCK 15
Section 4.1. Certificates for Shares 15
Section 4.2. Transfer of Shares 15
Section 4.3. Stock Ledgers 16
Section 4.4. Transfer Agents and Registrars 16
Section 4.5. Lost, Stolen or Destroyed Certificates 16
ARTICLE V CORPORATE SEAL; LOCATION OF OFFICES; BOOKS; NET ASSET VALUE 17
Section 5.1. Corporate Seal 17
Section 5.2. Location of Offices 17
Section 5.3. Books and Records 17
Section 5.4. Net Asset Value 17
ARTICLE VI FISCAL YEAR AND ACCOUNTANT 17
Section 6.1. Fiscal Year 18
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Section 6.2. Accountant 18
ARTICLE VII INDEMNIFICATION AND INSURANCE 18
Section 7.1. General 18
Section 7.2. Indemnification of Directors and Officers 18
Section 7.3. Insurance 19
ARTICLE VIII CUSTODIAN 20
ARTICLE IX AMENDMENT OF BY-LAWS 20
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ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
By-Laws
ARTICLE I
Stockholders
Section 1.1. Place of Meeting. All meetings of the stockholders
should be held at the principal office of the Corporation in the State of
Maryland or at such other place within the United States as may from time to
time be designated by the Board of Directors and stated in the notice of such
meeting.
Section 1.2. Annual Meetings. If a meeting of the stockholders of
the Corporation is required by the Investment Company Act of 1940, as amended,
to elect the directors, then there shall be submitted to the stockholders at
such meeting the question of the election of directors, and a meeting called for
that purpose shall be designated the annual meeting of stockholders for that
year. In other years in which no action by stockholders is required for the
aforesaid election of directors, no annual meeting need be held.
Section 1.3. Special Meetings. Special meetings of the stockholders
for any purpose or purposes may be called by the Chairman of the Board, the
President, or a majority of the Board of Directors. Special meetings of
stockholders shall also be called by the Secretary upon receipt of the request
in writing signed by stockholders holding not less than a majority of the votes
entitled to be cast thereat. Such request shall state the purpose or purposes of
the proposed meeting and the matters proposed to be acted on at such proposed
meeting. The Secretary shall inform such stockholders of the reasonably
estimated costs of preparing and mailing such notice of meeting and upon payment
to the Corporation of such costs, the Secretary
<PAGE>
shall give notice as required in this Article to all stockholders entitled to
notice of such meeting. No special meeting of stockholders need be called upon
the request of the holders of common stock entitled to cast less than a majority
of all votes entitled to be cast at such meeting to consider any matter which is
substantially the same as a matter voted upon at any special meeting of
stockholders held during the preceding twelve months.
Section 1.4. Notice of Meetings of Stockholders. Not less than ten
days' and not more than ninety days' written or printed notice of every meeting
of stockholders, stating the time and place thereof (and the purpose of any
special meeting), shall be given to each stockholder entitled to vote thereat
and to each other stockholder entitled to notice of the meeting by leaving the
same with such stockholder or at such stockholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such stockholder at
such stockholder's address as it appears upon the books of the Corporation. If
mailed, notice shall be deemed to be given when deposited in the mail addressed
to the stockholder as aforesaid.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by proxy
or to any stockholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
Section 1.5. Record Dates. The Board of Directors may fix, in
advance, a record date for the determination of stockholders entitled to notice
of or to vote at any stockholders meeting or to receive a dividend or be
allotted rights or for the purpose of any other proper determination with
respect to stockholders and only stockholders of record on such date shall be
entitled to notice of and to vote at such meeting or to receive such dividends
or rights or
<PAGE>
otherwise, as the case may be; provided, however, that such record date shall
not be prior to ninety days preceding the date of any such meeting of
stockholders, dividend payment date, date for the allotment of rights or other
such action requiring the determination of a record date; and further provided
that such record date shall not be prior to the close of business on the day the
record date is fixed, that the transfer books shall not be closed for a period
longer than 20 days, and that in the case of a meeting of stockholders, the
record date or the closing of the transfer books shall not be less than ten days
prior to the date fixed for such meeting.
Section 1.6. Quorum; Adjournment of Meetings. The presence in person
or by proxy of stockholders entitled to cast a majority of the votes entitled to
be cast thereat shall constitute a quorum at all meetings of the stockholders,
except as otherwise provided in the Articles of Incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the holders of a majority of the stock present in person or by proxy shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote at such meeting shall be present, to a date not more than 120 days after
the original record date. At such adjourned meeting at which the requisite
amount of stock entitled to vote thereat shall be represented, any business may
be transacted which might have been transacted at the meeting as originally
notified.
Any meeting of stockholders, annual or special, may adjourn from
time to time to reconvene at the same or some other place, and notice need not
be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have
<PAGE>
been transacted at the original meeting.
Section 1.7. Voting and Inspectors. At all meetings, stockholders of
record entitled to vote thereat shall have one vote for each share of common
stock standing in his name on the books of the Corporation (and such
stockholders of record holding fractional shares, if any, shall have
proportionate voting rights) on the date for the determination of stockholders
entitled to vote at such meeting, either in person or by proxy appointed by
instrument in writing subscribed by such stockholder or his duly authorized
attorney.
All elections shall be had and all questions decided by a majority
of the votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of Directors, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the stock entitled to
vote at such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
Inspector.
Section 1.8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a vice president, or
if none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a Secretary of such
meetings, or if he or she is not present, an Assistant Secretary shall so act;
if neither the Secretary nor the Assistant Secretary is present, then the
meeting shall elect its Secretary.
<PAGE>
Section 1.9. Concerning Validity of Proxies, Ballots, etc. At every
meeting of the stockholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the Secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed by the Chairman of the meeting,
in which event such inspectors of election shall decide all such questions.
Section 1.10. Action Without Meeting. Any action to be taken by
stockholders may be taken without a meeting if (1) all stockholders entitled to
vote on the matter consent to the action in writing, (2) all stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and (3) said consents and waivers are filed with
the records of the meetings of stockholders. Such consent shall be treated for
all purposes as a vote at the meeting.
Section 1.11. Advance Notice of Stockholder Nominees for Director
and Other Stockholder Proposals.
(a) The matters to be considered and brought before any annual or
special meeting of stockholders of the Corporation shall be limited to only such
matters, including the nomination and election of directors, as shall be brought
properly before such meeting in compliance with the procedures set forth in this
Section 1.11.
(b) For any matter to be properly before any annual meeting of
stockholders, the matter must be (i) specified in the notice of annual meeting
given by or at the direction of the Board of Directors, (ii) otherwise brought
before the annual meeting by or at the direction of the Board of Directors or
(iii) brought before the annual meeting in the manner specified in this
<PAGE>
Section 1.11 by a stockholder of record or a stockholder (a "Nominee Holder")
that holds voting securities entitled to vote at meetings of stockholders
through a nominee or "street name" holder of record and can demonstrate to the
Corporation such indirect ownership and such Nominee Holder's entitlement to
vote such securities. In addition to any other requirements under applicable law
and the Articles of Incorporation and By-Laws of the Corporation, persons
nominated by stockholders for election as directors of the Corporation and any
other proposals by stockholders shall be properly brought before the meeting
only if notice of any such matter to be presented by a stockholder at such
meeting of stockholders (the "Stockholder Notice") shall be delivered to the
Secretary of the Corporation at the principal executive office of the
Corporation not less than 60 nor more than 90 days prior to the first
anniversary date of the annual meeting for the preceding year; provided,
however, that, if and only if the annual meeting is not scheduled to be held
within a period that commences 30 days before such anniversary date and ends 30
days after such anniversary date (an annual meeting date outside such period
being referred to herein as an "Other Annual Meeting Date"), such Stockholder
Notice shall be given in the manner provided herein by the later of the close of
business on (i) the date 60 days prior to such Other Annual Meeting Date or (ii)
the 10th day following the date such Other Annual Meeting Date is first publicly
announced or disclosed. Any stockholder desiring to nominate any person or
persons (as the case may be) for election as a director or directors of the
Corporation shall deliver, as part of such Stockholder Notice: (i) a statement
in writing setting forth (A) the name of the person or persons to be nominated,
(B) the number and class of all shares of each class of stock of the Corporation
owned of record and beneficially by each such person, as reported to such
stockholder by such nominee(s), (C) the information regarding each such person
<PAGE>
required by paragraph (b) of Item 22 of Rule 14a-101 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), adopted by the Securities
and Exchange Commission (or the corresponding provisions of any regulation or
rule subsequently adopted by the Securities and Exchange Commission applicable
to the Corporation), (D) whether such stockholder believes any nominee will be
an "interested person" of the Corporation (as defined in the Investment Company
Act of 1940, as amended), and, if not an "interested person", information
regarding each nominee that will be sufficient for the Corporation to make such
determination, and (E) the number and class of all shares of each class of stock
of the Corporation owned of record and beneficially by such stockholder; (ii)
each such person's signed consent to serve as a director of the Corporation if
elected, such stockholder's name and address; and (iii) in the case of a Nominee
Holder, evidence establishing such Nominee Holder's indirect ownership of, and
entitlement to vote, securities at the meeting of stockholders. Any stockholder
who gives a Stockholder Notice of any matter proposed to be brought before the
meeting (not involving nominees for director) shall deliver, as part of such
Stockholder Notice, the text of the proposal to be presented and a brief written
statement of the reasons why such stockholder favors the proposal and setting
forth such stockholder's name and address, the number and class of all shares of
each class of stock of the Corporation owned of record and beneficially by such
stockholder, if applicable, any material interest of such stockholder in the
matter proposed (other than as a stockholder) and, in the case of a Nominee
Holder, evidence establishing such Nominee Holder's indirect ownership of, and
entitlement to vote, securities at the meeting of stockholders. As used herein,
shares "beneficially owned" shall mean all shares which such person is deemed to
beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act.
<PAGE>
Notwithstanding anything in this Section 1.11 to the contrary, in
the event that the number of directors to be elected to the Board of Directors
of the Corporation is increased and either all of the nominees for director or
the size of the increased Board of Directors are not publicly announced or
disclosed by the Corporation at least 70 days prior to the first anniversary of
the preceding year's annual meeting, a Stockholder Notice shall also be
considered timely hereunder, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary of
the Corporation at the principal executive office of the Corporation not later
than the close of business on the 10th day following the first date all of such
nominees or the size of the increased Board of Directors shall have been
publicly announced or disclosed.
(c) Only such matters shall be properly brought before a special
meeting of stockholders as shall have been brought before the meeting pursuant
to the Corporation's notice of meeting. In the event the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any stockholder may nominate a person or
persons (as the case may be), for election to such position(s) as specified in
the Corporation's notice of meeting, if the Stockholder Notice required by
clause (b) of this Section 1.11 hereof shall be delivered to the Secretary of
the Corporation at the principal executive office of the Corporation not later
than the close of business on the 10th day following the day on which the date
of the special meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting is publicly announced or disclosed.
(d) For purposes of this Section 1.11, a matter shall be deemed to
have been "publicly announced or disclosed" if such matter is disclosed in a
press release reported by the
<PAGE>
Dow Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and Exchange
Commission.
(e) In no event shall the adjournment of an annual meeting, or any
announcement thereof, commence a new period for the giving of notice as provided
in this Section 1.11. This Section 1.11 shall not apply to stockholder proposals
made pursuant to Rule 14a-8 under the Exchange Act.
(f) The person presiding at any meeting of stockholders, in addition
to making any other determinations that may be appropriate to the conduct of the
meeting, shall have the power and duty to determine whether notice of nominees
and other matters proposed to be brought before a meeting has been duly given in
the manner provided in this Section 1.11 and, if not so given, shall direct and
declare at the meeting that such nominees and other matters shall not be
considered.
ARTICLE II
Board of Directors
Section 2.1. Function of Directors. The business and affairs of the
Corporation shall be conducted and managed by a Board of Directors. All powers
of the Corporation shall be exercised by or under the authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute.
Section 2.2. Number of Directors. The Board of Directors shall
consist of not less than three nor more than fourteen Directors, as may be
determined from time to time by vote of a majority of the Directors then in
office. Directors need not be stockholders. The first Board
<PAGE>
of Directors shall consist of the directors named in the Articles of
Incorporation who shall hold office until the first meeting of stockholders or
until their successors have been elected and qualified.
Section 2.3. Vacancies. In case of any vacancy in the Board of
Directors through death, resignation or other cause, other than an increase in
the number of Directors, subject to the provisions of law, a majority of the
remaining Directors, although a majority is less than a quorum, by an
affirmative vote, may elect a successor to hold office until the next annual
meeting of stockholders or until his successor is chosen and qualified.
Section 2.4. Increase or Decrease in Number of Directors. The Board
of Directors, by the vote of a majority of the entire Board, may increase the
number of Directors and may elect Directors to fill the vacancies created by any
such increase in the number of Directors until the next annual meeting of
stockholders or until their successors are duly chosen and qualified. The Board
of Directors, by the vote of a majority of the entire Board, may likewise
decrease the number of Directors to a number not less than that permitted by
law.
Section 2.5. Place of Meeting. The Directors may hold their meetings
within or outside the State of Maryland, at any office or offices of the
Corporation or at any other place as they may from time to time determine.
Section 2.6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and on such notice as the Directors may
from time to time determine.
The annual meeting of the Board of Directors shall be held as soon
as practicable after the annual meeting of the stockholders for the election of
Directors.
Section 2.7. Special Meetings. Special meetings of the Board of
Directors may
<PAGE>
be held from time to time upon call of the Chairman of the Board, the President,
the Secretary or two or more of the Directors, by oral or telegraphic or written
notice duly served on or sent or mailed to each Director not less than one day
before such meeting.
Section 2.8. Notices. Unless required by statute or otherwise
determined by resolution of the Board of Directors in accordance with these
By-laws, notices to Directors need not be in writing and need not state the
business to be transacted at or the purpose of any meeting, and no notice need
be given to any Director who is present in person or to any Director who, in
writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Waivers of notice need not state
the purpose or purposes of such meeting.
Section 2.9. Quorum. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that if there is
more than one Director, a quorum shall in no case be less than two Directors. If
at any meeting of the Board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum shall have been obtained. The act of the majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Directors, except as may be otherwise specifically provided by statute or by the
Articles of Incorporation or by these By-Laws.
Section 2.10. Executive Committee. The Board of Directors may
appoint from the Directors an Executive Committee to consist of such number of
Directors (not less than two) as the Board may from time to time determine. The
Chairman of the Committee shall be elected by the Board of Directors. The Board
of Directors shall have power at any time to change the
<PAGE>
members of such Committee and may fill vacancies in the Committee by election
from the Directors. When the Board of Directors is not in session, to the extent
permitted by law, the Executive Committee shall have and may exercise any or all
of the powers of the Board of Directors in the management and conduct of the
business and affairs of the Corporation. The Executive Committee may fix its own
rules of procedure, and may meet when and as provided by such rules or by
resolution of the Board of Directors, but in every case the presence of a
majority shall be necessary to constitute a quorum. During the absence of a
member of the Executive Committee, the remaining members may appoint a member of
the Board of Directors to act in his place.
Section 2.11. Other Committees. The Board of Directors may appoint
from the Directors other committees which shall in each case consist of such
number of Directors (not less than two) and shall have and may exercise such
powers as the Board may determine in the resolution appointing them. A majority
of all the members of any such committee may determine its action and fix the
time and place of its meetings, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power at any time to change the
members and powers of any such committee, to fill vacancies and to discharge any
such committee.
Section 2.12. Telephone Meetings. Members of the Board of Directors
or a committee of the Board of Directors may participate in a meeting by means
of a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means, subject to the provisions of the Investment Company
Act of 1940, constitutes presence in person at the meeting.
<PAGE>
Section 2.13. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of the proceedings of the Board
or such committee.
Section 2.14. Compensation of Directors. No Director shall receive
any stated salary or fees from the Corporation for his services as such if such
Director is, otherwise than by reason of being such Director, an interested
person (as such term is defined by the Investment Company Act of 1940) of the
Corporation or of its investment manager or principal underwriter. Except as
provided in the preceding sentence, Directors shall be entitled to receive such
compensation from the Corporation for their services as may from time to time be
voted by the Board of Directors.
Section 2.15. Selection and Nomination of Non-Interested Directors.
Subject to approval by a majority of the directors of the Corporation, the
directors of the Corporation who are not interested persons of the Corporation
(as that term is defined in the Investment Company Act of 1940) shall select and
nominate the directors of the Corporation who are not interested persons of the
Corporation.
ARTICLE III
Officers
Section 3.1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors. These may include a
Chairman of the Board of Directors (who shall be a Director) and shall include a
President, a Secretary and a Treasurer. The Board
<PAGE>
of Directors or the Executive Committee may also in its discretion appoint one
or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board of Directors or the Executive Committee may determine. The
Board of Directors may fill any vacancy which may occur in any office. Any two
offices, except those of President and Vice President, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law or these By-Laws
to be executed, acknowledged or verified by two or more officers.
Section 3.2. Term of Office. The term of office of all officers
shall be one year and until their respective successors are chosen and
qualified. Any officer may be removed from office at any time with or without
cause by the vote of a majority of the whole Board of Directors. Any officer may
resign his office at any time by delivering a written resignation to the
Corporation and, unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 3.3. Powers and Duties. The officers of the Corporation
shall have such powers and duties as shall be stated in a resolution of the
Board of Directors, or the Executive Committee and, to the extent not so stated,
as generally pertain to their respective offices, subject to the control of the
Board of Directors and the Executive Committee.
Section 3.4. Surety Bonds. The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or sureties as
<PAGE>
the Board of Directors may determine, conditioned upon the faithful performance
of his duties to the Corporation, including responsibility for negligence and
for the accounting of any of the Corporation's property, funds or securities
that may come into his hands.
ARTICLE IV
Capital Stock
Section 4.1. Certificates for Shares. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for the full
number of shares of stock of the Corporation owned by him in such form as the
Board may from time to time prescribe.
Section 4.2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require; in the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
Section 4.3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a Transfer Agent, at the offices of
the Transfer Agent of the Corporation.
Section 4.4. Transfer Agents and Registrars. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon
<PAGE>
any such appointment being made all certificates representing shares of capital
stock thereafter issued shall be countersigned by one of such transfer agents or
by one of such registrars of transfers or by both and shall not be valid unless
so countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 4.5. Lost, Stolen or Destroyed Certificates. The Board of
Directors or the Executive Committee or any officer or agent authorized by the
Board of Directors or Executive Committee may determine the conditions upon
which a new certificate of stock of the Corporation of any class may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in its discretion, require the owner of such certificate or
such owner's legal representative to give bond, with sufficient surety, to the
Corporation and each Transfer Agent, if any, to indemnify it and each such
Transfer Agent against any and all loss or claims which may arise by reason of
the issue of a new certificate in the place of the one so lost, stolen or
destroyed.
ARTICLE V
Corporate Seal; Location of
Offices; Books; Net Asset Value
Section 5.1. Corporate Seal. The Board of Directors may provide for
a suitable corporate seal, in such form and bearing such inscriptions as it may
determine. Any officer or director shall have the authority to affix the
corporate seal. If the Corporation is required to place its corporate seal to a
document, it shall be sufficient to place the word "(seal)" adjacent to the
signature of the authorized officer of the Corporation signing the document.
Section 5.2. Location of Offices. The Corporation shall have a
principal office in the State of Maryland. The Corporation may, in addition,
establish and maintain such other
<PAGE>
offices as the Board of Directors or any officer may, from time to time,
determine.
Section 5.3. Books and Records. The books and records of the
Corporation shall be kept at the places, within or without the State of
Maryland, as the directors or any officer may determine; provided, however, that
the original or a certified copy of the by-laws, including any amendments to
them, shall be kept at the Corporation's principal executive office.
Section 5.4. Net Asset Value. The value of the Corporation's net
assets shall be determined at such times and by such method as shall be
established from time to time by the Board of Directors.
ARTICLE VI
Fiscal Year and Accountant
Section 6.1. Fiscal Year. The fiscal year of the Corporation, unless
otherwise fixed by resolution of the Board of Directors, shall begin on the
first day of May and shall end on the last day of April in each year.
Section 6.2. Accountant. The Corporation shall employ an independent
public accountant or a firm of independent public accountants as its Accountant
to examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The employment of the Accountant shall be
conditioned upon the right of the Corporation to terminate the employment
forthwith without any penalty by vote of a majority of the outstanding voting
securities at any stockholders' meeting called for that purpose.
ARTICLE VII
Indemnification and Insurance
<PAGE>
Section 7.1. General. The Corporation shall indemnify directors,
officers, employees and agents of the Corporation against judgments, fines,
settlements and expenses to the fullest extent authorized and in the manner
permitted, by applicable federal and state law.
Section 7.2. Indemnification of Directors and Officers. The
Corporation shall indemnify to the fullest extent permitted by law (including
the Investment Company Act of 1940, as amended) as currently in effect or as the
same may hereafter be amended, any person made or threatened to be made a party
to any action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director or officer of the Corporation or serves or
served at the request of the Corporation any other enterprise as a director or
officer. To the fullest extent permitted by law (including the Investment
Company Act of 1940) as currently in effect or as the same may hereafter be
amended, expenses incurred by any such person in defending any such action, suit
or proceeding shall be paid or reimbursed by the Corporation promptly upon
receipt by it of an undertaking of such person to repay such expenses if it
shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation. The rights provided to any person by this
Article VII shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing to serve as a
director or officer as provided above. No amendment of this Article VII shall
impair the rights of any person arising at any time with respect to events
occurring prior to such amendment. For purposes of this Article VII, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term "other enterprises" shall
include any corporation,
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partnership, joint venture, trust or employee benefit plan; service "at the
request of the Corporation" shall include service as a director or officer of
the Corporation which imposes duties on, or involves services by, such director
or officer with respect to an employee benefit plan, its participants or
beneficiaries; any excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and action by a
person with respect to any employee benefit plan which such person reasonably
believes to be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests of the
Corporation.
Section 7.3. Insurance. Subject to the provisions of the Investment
Company Act of 1940, as amended, the Corporation, directly, through third
parties or through affiliates of the Corporation, may purchase, or provide
through a trust fund, letter of credit or surety bond insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation,
or who, while a Director, officer, employee or agent of the Corporation, is or
was serving at the request of the Corporation as a Director, officer, employee,
partner, trustee or agent of another foreign or domestic corporation,
partnership joint venture, trust or other enterprise against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Corporation would have the power
to indemnify such person against such liability.
ARTICLE VIII
Custodian
The Corporation shall have as custodian or custodians one or more
trust companies or banks of good standing, foreign or domestic, as may be
designated by the Board of
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Directors, subject to the provisions of the Investment Company Act of 1940, as
amended, and other applicable laws and regulations; and the funds and securities
held by the Corporation shall be kept in the custody of one or more such
custodians, provided such custodian or custodians can be found ready and willing
to act, and further provided that the Corporation and/or the Custodians may
employ such subcustodians as the Board of Directors may approve and as shall be
permitted by law.
ARTICLE IX
Amendment of By-Laws
The By-Laws of the Corporation may be altered, amended, added to or
repealed only by majority vote of the entire Board of Directors.
