(As filed with the Securities and Exchange Commission on July 6, 2000)
Securities Act File No. 333-34586
Investment Company Act File No. 811-09889
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
Registration Statement Under The Securities Act of 1933 |X|
Pre-Effective Amendment No. 1 |X|
Post-Effective Amendment No. __ |_|
and/or
Registration Statement Under The Investment Company Act of 1940 |X|
Amendment No. 1 |X|
(check appropriate box or boxes)
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 a copy to:
Leonard B. Mackey, Jr., Esq.
Clifford Chance Rogers & Wells LLP
200 Park Avenue
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. |X|
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
Title of Securities Being Registered Offering Price Amount Of Registration Fee
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock $.01 Par Value......... $100,000 $26.40*
--------------------------------------------------------------------------------------------------------
</TABLE>
* Previously paid.
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>
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>
PROSPECTUS
Orbitex Life Sciences & Biotechnology Fund, Inc.
------------------------------
4,000,000 Shares of Common Stock
$25 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
of 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 engaged in life sciences, pharmaceuticals, medical research and
biotechnology research, development and implementation, and other areas related
to the life sciences and biotechnology industries. 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 7.
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 $ 26.00 $104,000,000
Sales Load $ 1.00 $ 4,000,000
Proceeds to Fund $ 25.00 $100,000,000
--------------------------
The Fund is offering up to 4,000,000 shares of its common stock through
Orbitex Funds Distributor, Inc., the Fund's distributor. The distributor has
entered into selected dealer agreements with various dealers that have agreed to
use their best efforts to sell the Fund's shares. The dealers have no obligation
to sell any specific number of Fund shares. The Fund will pay the distributor a
one-time placement fee equal to 0.50% of the net proceeds to the Fund. The Fund
will pay each dealer that has entered into a shareholder servicing agreement
with the distributor 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 dealer. Orbitex will make additional annual payments of 0.25% of such net
asset value to each such dealer from its own resources. The Fund will pay
organizational and offering expenses estimated at $________ from the proceeds of
the offering.
JULY __, 2000
ii
<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 July __, 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.
iii
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY........................................................... 1
SUMMARY OF FUND EXPENSES..................................................... 6
RISK FACTORS................................................................. 7
USE OF PROCEEDS.............................................................. 12
MANAGEMENT OF THE FUND....................................................... 16
REPURCHASE OFFERS............................................................ 17
CALCULATION OF NET ASSET VALUE............................................... 19
CAPITAL STOCK................................................................ 20
DISTRIBUTION POLICY.......................................................... 20
TAXES........................................................................ 21
DISTRIBUTION................................................................. 22
GENERAL INFORMATION.......................................................... 22
TABLE OF CONTENTS OF SAI..................................................... 23
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.
iv
<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, primarily
engaged in life sciences, pharmaceuticals,
medical research and biotechnology research,
development and implementation, and other areas
related to the life sciences and biotechnology
industries. 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 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. 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 is the Fund's investment manager. As of
May 31, 2000, Orbitex managed approximately $690
million in 11 mutual fund portfolios and for
institutional and other accounts.
Timothy F. Bepler, CFA is the portfolio manager
for the Fund. Mr. Bepler joined Orbitex in 1999
as a Vice President and portfolio manager. He
brought with him eight years of investment
analysis 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.
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.
2
<PAGE>
The Offering The Fund is offering up to 4,000,000 shares of
common stock at $25 per share plus a sales charge
through its distributor, Orbitex Funds
Distributor, Inc. The distributor has entered
into selected dealer agreements with various
dealers that have agreed to use their best
efforts to sell the Fund's shares. The dealers
are not obligated to sell any specific number of
Fund shares. It is contemplated that the dealers
will solicit subscriptions for Fund shares during
a subscription period which shall end on or about
________, 2000 (the "Closing Date"), at which
time the Fund will commence operations. During
the 90-day period following the Closing Date or
such other period of time as may be determined by
the Fund in its sole discretion, the Fund will
continuously offer its shares to investors at its
then current net asset value per share plus the
sales charge. The minimum investment in the Fund
is $25,000. See "Distribution." The Fund will pay
the distributor a one-time placement fee equal to
0.50% of the value of the net proceeds to the
Fund. The Fund will pay each dealer that has
entered into a shareholder servicing agreement
with the distributor 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 dealer. Orbitex will
make additional annual payments of 0.25% of such
net asset value to each such dealer 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.
3
<PAGE>
Unlisted Closed-End Structure; The Fund has been organized as a closed-end
Limited Liquidity management investment company. Closed-end funds
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."
4
<PAGE>
Risk Factors An investment in the Fund involves a high degree
of risk. These include the risks of:
o Investing in life sciences and biotechnology
companies - These companies are subject to
government regulation and approval of their
products and services, which can have a
significant effect on their market price. The
types of products or services produced or
provided by these companies may quickly become
obsolete. Many of these companies are relatively
small and have thinly traded securities, may not
yet offer products and may have persistent losses
during a new product's transition from
development to production.
o Investing in venture capital companies and
private venture capital funds - Venture capital
companies represent highly speculative
investments. 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.
o Investing in securities that are illiquid and
volatile - Illiquid securities involve the risk
that they cannot be sold at the time desired by
the Fund or at prices approximating the value the
Fund has determined. Stock prices of
biotechnology companies are very volatile and the
Fund's performance may sometimes be significantly
worse than that of other types of funds.
o Investing in illiquid shares of an unlisted
closed-end fund - The Fund does not intend to
list its shares for trading on any national
securities exchange. The Fund's shares are not
readily marketable and are significantly less
liquid than shares of funds that trade on an
exchange. Because the Fund is a closed-end
investment company, shares of the Fund may not be
redeemed on a daily basis. Although the Fund will
make quarterly repurchase offers, you may not be
able to sell all the shares that you wish to sell
in a repurchase offer.
o Investing in a fund that may employ substantial
leverage - To the extent 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.
o Concentration in a small number of industry
sectors and maintaining a "non-diversified"
portfolio - 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.
o Investing in small companies - Small companies
may be subject to poor corporate performance due
to less experienced management, limited product
lines, undeveloped markets and/or limited
financial resources, and to less predictable
returns due to shorter operating histories, less
publicly available information and little or no
research by the investment community.
o Investing in debt securities rated below
investment grade - Non-investment grade
securities are considered to be predominantly
speculative with respect to the issuer's capacity
to pay interest and repay principal.
o Investing in securities of non-U.S. issuers -
Foreign securities face specific risks,
including: unfavorable changes in currency rates,
restrictions on the repatriation of capital
invested abroad, reduced availability of
information, different accounting and financial
standards, and reduced liquidity as a result of
inadequate trading volume.
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. For a more complete
discussion of the risks, see "Risk Factors."
5
<PAGE>
6
<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)............. 4.00%
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..................................................... 0.75%
----
Total Annual Expenses (other than interest expense)................ 2.75%
====
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 $100 million. The Fund will pay the
distributor a one-time placement fee equal to 0.50% of the net proceeds of this
offering, which is not included in "Total Annual Expenses" above. The Fund also
will pay organizational and offering expenses, estimated to be $_________,
from the proceeds of the offering; these expenses 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............ $27 $82 $140 $296
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.
7
<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 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.
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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 the 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 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
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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.
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. In addition, if the Fund makes an
equity investment in a venture capital company which has already received
venture capital investments from other sources, the Fund's investment may be
subordinate to such other investments.
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,
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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 its investors, including 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 fee).
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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.
Lending of Securities
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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.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.
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 and Biotechnology Companies
The Fund will invest primarily in the securities of companies, both U.S.
and foreign, primarily engaged in life sciences, pharmaceuticals, medical
research and biotechnology research, development and implementation, and other
areas related to the life sciences and biotechnology industries. 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
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
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to be "principally engaged" in one of the above activities if at least 50% of
its revenues or profits were derived from, or at least 50% of its assets were
in, 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 10% of the Fund's total
assets 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 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
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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.
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 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.
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Short Sales
The Fund may engage in 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. The Fund's short sales transactions
will not be limited by the Fund's borrowing policy described above.
Non-Diversified Status
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
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
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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 was established in 1995 and employs a staff
of eight investment management professionals with an average experience of ten
years in the investment management business. 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 May 31,
2000, Orbitex managed approximately $690 million in 11 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 as a Vice President and portfolio manager. He brought with him
eight years of investment analysis 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 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.
The Fund's organizational and offering expenses are estimated at $________
and will be paid from the proceeds of the offering.
Transfer Agent and Dividend Disbursing Agent
American Data Services, Inc. ("ADS"), The Hauppauge Corporate Center, 150
Motor Parkway, Hauppauge, New York 11788, is the Fund's transfer agent and
dividend disbursing agent. ADS also is the Fund's shareholder service agent, ^
providing 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.
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<PAGE>
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.
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
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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.
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."
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
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<PAGE>
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 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 its net asset value per share available
for publication weekly.
CAPITAL STOCK
The Fund is authorized to issue 100 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.
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<PAGE>
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.
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
21
<PAGE>
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.
For additional information about the Fund's automatic reinvestment plan,
you may call 1-888-ORBITEX or contact ADS, The Hauppauge Corporate Center, 150
Motor Parkway, Hauppauge, New York 11788.
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 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.
DISTRIBUTION
Orbitex Funds Distributor, Inc., 410 Park Avenue, New York, New York 10022
(the "Distributor"), is the distributor of the Fund's shares. The Distributor
has entered into selected dealer agreements with various dealers (the "Selected
Dealers") that have agreed to use their best efforts to sell the Fund's shares.
The Selected Dealers are required to pay for only the securities they sell to
the public and have no obligation to sell any specific number of Fund shares.
The Selected Dealers will solicit subscriptions for Fund shares from the
date hereof until __________, 2000 (the "Subscription Period"), unless extended
by the mutual agreement of the Fund and the Distributor. Subscriptions will be
payable on the [third] business day following the termination of the
Subscription Period (the "Closing Date"), at which time the Fund will commence
operations. In addition, during the 90-day period following the Closing Date or
such other period of time as may be determined by the Fund in its sole
discretion (the "Continuous Offering Period"), the Fund will continuously offer
its shares through the Distributor and the Selected Dealers.
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During the Subscription Period, the public offering price of the shares to
investors shall be $25.00 per share plus the sales charge equal to 4% (4.16% of
the net amount invested). The Selected Dealers will be entitled to receive the
amount of the sales charge in respect of Fund shares sold during the
Subscription Period.
During the Continuous Offering Period, the public offering price of the
shares to investors shall be the Fund's then current net asset value per share,
determined by the Fund or any agent of the Fund in accordance with the method
set forth above under "Calculation of Net Asset Value," plus the sales charge
equal to 4% (4.16% of the net amount invested). The Selected Dealers will be
entitled to receive the amount of the sales charge in respect of Fund shares
sold during the Continuous Offering Period.
The Distributor, in its sole discretion, may pay all or a portion of the
placement fee to certain Selected Dealers.
Fund shares may be sold without a sales charge to the directors, trustees,
officers and employees of the Fund, a fund in the Orbitex Group of Funds,
Orbitex or its affiliates, a Selected Dealer, such persons' immediate family
members, and partners and employees of outside legal counsel to the Fund or
other funds managed by Orbitex.
Future Offerings
After the end of the Continuous Offering Period, the Fund may from time to
time 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 Dealers that have entered into a
shareholder servicing agreement with the Distributor a shareholder servicing fee
to compensate them for providing shareholder services and the maintenance of
accounts. These services include responding to client inquiries about the Fund
or their share position in the Fund, forwarding shareholder communications to
clients, assisting clients in changing dividend options, account designations or
addresses, and assisting in processing repurchase requests. 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 April 6, 2000 and has no operating history.
The Fund's office is located at The Hauppauge Corporate Center, 150 Motor
Parkway, Hauppauge, NY 11788 and its telephone number is 1-888-ORBITEX.
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.
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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 Statement and Report of Independent Auditor...................... B-14
24
<PAGE>
ORBITEX
LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
The Hauppage Corporate Center, 150 Motor Parkway,
Hauppage, New York 11788
A Management Type
Non-Diversified, Closed-End
Investment Company
COMMON STOCK
($0.01 PAR VALUE)
PROSPECTUS
JULY __, 2000
INVESTMENT MANAGER SHAREHOLDER SERVICE AGENT
Orbitex Management, Inc. American Data Services, Inc.
410 Park Avenue The Hauppauge Corporate Center
New York, New York 10022 150 Motor Parkway
Hauppauge, New York 11788
CUSTODIAN GENERAL COUNSEL
Circle Trust Company Clifford Chance Rogers & Wells LLP
Metro Center 200 Park Avenue
One Station Place New York, New York 10166
Stamford, Connecticut 06902
<PAGE>
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY FUND, INC.
JULY __, 2000
STATEMENT OF ADDITIONAL INFORMATION
The Hauppauge Corporate Center
150 Motor Parkway
Hauppauge, New York 11788
1-888-ORBITEX
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 JULY __, 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-8
Investment Advisory and Other Services.................................... B-9
Experts................................................................... B-10
Custodian, Stockholder Service Agent and Dividend Paying Agent............ B-10
Brokerage Commissions..................................................... B-10
Additional Information.................................................... B-11
Financial Statement and Report of Independent Accountants................. B-12
B-1
<PAGE>
ADDITIONAL INVESTMENT POLICIES
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. The Fund will invest primarily in the
securities of companies, both U.S. and foreign, primarily engaged in life
sciences, pharmaceuticals, medical research and biotechnology research,
development and implementation, and other areas related to the life sciences and
biotechnology industries. A company that is "primarily engaged" in life sciences
or biotechnology is one that either derives at least 50% of its revenue from, or
has at least 50% of its assets in, life sciences or biotechnology activities.
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:
o the Fund will make share repurchase offers every three
months (except under
2
<PAGE>
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;
o 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%;
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); and
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.
(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
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<PAGE>
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 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.
4
<PAGE>
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 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
5
<PAGE>
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 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
6
<PAGE>
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 the 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 or Illiquid Securities. The Fund may invest in illiquid
securities, including restricted securities (i.e., securities not readily
marketable without registration under 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:
7
<PAGE>
o 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;
o 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;
o 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
o 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 (54) Director Chairman, Paul Sebastian, Inc. (1994-present)
1540 West Park Avenue (Perfume distributor); President, Olcott
Ocean, New Jersey 07712 Corporation (1992-1994) (Perfume distributor).
*Richard E. Stierwalt (46) President and President, Chief Executive Officer and Director,
Chairman of the Orbitex Financial Services Group, Inc.
Board (1998-present) (Investment management);
Consultant, Bisys Management, Inc. (1996-1998
(Mutual fund distributor); Chairman of the Board
and Chief Executive Officer, Concord Financial
Group (1987-1996) (Administrator and distributor
of mutual funds).
Stephen J. Hamrick (48) Director Chief Executive Officer, Carey Financial
Carey Financial Corp. Corporation (1995-present) (Broker-dealer); Chief
50 Rockefeller Plaza Executive Officer, Wall Street Investors Services
New York, New York 10020 (1994-1995) (Retail brokerage firm); Senior Vice
President, PaineWebber, Inc. (1988-1994)
(Investment Services).
Leigh Wilson (51) Director Chairman & CEO, New Century Care, Inc.
53 Sylvan Road North (1989-present) (Merchant bank); Principal, New
Westport, Connecticut Century Living, Inc. (1995-present); Director,
06880 Chimney Rock Vineyard and Chimney Rock Winery;
President and Director, Key Mutual Funds
(1989-present).
Keith Kemp (40) Vice President Chairman & CEO, New Century Care, Inc.
and Assistant (1989-present) (Merchant bank); Principal, New
Treasurer Century Living, Inc. (1995-present); Director,
Chimney Rock Vineyard and Chimney Rock Winery;
President and Director, Key Mutual Funds
(1989-present). February 1999) (Bank); Senior
Manager, Forum Financial Group (November 1996 -
February 1998) (Mutual Fund Administrator);
Business Unit Controller, First Data Investor
Services Group (March 1995 - November 1996)
(Mutual Fund Administrator).
M. Fyzul Khan (29) Vice President Legal Counsel, Orbitex Financial Services Group,
and Secretary Inc. (1998-present); Attorney, CIBC Oppenheimer
(1997-1998).
Kevin Meehan (38) Vice President Chief Operations Officer, Orbitex Financial
and Assistant Services Group, Inc. (1998-present); Manager,
Secretary Investor Services Consulting, KPMG (1995-1998).
Vali Nasr (46) Vice President Chief Financial Officer, Orbitex Management, 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).
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Position(s) Held
Address with Fund Principal Occupation(s) During the Past 5 Years
<S> <C> <C>
Catherine McCabe (33) Assistant Vice Compliance Officer, Orbitex Management, Inc.
President and (March 2000-present); Compliance Analyst, Mutual
Assistant of America Life Insurance Company (February 1996-
Secretary March 2000); Sales Assistant, Smith Barney (June
1993-January 1996) (Broker-dealer).
Michael Wagner (49) Assistant Senior Vice President, American Data Services,
150 Motor Parkway Treasurer Inc. (1987-present) (Mutual Fund Administrator).
Hauppauge, New York
11788-0132
</TABLE>
The Fund pays each Director of the Fund who is not an interested person of
the Fund its allocable share of an aggregate per meeting fee of $1,250 for
the Fund and any other closed-end fund advised by Orbitex.
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.
The Board of Directors has approved a Code of Ethics (the "Code") under
Rule 17j-1 of the 1940 Act that covers the Fund and Orbitex. The Code restricts
the personal investing activities of personnel subject to the Code, but permits
them to invest in securities, including securities that may be purchased or held
by the Fund, if certain procedures are followed. Among other things, the Code
provides for trading "blackout periods" which prohibit trading by such personnel
within seven calendar days before or after trading by the Fund in the same or an
equivalent security. The Code can be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-202-942-8090. The Code also is available on the Commission's Internet site at
http://www.sec.gov. A copy of the Code also may be obtained, after paying a
duplicating fee, by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.
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.
Orbitex is a wholly-owned subsidiary of Orbitex Financial Services Group, Inc.,
a New York holding company. 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
9
<PAGE>
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 accountants for
the Fund and in such capacity will audit the Fund's annual financial statements
and financial highlights.
CUSTODIAN, STOCKHOLDER SERVICE AGENT AND
DIVIDEND PAYING AGENT
Circle Trust Company, Metro Center, One Station Place, Stamford,
Connecticut 06902, serves as custodian to the Fund. Circle Trust's
responsibilities include safeguarding and controlling the Fund's cash and
securities, handling the receipt and delivery of portfolio securities, and
collecting interest and dividends on the Fund's investments. Circle Trust
provides a full range of custody, management, accounting and administrative
services to institutional investors worldwide. American Data Services, Inc., The
Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788, 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.
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
10
<PAGE>
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 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.
11
<PAGE>
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 a majority 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 ACCOUNTANTS
[To be provided by amendment]
12
<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 is incorporated by reference to Exhibit
2(a) to the Fund's Registration Statement on Form N-2.
b. Bylaws of Registrant are incorporated by reference to Exhibit
2(b) to the Fund's Registration Statement on Form N-2.
c. Not Applicable.
d. Not Applicable.
e. Not Applicable.
f. Not Applicable.
g. Investment Advisory Agreement between Registrant and Orbitex
Management, Inc.*
h. Distribution Agreement between Registrant and Orbitex Funds
Distributor, Inc.*
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 $ 5,000
Miscellaneous (mailing, etc.) $______
Total...............................................$______
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<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 July 1, 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: Circle Trust Company
Metro Center
One Station Place
Stamford, Connecticut 06902
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:
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<PAGE>
I. The Registrant undertakes to suspend the offering of shares until the
prospectus is amended 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 Amendment to
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
6th day of July, 2000.
ORBITEX LIFE SCIENCES & BIOTECHNOLOGY
FUND, INC.
By:
----------------------------------
Richard E. Stierwalt
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons, in the
capacities indicated, on July 6, 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 officer)
(Vali Nasr)
/s/ M. Fyzul Khan Director
--------------------------------
(M. Fyzul Khan)
/s/ Catherine McCabe Director
--------------------------------
(Catherine McCabe)
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