As filed with the Securities and Exchange Commission on February 23, 1999
1940 Act Registration No. 811-6187
1933 Act File No. 33-36454
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 10 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 10 /X/
(Check appropriate box or boxes)
ASM Index 30 Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
15436 North Florida Avenue, Suite 110, Tampa, Florida 33613
(Address of Principal Executive Offices) (Zip Code)
(813) 963-3150
Registrant's Telephone Number, Including Area Code
S. Cash Ulmer, 15436 North Florida Avenue, Suite 110, Tampa, Florida 33613
(Name and Address of Agent for Service)
Please send copies of communications to
Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
It is proposed that this filing will become effective
___ immediately upon filing pursuant to paragraph (b)
___ on ____________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
___ on ____________ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ____________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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[Front Cover]
ASM Index 30
Fund, Inc. Logo
ASM INDEX 30 FUND
15436 N. Florida Avenue
Suite 110
Tampa, Florida 33613
(800) 445-2763
PROSPECTUS
DATED MARCH __, 1999
A DIVERSIFIED, PURE NO-LOAD MUTUAL FUND
Everything you need to open your account is inside, including:
Current Prospectus
New Account Application
New Account Information
How to Contact ASM Index 30 Fund
As with all mutual funds, the U.S. Securities and Exchange Commission has not
approved or disapproved these securities and does not guarantee the accuracy or
completeness of this Prospectus. It is a criminal offense to imply or state
otherwise.
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[INSIDE FRONT COVER]
Logos of Companies that Comprise the Dow Jones Industrial Average
All trademarks are registered and printed with the permission of each company.
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Table of Contents Page Page
- ----------------- ---- ----
About the Fund 4 Buying Shares 9
Performance Information 6 Net Asset Value 9
Fees and Expenses 7 Selling Shares 12
Management of the Fund 8 Distribution and Taxes 13
Shareholder Investment Financial Highlights 15
Accounts 9
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ABOUT THE FUND
Investment Objective --
The investment objective of the ASM Index 30 Fund, Inc.(the "Fund") is to
achieve total return through a combination of capital appreciation and current
income.
Investment Approach --
The Fund limits its investments to the common stocks of the 30 companies that
make up the well-known Dow Jones Industrial Average ("DJIA")*, all of which are
listed on the New York Stock Exchange. The stocks of these companies are widely
known and represent major American corporations engaged in a variety of
industries. The Fund is sold directly to investors at the current net asset
value without a sales charge or distribution (12b-1) charge.
The Fund invests at least 95% of the Fund's assets in an equal number of shares
of each of these 30 companies, without regard to the share prices of the
individual stocks, with the goal of tracking the total return of the DJIA. The
balance of any assets not invested in these companies is normally held in cash
or cash equivalents.
* "Dow Jones Industrial Average" and "DJIA" are the property of Dow Jones &
Company. The ASM Index 30 Fund, Inc. is neither affiliated with, nor endorsed
by, Dow Jones & Company.
Investment Risks --
There is no guarantee that the Fund will achieve its investment objective. Since
the Fund limits its investments to 30 widely followed stocks, any number of
factors, including market and economic conditions, can cause the Fund's
performance to be lower or greater than that of other funds which invest in
similar stocks. Because the prices of stocks fluctuate, your investment in the
Fund will fluctuate, which means that you could lose money. However, stocks have
historically been a popular choice of long term investors with specific
investment goals.
Some of the risks of investing in the Fund include:
Market Risk - Market risk is the risk that all or a majority of the
securities in a certain market - like the stock or bond market - will
decline in value because of factors such as economic conditions, investor
confidence and future expectations.
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Industry and Security Risk - Generally, this is the risk that the value of
securities in a particular industry or the value of an individual stock or
bond will decline because of changing expectations for the performance of
that industry or for the individual company issuing the stock or bond.
The risks make it possible that one or more of the stocks held by the Fund may
go down in value, which will affect the Fund's goal of increasing the total
value of Fund shares. However, by limiting the stocks held by the Fund to 30
well-known, major American corporations, the potential for risk, while not
eliminated, may be somewhat reduced. Please see the Statement of Additional
Information for further discussion of these risks and other risk factors.
The Fund may not achieve its investment goals and it is not intended to serve as
a complete investment program. An investment in the Fund is not a bank deposit
and it is not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or any other government agency.
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PERFORMANCE INFORMATION
The charts that follow help to show the returns and risks of investing in the
Fund. They show changes in the Fund's yearly performance over the life of the
Fund and compare the Fund's average annual returns for the past one-year,
five-year, and the life of the Fund to those of the DJIA during each period.
Investment performance also often reflects the risks associated with the Fund's
investment objective and policies. These factors should be considered when
comparing the Funds to other funds. You should keep in mind that the Fund's past
performance is not necessarily an indication of the Fund's future performance.
ASM INDEX 30 FUND TOTAL RETURN AS OF 12/31 EACH YEAR
[OBJECT OMITTED]
Best Quarter: Q2 1997 17.08% Worst Quarter: Q3 1998 -11.72%
The Fund's fiscal year end is October 31st. For the period from November 1, 1998
through January 31, 1999 the Fund's total return was 8.39%.
* Not Annualized. Shares of the Fund were first sold on March 4, 1991.
Average Annual Total Returns (for the periods ending 12/31/98)
Since Commencement of
Operations
Past One Year Past Five Years March 4, 1991
ASM Index 30 Fund, Inc. 16.78% 18.71% 12.87%
Dow Jones Industrial 18.13% 22.25% 18.79%
Average++
++ The DJIA is a composite of the common stocks of 30 widely held, well known
large capitalization domestic corporations. The DJIA's performance assumes
reinvestment of all dividends and distributions and does not reflect any
asset-based charges for investment management or other expenses.
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FEES AND EXPENSES
The following table describes the fees and expenses that you would pay in
connection with an investment in the Fund. Annual Fund operating expenses are
deducted from the Fund's assets. The purpose of this table is to assist in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The example should not be considered a
representation of past or future expenses and actual expense may be greater or
less than those shown.
---------------------------------------------------------------------
Shareholder Transaction Fees
(Fees paid directly from your investment)
---------------------------------------------------------------------
Maximum Sales Charge (load) on Purchases (as a None
percentage of offering price)
Sales Charge on Reinvested Dividends None
Redemption Fees None 1
Exchange Fees None
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Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
---------------------------------------------------------------------
Advisory Fee 0.08%
Other Expenses 0.83%
--------------- ------
Total Fund Operating Expenses 0.91% 2
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1 The Fund will deduct a redemption fee of up to 0.75% of the value of shares
redeemed only if they are redeemed more than six (6) times per year. However,
the redemption fee will not be applicable to shares held in omnibus accounts.
This fee, which is applicable only to such short-term redemptions on certain
accounts, is not reflected in the example below.
2 Effective March 1, 1999, the Fund's investment adviser has agreed that it will
waive that portion, if any, of the annual management fees payable by the Fund
and to pay certain expenses of the Fund to the extent necessary to ensure that
the Fund's Total Operating Expenses do not exceed, on an annualized basis, 0.18%
of the average daily net assets of the Fund. The commitment to limit expenses
does not include extraordinary expenses, and certain costs incurred by the Fund
under a prior adviser may not be payable by the new investment adviser.
Expense Example --
This is an example of what you might pay in expenses over various time periods
and will help you to compare the cost of investing in the Fund with the cost of
investing in other mutual funds. It is based on the same hypothetical factors
used by other funds in their prospectuses: a $10,000 investment, 5% total return
each year and no change in Fund expense levels. This example is
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the same whether you sold your shares at the end of the period or kept them.
This example is for comparison only since actual returns and expenses will be
different.
One Year Three Years Five Years Ten Years
Without Fee
Waiver or
Expense Limitation $93 $290 $504 $1,120
MANAGEMENT OF THE FUND
The Fund is managed by the Board of Directors which is responsible for
protecting the interests of shareholders. The members of the Board of Directors
are experienced business persons who meet throughout the year to oversee the
Fund's activities, review contractual arrangements with companies that provide
services to the Fund, and review Fund performance.
The Board appoints an investment adviser to manage the day-to-day operations of
the Fund. The basis for this arrangement is detailed in an Investment Management
Agreement between the Fund and the investment adviser.
The Fund's investment adviser is required to manage the Fund in accordance with
its fundamental policy, which limits the Fund's investments to the common stocks
of the 30 companies that comprise the DJIA. In doing so, the investment adviser
is responsible for purchases and sales of the securities held by the Fund,
including the reinvestment of the Fund's assets. As such, the investment adviser
conducts the daily business affairs of the Fund and oversees investments in the
Fund in keeping with its investment objective, policies and restrictions.
On February __, 1999, the Board appointed Orbitex Management, Inc. ("Orbitex"),
410 Park Avenue, New York, N. Y. 10022 to serve as the investment adviser to the
Fund for an interim period of up to 120 days. The Board also recommended that
shareholders approve (at a meeting to be called to consider this proposal) a
tax-free reorganization of the Fund as a new series of an existing fund managed
by Orbitex.
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SHAREHOLDER INVESTMENT ACCOUNTS
BUYING SHARES
You may purchase shares of the Fund without any sales charge directly from the
Fund or through an investment adviser, financial planner, broker, dealer or
other investment professional. You may buy shares at the Fund's Net Asset Value
("NAV"), which is calculated at the close of business (currently 4:00 pm Eastern
time) each day that the New York Stock Exchange is open. The NAV is determined
by dividing the value of the Fund's securities, cash and other assets, minus all
expenses and liabilities, by the number of shares outstanding. The Fund's
securities are valued each day at their market value, which usually means the
last quoted sale price on the security's principal exchange on that day.
The following chart shows the minimum investments required to open an account:
Minimum
Minimum Initial Additional
Type of Account Investment Investment
Regular Accounts $1,000 $100
Automatic Investment Plan $1,000 $100
Regular, Spousal, Roth and
Educational IRAs+ $500 $100
Only investments in U.S. dollars are accepted. Third party checks are not
acceptable. A fee may be charged for a check that does not clear and the Fund
reserves the right to refuse any investment.
+ For IRA accounts - Please call us at 1-800-445-2763 to obtain the required
forms to establish any of the IRAs currently available.
Share Exchange Privilege --
You may exchange shares you own (minimum, $2,500) for shares of the Flex-Funds
Money Market Fund, provided such shares are offered in your state of residence.
The exchange request may be made by phone or by mail. Be sure
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to obtain and read the current prospectus of the Flex-Funds Money Market Fund
before you make the exchange. All new accounts resulting from a share exchange
will be subject to the same privileges as your original account. Currently there
is no charge applicable for share exchanges. Such exchange of shares, however,
is considered a taxable event for IRS purposes. The Fund may change, discontinue
or temporarily suspend this exchange privilege during unusual market conditions
or upon 60 days' notice to shareholders.
Automatic Investment Plan --
Shareholders may elect to automatically make investments in the Fund ($100
minimum per transaction) by completing the section of the account application
for this purpose. There is no charge for this service. However, the transfer
agent will impose a fee if sufficient funds are not available in your account at
the time of the automatic transaction.
Account Statements and Reports --
Every Shareholder will receive an account statement that describes transactions
processed in an account. In addition, every Shareholder will receive a statement
whenever the Fund declares a dividend or distribution. Shareholders will also
receive a year-end statement providing information for tax purposes as well as
Annual and Semi-Annual Reports for the Fund.
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How to Open an Account --
- --------------------------------------------------------------------------------
New Accounts Add to Accounts
- --------------------------------------------------------------------------------
In Writing:
Complete and sign the application and On the investment slip, fill in the
mail the application along with your amount you are enclosing, write
check to : your account number on your check
and mail to:
- --------------------------------------------------------------------------------
THE ASM INDEX 30 FUND
c/o Mutual Funds Service Co., Inc.
P. O. Box 7177, 6000 Memorial Drive
Dublin, OH 43017
- --------------------------------------------------------------------------------
By Phone - Federal Funds Wire:
Call first to obtain an account number Instruct your bank to send your
and complete the required information investment by wire as follows:
on the application. Instruct your bank
to wire your investment to:
- --------------------------------------------------------------------------------
Star Bank, N.A., Cinti/Trust, ABA # 0420-0001-3
Attn: ASM Index 30 Fund, credit account # 480389436
Name(s) of registered Shareholder(s)
Personal Account Number (Your ASM 30 Fund a/c number)
- --------------------------------------------------------------------------------
Automatically:
Complete the required information on Call us to request the appropriate
the application and send it with your forms and instructions.
initial investment to:
- --------------------------------------------------------------------------------
THE ASM INDEX 30 FUND
c/o Mutual Funds Service Co., Inc.
P. O. Box 7177, 6000 Memorial Drive
Dublin, OH 43017
- --------------------------------------------------------------------------------
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SELLING SHARES
You may sell shares of the Fund that you own back to the Fund at any time. The
price per share will be the next NAV determined after you request is accepted in
good order by the Fund's transfer agent. A request for a sale of shares will be
processed promptly and you can generally expect to receive a check for the
proceeds within a week (7 days). No fees are imposed by the Fund when shares are
sold. You may redeem by telephone up to 3:00 P.M. EST.
How to Sell Your Shares --
In Writing: Mail to:
Send a written letter of instruction signed
by all registered owners indicating: The ASM Index 30 Fund
c/o Mutual Fund Service Co., Inc.
Your name(s) on the account P.O. Box 7177
6000 Memorial Drive
Your Account number Dublin, OH 43017
The dollar amount you wish to sell
How and where to send the proceeds (including
signature guarantee(s) and other documentation,
if required)
Please include signature(s) and other documentation if required.
By Phone:
Call us at 1-800-445-2763 with your request and a check will be sent to the
address of record.
By Wire:
Call us at 1-800-445-2763 with your request and a federal funds wire will be
transmitted to your bank based on the information you gave us on your account
application
Certain written requests to sell shares require a signature guarantee. A
signature guarantee is used to help protect you and the Fund from fraud. A
signature guarantee for all registered owners is required under the following
circumstances: redemptions of $25,000 or more, all requests where the address of
record on the account was changed within the last 30 days, and when the proceeds
are to be sent to a different payee or address of record.
You can obtain a signature guarantee from most banks and securities dealers, but
not from a notary public. Please call the Fund to learn if a signature
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guarantee is needed or to make sure that it is completed appropriately in order
to avoid any processing delays.
Additional Investment Information
The Fund reserves the right to make a "redemption in kind" (payment in portfolio
securities rather than cash) if the amount to be redeemed is large enough to
possibly affect Fund operations or if the redemption would otherwise disrupt the
Fund. For example, the Fund may redeem shares in-kind if the amount represents
more than 5% of the Fund's assets.
If you are selling shares recently purchased, your request may be delayed until
payment for those shares has been confirmed by the transfer agent, but not in
excess of 15 days.
DISTRIBUTIONS AND TAXES
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional shares of the Fund or receive them in cash. Any capital gains the
Fund distributes are taxable to you as long-term capital gains no matter how
long you have owned your shares.
Every January you will receive a statement that shows the tax status of
distributions you received for the previous year. Distribution declared in
October, November and December but paid in January are taxable as if they were
paid in December.
When you sell your shares of the Fund, you may have a capital gain or loss. For
tax purposes, an exchange of your shares of the Fund for shares of The
Flex-Funds Money Market fund is the same as a sale. The individual tax rate on
any gain from the sale or exchange of your shares depends on how long you have
held your shares.
By law, the Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number (TIN), or certify
that your TIN is correct, or if the IRS instructs the Fund to do so.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to sate and local income tax. Non-U.S. investors may be
subject to U.S. withholding and estate tax. You should consult with your tax
adviser about the federal, state, local or foreign tax consequences of your
investment in the Fund.
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YEAR 2000
As with other mutual funds, financial and business organizations and individuals
around the word, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate data-related
information on or after January 1, 2000. This is commonly referred to as the
"Year 2000 Issue." The Fund is taking steps to obtain satisfactory assurances
that the Fund's major service providers are taking steps reasonably designed to
address the Year 2000 Issue with respect to the computer systems that such
service providers use. There can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.
RECENT DEVELOPMENTS
The appointment of Orbitex as the Fund's investment adviser was approved by the
Board to assure continuity of management upon the termination of the previous
adviser as of the close of business on February 28, 1999. The Board has also
proposed that shareholders approve a tax-free reorganization of the Fund with
another fund advised by Orbitex.
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FINANCIAL HIGHLIGHTS
The table below provides details of the Fund's performance for the fiscal years
ended October 31 since the inception of the Fund on March 4, 1991. The line at
the end of the first section, "Total Return (%)", shows the actual performance
results experienced by the Fund for each period and the percentage by which an
investment in the Fund would have increased (or decreased), assuming all
distributions were reinvested each year. All of these figures were audited by
the Fund's independent auditors, PricewaterhouseCoopers, LLP, or other
accounting firms previously engaged by the Fund.
<TABLE>
<CAPTION>
Years Ended October 31,
1998 1997 1996 1995(a) 1994(a)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $17.21 $14.13 $11.37 $9.78 $10.07
Income from Investment Operations:
Net investment income 0.32 0.18 0.08 0.00 0.56
Net gains (losses) from investments
(realized and unrealized) 2.54 3.34 2.76 1.77 -0.16
------- ------- ------ ------ ------
Total from investment operations 2.86 3.52 2.84 1.77 0.40
------- ------- ------ ------ ------
Distributions:
From net investment income -0.27 -0.18 -0.07 -0.05 -0.52
In excess of net investment income 0.00 -0.11 -0.01 -0.13 0.00
From net realized gains -0.78 -0.15 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 -0.17
------- ------- ------ ------ ------
Total Distributions -1.05 -0.44 -0.08 -0.18 -0.69
Net asset value, end of period $19.02 $17.21 $14.13 $11.37 $9.78
======= ======= ====== ====== ======
Total return 17.13% 25.18% 25.01% 18.10% 3.97%
======= ======= ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000) $29,535 $21,127 $9,315 $9,704 $7,277
Ratio of expenses to average
net assets* 0.18% 0.42% 1.86% 3.01%** 0.75%
Ratio of net investment
income to average net assets* 1.60% 1.51% 0.53% 0.04% 2.17%
Portfolio turnover rate*** 196% 265% 391% 340% 1193%
</TABLE>
* Ratios are presented net of fees voluntarily reduced. If such voluntary fee
reductions had not occurred, the rations would have been as follows: ratio of
net investment income to average net assets would have been 0.91%. 1.05%, 2.59%,
5.77%, 2.94% for 1998, 1997, 1996, 1995, and 1994, respectively; ratio of net
investment income (loss) to average net assets would have been 0.87%, 0.88%,
(0.20%), (2.72%) and (0.02%) for 1998, 1997, 1996, 1995 and 1994, respectively.
As a result of certain tax adjustments necessitated by the Fund's failure to
qualify as a regulated investment company for the years ended October 31, 1995
and October 31, 1994, as well as other adjustments, the gross expense ratios
previously reported for these periods have been restated.
** Includes $50,460 of interest expense not subject to the expense reimbursement
agreement.
*** The Fund continues to be as fully invested in equities as possible.
Therefore, portfolio turnover is higher than most equity mutual finds because
purchases and sales of securities are necessary for settlement of transactions
requested by Fund shareholders.
(a) Audited by predecessor auditor.
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[BACK COVER]
ASM Index 30
Fund, Inc. Logo
A Statement of Additional Information ("SAI") contains additional information
about the Fund and is incorporated by reference into this Prospectus. The Fund's
annual and semi-Annual Reports to shareholders contain additional information
about the Fund's investments. In the Fund's Annual Report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during the fiscal year.
You may obtain a free copy of these documents by calling or writing the Fund:
BY TELEPHONE: 1-800-445-2763
BY MAIL: ASM Index 30 Fund, Inc.
15436 N. Florida Avenue
Suite 110,
Tampa, Fl 33613
ASM Index 30 Fund, Inc.
c/o Mutual Funds Service Co., Inc.
6000 Memorial Drive
P. O. Box 7177
Dublin, OH 43017
You may review and copy the SAI and other information about the Fund by visiting
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. or by visiting the Commission's Internet site at http://www.sec.gov. Copies
of this information may also be obtained, upon payment of a duplicating fee, by
writing to the Public Reference Section of the Commission, Washington, D.C.
20549-6009. You may call the Commission at 1-800-SEC-0330 for information about
the operation of the public reference room.
(Investment Company Act No. 811-6187)
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ASM INDEX 30 FUND, INC.
Statement of Additional Information
March __, 1999
This Statement of Additional Information (SAI) relates to the ASM Index 30 Fund,
Inc., (the "Fund") which is a registered open-end management investment company,
commonly known as a mutual fund. This SAI is not a prospectus and should be read
in conjunction with the prospectus of the Fund dated March __, 1999.
Certain information from the Fund's Annual Report has been incorporated by
reference into this SAI. To obtain a copy of the Prospectus or Annual Report for
the Fund, please write to the Fund at 15436 North Florida Avenue, Suite 110,
Tampa, Florida 33613, or call (813) 963-3150 or (800) 445-2763.
17
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TABLE OF CONTENTS
Page
Fund History 19
Description of the Fund and its investments and risks 19
Investment Restrictions 19
Repurchase Agreements 21
Portfolio Turnover 22
Management of the Fund 22
Control Persons and Principal Holders of Securities 24
Investment Advisory and Other Services 25
Brokerage Allocation and Other Practices 27
Purchases, Redemptions and Pricing of Shares 28
Taxation of the Fund 29
Calculation of Performance Data 31
Financial Statements 34
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FUND HISTORY
The Fund was organized in the State of Maryland on April 25, 1990. The Fund is a
diversified, open-end management investment company.
It is not contemplated that regular annual meetings of shareholders will be
held. There normally will be no meetings of shareholders for the purpose of
electing directors unless and until such time as less than a majority of the
directors holding office have been elected by shareholders, at which time the
directors then in office will call a shareholders' meeting for the election of
directors. The Fund has undertaken to afford shareholders certain rights,
including the right to call a meeting of shareholders for the purpose of voting
on the removal of one or more directors. Such removal can be effected upon the
action of two-thirds of the outstanding shares of the Fund. The directors are
required to call a meeting of shareholders for the purpose of voting on the
question of removal of any director when requested in writing to do so by
shareholders of record of not less than 10% of the Fund's outstanding shares. In
addition, ten of the Fund's shareholders holding the lesser of $25,000 worth or
one percent of the Fund's shares may advise the directors in writing that they
wish to communicate with other shareholders for the purpose of requesting a
meeting to remove a director. The directors will then, if requested by the
Applicants, mail at the Applicants' expense the Applicants' communication to all
other shareholders.
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The following information supplements the discussion of the Fund's investment
objectives and policies.
The investment objective of the Fund is to provide total return through a
combination of capital appreciation and current income. The Fund's investment
policies are described in the Fund's prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions (in addition to those indicated
in its prospectus) as fundamental policies, which may not be changed without the
favorable vote of the holders of a "majority," as defined in the Investment
Company Act of 1940 (the "1940 Act"), of the Fund's outstanding voting
securities. Under the 1940 Act, the vote of the holders of a majority of a
Fund's outstanding voting securities means the vote of the holders of the lesser
of (i) 67% of the shares of the Fund represented at a meeting at which the
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holders of more than 50% of its outstanding shares are represented or (ii) more
than 50% of the outstanding shares.
The Fund may not:
1. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not
exceeding 10% of its total assets (not including the amount borrowed)
and will not make investments while borrowings in excess of 5% of the
value of the Fund's total assets are outstanding.
4. Buy or sell commodities or commodity futures contracts, or buy or sell
real estate, real estate limited partnership interests or other
interests in real estate (although it may purchase and sell securities
which are secured by real estate and securities of companies which
invest or deal in real estate).
5. Make loans (except for purchases of publicly-traded debt securities
consistent with the Fund's investment policies).
6. Make investments for the purpose of exercising control or management.
7. Act as underwriter (except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities in the Fund's
investment portfolio).
8. Invest 25% or more of its total assets (calculated at the time of
purchase and taken at market value) in any one industry.
9. As to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer (other
than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities), or purchase more than 10% of all
outstanding voting securities of any one issuer.
The Fund observes the following restrictions as a matter of operating but not
fundamental policy, pursuant to positions taken by federal and state regulatory
authorities:
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The Fund may not:
10. Purchase any security if as a result the Fund would then hold more than
10% of any class of securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class,
and all debt issues a single class).
11. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or director of the Fund or of the Advisor owns more than
1/2 of 1% of the outstanding securities of such issuer, and such
directors who own more than 1/2 of 1% own in the aggregate more than 5%
of the outstanding securities of such issuer.
12. Invest more than 5% of the value of its net assets in warrants
(included in that amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not listed on the New York
or American Stock Exchange).
13. Invest in any security if as a result the Fund would have more than 5%
of its total assets invested in securities of companies which together
with any predecessor have been in continuous operation for fewer than
three years.
14. Invest in oil, gas or mineral related programs, partnerships or leases.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased security. The Fund maintains custody of the underlying securities
prior to their repurchase; thus the obligation of the bank or dealer to pay the
repurchase price on the date agreed to is, in effect, secured by such underlying
securities. If the value of such securities is less than the repurchase price,
the other party to the agreement will provide additional collateral so that at
all times the collateral is at least equal to the repurchase price.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, the Fund intends to enter into repurchase agreements
only with banks and dealers believed by the Advisor to present minimum credit
risks in accordance with guidelines established by the Board of Directors. The
Advisor will review and monitor the creditworthiness of such institutions under
the Board's general supervision. To the extent that the proceeds from any sale
of collateral upon a default in the obligation to repurchase were less than the
repurchase price, the Fund would suffer a loss.
21
<PAGE>
If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the Fund's ability to sell the collateral and the Fund
could suffer a loss. However, with respect to financial institutions whose
bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy Code,
the Fund intends to comply with provisions under such Code that would allow it
immediately to resell the collateral.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate for each of the fiscal years ending October
31, 1997 and 1998 was 265% and 196%, respectively. The Fund continues to be 100%
invested in equities. Therefore, almost all Fund portfolio turnover is a result
of purchases and sale of securities necessary for settlement of transactions
requested by Fund shareholders. High portfolio turnover may involve additional
brokerage or tax consequences to the Fund and its shareholders. See "Dividends
and Tax Status" in the Fund's Prospectus.
MANAGEMENT OF THE FUND
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board approves all significant agreements between
the Fund and persons or companies furnishing services to it, including the
Fund's agreement with its Advisor, Custodian and Transfer Agent. The day to day
operations of the Fund are delegated to its officers, subject to the investment
objectives and policies of the Fund and to general supervision by the Board of
Directors. The directors and officers of the Fund and of the Advisor, their age,
business addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
<S> <C> <C>
Directors & Officers Position with Fund Principal Occupation During
the Past 5 Years
W. Keith Schilit, Director; Chair, Audit Faculty Member, Univ. of
Age 44 Committee South Florida;
Catalyst Ventures President, Catalyst Ventures
4928 Bay Way Drive
Tampa, FL 33629
Daniel Calabria, Director Retired; formerly Executive
Age 62 Vice President, Wm. R. Hough
7068 South Shore Drive South & Co.; formerly President,
South Pasadena, FL 33707 Templeton Fund Management
Corp.; Trustee, IDEX
Mutual Funds; Trustee,
Florida TaxFree Funds
22
<PAGE>
Jerome P. Feltenstein, Director President, American Business
Age 64 Associates, Inc.
61 Mimosa Drive
Cos Cob, CT 06807
Arthur Salzfass, Director Consultant, Micro Info;
Age 64 Director, SBM Inc.;
98 Paulding Drive President, Rutledge Books,
Chappaqua, NY 10514 Inc.; Chief Operating
Officer, Honi-Corp, Inc.;
Chief Executive Officer and
President, U.S. Fibercom,
Inc.
Steven H. Adler (1), (2) Former President, Secretary President, Seretary and Director
Age 60 and Director of Vector Index Advisers, Inc.,
formerly, Vice President,
George K. Baum & Co.
S. Cash Ulmer (2) Acting Chief Executive Employee of the Fund; student,
Age 35 Officer and Vice President Stensen University College of Law
and MBA program.
</TABLE>
(1) denotes directors or officers who are "interested persons" of the Fund under
the 1940 Act.
(2) On December 11, 1998, the Board of the Fund received and accepted Mr.
Adler's request for an indefinite leave of absence. Mr. Adler has not
participated in the business of the Fund as a director or officer since that
date. Cash Ulmer was appointed by the Board of the Fund to serve as acting Chief
Executive Officer effective as of Mr. Adler's leave of absence.
The following table shows the compensation paid by the Fund to the Directors of
the Fund during the fiscal year ended October 31, 1998:
<TABLE>
<CAPTION>
COMPENSATION TABLE
- ------------------------------ ---------------- -------------------- -------------- ------------------
Pension or Estimated Total
Retirement Annual Compensation
Aggregate Benefits Accrued Benefits From Fund and
Compensation as Part of Fund Upon Fund Complex
Name of Person, Position from Fund Expenses Retirement Paid to Directors
- ------------------------------ ---------------- -------------------- -------------- ------------------
<S> <C> <C> <C> <C>
Steven H. Adler* Former None None None None
President
W. Keith Schilit, Director $5,500 None None $5,500
23
<PAGE>
Daniel Calabria, Director $5,500 None None $5,500
Jerome P. Feltenstein, $5,500 None None $5,500
Director
Arthur Salzfass, Director $5,500 None None $5,500
</TABLE>
The Fund pays fees of $4,000 per year plus $500 for each meeting attended by
directors who are not "interested persons" of the Fund. Such directors are
reimbursed for any expenses incurred in attending meetings. During the fiscal
period ended October 31, 1998, directors fees and expenses totaled $22,000.
* On December 11, 1998, the Board of the Fund received and accepted Mr. Adler's
request for an indefinite leave of leave of absence. Mr. Adler has not
participated in the business of the Fund as a director or officer since that
date.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) As December 31, 1998, there were no control persons of the Fund.
(b) Principal Holders
As of January 31, 1999, the following persons held of record 5% or more of the
outstanding shares of common stock of the Fund:
Name & Address % Ownership
Donaldson Lufkin & Jenrette 15.2%
Pershing Division
Jersey City, NJ 7303-2052
National Financial Services Corp. 13.8%
Church Street Station, 5th Floor
P.O. Box 3908
New York, NY 10008-3908
24
<PAGE>
As of January 31, 1999, the officers and directors of the Fund owned less than
1% of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
THE MANAGEMENT AGREEMENT
Subject to the supervision of the Board of Directors, current investment
advisory and management services are provided to the Fund by Orbitex Management,
Inc., (the "Advisor") pursuant to an Investment Management Agreement dated as of
February 28, 1999 and effective March 1, 1999 (the "Agreement"). The Advisor is
a New York corporation that is owned by a Zurich parent founded in 1986. The
Orbitex Group of Companies currently manages approximately $1.2 billion of
assets.
The Agreement was approved by the Board of Directors and by a majority of the
directors who neither are interested persons of the Fund nor have any direct or
indirect financial interest in the Agreement or any other agreement related
thereto ("Independent Directors") on February __, 1999. It will continue in
effect for up to 120 days.
Under the Agreement, the Advisor provides a continuous investment program for
the Fund and make decisions and place orders to buy, sell or hold particular
securities. The Advisor also supervises all matters relating to the operation of
the Fund and obtains for it corporate officers, clerical staff, office space,
equipment and services. Under the Agreement, the Advisor is entitled to receive
a monthly fee at an annual rate of 0.08 of 1% of the Fund's average daily net
assets for services provided to the Fund. In addition to the fee payable to the
Advisor, the Fund is responsible for its operating expenses, including: (i)
interest and taxes; (ii) brokerage and futures commissions; (iii) insurance
premiums; (iv) compensation and expenses of Directors other than those
affiliated with the Advisor; (v) legal and audit expenses; (vi) fees and
expenses of the custodian, shareholder, service or transfer agent; (vii) fees
and expenses for registration or qualification of the Fund and its shares under
federal or state securities laws; (viii) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders; (ix) other
expenses incidental to holding any shareholder meetings; (x) dues or assessments
of or contributions to the Investment Company Institute or any successor; and
(xi) such non-recurring expenses as may arise, including litigation affecting
the Fund and the legal obligations with respect to which the Fund may have to
indemnify its officers and Directors.
The Advisor has agreed to limit expenses of the Fund to 0.18% of average net
assets on an annual basis. This expense limitation commitment will remain in
25
<PAGE>
effect at least until the earlier of June 30, 1999 or the closing of the
proposed tax-free reorganization which is to be submitted to the Fund's
shareholders.
For the fiscal year ended 1998, the Fund's previous advisor waived fees and
reimbursed the Fund for expenses in the amount of $242,280 which included
management fees of $26,302. For fiscal years ended 1996 and 1997 the previous
advisor was not entitled to any fees, and reimbursed the Fund for expenses in
the amount of $89,199 and $180,781, respectively.
Under the terms of the Agreement, the Advisor will continue to use the
administrative services of the present administrator for the Fund. The services
provided under the Agreement are subject to the supervision of the officers and
directors of the Fund, and include the day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of its records,
preparation of reports, and assistance in the preparation of the Fund's
registration statements under Federal and State laws.
The cost of distributing shares of the Fund is borne by the Advisor.
Unaffiliated registered broker-dealers act as, or will act as distributor of
Fund shares at no cost to the Fund.
The Agreement is terminable by vote of the Board of Directors or by the holders
of a majority of the outstanding voting securities of the Fund at any time
without penalty, on 60 days' written notice to the Advisors. The Agreement also
may be terminated by the Advisor on 60 days written notice to the Fund. On
December 23, 1998, the Board of Directors voted to approve the termination of
the previous advisor effective at the close of business on February 28, 1999.
The previous advisor served as investment adviser to the Fund until that date.
OTHER SERVICE PROVIDERS
PricewaterhouseCoopers LLP, 200 South Biscayne Boulevard, Suite 1900, Miami,
Florida 33131, have been chosen to be Independent Auditors for the Fund.
The Fund employs Mutual Funds Service Co., P.O. Box 7177, 6000 Memorial Drive,
Dublin, OH 43017 to provide fund administrative accounting and transfer agency
services. For the administrative, accounting and transfer agency services
provided, Mutual Funds Service Co., received $36,409, $52,791 and $76,464 for
1996, 1997, and 1998, respectively.
In addition, Star Bank, N.A., located at 425 Walnut Street, Cincinnati, Ohio
45201, serves as the Fund's Custodian.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Agreement states that in connection with its duties to arrange for the
purchase and the sale of securities held in the portfolio of the Fund by placing
26
<PAGE>
purchase and sale orders for the Fund, the Advisor shall select such
broker-dealers ("brokers") as shall, in its judgment, achieve the policy of
"best execution," i,e., prompt and efficient execution at the most favorable
securities price. In making such selection, the Advisor is authorized in the
Agreement to consider the reliability, integrity and financial condition of the
broker. The Advisor also is authorized by Agreement to consider whether the
broker provides research or statistical information to the Fund and/or other
accounts of the Advisor.
The Agreement states that the commissions paid to brokers may be higher than
another broker would have charged if a good faith determination is made by the
Advisor that the commission is reasonable in relation to the services provided,
viewed in terms of either that particular transaction or the Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion and that the Advisor shall use its judgment in determining that the
amount of commissions paid are reasonable in relation to the value of brokerage
and research services provided and need not place or attempt to place a specific
dollar value on such services or on the portion of commission rates reflecting
such services. The Agreement provides that to demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor shall be prepared to show that commissions paid
(i) were for purposes contemplated by the Agreement; (ii) were for products or
services which provide lawful and appropriate assistance to its decision-making
process; and (iii) were within a reasonable range as compared to the rates
charged by brokers to other institutional investors as such rates may become
known from available information.
The research services discussed above may be in written form or through direct
contact with individuals and may include information as to particular companies
and securities as well as market, economic or institutional areas and
information assisting the Fund in the valuation of its investments. The research
which the Advisor receives for the Fund's brokerage commissions, whether or not
useful to the Fund, may be useful to it in managing the accounts of its other
advisory clients, if any. Similarly, the research received for the commissions
of such accounts may be useful to the Fund.
During the fiscal years ended October 31, 1996, 1997 and 1998, the Fund paid a
total of $124,142, $83,761 and $77,796.88 in brokerage commissions,
respectively.
CAPITAL STOCK
The Fund is authorized to issue 1,000,000,000 shares of common stock, $.001 per
value (the "Common Stock"). Shares of the Fund, when issued, are fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund in certain circumstances as described in
27
<PAGE>
the Fund's Prospectus under "How to Redeem Shares." All Fund shares are equal as
to earnings assets and voting privileges. There are no conversion, preemption or
other subscription rights. Under the Fund's Articles of Incorporation, the Board
of Directors may authorize the creation of additional series of common stock,
with such preferences, privileges, limitations and voting and dividend rights as
the Board may determine. Each share of the Fund outstanding is entitled to share
equally in dividends and other distributions and in the net assets of the Fund
on liquidation. Accordingly, in the event of liquidation, each share of the
Fund's common stock is entitled to its portion of all the Fund's assets after
all debts and expenses have been paid. The shares of the Fund do not have
cumulative voting rights for the election of Directors.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
NET ASSET VALUE
The net asset value of the Fund's shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (NYSE) (currently 4:00 p.m.
Eastern time) each business day. Currently, the NYSE observes the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. However, the Exchange may close on days not included in that
announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding at such time.
Portfolio securities that are principally traded on a national securities
exchange are valued at their last sale on the exchange on which they are
principally traded prior to the close of the NYSE or, in the absence of recorded
sales, at their current bid price on such exchanges. Securities listed on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
are valued at the last available sale price on NASDAQ prior to the time of
valuation. Securities that are principally traded in securities markets, but not
principally traded on securities exchanges or NASDAQ, are valued at the current
bid price prior to the close of the NYSE. Other securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith using methods approved by the Board of Directors.
REDEMPTION IN KIND
If the Board of Directors determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly in
28
<PAGE>
cash, the Fund may pay the redemption price in part by a distribution in kind of
securities from the portfolio of the Fund, in lieu of cash. The Fund has elected
to be governed by Rule 18f-1 under the 1940 Act pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or one
percent of the net asset value of the Fund during any 90 day period for any one
shareholder. Should redemptions by any shareholder exceed such limitation, the
Fund will have the option of redeeming the excess in cash or in kind. If shares
are redeemed in kind, the redeeming shareholder would incur brokerage costs in
converting the assets into cash.
TAXATION OF THE FUND
Distribution of net investment income. The Fund receives income generally in the
form of dividends and interest on its investments. This income, less expenses
incurred in the operation of the Fund, constitutes the Fund's investment income
from which dividends may be paid to you. Any distributions by the Fund from such
income will be taxable to you as ordinary income, whether you take them in cash
or in additional shares.
Distributions of capital gains. The Fund may derive capital gains and losses in
connection with the sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate excise or income taxes on the Fund.
Information on the tax character of distributions. The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held Fund shares for a full year, the Fund may designate and distribute to
you as ordinary income or capital gain a percentage of income that is not equal
to the actual amount of such income earned during the period of your investment
in the Fund.
Election to be taxed as a regulated investment company. The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the Fund generally pays no federal income tax on the income and gains it
distributed to you. The Board of Directors reserves the right not to maintain
the qualification of the Fund as a regulated investment company if it determined
such course of action to be beneficial to shareholders.
29
<PAGE>
In such case, the Fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains, and distributions to you will be taxed as
ordinary dividend income to the extent of the Fund's earnings and profits.
Excise tax distributions requirements. To avoid federal excise taxes, the
Internal Revenue Code requires the Fund to distribute to you by December 31 of
each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January that are treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
Redemption of Fund shares. Redemptions and exchanges of Fund shares are taxable
transactions for federal and state income tax purposes. If you redeem your Fund
shares, or exchange your Fund shares for shares of The Flex-Funds Money Market
Fund, the IRS will require that you report a gain or loss on your redemption or
exchange. If you hold your shares as a capital asset, the gain or loss that you
realize will be capital gain or loss and will be long-term or short-term,
generally depending on how long you hold your shares. Any loss incurred on the
redemption or exchange of shares held for six months or less will be treated as
a long-term capital loss to the extent of any long-term capital gains
distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in the Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.
Dividends-received deduction for corporations. As a corporate shareholder, you
should note that 19.6% of the dividends paid by the Fund for the most recent
fiscal year qualified for the dividends-received deduction. You will be
permitted in some circumstances to deduct these qualified dividends, thereby
reducing the tax that you would otherwise be required to pay on these dividends.
The dividends-received deduction will be available only with respect to
dividends designated by the Fund as eligible for such treatment. All dividends
(including the deducted portion) must be included in your alternative minimum
taxable income calculations.
30
<PAGE>
UNDERWRITERS
The costs of distributing shares of the Fund is borne by the Advisor.
Unaffiliated registered broker-dealers act as, or will act as, distributor of
Fund shares at no cost to the Fund.
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may quote its average annual total return
("standardized return") in advertisements or promotional materials.
Advertisements and promotional materials reflecting standardized return
("performance advertisements") will show percentage rates reflecting the average
annual change in the value of an assumed initial investment in the Fund of
$1,000 at the end of one, five and ten year periods. If such periods have not
yet elapsed, data will be given as of the end of a shorter period corresponding
to the duration of the Fund. Standardized return assumes the reinvestment of all
dividends and capital gain distributions.
The Fund also may refer in advertising and promotional materials to its yield.
The Fund's yield shows the rate of income that it earns on its investments,
expressed as a percentage of the net asset value of Fund shares. The Fund
calculates yield by determining the interest income it earned from its portfolio
investments for a specified thirty day period (net of expenses), dividing such
income by the average number of Fund shares outstanding, and expressing the
result as an annualized percentage based on the net assets value at the end of
that thirty day period. Yield accounting methods differ from the methods used
for other accounting purposes; accordingly, the Fund's yield may not equal the
dividend income actually paid to investors or the income reported in the Fund's
financial statements.
In addition to standardized return, performance advertisements may also include
other total return performance data ("non-standardized return").
Non-standardized return may be quoted for the same or different periods as those
for which standardized return is quoted and may consist of aggregate or average
annual percentage rate of return, actual year by year rates or any combination
thereof.
All data included in performance advertisements will reflect past performance
and will not necessarily be indicative of future results. The investment return
and principal value of an investment in the Fund will fluctuate, and an
investor's proceeds upon redeeming Fund shares may be more or less than the
original cost of the shares.
Total return. Average annual total return quotations used in the Fund's
advertising and promotional materials are calculated according to the following
formula:
31
<PAGE>
n
P (1 + T) = ERV
Where:
P equals a hypothetical initial payment of $1000.
T equals average annual total return.
n equals the number of years.
ERV equals the ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year
periods at the end of the 1-, 5-, or 10-year periods (or fractional portion).
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.
Average Annual Total Returns
For the Periods Ended October 31, 1998
From March 4, 1991 to
Past One Year Past 5 Years October 31, 1998
17.13% 17.70% 12.29%
Yield. Annualized yield quotations used in the Fund's advertising and
promotional materials are calculated by dividing the Fund's interest income for
a specified thirty-day period, net of expenses, by the average number of shares
outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the net asset value per share
at the end of the period. A portfolio's yield is a way of showing the rate of
income the portfolio earns on its investments as a percentage of the portfolio's
share price. Yield quotations are calculated according to the following formula:
32
<PAGE>
6
YIELD = 2 [(a-b + 1) - 1 ]
----
cd
Where
a = dividends and interest earned during the period.
b = expenses accrued for the period, net of reimbursements.
c = the average daily number of shares outstanding during the period that are
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Except as noted below, in determining net investment income earned during the
period ("a" in the above formula), the Fund calculates interest earned on each
debt obligation held by it during the period by (1) computing the obligation's
yield to maturity, based on the market value of the obligation (including actual
accrued interest) on the last business day of the period or, if the obligation
was purchased during the period, the maturity by 360 and multiplying the
resulting quotient by the market value of the obligation (including actual
accrued interest). Once interest earned is calculated in this fashion for each
debt obligation held by the Fund, net investment income is then determined by
totaling all such interest earned.
For purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.
For the 30-day period ended 10/31/98, the yield of the Fund was 1.7625%.
Other information. The Fund's performance data quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in
the Fund will fluctuate, and an investor's redemption proceeds may be more or
less than the original investment amount. In advertising and promotional
materials the Fund may compare its performance with data published by Lipper
Analytical Services, Inc. ("Lipper") or CDA Investment Technologies, Inc.
("CDA"). The Fund also may refer in such materials to mutual fund performance
rankings and other data, such as comparative asset, expense and fee levels,
published by Lipper or CDA. Advertising and promotional materials also may refer
to comparisons of the Fund and comparative mutual fund data and ratings reported
in independent periodicals including, but not limited to, The Wall Street
Journal, Money Magazine, Forbes, Business Week, Financial World, and Barron's.
33
<PAGE>
FINANCIAL STATEMENTS
PricewaterhouseCoopers, LLP serves as independent auditors for the Fund, and in
its capacity as such, audits the financial statements contained in the Fund's
Annual Report. The Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights and Notes
to Financial Statements, as well as the [unqualified] report of
PricewaterhouseCoopers, LLP for the fiscal year ended October 31, 1998 are
included in the Fund's Annual Report to shareholders and are incorporated by
reference in this Statement of Additional Information. You may request a copy of
the Annual Report, without charge, by writing to the Fund or calling (800)
445-2763.
34
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Amendment*
(b) By-laws*
(c) Not Applicable.
(d) Investment Advisory Agreement between ASM Index 30 Fund, Inc.
and Orbitex Management, Inc. to be filed by amendment.
(e) Not Applicable.
(f) Not Applicable.
(g) Custodian Agreement*
(h) (1) Transfer Agency Agreement*
(2) Accounting Agreement*
(i) Opinion concerning the legality of shares to be filed by
amendment.
35
<PAGE>
(j) (1) Consent of auditors is filed herewith as Exhibit
No. 23(j)(1).
(2) Power of Attorney to be filed by amendment.
(k) Not Applicable.
(l) Not Applicable.
(m) Not Applicable.
(n) Financial Data Schedule for the ASM Index 30 Fund is filed
herewith as Exhibit No. 23(n).
(o) Not Applicable.
* Previously filed and incorporated by reference from Registration Statement
on Form N-1A, File No. 33-36454, and Amendment Nos. 1. 2, 3 and 4.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See "Management of the Fund" in Part A of this Registration
Statement.
ITEM 25. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment
Company Act of 1940 (the "1940 Act") and pursuant to Article
Tenth of the Fund Articles of Incorporation (Exhibit 1 to the
Registration Statement) and section 2-418 of the Maryland
General Corporation Law, officers and directors of the
Registrant may be indemnified against liabilities in
connection with the Registration, unless it is proved that (i)
the act or omission of the director or officer was material to
the cause of action adjudicated in the proceeding and was
committed in bad faith or with active and deliberate
dishonesty, (ii) the director actually received an improper
personal benefit in money, property or services, or (iii)in
the case of a criminal proceedings, the director had
reasonable cause to believe that the act of omission was
unlawful. As permitted by Section 17(i) of the 1940 Act,
pursuant to the Distribution Agreement
36
<PAGE>
(Exhibit 6 to the Registration Statement), the Distributor of
the Registrant may be indemnified against liabilities which it
may incur except liabilities arising from bad faith, gross
negligence, willful misfeasance or reckless disregard of
duties.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that the public policy as
expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is
asserted against the Registrant by such director, officer or
controlling person in connection with the shares 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 Securities Act and will be governed by the
final adjudication of such issue.
Section 2(d) of the Investment Management Agreement limits the
liability of Vector Index Advisors, Inc. to losses resulting
from a breach of fiduciary duty with respect to their receipt
of compensation for services (in which case any award of
damages shall be limited to the period and amount set forth in
section 36(b) of the 1940 Act) or losses resulting from
willful misfeasance, bad faith or gross negligence in
performance of its duties and obligation under the Management
Agreement.
The Registrant undertakes to apply the indemnification
provisions of its Articles of Incorporation and the Investment
Management Agreement in a manner consistent with the
provisions of Sections 17(h) and (i) of the Investment Company
Act.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Reference is made to Part A of this Registration Statement and
to Form ADV filed under the Investment Advisors Act of 1940 by
Orbitex Management, Inc. (File No. 801-52312).
37
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITER
Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Registrant and
Registrant's custodian and shareholder service agent, as
follows: the documents required to be maintained by paragraphs
(4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be
maintained by the Registrant, and all other records will be
maintained by the Custodian and Shareholder Service Agent.
ITEM 29. MANAGEMENT SERVICES.
All management-related service contracts are discussed in
Parts A or B of this Registration Statement.
ITEM 30. UNDERTAKINGS.
Registrant hereby undertakes to conduct its operations in
accord with the director removal and shareholder assistance
provisions of Section 16(c) of the Investment Company Act of
1940.
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to shareholders upon request and without charge.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Tampa, and State of Florida on the 18th day of February, 1999.
ASM Index 30 Fund, Inc.
Registrant
By: /s/ S. Cash Ulmer
S. Cash Ulmer*
Acting Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
*____________________ Director February 18, 1999
Steven H. Adler
/s/ Jerome Feltenstein Director February 18, 1999
Jerome Feltenstein
/s/ W. Keith Schilit Director February 18, 1999
W. Keith Schilit
/s/ Daniel Calabria Director February 18, 1999
Daniel Calabria
/s/ Arthur Salzfass Director February 18, 1999
Arthur Salzfass
/s/ S. Cash Ulmer Acting Chief February 18, 1999
S. Cash Ulmer Executive Officer &
Chief Financial Officer
* Steven H. Alder, Chief Executive Officer is on an indefinite leave of absence
as a Director and Officer of the Fund.
39
<PAGE>
EXHIBIT INDEX
FORM N-1A EXHIBIT NO. EDGAR EXHIBIT NO.
23(j)(1) Consent of Auditors Ex-23.23(j)(1)
23(n) Financial Data Schedule Ex-23.23(n)
40
EX-23.23(j)(1)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of ASM Index 30 Fund
We hereby consent to the inclusion in Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A (File No. 33-36454, hereafter the
"Registration Statement") of ASM Index 30 Fund, Inc. of our report dated
December 30, 1998, on our audit of the financial statements and financial
highlights of the ASM Index 30 Fund, Inc. appearing in the October 31, 1998
Annual Reports to Shareholders of the Fund, which annual reports are
incorporated by reference in Post-Effective Amendment No. 10 to the Registration
Statement. We also consent to the reference to our Firm under the caption
"Financial Highlights" in the Prospectus and "Financial Statements" in the
Fund's Statement of Additional Information.
PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 23, 1999
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