<PAGE>
As filed with the U.S. Securities and Exchange Commission
on MARCH 22, 1999
Securities Act File No. 333-66279
Investment Company Act File No. 811-09083
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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)
CDC MPT+ FUNDS
---------------------------------------
(Exact Name of Registrant as Specified in Charter)
9 West 57th Street, 35th Floor
New York, New York 10019
---------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 891-0667
Bluford H. Putnam
President and Chief Investment Officer
9 West 57th Street, 35th Floor
New York, New York 10019
--------------------------------------
(Name and Address of Agent for Service)
Copy to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
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, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
CDC MPT+ FUNDS
FORM N-1A
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
- -------- ------------------
1. Front and Back Cover Page . . . . . . . . Front Cover Page; Back
Cover Page
2. Risk/Return Summary:
Investments, Risks,
and Performance . . . . . . . . . . . . Risk/Return Summary
-- "Investment Goals and
Principal Strategies" and "A
Word About Risk"
3. Risk/Return Summary:
Fee Table . . . . . . . . . . . . . . . Risk/Return Summary --
"Investor Expenses"
4. Investment Objectives,
Principal Investment Strategies,
and Related Risks . . . . . . . . . . . Risk/Return Summary; U.S.
Core Equity Fund; Aggressive
Equity Fund; Global
Independence Fund; Common
Investment Strategies For:
Aggressive Equity Fund and
Global Independence Fund; More
About Risk
5. Management's Discussion of
Fund Performance. . . . . . . . . . . . Not Applicable
6. Management, Organization, and
Capital Structure . . . . . . . . . . . . Management; Fund Details --
"Multi-Class Structure"
7. Shareholder Information . . . . . . . . . Account Policies; Shareholder
Services; Distribution
Policies and Taxes; Fund
Details
8. Distribution Arrangements . . . . . . . . Fund Details
<PAGE>
9. Financial Highlights Information. . . . . Not Applicable
Part B
Item No.
- --------
10. Front Cover Page and
Table of Contents . . . . . . . . . . . Cover Page
11. Fund History. . . . . . . . . . . . . . . Organization of the Funds
12. Description of the Fund and its
Investments and Risks . . . . . . . . . Organization of the Funds;
Investment Objectives and
Policies; See Prospectus --
"Risk/Return Summary;" U.S.
Core Equity Fund; Aggressive
Equity Fund; Global
Independence Fund; "Common
Investment Strategies For:
Aggressive Equity Fund and
Global Independence Fund," and
"More About Risk"
13. Management of the Fund. . . . . . . . . . Management of the Funds
14. Control Persons and Principal
Holders of Securities . . . . . . . . . Management of the Funds --
"Control Persons and Principal
Stockholders"
15. Investment Advisory and
Other Services. . . . . . . . . . . . . Management of the Funds; See
Prospectus - "Management"
16. Brokerage Allocation
and Other Practices . . . . . . . . . . Investment Objectives and
Policies -- "Portfolio
Transactions"
<PAGE>
17. Capital Stock and Other
Securities. . . . . . . . . . . . . . . Organization of the Funds;
Management of the Funds --
"Capital Stock"
18. Purchase, Redemption and Pricing
of Shares . . . . . . . . . . . . . . . Investment Objectives and
Policies -- "Portfolio
Valuation"; Additional
Purchase and Redemption
Information; Exchange
Privilege; See Prospectus --
"Account Policies" and
"Shareholder Services"
19. Taxation of the Fund. . . . . . . . . . . Additional Information
Concerning Taxes
20. Underwriters. . . . . . . . . . . . . . . Management of the Funds; See
Prospectus - "Fund Details"
21. Calculation of Performance Data.. . . . . Determination of Performance
22. Financial Statements............... . . . Financial Statements; Report
of Deloitte & Touche
Part C
- ------
Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any State where the offer or sale is not permitted.
Subject to Completion, Dated March 22, 1999
PROSPECTUS
________ __, 1999
CDC MPT+ FUNDS
U.S. CORE EQUITY FUND
AGGRESSIVE EQUITY FUND
GLOBAL INDEPENDENCE FUND
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
RISK/RETURN SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. CORE EQUITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AGGRESSIVE EQUITY FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
GLOBAL INDEPENDENCE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . 14
COMMON INVESTMENT STRATEGIES FOR: AGGRESSIVE EQUITY FUND AND
GLOBAL INDEPENDENCE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . 16
MORE ABOUT RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CERTAIN INVESTMENT PRACTICES. . . . . . . . . . . . . . . . . . . . . . . . 21
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ACCOUNT POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SHAREHOLDER SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
DISTRIBUTION POLICIES AND TAXES . . . . . . . . . . . . . . . . . . . . . . 31
FUND DETAILS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-i-
<PAGE>
RISK/RETURN SUMMARY
GENERAL
CDC MPT+ Funds is a newly organized no-load mutual fund complex with three
separate investment portfolios (each, a "Fund"): the U.S. Core Equity Fund, the
Aggressive Equity Fund and the Global Independence Fund.
MULTI-CLASS STRUCTURE
** 1 Each of the funds offers two no-load classes of shares: Investor shares
and Institutional shares. Investor shares bear a shareholding service and
distribution fee of 0.25% of the shares' net asset value. Institutional shares
do not bear this fee. Whether an investor is eligible to purchase Investor
shares or Institutional shares generally depends on the amount invested in a
particular fund.
INVESTOR PROFILE
These funds are designed for investors who:
- - are investing for long-term goals that may include college or retirement,
with a time horizon of several years
- - are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- - are investing for total return greater than the S&P 500 Index, or, in the
case of the Global Independence Fund, are investing for return in excess
of cash returns, regardless of the global market environment
They may NOT be appropriate if you:
- - are investing for a shorter time horizon, especially one of less than
several years
- - are uncomfortable with an investment that will fluctuate in value
- - are primarily looking for income or tax-free income
You should base your selection of a fund on your own goals, risk preferences and
time horizon.
* 1 MOVED FROM HERE; TEXT NOT SHOWN
* 2 MOVED FROM HERE; TEXT NOT SHOWN
INVESTMENT GOALS AND PRINCIPAL STRATEGIES
The U.S. Core Equity Fund is a diversified portfolio that seeks a high total
return by investing primarily in common stocks of U.S. issuers. The Aggressive
Equity Fund is a non-diversified portfolio that seeks a high total return by
investing primarily in equity and equity-related securities and certain
derivative instruments, including U.S. dollar and non-U.S. dollar denominated
fixed income derivative instruments and currencies. The Global Independence
Fund is a non-diversified portfolio that seeks a high total return by investing
primarily in global equity indices, global fixed income and currency markets.
Each fund employs its own strategy and has its own risk/reward profile. Because
you can lose money by investing in these funds, be sure to read all risk
disclosures carefully before investing.
-1-
<PAGE>
<TABLE>
<CAPTION>
Fund/Risk Factors Investment Goal Principal Strategies
- ----------------- --------------- --------------------
<S> <C> <C>
U.S. CORE EQUITY FUND Total return greater than that of the S&P - Invests primarily in equity
500 Index securities of U.S. companies
- - EQUITY RISK
- - MARKET RISK
- - LEVERAGE RISK
- - EXPOSURE RISK
- - RISKS OF DERIVATIVE
INSTRUMENTS
AGGRESSIVE EQUITY FUND Total return greater than that of the - Invests primarily in equity and
S&P 500 Index equity-related investments,
- - EQUITY RISK including common stocks, options
on securities and securities
- - EXPOSURE RISK indices, convertible securities,
rights and warrants, equity swaps,
- - FUTURES RISK and S&P 500 index futures and
options thereon
- - LEVERAGE RISK - To enhance return incrementally
and manage risk, invests in equity
- - RISKS OF DERIVATIVE INSTRUMENTS index and bond futures contracts
and options thereon, currency spot
- - MARKET RISK and forward contracts, currency
and interest rate futures
- - FOREIGN SECURITIES RISK contracts and options thereon, and
equity and interest rate swap
- - INTEREST RATE RISK contracts
- Obtains exposure to the global
- - NON-DIVERSIFICATION RISK equity, global fixed income and
currency markets through the use
of currency forward contracts,
options on securities and
securities indices, futures
contracts and options thereon,
swaps and other derivative
instruments
- Uses unencumbered cash to invest
in money market instruments and
short-term obligations of high
quality
-2-
<PAGE>
Fund/Risk Factors Investment Goal Principal Strategies
- ----------------- --------------- --------------------
GLOBAL INDEPENDENCE FUND Total return greater than that of the 90- - Invests primarily in global equity
day U.S. Treasury bill rate indices, global fixed income and
currency markets
- - EXPOSURE RISK - To enhance return incrementally
and manage risk, invests in common
- - FUTURES RISK stocks, corporate bonds,
debentures and notes, convertible
- - LEVERAGE RISK securities, non-convertible debt
instruments and preferred stocks,
- - RISKS OF DERIVATIVE INSTRUMENTS government, bank and commercial
obligations, rights and warrants,
- - FOREIGN SECURITIES RISK depositary receipts, currency spot
and forward contracts, options on
- - INTEREST RATE RISK securities and securities indices,
equity and interest rate swap
- - MARKET RISK contracts; equity index and bond
futures and options thereon, and
- - NON-DIVERSIFICATION RISK currency and interest rate futures
contracts and options thereon
- Uses unencumbered cash to invest
in money market instruments and
short-term obligations of high
quality
</TABLE>
A WORD ABOUT RISK
** 2 INVESTMENT IN THE FUNDS INVOLVES SPECIAL RISKS, SOME NOT TYPICALLY
ASSOCIATED WITH MUTUAL FUNDS. INVESTORS SHOULD CAREFULLY REVIEW AND EVALUATE
THESE RISKS WHEN CONSIDERING AN INVESTMENT IN THE FUNDS. NONE OF THE FUNDS
CONSTITUTES A BALANCED INVESTMENT PLAN.
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money and not make money.
The principal risks of investing in the funds are noted above and discussed
more fully in "More About Risk". Before you invest, please make sure you
understand the risks that apply to your fund. As with any mutual fund, there
is no guarantee that you will make money over any period of time and you
could lose money by investing in a fund.
Investments in the funds are not bank deposits. They are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
-3-
<PAGE>
* 7 MOVED FROM HERE; TEXT NOT SHOWN
* 8 MOVED FROM HERE; TEXT NOT SHOWN
* 5 MOVED FROM HERE; TEXT NOT SHOWN
* 6 MOVED FROM HERE; TEXT NOT SHOWN
* 9 MOVED FROM HERE; TEXT NOT SHOWN
* 10 MOVED FROM HERE; TEXT NOT SHOWN
* 11 MOVED FROM HERE; TEXT NOT SHOWN
* 12 MOVED FROM HERE; TEXT NOT SHOWN
* 13 MOVED FROM HERE; TEXT NOT SHOWN
* 14 MOVED FROM HERE; TEXT NOT SHOWN
INVESTOR EXPENSES
The following tables describe the fees and expenses you may pay if you buy
and hold shares of a fund. Please note that the expenses of each fund
include the basic maximum and minimum management fees payable to the Adviser.
FEES AND EXPENSES OF THE INVESTOR SHARES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
GLOBAL
U.S. CORE EQUITY FUND AGGRESSIVE EQUITY FUND INDEPENDENCE FUND
- ------------------------------------------------------------------------------------------------------------------------------
BASIC MAXIMUM MINIMUM BASIC MAXIMUM MINIMUM BASIC MAXIMUM MINIMUM
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(paid directly from your
investment)
- ------------------------------------------------------------------------------------------------------------------------------
-4-
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
Sales charge "load" on
purchases None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Deferred sales charge
"load" None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Sales charge "load" on
reinvested distributions None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees (short-
term trading fees)(1) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (deducted from
fund assets)
- ------------------------------------------------------------------------------------------------------------------------------
Management fees(2) 1.00% 2.00% 0% 1.50% 3.00% 0% 1.50% 3.00% 0%
- ------------------------------------------------------------------------------------------------------------------------------
Distribution and service
(12b-1) fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------
Other expenses(3) 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 2.77% 3.77% 1.77% 3.27% 4.77% 1.77% 3.27% 4.77% 1.77%
- ------------------------------------------------------------------------------------------------------------------------------
Fee waivers and/or expense 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17%
reimbursements(4)
- ------------------------------------------------------------------------------------------------------------------------------
Total annual fund 1.60% 2.60% 0.60% 2.10% 3.60% 0.60% 2.10% 3.60% 0.60%
operating expenses (after
fee waivers and/or expense
reimbursements)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES ON THE FOLLOWING PAGES.
-5-
<PAGE>
<TABLE>
<CAPTION>
FEES AND EXPENSES OF THE INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------
GLOBAL
U.S. CORE EQUITY FUND AGGRESSIVE EQUITY FUND INDEPENDENCE FUND
- ------------------------------------------------------------------------------------------------------------------------------
BASIC MAXIMUM MINIMUM BASIC MAXIMUM MINIMUM BASIC MAXIMUM MINIMUM
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(paid directly from your
investment)
- ------------------------------------------------------------------------------------------------------------------------------
Sales charge "load" on
purchases None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Deferred sales charge
"load" None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Sales charge "load" on
reinvested distributions None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees (short-
term trading fees)(1) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (deducted from
fund assets)
- ------------------------------------------------------------------------------------------------------------------------------
Management fees(2) 1.00% 2.00% 0% 1.50% 3.00% 0% 1.50% 3.00% 0%
- ------------------------------------------------------------------------------------------------------------------------------
Distribution and service
(12b-1) fees None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------
Other expenses(3) 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 2.17% 3.17% 1.17% 2.67% 4.17% 1.17% 2.67% 4.17% 1.17%
- ------------------------------------------------------------------------------------------------------------------------------
Fee waivers and/or expense 0.82% 0.82% 0.82% 0.82% 0.82% 0.82% 0.82% 0.82% 0.82%
reimbursements(4)
- ------------------------------------------------------------------------------------------------------------------------------
Total annual fund 1.35% 2.35% 0.35% 1.85% 3.35% 0.35% 1.85% 3.35% 0.35%
operating expenses (after
fee waivers and/or expense
reimbursements)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each fund will deduct a short-term trading fee equal to 1.00% of the net
asset value of the shares from the redemption amount if you sell your
shares after holding them less than 90 days. This fee is paid to the fund
rather than the Adviser, and is designed to offset the brokerage
commissions, market impact and other costs associated with fluctuations in
fund asset levels and cash flow caused by short-term shareholder trading.
The short-term trading fee, if applicable, is charged on exchanges out of a
fund. If you bought shares on different days, the shares you held longest
will be redeemed first for
-6-
<PAGE>
purposes of determining whether the short-term trading fee applies. The
short-term trading fee does not apply to shares that were acquired through
reinvestment of distributions.
(2) The management fee paid to the Adviser for providing advisory services to
the funds consists of a basic fee and a performance adjustment calculated
by comparing the Fund's performance to a target. The basic fee for the
U.S. Core Equity Fund, the Aggressive Equity Fund and the Global
Independence Fund is 1.00%, 1.50% and 1.50% of the fund's average net
assets, respectively. The actual fees paid to the Adviser may be higher or
lower than the basic fee. The target for the U.S. Core Equity Fund and the
Aggressive Equity Fund is the investment record of the Standard & Poor's
500 Composite Price Index (the "S&P 500 Index"), and the target for the
Global Independence Fund is the investment record of the 90-day U.S.
Treasury bill rate. The S&P 500 Index is an unmanaged index composed of
500 common stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative percentage weights to the stocks
included in the index, weighted according to each stock's total market
value relative to the total market value of the other stocks in such index.
The 90-day U.S. Treasury bill rate is an index composed of offered levels
for U.S. Treasury bills. See "Management--Management Fees" for additional
information about the fee calculation.
(3) Other expenses are based on estimated amounts for each fund's first full
fiscal year since the funds have not yet commenced operations.
(4) The Adviser has agreed, for the 12-month period commencing on the date of
this Prospectus, to reimburse expenses to each Fund if necessary so that
the Fund's "Other Expenses" (other than interest, taxes, brokerage and
extraordinary expenses including litigation expenses) do not exceed .35% of
the Fund's average net assets.
-7-
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the funds
with the cost of investing in other mutual funds. However, it is only
hypothetical and your actual costs may be higher or lower.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses (other than the management fee) remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your cost would be:
<TABLE>
<CAPTION>
INVESTOR SHARES
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
basic maximum minimum basic maximum minimum
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. CORE EQUITY FUND $160 $260 $ 60 $497 $ 799 $188
AGGRESSIVE EQUITY FUND $210 $360 $ 60 $648 $1,095 $188
GLOBAL INDEPENDENCE FUND $210 $360 $ 60 $648 $1.095 $188
- --------------------------------------------------------------------------------
<CAPTION>
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
basic maximum minimum basic maximum minimum
- --------------------------------------------------------------------------------
U.S. CORE EQUITY FUND $135 $235 $ 35 $420 $724 $110
AGGRESSIVE EQUITY FUND $185 $335 $ 35 $573 $1,022 $110
GLOBAL INDEPENDENCE FUND $185 $335 $ 35 $573 $1,022 $110
- --------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
U.S. CORE EQUITY FUND
GOAL AND STRATEGIES
The U.S. Core Equity Fund seeks a total return greater than that of the S&P 500
Index by providing investors with a professionally and actively managed
portfolio that aims to provide superior investment returns compared to those
otherwise achievable in the general U.S. equity market. The Fund will use a
fundamental and quantitative approach to equity portfolio management that
emphasizes modern portfolio theory and other well-tested academic theories of
corporate finance moderated by consideration of the general economic
environment and practical financial market experience. The investment strategy
will focus on companies where management creates shareholder value by:
- - increasing operating profits
- - designing appropriate capital structures for the business risks being taken
- - adopting disciplined new project investment policies as well as acquisition
and divestiture policies that earn expected returns in excess of the
risk-adjusted cost of capital
- - designing senior management compensation plans that reward the creation of
shareholder value.
The Fund will use time-tested quantitative systems for identifying overvalued
and undervalued common stocks. These quantitative tools will focus on a number
of analytical topics, including:
- - earnings growth, earnings surprises and earnings estimate revisions
- - price momentum of stocks
- - valuation analysis
- - merger and acquisition arbitrage analysis
- - seasonal market factors
- - analyzing secondary public offerings and stock buy-backs
The Adviser will manage the Fund with a controlled and disciplined approach to
risk-taking with the objective of earning superior returns to the S&P 500 Index
from careful stock selection. The Adviser will use quantitative tools to
measure and limit portfolio risk, including market timing risk and industry risk
in particular, as well as economic risk, financial risk and stock specific risk.
When necessary to conserve the Fund's capital, the Adviser may permit some
market directional risk to protect the Fund against market downturns through
the use of futures, options on futures or short sales .
The Fund does not focus on one source of shareholder value, but seeks a deeper
understanding of the many sources from which shareholder value can be created.
The guiding principles of modern portfolio theory, corporate finance theory and
economic value-added analysis() and the disciplined use of quantitative and
risk management tools are intended to produce a diversified and balanced
portfolio that can earn returns superior to the S&P 500 Index without taking
unnecessary risk. As such, the Fund is a risk-managed portfolio seeking equity
returns from diversified sources and not merely a value or growth fund.
- --------------------
(1) EVA-Registered Trademark- is a registered trademark of Stern Stewart & Co.
-9-
<PAGE>
Securities and industry concentration will be limited by the desire to maintain
a reasonable risk level relative to the S&P 500 Index.
S&P Index futures may be used to manage cash flows, invest excess cash, control
risk or incrementally enhance return.
PORTFOLIO INVESTMENTS
Under normal market conditions, this Fund invests at least 65% of its assets in
equity securities, including:
- - common stocks of U.S. issuers
- - securities convertible into common stocks
- - securities such as rights and warrants, whose values are based on common
stocks
- - dollar-denominated American Depositary Receipts ("ADRs")
The Fund may also invest in preferred stocks and non-convertible debt securities
such as bonds, debentures and notes. The cash portion of this Fund will have a
duration of less than 3 years and will consist of investment grade fixed-income
securities .
The Fund may gain exposure to stocks through:
- common and convertible shares
- short sales
- purchases on margin
- writing put and call options
- initial public offerings
Exposures to the U.S. stock market may also be acquired by:
- stock market and industry specific index commodity futures contracts
- options contracts
- options on futures contracts
- exchange-traded options on individuals stocks
The Fund may also engage in:
- arbitrage activities
- repurchase agreements
- reverse repurchase agreements
- forward delivery contracts
-10-
<PAGE>
For liquidity and flexibility, the Fund may invest a portion of its assets in
money market instruments and short-term obligations of high quality, including
U.S. Government securities, bank obligations, repurchase and reverse repurchase
agreements, commercial paper and other investment-grade debt securities. As a
defensive tactic in unusual market conditions, the Fund may temporarily invest
without limit in these money market and short-term obligations. This could
potentially keep the Fund from achieving its objective.
RISK FACTORS
This Fund's principal risk factors are:
- - equity risk
- - market risk
- - leverage risk
- - exposure risk
- - risks of derivative instruments
The value of your investment will fluctuate in response to stock market
movements. To a limited extent, the Fund may also engage in other investment
practices, including the purchase of foreign securities. International
investing is associated with additional risks, including currency, information
and political risks. The Fund may use structured securities and other
instruments (such as swaps) to gain access to the performance of a benchmark
asset such as an index or selected stocks where the Fund's direct investment in
the benchmark asset is restricted. These types of investments carry a number of
additional risks such as access, credit, currency, exposure, information,
interest rate, liquidity, market, political and valuation risks. In addition,
the Fund may be subject to interest rate risk to the extent it invests in
fixed-income securities and engages in futures and options on futures
transactions. These risks are defined in "More About Risk."
Although the Fund may hedge its portfolio to reduce investment risk, the Fund is
not obligated to pursue any hedging strategy. In addition, hedging practices
may not be available, may be too costly to be used effectively or may be unable
to be used for other reasons.
To the extent that it invests in certain securities or other instruments, the
Fund may be affected by additional risks. These risks are defined in "More
About Risk." That section also details other investment practices the Fund may
use. Please read "More About Risk" carefully before you invest.
-11-
<PAGE>
AGGRESSIVE EQUITY FUND
GOAL AND STRATEGIES
The Aggressive Equity Fund seeks a total return greater than that of the S&P
500 Index by investing primarily in the U.S. equity market, as well as the
global equity, global fixed income and currency markets. The Fund's
investments outside the United States will generally be limited to developed
countries. The Fund may use certain derivative instruments to enhance its
return incrementally as well as to manage portfolio risk.
The Fund will apply the Adviser's Global Dynamic Asset Allocation Strategy
("GDAA") which balances the goal of high performance with the appropriate risk.
The GDAA Strategy seeks to control the effect of shifts in market volatility in
the liquid equity and fixed-income markets of developed economies. In
addition, the strategy uses short-term currency forward contracts for
sufficiently liquid currency markets. Furthermore, the GDAA Strategy seeks to
exploit consistent (although evolving) patterns in the relationships of
fundamental economic and financial variables to the underlying equity, bond and
currency markets. It uses a mixture of fundamental judgment and sophisticated
quantitative tools, which include systems which simultaneously estimate
predictive expected asset returns with asset risks and correlations to achieve a
stream of portfolio returns which effectively balance a reasonable range of risk
against return.
PORTFOLIO INVESTMENTS
Under normal market conditions, the Fund will invest at least 65% of its assets
in equity and equity-related securities and derivative instruments of U.S.
issuers including:
- - common stocks
- - **3 options on securities and securities indices
- - securities convertible into common stocks
- - rights and warrants, whose values are based on common stocks
- - equity swap contracts
- - *3 moved from here; text not shown S&P 500 index futures contracts and
options thereon
To enhance its investment returns incrementally and to manage risk, the Fund may
also enter into:
- - equity index and bond futures contracts and options thereon
- - currency spot and forward contracts
- - currency and interest rate futures contracts and options thereon
- - equity and interest rate swap contracts
To a lesser extent, the Fund may also purchase or sell contracts relating to the
future delivery of precious metals.
The Fund may also invest directly in long-term U.S. and foreign government
securities. For liquidity and flexibility, the Fund intends to place its
remaining assets in money market instruments and short-term obligations of high
quality, including U.S. Government securities, bank obligations, repurchase and
reverse repurchase
-12-
<PAGE>
agreements, commercial paper and other investment-grade debt securities. As a
defensive tactic in unusual market conditions, the Fund may temporarily invest
without limit in these money market and short-term obligations. This could
potentially keep the Fund from achieving its goal.
The Fund may also invest in preferred stocks and non-convertible debt securities
such as bonds, debentures and notes.
Although the Fund may hedge its portfolio to reduce investment risk, the Fund is
not obligated to pursue any hedging strategy. In addition, hedging practices
may not be available, may be too costly to be used effectively or may be unable
to be used for other reasons.
RISK FACTORS
This Fund's principal risk factors are:
- - equity risk
- - exposure risk
- - futures risk
- - leverage risk
- - risks of derivative instruments
- - foreign securities risk
- - market risk
- - interest rate risk
- - non-diversification risk
The value of your investment will fluctuate in response to global stock market
movements, as well as global bond market movements. In addition, because the
Fund invests globally, it will be exposed to currency, information, political
and, possibly, natural event risks. To the extent that the Fund's foreign
investments at any given time are focused in one particular country or target a
single region, the Fund may be more volatile than a more geographically
diversified fund.
The Fund's transactions in leveraged derivative securities, such as options on
securities and indices, futures contracts and related options, and transactions
in currency contracts, carry additional risks, such as correlation, liquidity,
credit, opportunity and regulatory risks. The Fund may also use structured
securities and other instruments (such as swaps) to gain access to the
performance of a benchmark asset such as an index or selected stocks where the
Fund's direct investment in the benchmark asset is restricted. These types of
investments carry a number of additional risks such as access, credit, currency,
exposure, information, interest rate, liquidity, market, political and valuation
risks. These risks and additional risks that the Fund may be subject to are
defined in "More About Risk." "More About Risk" also details other investment
practices the Fund may use, which, if employed, are associated with further risk
that could adversely affect the Fund's performance. Please read "More About
Risk" carefully before you invest.
-13-
<PAGE>
GLOBAL INDEPENDENCE FUND
GOAL AND STRATEGIES
The Global Independence Fund seeks a total return greater than that of the
90-day U.S. Treasury bill rate. To achieve its investment objective, the Fund
invests in the global equity, global fixed income and currency markets. The
Fund seeks to enhance its return incrementally and manage risk by using
currency spot and forward contracts, financial futures, options on futures and
other derivative instruments. The Fund will seek to provide a high total return
on a risk adjusted basis by applying the GDAA Strategy described under
"Aggressive Equity Fund" and investing, through the use of the instruments
described below, in the global equity, global fixed income and currency markets.
The Fund's investments outside the United States will generally be limited to
developed countries.
PORTFOLIO INVESTMENTS
- - common stocks, corporate bonds, debentures and notes
- - securities convertible into common stocks, non-convertible debt instruments
and preferred stocks
- - government, bank and commercial obligations
- - rights and warrants, whose value is based on common stocks
- - depositary receipts relating to equity securities
- - ** 4 currency spot and forward contracts
- - options on securities and securities indices
- - equity and interest swap contracts
- - equity index and bond futures contracts and options thereon
- - currency and interest rate futures contracts and options thereon
The Fund intends to place a substantial portion of its assets in short-term
obligations of high quality, including:
- - U.S. Government securities
- - bank obligations
- - repurchase and reverse repurchase agreements
- - commercial paper and other investment-grade debt securities
As a defensive tactic in unusual market conditions, the Fund may temporarily
invest without limit in these money market and short-term obligations. This
could potentially keep the Fund from achieving its goal.
* 4 moved from here; text not shown
To a lesser extent, the Fund may also purchase or sell contracts relating to the
future delivery of precious metals.
-14-
<PAGE>
Although the Fund may hedge its portfolio to reduce investment risk, the Fund is
not obligated to pursue any hedging strategy. In addition, hedging practices
may not be available, may be too costly to be used effectively or may be unable
to be used for other reasons.
RISK FACTORS
This Fund's principal risk factors are:
- - exposure risk
- - futures risk
- - leverage risk
- - risks of derivative instruments
- - foreign securities risk
- - interest rate risk
- - market risk
- - non-diversification risk
The value of your investment in the Fund will fluctuate in response to stock,
bond and currency market movements.
Because the Fund invests in foreign securities, the Fund may be affected by
additional risks such as currency, information, political and possibly, natural
event risks. To the extent that the Fund's foreign investments at any given
time are focused in one particular country or target a single region, the Fund
may be more volatile than a more geographically diversified fund.
The Fund's transactions in leveraged derivative securities, such as futures
contracts and related options, options on securities and indices and
transactions in currency contracts, carry additional risks, such as correlation,
liquidity, credit, opportunity and regulatory risks.
These risks and other risks which the Fund may be subject to are defined in
"More About Risk." "More About Risk" also details other investment practices
the Fund may use. Please read "More About Risk" carefully before you invest.
-15-
<PAGE>
COMMON INVESTMENT STRATEGIES FOR:
AGGRESSIVE EQUITY FUND
AND
GLOBAL INDEPENDENCE FUND
To realize the funds' investment objectives, the Adviser will be continuously
developing new strategies to take advantage of future market shifts or shifts in
market fundamentals, behavior or patterns. Broadly, however, the funds will
combine various approaches to modern portfolio theory and risk management with
investment themes such as relative value, market arbitrage and directional
trading. Individual position risk and return potential are estimated in a
consistent framework involving the Adviser's judgment and the use of
sophisticated quantitative tools. At the fund level, risk-return trade-offs are
carefully weighted to keep the fund's expected volatility within reasonable
ranges.
RELATIVE VALUE: Using a trading strategy, the funds will seek to exploit the
fundamental and persistent patterns of market behavior between interrelated
assets such as yield curve points, credit points, credit spreads and/or related
market spreads. As an example, a long position in a country's bond market might
be held against a short position with a similar maturity in a bond market of
another country. The related currency position could be taken to mitigate risk,
depending on market circumstances and our fundamental and quantitative analysis.
This differs from classic arbitrage positions as convergence may not be assured
or the date of the convergence may be very distant. The returns on these
transactions would be relatively independent of overall market trends.
DIRECTIONAL TRADING: The funds will take positions which will attempt to
capture gains from changes in volatility or the direction of a particular
market. The Adviser's strategies seek to exploit consistent patterns in the
relationships of fundamental economic and financial variables to the underlying
bond and currency markets. The Adviser will monitor the implicit forecasting
relationships using error-learning statistical processes. The Adviser will use
these tools in making decisions regarding the optimal level of risk to be
employed on various positions.
MODERN PORTFOLIO THEORY: The funds will employ a strategy that uses theoretical
tools in practice which consider risk, return and efficiency. With the
combination of fundamental judgment and quantitative analysis, the Adviser may
select trades not only for these reasons, but for their net return-enhancing or
risk-mitigating properties for the fund as a whole.
RISK MANAGEMENT: The risk management process emphasizes a blending of judgment
with quantitative discipline. The Adviser will monitor and control the targeted
risk-return trade-off throughout the portfolio allocation process and day-to-day
management process. As the basic measure of risk, the Adviser will focus on the
annualized standard deviation of monthly performance. The Adviser will use
daily, weekly and monthly historical data, as well as risk forecasting systems,
to provide measures of the expected standard deviation of the fund. Stress
testing for different economic environments will be performed as another measure
of risk.
The Adviser will seek to target returns for relative value and directional
trading based on the examination of long term themes, short term factors and
relative indicators. To assist in capturing and analyzing these factors, the
Adviser may use a system that has both quantitative and qualitative elements.
The system incorporates a sophisticated and dynamic process which is designed to
forecast the risk and return characteristics of all the assets in a consistent
manner.
The Adviser will also, on a regular basis, compare the correlation of individual
risk factors, projected fund returns, measures of relevant indices and
investment strategies to build a portfolio of securities that attempts to
optimize the risk-return objectives of the fund.
In addition, forecasts of targeted asset return and associated risk measures are
generated using financial and economic inputs. These forecasts are examined and
data is analyzed to promote consistency. External information, which the
Adviser deems to be outside the scope of the initial inputs, is integrated in
the forecasting
-16-
<PAGE>
process and new forecasts are generated. These forecasts and measures of
forecasting error, as well as the relationships among those errors, are all
generated in a consistent manner allowing for optimization. Optimization of the
portfolio, given the targeted risk-return trade-off, suggests potential
allocations, which are again examined for inconsistencies. These
inconsistencies, if found, tend to highlight potential errors in the information
input or assumptions about relative market movements that a non-quantitative
system would typically overlook. Inconsistencies are then dealt with at the
point of origin, and the system is once against rerun (if necessary). New
allocations are then overlaid on existing asset class positions to generate new
net exposures. Trading based on the resulting portfolio is then implemented.
Adjustments are made whenever the Adviser deems that the environment has changed
dramatically from that assumed in the current portfolio's allocations.
The entire investment process is regularly monitored, upgraded and tested to
promote consistency and integrity for the resulting portfolios and each fund's
objective.
-17-
<PAGE>
MORE ABOUT RISK
INTRODUCTION
A fund's risk profile is largely defined by the fund's investment goal and
principal strategies. You will find a summary of each fund's risk profile in
"Risk/Return Summary - Investment Goals and Principal Strategies." The
fund-by-fund discussions contain more detailed information.
In addition to the risks previously mentioned, the funds may use certain
investment practices that have high risks and opportunities associated with
them. However, each fund has limitations and policies designed to reduce these
risks. To the extent a fund utilizes these securities or practices, its overall
performance may be affected, either positively or negatively. The "Certain
Investment Practices" table in this section briefly describes these practices
and the limitations on their use, as well as the risks associated with them.
TYPES OF INVESTMENT RISK
ALL FUNDS
ACCESS RISK The risk that some countries may restrict a fund's access to
investments or offer terms that are less advantageous than those for local
investors. This could limit the attractive investment opportunities available
to a fund.
CORRELATION RISK The risk that the relationships between markets are not
contemplated in the investment decision-making process. Incomplete correlation,
or inaccurately forecasted correlation, can result in unanticipated risks.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
EQUITY RISK Investments in equity securities and equity derivatives in general
are subject to market risks that may cause their prices to fluctuate over time.
The value of securities convertible into equity securities, such as warrants or
convertible debt, is also affected by prevailing interest rates, the credit
quality of the issuer and any call provision. Fluctuations in the value of
equity securities in which the funds invest will cause the net asset value of
the funds to fluctuate.
** 5 EXPOSURE RISK The risk associated with techniques that increase a fund's
exposure to a security, index or its investment portfolio. Exposure is the
fund's maximum potential gain or loss from an investment. Certain investments
(such as options and futures) and certain practices (such as short-selling) may
have the effect of magnifying declines as well as increases in a fund's net
asset value. Losses from writing options and entering into futures and short
sales can be unlimited.
** 6 LEVERAGE RISK If a fund borrows or otherwise uses leverage to invest in
securities or derivative instruments, any investment gains made on the
securities or instruments in excess of interest or other amounts paid by the
fund will cause the net asset value of the fund's shares to rise faster than
would otherwise be the case. On the other hand, if the investment performance
of the additional securities or instruments purchased fails to cover their cost
(including any interest paid on borrowed money) to the fund, the net asset value
of the fund's shares will decrease faster than would otherwise be the case. The
use of leverage can lead to substantial losses.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on fund management or
performance.
-18-
<PAGE>
MANAGEMENT AND OPPORTUNITY RISK The risk that a strategy used by a fund's
management may fail to produce the intended result. The risk of missing out on
an investment opportunity because the assets necessary to take advantage of it
are tied up in other investments. These risks are common to all mutual funds.
** 7 MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. Stock markets tend to move in cycles, with periods
of rising stock prices and periods of falling stock prices. These fluctuations
may cause a security to be worth less than the price originally paid for it, or
less than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. Market risk
is common to most investments -- including stocks and bonds, and the mutual
funds that invest in them.
** 8 Bonds and other fixed-income securities may involve less market risk than
stocks, but not always. The risk of bonds can vary significantly depending upon
factors such as issuer and maturity. Bonds of some companies are riskier than
the stocks of others. The risk of bonds declining in value may be offset in
whole or in part by the income they provide.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
OPERATIONAL RISK The risk that some countries may have less developed
securities markets (and related transaction, registration and custody
practices).
PREPAYMENT AND EXTENSION RISKS The risk that the term of a mortgage or
asset-backed pool of securities in which a fund may invest may be shortened by
unscheduled or early payments of principal on underlying mortgages or assets, or
extended under certain circumstances. Prepayments and extensions may cause the
yield on such securities to differ from the expected yield based on assumed
average life. Reinvestments of prepayments may occur at higher or lower
interest rates than the original investment and affect a fund's yield.
** 9 RISKS OF DERIVATIVE INSTRUMENTS The use of these instruments requires
special skills, knowledge and investment techniques that differ from those
required for normal portfolio management. The success of the funds in selecting
these instruments for their portfolios depends on the skill of the Adviser in
predicting the movement of interest rates, the value of particular instruments
and other economic variables. There is no assurance that the Adviser will
accurately predict these movements.
TRADING LIMIT AND TRADING HALT RISK. Exchanges on which options and futures
contracts are traded, such as the Chicago Mercantile Exchange, have established
limits on how much an option or futures contract may decline over various time
periods within a day. If an option or futures contract's price declines more
than the established limits, no trading may occur at prices outside that limit.
If a trading limit is reached before the close of a trading day, a Fund may not
be able to purchase or sell options or futures contracts at advantageous prices
or at all. In such an event, the Fund also may be required to use a
"fair-value" method to price its outstanding contracts. In addition, the
Chicago Mercantile Exchange imposes intraday 10 minute trading halts when trades
occur at specified limits within the various time periods.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price that it can sell them for.
YEAR 2000 PROCESSING RISK. The risk that a fund is adversely affected if the
computer systems used by the Adviser or other service providers do not correctly
handle the change from "99" to "00" on January 1, 2000. CDC Investments is
working to avoid such problems and to obtain assurances from service providers
that they are taking similar steps. However, there can be no assurance that
these efforts will be entirely successful. The Year 2000 issue affects
practically all companies, organizations, governments and markets throughout the
world -- including companies or governmental entities in which the funds invest.
To the extent that the impact on a fund's holdings or on the global markets or
economies is negative, it could adversely affect a fund's returns.
-19-
<PAGE>
AGGRESSIVE EQUITY FUND AND GLOBAL INDEPENDENCE FUND ONLY
FUTURES RISK These funds will buy and sell commodity futures contracts and
options thereon up to the fullest extent permissible under applicable law.
Futures contracts and options on futures contracts provide for the future sale
by one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. An option on a
futures contract gives the purchaser the right, in exchange for a premium, to
assume a position in a futures contract at a specified exercise price during the
term of the option. Index futures are futures contracts for various securities
indices that are settled in cash. Applicable law currently permits unlimited
use of futures and related options for bona fide hedging purposes; however,
aggregate initial margin and premiums required to establish non-hedging
positions may not exceed 5% of each fund's net asset value after taking into
account unrealized profits and unrealized losses on any contracts it has entered
into. Unforeseen changes in regulatory provisions relating to the use of
futures and options on futures may adversely affect a fund's management or
performance. Although these funds are limited in the amount of assets that may
be invested in futures transactions, there is no overall limit on the percentage
of a fund's assets that may be at risk with respect to futures activities.
** 10 INTEREST RATE RISK Changes in interest rates may cause a decline in an
investment's market value. With bonds and other fixed income securities, a rise
in interest rates typically causes a fall in values, while a fall in interest
rates typically causes a rise in values.
FOREIGN SECURITIES RISK
** 11 CURRENCY RISK Fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by
foreign currency-denominated investments and may widen any losses. If
futures are traded on non-U.S. exchanges, such exchanges may require that
margin for open positions be converted to the home currency of the
contract. Whenever margin is held in a non-U.S. currency, losses may occur
if exchange rates fluctuate. Also, direct currency positions, through
currency forward contracts, may go up or down in price.
** 12 POLITICAL RISK Government or political actions of any sort may cause
losses in a fund. These actions may range from changes in tax or trade
statutes to nationalization, expropriation, currency blockage or
governmental collapse and war, among many others.
** 13 INFORMATION RISK Key information about an issuer, security or market
may be inaccurate or unavailable.
** 14 NON-DIVERSIFICATION RISK AS non-diversified portfolios, these funds are
not limited in the amount of their assets that may be invested in the securities
of a single issuer. Each fund may invest a greater proportion of its assets in
the securities of a smaller number of issuers. Because each fund is
non-diversified, there is a greater chance that the poor performance of a single
position could hurt the total value of the fund.
-20-
<PAGE>
<TABLE>
<CAPTION>
CERTAIN INVESTMENT PRACTICES
- ------------------------------------------------------------------------------------------------------------------------------------
Global
U.S. Core Aggressive Independence
This table shows each fund's limitations on certain investment practices. In each Equity Fund Equity Fund Fund
case the significant types of risk are listed, which are defined elsewhere in this
prospectus.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Interests in pools of assets such as receivables from -- * *
credit card and automobile loans. CREDIT, PREPAYMENT AND EXTENSION, LIQUIDITY,
INTEREST RATE RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
BELOW INVESTMENT GRADE DEBT SECURITIES Debt securities rated below BBB by -- 10% 10%
Moody's Investors Service, Inc. or Baa by Standard & Poor's Ratings Service
(or of comparable quality, if unrated) are considered junk bonds. CREDIT,
MARKET, INTEREST RATE, LIQUIDITY, VALUATION, INFORMATION RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
BORROWING The borrowing of money from banks for temporary or emergency 33 1/3% 33 1/3% 33 1/3%
purposes to meet redemption requests and to facilitate settlement of
transactions in portfolio securities. EXPOSURE, LEVERAGE RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES Debt securities backed by pools of mortgages, -- * *
including pass-through certificates and other senior classes of
collateralized mortgage obligations (CMOs). CREDIT, PREPAYMENT AND EXTENSION,
LIQUIDITY, INTEREST RATE RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Securities with restrictions on trading or 15% 15% 15%
those not actively traded on the open market. LIQUIDITY, VALUATION, MARKET RISKS
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITIES LENDING. Lending portfolio securities to financial institutions; a fund 50% -- --
receives cash, U.S. government securities or bank letters of credit as collateral.
CREDIT, LIQUIDITY, MARKET, OPERATIONAL RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT SALES AND SHORT SALES AGAINST THE BOX The selling of securities that have 10% -- --
been borrowed on the expectation that the market price will drop.
- - Hedged. LEVERAGE, MARKET, CORRELATION, LIQUIDITY, OPPORTUNITY RISKS.
- - Speculative. LEVERAGE, MARKET, LIQUIDITY RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TRADING Selling a security shortly after purchase. A fund engaging in - * *
short-term trading will have higher turnover and transaction expenses. Increased
short-term capital gains distributions could raise shareholders' income tax liability.
MARKET RISK.
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a fund's assets in investments - - -
such as money market obligation and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in unusual market
conditions, defensive tactics might prevent a fund from achieving its goal.
- ------------------------------------------------------------------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the right to buy certain 10% 10% 10%
securities, generally common stock, at a specified price and usually for a limited
time. LIQUIDITY, MARKET, EXPOSURE RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase or sale of 20% 20% 20%
securities for delivery at a future date; market value may change before delivery.
MARKET, LIQUIDITY, EXPOSURE, OPPORTUNITY, LEVERAGE RISKS.
- ------------------------------------------------------------------------------------------------------------------------------------
-21-
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
ZERO COUPON BONDS Debt securities that pay no cash income to holders until 20% 20% 20%
maturity and are issued at a discount from maturity value. At maturity, the entire
return comes from the difference between purchase price and maturity value.
INTEREST RATE RISK.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
KEY TO TABLE:
- - No policy limitation on usage
* Permitted, but not typically used
- -- Not permitted
Numbers shown indicate percentages:
20 ITALIC TYPE represents percent of total assets
20 roman type represents percent of net assets
-22-
<PAGE>
MANAGEMENT
ABOUT THE ADVISER
The board of trustees of CDC MPT+ Funds supervises each fund's business affairs.
The board has selected CDC Investment Management Corporation, to manage the
funds. It is responsible for:
- - investing each fund's assets according to its goal and strategy
- - placing buy and sell orders
- - managing day-to-day operations and business activities
- - providing office space and equipment
CDC Investment Management Corporation was formed as a New York corporation in
1990 and is a registered investment adviser under the Investment Advisers Act of
1940, as amended. CDC Investments is an established leader in providing
alternative investment strategies for institutional clients. CDC Investments
strives to develop products and strategies which will provide its clients with
superior risk-adjusted performance that is not well correlated with traditional
stock and bond market indices. Although the Adviser has not managed U.S.
registered funds in the past, it has substantial experience managing
unregistered portfolios based in Luxembourg that are subject to restrictions
similar to those imposed on U.S. registered investment companies. As of
December 1998, CDC Investments has approximately $3.3 billion in assets under
management, providing asset management services to large European, Asian and
North American financial institutions, family offices, fund of funds, pension
funds and other investors.
CDC Investments is the wholly owned, U.S.-based, asset management subsidiary of
Caisse des Depots et Consignations ("CDC Group"), One of the world's largest
financial institutions with a "AAA" credit rating on its senior long-term debt.
Headquartered in Paris, CDC Group has nearly a 180 year record of providing
financial services. With autonomous subsidiaries in New York, Frankfurt and
Tokyo, the CDC Group specializes in investment management, capital market and
other financial activities, savings and life insurance, fiduciary services and
public finance. CDC Investments was founded as part of a strategic expansion to
provide world-class investment services in the United States and to expand its
asset management expertise and products for the European asset management
subsidiaries.
The adviser's offices are located at:
9 West 57th Street, 35th Floor
New York, NY 10019
MANAGEMENT FEES
The U.S. Core Equity Fund pays the Adviser a basic fee of 1.00% per annum, and
the Aggressive Equity Fund and the Global Independence Fund each pay the Adviser
a basic fee of 1.50% per annum, of the respective fund's average daily net
assets. This basic management fee may be adjusted upward or downward by
applying an adjustment formula (the "Performance Adjustment"). The Performance
Adjustment is calculated monthly by comparing the fund's investment performance
to a target during the most recent twelve-month period. The target for the U.S.
Core Equity Fund and the Aggressive Equity Fund is the investment record of the
S&P 500 Index, and the target for the Global Independence Fund is the investment
record of the 90-day U.S. Treasury bill rate. The difference between the fund's
performance compared to the performance of the relevant target is multiplied by
a Performance Adjustment of 25% (as an annual rate). The Performance Adjustment
is then added to or subtracted
-23-
<PAGE>
from the basic fee. The maximum annualized Performance Adjustment is 1.00% for
the U.S. Core Equity Fund and 1.50% for each of the Aggressive Equity Fund and
the Global Independence Fund.
Here are examples of how the Performance Adjustment would work (using annual
rates):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
U.S. CORE EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Fund Performance Relevant Basic Management Total Management
(before Management fee) Index Excess Performance Fee Fee Adjustment Fee
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-10.00% -15.00% 5.00% 1.00% 1.00% 2.00%
- -----------------------------------------------------------------------------------------------------------------------
-5.00% 5.00% -10.00% 1.00% -1.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------
4.00% 5.00% -1.00% 1.00% -0.25% 0.75%
- -----------------------------------------------------------------------------------------------------------------------
5.00% 5.00% 0.00% 1.00% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
6.00% 5.00% 1.00% 1.00% 0.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------
10.00% 5.00% 5.00% 1.00% 1.00% 2.00%
- -----------------------------------------------------------------------------------------------------------------------
15.00% 5.00% 10.00% 1.00% 1.00% 2.00%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Aggressive Equity Fund and Global Independence Fund
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Fund Performance Relevant Basic Management Total Management
(before Management fee) Index Excess Performance Fee Fee Adjustment Fee
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-10.00% -15.00% 5.00% 1.50% 1.25% 2.75%
- -----------------------------------------------------------------------------------------------------------------------
-5.00% 5.00% -10.00% 1.50% -1.50% 0.00%
- -----------------------------------------------------------------------------------------------------------------------
2.00% 5.00% -3.00% 1.50% -0.75% 2.25%
- -----------------------------------------------------------------------------------------------------------------------
5.00% 5.00% 0.00% 1.50% 0.00% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
8.00% 5.00% 3.00% 1.50% 0.75% 2.25%
- -----------------------------------------------------------------------------------------------------------------------
12.00% 5.00% 7.00% 1.50% 1.50% 3.00%
- -----------------------------------------------------------------------------------------------------------------------
15.00% 5.00% 10.00% 1.50% 1.50% 3.00%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Each fund's performance is calculated based on its net asset value per share
after expenses but before the management fee.
For purposes of calculating the Performance Adjustment, any dividends or capital
gains distributions paid by a fund are treated as if those distributions were
reinvested by shareholders in fund shares at the net asset value per share as of
the record date for payment. The performance record for the S&P 500 Index is
based on the change in value of the Index, and is adjusted for any cash
distributions from the companies whose securities comprise the Index. The
performance record for the 90-day U.S. Treasury bill rate is based upon the
U.S. Treasury Yield Convention for the most recently issued "on the run" 90-day
Treasury bill quoted on page "GOV PX" of the Bloomberg Financial Markets Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service).
Because the adjustment to the basic fee is based on the comparative performance
of the fund and the record of the corresponding index, the controlling factor
(regarding the Performance Adjustment to the basic fee) is not whether the
fund's performance is up or down, but whether it is up or down more or less than
the performance record of the corresponding index. Moreover, the comparative
investment record of the fund is based solely on the relevant performance period
without regard to the cumulative performance over a longer or shorter period.
-24-
<PAGE>
MEET THE MANAGERS
The day-to-day portfolio management of each of the funds is managed by the
following teams of investment professionals. Each person joined CDC Investments
in 1997 and has been a co-portfolio manager of the relevant fund since its
inception. Each portfolio manager's title with CDC Investments appears next to
his name.
<TABLE>
<CAPTION>
U.S. CORE EQUITY FUND
<S> <C>
BLUFORD H. PUTNAM, PH.D., President and Chief Investment Officer
- Managing Director and Chief Investment Officer for Equities and Asset Allocation with the
Global Investment Management Department of Bankers Trust Company (NY) from 1994 TO 1997
- President of Putnam & Associates, Inc. from 1991 to 1994
- Director and Chief Economist at Kleinwort Benson Ltd. (London) from 1989 to 1991
- Visiting Professor at St. Mary's College, 1988 to 1989
- Principal and Head of the International Fixed Income Strategy Team at Morgan Stanley
& Co. from 1984 to 1988
- Partner with Stern Stewart & Co. from 1982 to 1984
- Economist with Chase Manhattan Bank from 1978 to 1982
- Economist with the Federal Reserve Bank of New York from 1976 to 1978
JOSE QUINTANA, PH.D., Managing Director
- Vice President and Head of Quantitative Research for the Strategic Asset Allocation team
in the Global Investment Management Group of Bankers Trust Company from 1994 to 1997
- Vice President in the Global Risk Management Sector of Chase Manhattan Bank from 1992
to 1994
- Vice President at Chase Investors Management Corporation from 1988 to 1992
- Staff Supervisor for AT&T's Market Analysis and Forecasting Directorate from 1987 to
1988
JASON WOLIN, Vice President and Portfolio Manager
- Portfolio Manager at Bankers Trust Company from 1994 to 1997
- Project Manager (Financial Systems Group) at JP Morgan & Co. from 1992 to 1994
FRANK HANLEY, Vice President
- Worked as a proprietary trader with Spear, Leeds & Kellog from 1995 to 1997
- Worked as a head trader for Gabelli & Co. Inc./GAMCO Investors from 1984 to 1995
-25-
<PAGE>
<CAPTION>
AGGRESSIVE EQUITY FUND AND
GLOBAL INDEPENDENCE FUND
<S> <C>
BLUFORD H. PUTNAM, PH.D., President
- See above
JOSE QUINTANA, PH.D., Managing Director
- See above
D. SYKES WILFORD, PH.D., Managing Director
- Chief Investment Officer of Bankers Trust Private Bank and Managing Director of Bankers
Trust Global Investment Management from 1994 to 1997
- Managing Director of Chase Investment Bank, Ltd., London from 1992 to 1994
- Managing Director of Chase Manhattan Bank, responsible for Risk Management product
development and marketing from 1988 to 1992
- Chief International Fixed Income Strategist for Drexel Burnham Lambert (London) from
1987 to 1988
- Managing Director of Chase Manhattan Bank from 1977 to 1987
- Economist with the Federal Reserve Bank of New York from 1976 to 1977
ANDREW DALTON, Director
- Vice President at Bankers Trust Company from 1995 to 1997
- Worked on the development and implementation of global asset allocation models for
Chase Manhattan Bank 1992 to 1995
</TABLE>
PRIOR PERFORMANCE OF SIMILAR PORTFOLIOS MANAGED BY THE ADVISER
The statistics below show the performance of three unregistered investment
portfolios managed by CDC Investments. In managing the Funds, CDC Investments
will employ substantially the same investment objectives, policies and
strategies that it employs in managing the corresponding portfolios described
below. However, in managing the Funds, CDC Investments will be subject to
certain rules imposed on registered investment companies (E.G., limits on the
percentage of assets invested in securities of issuers in a single industry,
limits on futures trading and requirements on distributing income to
shareholders) that do not apply to the unregistered portfolios. In addition,
the continuous offering of a Fund's shares and a Fund's obligation to redeem
its shares will likely cause the Fund to experience cash flows different from
those of the corresponding portfolio. Moreover, the way of calculating the
performance of the portfolios, which value their assets at the end of each
month, differs from the method employed by mutual funds, which among other
things value their assets on a daily basis. If the unregistered investment
portfolios had been subject to the same investment restrictions as the Funds,
their investment returns may have been lower.
The performance returns shown below are for the period from the commencement of
the relative portfolio's operations through December 31, 1998, and, in the case
of the Global Independence Portfolio described below, for the full year ended
December 31, 1998.
Fees and expenses incurred in the operation of the portfolios differ from and
are lower than the fees and expenses expected to be incurred by the
corresponding Funds. Accordingly, the performance results for each portfolio
have been adjusted to reflect the overall expense ratio expected to be borne by
the corresponding Fund in its first fiscal year and the management fee and
applicable Performance Adjustment that would have been charged given the actual
performance of the relevant index over the period shown.
-26-
<PAGE>
The performance data represents the prior performance of the portfolios, not
the prior performance of the Funds, and should not be considered an
indication of or a substitute for future performance of any of the Funds.
The time periods referenced below are relatively short and may not be
representative of the performance of these portfolios over the long term.
The performance figures for the Global Independence Portfolio are presented
in accordance with the standards promulgated by the Association for
Investment Management and Research ("AIMR"). The figures for the year ended
December 31, 1997 (included in the return since inception) have been examined
by an independent accounting firm. The U.S. Equity Portfolio and the
Aggressive Equity Portfolio have engaged an independent accounting firm to
perform an examination of the performance figures for the period ended
December 31, 1998 for presentation in accordance with the standards
promulgated by AIMR.
Set forth below is the performance of an unregistered, privately-offered
investment portfolio (the "U.S. Equity Portfolio"), which commenced operations
on January 5, 1998 and employs substantially the same investment objectives,
policies and strategies as the U.S. Core Equity Fund. Returns of the U.S.
Equity Portfolio are compared to the S&P 500 Index. Unlike the U.S. Equity
Portfolio's net returns, those of the S&P 500 Index, an unmanaged index, do not
reflect fees and expenses. Both the returns of the U.S. Equity Portfolio and
the S&P 500 Index reflect the reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
MGMT. FEE PLUS
GROSS OTHER ADJUSTED PERFORMANCE NET
RETURN EXPENSES RETURN ADJUSTMENT RETURN
<S> <C> <C> <C> <C> <C>
U.S. Equity Portfolio 29.53% .35% 29.18% 1.30% 27.88%
S&P 500 Index 27.97% n/a n/a n/a n/a
</TABLE>
Set forth below is the performance of a separately managed private account (the
"Aggressive Equity Portfolio"), which commenced operations on July 1, 1998 and
employs substantially the same investment objectives, policies and strategies as
the Aggressive Equity Fund. Returns of the Aggressive Equity Portfolio are
compared to the S&P 500 Index. Unlike the Aggressive Equity Portfolio's net
returns, those of the S&P 500 Index do not reflect fees and expenses. Both the
returns of the Aggressive Equity Portfolio and the S&P 500 Index reflect the
reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
MGMT. FEE PLUS
GROSS OTHER ADJUSTED PERFORMANCE NET
RETURN EXPENSES RETURN ADJUSTMENT RETURN
<S> <C> <C> <C> <C> <C>
Aggressive Equity 10.52% .35% 10.17% 1.74% 8.43%
Portfolio
S&P 500 Index 9.23% n/a n/a n/a n/a
</TABLE>
Set forth below is the performance of an unregistered, privately-offered
investment portfolio registered under the laws of Luxembourg (the "Global
Independence Portfolio"), which commenced operations on October 1, 1997 and
employs substantially the same investment objectives, policies and strategies as
the Global Independence Fund. Returns of the Global Independence Portfolio are
compared to the 90-day U.S. Treasury bill rate. Unlike the Global Independence
Portfolio's net returns, those of the 90-day U.S. Treasury bill rate do not
reflect fees and expenses. Both the returns of the Global Independence
Portfolio and the 90-day U.S. Treasury bill rate reflect the reinvestment of
dividends and distributions, if any.
-27-
<PAGE>
<TABLE>
<CAPTION>
SINCE INCEPTION MGMT. FEE PLUS
OTHER ADJUSTED PERFORMANCE NET
GROSS RETURN EXPENSES RETURN ADJUSTMENT RETURN
<S> <C> <C> <C> <C> <C>
Global Independence 22.18% .35% 21.83% 3.00% 18.83%
Portfolio
90-Day U.S. Treasury 6.41% n/a n/a n/a n/a
Bill Rate
<CAPTION>
MGMT. FEE PLUS
YEAR-ENDED OTHER ADJUSTED PERFORMANCE NET
DECEMBER 31, 1998 GROSS RETURN EXPENSES RETURN ADJUSTMENT RETURN
<S> <C> <C> <C> <C> <C>
Global Independence 17.51% .35% 17.16% 3.00% 14.16%
Portfolio
90-Day U.S. Treasury 5.05% n/a n/a n/a n/a
Bill Rate
</TABLE>
ACCOUNT POLICIES
PRICING OF SHARES
You pay no sales charges to invest in the funds. When you invest in a fund, you
pay the net asset value (NAV) per Institutional share or Investor share, as
appropriate. Your purchase or redemption order will be priced at the next NAV
calculated after your order is received by the Fund.
The NAV is determined at the close of regular trading on the New York Stock
Exchange (typically 4 p.m. Eastern time) each day the Exchange is open for
business. It is calculated by dividing total assets of the fund's relevant
class of shares, less all liabilities, by the number of the relevant class of
shares outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Short-term securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued on the basis of amortized cost.
This method minimizes the effect of changes in a security's market value.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. Options are generally valued at the last
sale price or, in the absence of a last sale price, the last bid price. The
value of a futures contract equals the unrealized gain or loss on the contract
that is determined by marking it to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued. A
settlement price may not be used if the market makes a limit move with respect
to a particular commodity. In addition, if quotations are not readily
available, or if the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by another method
that the Board of Trustees believes accurately reflects fair value.
BUYING AND SELLING SHARES
Each fund is open on those days when the New York Stock Exchange is open,
typically Monday through Friday. Fund shares will not be priced on major
national holidays recognized in New York and other days when the Exchange is
closed for trading.
-28-
<PAGE>
If we receive your purchase or redemption request in correct form by 4 p.m. ET,
your transaction will be priced at that day's NAV. If we receive it after
4 p.m., it will be priced at the next business day's NAV.
You can also purchase fund shares through financial services firms such as
banks, brokers and investment advisers. Where authorized, your order will be
priced at the NAV next computed after your financial services firm has accepted
it.
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear.
When selling shares, your order will be processed promptly and you will
generally receive the proceeds within a week.
Some circumstances require written sell orders, along with signature guarantees.
These include:
- - amounts of $100,000 or more
- - amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
- - requests to send the proceeds to a different payee or address
A signature guarantee helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. Please call us to
ensure that your signature guarantee will be processed correctly.
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS:
INVESTOR SHARES: $2,500
INSTITUTIONAL SHARES: $1,000,000
In its discretion, subject to review by the board of trustees, the Adviser may
waive these minimum investment requirements. Without limiting this discretion,
the Adviser intends to waive the minimum on investments in Institutional shares
for employees of the Adviser and its affiliates, and for the spouse, parents,
children, siblings, grandparents or grandchildren of these employees.
ACCOUNT STATEMENTS
In general, you will receive account statements as follows:
- - after every transaction that affects your account balance (except for
distribution reinvestments and automatic purchases)
- - after any changes of name or address of the registered owner(s)
- - otherwise, every month
You will receive annual and semiannual financial reports. Every year you also
should receive, if applicable, a Form 1099 tax information statement mailed by
January 31.
-29-
<PAGE>
SHAREHOLDER SERVICES
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800___-____.
FOR BUYING SHARES:
AUTOMATIC INVESTMENT PLAN For making automatic investments from
a designated bank account.
PAYROLL DEDUCTION PLAN For making automatic investments
through a payroll deduction.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE For making automatic investments from
your federal employment, Social
Security or other regular federal
government check.
FOR BUYING AND FOR SELLING SHARES:
AUTO-EXCHANGE PRIVILEGE For making regular exchanges from one
fund into another.
FOR SELLING SHARES:
AUTOMATIC WITHDRAWAL PLAN For making regular withdrawals from
the funds.
EXCHANGE PRIVILEGE
You can exchange $2,500 or more of the Investor shares and $1,000,000 or more of
the Institutional shares from one fund into the same class of shares of another
fund (no minimum for retirement accounts). You can request your exchange in
writing or by phone. Be sure to read the fund description in the current
prospectus for any fund into which you are exchanging. Any new account
established through an exchange will have the same privileges as your original
account (as long as they are available). No fee is currently charged on
exchanges.
TELEPHONE PRIVILEGE
To move money between your bank account and your fund account with a phone call,
use the telephone privilege. You can set up this privilege on your account by
providing bank account information and following the instructions on your
application.
** 15 Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as the fund takes
reasonable measures to verify the order.
GENERAL POLICIES
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
-30-
<PAGE>
* 15 moved from here; text not shown
Each fund reserves the right to:
- - refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)
- - refuse any purchase or exchange request in excess of 1% of the fund's total
assets
- - change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
- - change its minimum investment amounts
- - delay sending out redemption proceeds for up to seven days if doing so
sooner would adversely affect the fund (generally applies only in cases of
very large redemptions, excessive trading or during unusual market
conditions)
- - make a "redemption in kind" -- payment in portfolio securities rather than
cash -- if the amount you are redeeming is large enough to affect fund
operations
INVESTMENT THROUGH INTERMEDIARIES
If you invest through a third party (rather than directly through the funds'
distributor), the policies and fees may be different than those described here.
Banks, brokers, 401(k) plans, financial advisers and financial supermarkets may
charge transaction fees and may set different minimum investments or limitations
on buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
Financial services firms selling significant amounts of fund shares may receive
extra compensation. This compensation, which the Adviser will pay out of its
own resources, may include non-cash promotional incentives as well as
reimbursement for marketing costs. From time to time, we may provide
opportunities for you or your financial representative to attend business
meetings, conferences, training programs or other events. Travel, meals and
lodging may be included. To find out more about promotional events in your
area, please contact your financial representative.
DISTRIBUTION POLICIES AND TAXES
DISTRIBUTIONS
As a fund investor, you are entitled to your share of the fund's net income and
gains on its investments. The fund passes these earnings along to its
shareholders as distributions.
Each fund earns dividends from stocks and interest from bond, money market and
other investments. These are passed along as dividend distributions. A fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital gain distributions, a portion
of which may be taxable to you as ordinary income.
Each fund distributes its net income at least annually. All of the funds
distribute capital gains annually, usually in November or December.
-31-
<PAGE>
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. Each fund offers the following options:
- - REINVESTMENT OPTION Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the fund. You will be
assigned this option unless you indicate a different choice.
- - INCOME-EARNED OPTION Your capital gain distributions will be automatically
reinvested, but you will receive dividend distributions by check or
electronic transfer.
- - CAPITAL GAINS OPTION Your dividend distributions will be automatically
reinvested, but you will receive capital gain distributions by check or
electronic transfer.
- - CASH OPTION You will receive your dividend and capital gain distributions
by check or electronic transfer.
For retirement accounts, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.
TAXES
As with any investment, you should consider how your investment in a fund will
be taxed. Unless your account is an IRA or other tax-advantaged account, you
should be aware of the potential tax implications. Please consult your tax
professional concerning your own tax situation.
TAXES ON DISTRIBUTIONS
As long as a fund continues to meet the requirements for being a tax-qualified
regulated investment company, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, distributions you receive from a fund, whether reinvested or taken
in cash, are generally considered taxable. Distributions from a fund's
long-term capital gains are taxed as capital gains; distributions from other
sources are generally taxed as ordinary income.
If you buy shares shortly before or on the "record date" -- the date that
establishes you as the person to receive the upcoming distribution -- you will
receive a portion of the money you just invested in the form of a taxable
distribution. Some dividends paid in January may be taxable as if they had been
paid the previous December.
If you fail to provide your correct taxpayer identification number on your
application, or you have been notified by the IRS that you are subject to backup
withholding, the funds may withhold 31% of all distributions to you for federal
taxes. In the case of an individual, your taxpayer identification number is
your social security number.
The form 1099 that is mailed to you every January details your distributions and
their federal tax category.
TAXES ON TRANSACTIONS
Any time you sell or exchange shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell or
exchange, you may have a gain or loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.
-32-
<PAGE>
FUND DETAILS
MULTI-CLASS STRUCTURE
Each fund offers two no-load classes of shares, called Institutional and
Investor.
Institutional shares are sold directly by the funds' distributor. They may be
purchased by endowments, foundations and plan sponsors of 401(a), 401(k), 457
and 403(b) plans and by individuals.
Investor shares may be purchased by intermediary financial institutions
(including broker-dealers, investment advisers, financial planners, banks and
insurance companies), and certain individual retirement accounts and
individuals. Investment professionals may purchase Investor shares for
discretionary or non-discretionary accounts maintained by individuals.
Shares of each class represent equal pro rata interests in the funds. Each
class accrues dividends and calculates its net asset value and performance the
same way. But because of their higher fees, Investor shares will generally have
a lower total return than Institutional shares.
SHAREHOLDER SERVICING AND DISTRIBUTION
As part of its business strategy, each fund has adopted a Rule 12b-1 shareholder
servicing and distribution plan with respect to Investor shares for the payment
of certain distribution-related services. Under the plan, the distributor
receives fees at an annual rate of 0.25% of the average daily net assets of the
fund's Investor shares, which the distributor may use to pay third-party
broker-dealers who sell shares of the fund or other distribution-related
services.
Rule 12b-1 is the federal securities regulation authorizing fees of this type.
Because the fees are paid out of a fund's assets on an ongoing basis, over time
they will increase the cost of an investment in Investor shares and may cost you
more than paying other types of sales charges.
No compensation is paid by the funds for distribution services with respect to
sales of Institutional shares. Shareholder and distribution services to these
shareholders will be provided at no charge to fund shareholders.
-33-
<PAGE>
ADDITIONAL INFORMATION
Additional documents are available that offer further information about the
funds:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, portfolio investments, detailed performance
information, a statement from portfolio management and the independent
accountants' report.
The annual report also provides a discussion of the market conditions and
investment strategies that significantly affected fund performance during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more details about the funds and their investments. A current SAI has
been filed with the Securities and Exchange Commission and is incorporated by
reference. You may visit the Commission's Internet Website (www.sec.gov) to
view the SAI, other material incorporated by reference, and other information.
You can also get copies of this information by writing to the Commission and
paying a duplicating fee. Write to:
Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20540-6009.
You may review and copy information about the funds, including the SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
To find out more about the public reference room, call the Commission at
1-800-SEC-0330.
Please contact CDC MPT+ Funds to obtain more information about the funds,
inquire about your account or request a free copy of the current
annual/semi-annual report or SAI:
By mail:
CDC MPT+ Funds
[Address to be Provided]
By overnight or courier service:
[ADDRESS TO BE PROVIDED BY ADMINISTRATOR]
By telephone:
800-___ - ____
Via the Internet:
[www.________.com]
SEC File No. 811-09083
-34-
<PAGE>
The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This Statement of Additional Information is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any
State where the offer or sale is not permitted.
Subject to Completion, dated March 22, 1999
STATEMENT OF ADDITIONAL INFORMATION
[__________], 1999
---------------------------------
CDC MPT+ FUNDS
U.S. CORE EQUITY FUND
AGGRESSIVE EQUITY FUND
GLOBAL INDEPENDENCE FUND
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus for the Institutional shares and the Investor
shares of CDC MPT+ Funds (the "Trust"), dated [___________], 1999 as amended or
supplemented from time to time (the "Prospectus"), and is incorporated by
reference in its entirety into the Prospectus. The Trust currently offers three
separately managed portfolios: U.S. Core Equity Fund, Aggressive Equity Fund and
Global Independence Fund (together the "Funds" and each a "Fund"). Because this
Statement of Additional Information is not itself a prospectus, no investment in
shares of a Fund should be made solely upon the information contained herein.
Copies of the Funds' Prospectus and information regarding the Funds' current
performance may be obtained by calling the Funds at (800) [ ].
Information regarding the status of shareholder accounts may be obtained by
calling the Funds at (800) [ ] or by writing to the Funds at 9 West
57th Street, New York, New York 10019.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
----
<S> <C>
Organization of the Funds. . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . 1
Options, Swaps, Futures and Currency Exchange Transactions. . . . . . 1
Securities Options . . . . . . . . . . . . . . . . . . . . . . . 2
Securities Index Options . . . . . . . . . . . . . . . . . . . . 5
OTC Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Futures Activities . . . . . . . . . . . . . . . . . . . . . . . 6
Futures Contracts . . . . . . . . . . . . . . . . . . . . . 6
Options on Futures Contracts. . . . . . . . . . . . . . . . 7
Currency Exchange Transactions . . . . . . . . . . . . . . . . . 8
Forward Currency Contracts. . . . . . . . . . . . . . . . . 8
Currency Options. . . . . . . . . . . . . . . . . . . . . . 9
Hedging . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Asset Coverage for Forward Contracts, Options, Futures
and Options on Futures. . . . . . . . . . . . . . . . . . . . . 11
U.S. Government Securities. . . . . . . . . . . . . . . . . . . . . . 12
Money Market Obligations. . . . . . . . . . . . . . . . . . . . . . . 12
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . 13
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Short-Term Corporate Obligations . . . . . . . . . . . . . 13
Foreign Investments . . . . . . . . . . . . . . . . . . . . . . . . . 14
Foreign Currency Exchange. . . . . . . . . . . . . . . . . . . . 14
Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Foreign Markets. . . . . . . . . . . . . . . . . . . . . . . . . 15
Political Instability. . . . . . . . . . . . . . . . . . . . . . 15
Increased Expenses . . . . . . . . . . . . . . . . . . . . . . . 15
Foreign Debt Securities. . . . . . . . . . . . . . . . . . . . . 15
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . 16
Depositary Receipts. . . . . . . . . . . . . . . . . . . . . . . 16
Euro Conversion. . . . . . . . . . . . . . . . . . . . . . . . . 16
Fixed Income Securities . . . . . . . . . . . . . . . . . . . . . . . 17
Securities of Other Investment Companies. . . . . . . . . . . . . . . 17
Standard & Poor's Depositary Receipts ("SPDRS") . . . . . . . . . . . 17
When-Issued Securities, Delayed-Delivery Transactions
and Forward Commitments. . . . . . . . . . . . . . . . . . . . . . . 18
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . 18
Reverse Repurchase Agreements and Dollar Rolls. . . . . . . . . . . . 19
Loan Participations and Assignments . . . . . . . . . . . . . . . . . 20
Zero Coupon Securities. . . . . . . . . . . . . . . . . . . . . . . . 20
Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . . 20
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . 22
Asset-Backed Securities. . . . . . . . . . . . . . . . . . . . . 23
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Structured Notes . . . . . . . . . . . . . . . . . . . . . . . . 23
Non-Publicly Traded and Illiquid Securities. . . . . . . . . . . 24
Rule 144A Securities. . . . . . . . . . . . . . . . . . . . 24
Rights Offerings and Purchase Warrants . . . . . . . . . . . . . 25
Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
U.S. Core Equity Fund Only. . . . . . . . . . . . . . . . . . . . . . 26
Short Selling. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Short Sales "Against the Box". . . . . . . . . . . . . . . . . . 27
Lending of Portfolio Securities. . . . . . . . . . . . . . . . . 27
Aggressive Equity Fund and Global Independence Fund Only. . . . . . . 28
Non-Diversified Status . . . . . . . . . . . . . . . . . . . . . 28
Below Investment Grade Securities. . . . . . . . . . . . . . . . 28
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 30
Portfolio Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Management of the Funds. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Officers and Trustees . . . . . . . . . . . . . . . . . . . . . . . . 36
Control Persons and Principal Stockholders. . . . . . . . . . . . . . 38
Investment Adviser and Administrator. . . . . . . . . . . . . . . . . 38
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Choice of Performance Benchmark. . . . . . . . . . . . . . . . . 39
Distribution and Shareholder Servicing. . . . . . . . . . . . . . . . 43
Investor Shares. . . . . . . . . . . . . . . . . . . . . . . . . 43
Institutional Shares . . . . . . . . . . . . . . . . . . . . . . 43
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Custodian and Transfer Agent. . . . . . . . . . . . . . . . . . . . . 44
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Additional Purchase and Redemption Information . . . . . . . . . . . . . . 45
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Additional Information Concerning Taxes. . . . . . . . . . . . . . . . . . 47
The Funds and Their Investments . . . . . . . . . . . . . . . . . . . 47
Taxation of United States Shareholders. . . . . . . . . . . . . . . . 50
Other Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Determination of Performance . . . . . . . . . . . . . . . . . . . . . . . 52
Independent Auditors and Counsel. . . . . . . . . . . . . . . . . . . . . 53
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Appendix -- Description of Ratings . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
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ORGANIZATION OF THE FUNDS
The Trust is an open-end management investment company that was
organized on October 13, 1998 under the laws of the State of Delaware and is a
business entity commonly known as "Delaware business trust." The Trust
currently offers three separately managed series each comprised of both Investor
and Institutional shares: U.S. Core Equity Fund, Aggressive Equity Fund and
Global Independence Fund. Unless otherwise indicated, references to a "Fund"
apply to all classes of shares of that Fund as a group.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's
investment objectives and policies in the Prospectus. There are no assurances
that a Fund will achieve its investment objectives.
The U.S. Core Equity Fund is a diversified portfolio that seeks a high
total return greater than that of the S&P 500 Index by investing primarily in
equity securities of U.S. companies.
The Aggressive Equity Fund is a non-diversified portfolio that seeks a
high total return greater than that of the S&P 500 Index by investing primarily
in equity and equity related securities and certain derivative instruments.
The Global Independence Fund is a non-diversified portfolio that seeks
a high total return greater than that of the 90-day U.S. Treasury bill rate by
investing primarily in the global equity, global fixed income and currency
markets.
CDC Investment Management Corporation ("CDC Investments" or the
"Adviser") serves as the investment adviser to each Fund. Both the Aggressive
Equity Fund and the Global Independence Fund apply CDC Investments' Global
Dynamic Asset Allocation Strategy ("GDAA Strategy"), which focuses on building a
risk-return balanced portfolio which seeks to control the effect of shifts in
market volatility through the use of certain investment strategies. The GDAA
Strategy seeks to exploit patterns in the relationships of fundamental economic
and financial variables to the underlying equity, bond and currency markets and
uses a mix of fundamental judgment and sophisticated quantitative tools to
achieve that objective.
OPTIONS, SWAPS, FUTURES AND CURRENCY EXCHANGE TRANSACTIONS
At the discretion of CDC Investments, each Fund may engage in a number
of strategies involving options, futures, forward currency contracts and swaps.
These instruments, commonly referred to as "derivatives," may be used (i) for
the purpose of hedging against a decline in value of a Fund's current or
anticipated portfolio holdings, (ii) as a substitute for purchasing or selling
portfolio securities or (iii) in an attempt to generate income to offset
expenses or increase return. Transactions that are not considered hedging
should be considered speculative and may serve to increase a Fund's investment
risk. Transaction costs and any premiums associated with these strategies, and
any losses incurred,
<PAGE>
will affect a Fund's net asset value and performance. Therefore, an investment
in a Fund may involve a greater risk than an investment in other mutual funds
that do not use these strategies. The Funds' use of these strategies may be
limited by position and exercise limits established by securities and
commodities exchanges and other applicable regulatory authorities.
To the extent a Fund engages in the strategies described below, a Fund
may experience losses greater than if these strategies had not been utilized.
In addition to the risks described below, these instruments may be illiquid
and/or subject to trading limits, and a Fund may be unable to close out
positions without incurring substantial losses, if at all. A Fund is also
subject to the risk of a default by a counterparty to an off-exchange
transaction.
SECURITIES OPTIONS. Each Fund may write covered call options on stock
and debt securities and may purchase U.S. and foreign exchange-traded and
over-the-counter ("OTC") put and call options.
A Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the right
of its purchaser to compel the writer of the option to purchase from the option
holder an underlying security at a specified price for a specified time period
or at a specified time. In contrast, a call option embodies the right of its
purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Fund that
writes a covered call option forfeits the right to any appreciation in the value
of the underlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). A Fund that writes a
call option retains the risk of an increase in the price of the underlying
security. The size of the premiums that a Fund may receive may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option-writing activities.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices decline, the put writer would expect to suffer
a loss. This loss may be less than the loss from purchasing the underlying
instrument directly to the extent that the premium received offsets the effects
of the decline.
In the case of options written by a Fund that are deemed covered by
virtue of a Fund holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which a Fund has written
options may exceed the time within which a Fund must make delivery in accordance
with an exercise notice. In these instances, a Fund may purchase or temporarily
borrow the underlying securities for purposes of physical delivery. By so
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doing, a Fund will not bear any market risk, since a Fund will have the absolute
right to receive from the issuer of the underlying security an equal number of
shares to replace the borrowed securities, but a Fund may incur additional
transaction costs or interest expenses in connection with any such purchase or
borrowing.
The potential loss associated with purchasing an option is limited to
the premium paid, and the premium would partially offset any gains achieved by
its use. However, for an option writer the exposure to adverse price movements
in the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a Fund,
force the sale of portfolio securities at inopportune times or at less
advantageous prices, limit the amount of appreciation a Fund could realize on
its investments or require a Fund to hold securities it would otherwise sell.
Additional risks exist with respect to certain securities for which a
Fund may write covered call options. For example, if a Fund writes covered call
options on mortgage-backed securities, the mortgage-backed securities that it
holds as cover may, because of scheduled amortization or unscheduled
prepayments, cease to be sufficient cover. If this occurs, a Fund will
compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
Options written by a Fund will normally have expiration dates between
one and nine months from the date written. The exercise price of the options
may be below, equal to or above the market values of the underlying securities
at the times the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. Each Fund may write (i) in-the-money call
options when CDC Investments expects that the price of the underlying security
will remain flat or decline moderately during the option period,
(ii) at-the-money call options when CDC Investments expects that the price of
the underlying security will remain flat or advance moderately during the option
period and (iii) out-of-the-money call options when CDC Investments expects that
the premiums received from writing the call option plus the appreciation in
market price of the underlying security up to the exercise price will be greater
than the appreciation in the price of the underlying security alone. In any of
the preceding situations, if the market price of the underlying security
declines and the security is sold at this lower price, the amount of any
realized loss will be offset wholly or in part by the premium received. To
secure its obligation to deliver the underlying security when it writes a call
option, each Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing Corporation
(the "Clearing Corporation") and of the securities exchange on which the option
is written.
Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which a Fund may realize a profit or loss from the sale.
An option position may be closed out only where there exists a secondary market
for an option of the same series on a recognized securities exchange or in the
OTC market. When a Fund has purchased an option and engages in a closing sale
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<PAGE>
transaction, whether a Fund realizes a profit or loss will depend upon whether
the amount received in the closing sale transaction is more or less than the
premium a Fund initially paid for the original option plus the related
transaction costs. Similarly, in cases where a Fund has written an option, it
will realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur a loss
if the cost of the closing purchase transaction exceeds the premium received
upon writing the original option. Each Fund may engage in a closing purchase
transaction to realize a profit, to prevent an underlying security with respect
to which it has written an option from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby permitting its sale or
the writing of a new option on the security prior to the outstanding option's
expiration). The obligation of a Fund under an option it has written would be
terminated by a closing purchase transaction, but a Fund would not be deemed to
own an option as a result of the transaction. So long as the obligation of a
Fund as the writer of an option continues, a Fund may be assigned an exercise
notice by the broker-dealer through which the option was sold, requiring a Fund
to deliver the underlying security against payment of the exercise price. This
obligation terminates when the option expires or a Fund effects a closing
purchase transaction. A Fund cannot effect a closing purchase transaction with
respect to an option once it has been assigned an exercise notice.
There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market for an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, each Fund's
ability to terminate options positions established in the OTC market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in OTC transactions would fail to meet their
obligations to a Fund. Each Fund, however, intends to purchase OTC options
only from dealers whose debt securities, as determined by CDC Investments, are
considered to be investment grade. If, as a covered call option writer, a Fund
is unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. In either case, a Fund would
continue to have market risk on the security and could face higher transaction
costs, including brokerage commissions.
Securities exchanges generally have established limitations governing
the maximum number of calls and puts for each class which may be held or
written, or exercised within certain time periods by an investor or group of
investors acting in concert (regardless of whether the options are written on
the same or different securities exchanges or are held, written or exercised in
one or more accounts or through one or more brokers). It is possible
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<PAGE>
that each Fund and other clients of CDC Investments and certain of its
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits and
it may impose certain other sanctions. These limits may restrict the number of
options a Fund will be able to purchase on a particular security.
SECURITIES INDEX OPTIONS. Each Fund may purchase and write
exchange-listed and OTC put and call options on securities indexes. A
securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index, fluctuating
with changes in the market values of the securities included in the index.
Some securities index options are based on a broad market index, such as the
NYSE Composite Index, or a narrower market index such as the Standard & Poor's
100 Index. Indexes may also be based on a particular industry or market
segment.
Options on securities indexes are similar to options on stock, except
that (i) the expiration cycles of securities index options are monthly, while
those of stock options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make
delivery of stock at a specified price, an option on a securities index gives
the holder the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Securities index options may be offset by entering
into closing transactions as described above for stock options.
OTC OPTIONS. Each Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying stock to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If a Fund were to
purchase a dealer option, however, it would rely on the dealer from whom it
purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by a Fund, a Fund would lose the
premium it paid for the option and the expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market
while OTC or dealer options do not. Consequently, a Fund will generally be able
to realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when a Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to
5
<PAGE>
which a Fund originally wrote the option. Although each Fund will seek to enter
into dealer options only with dealers who will agree to and that are expected to
be capable of entering into closing transactions with a Fund, there can be no
assurance that a Fund will be able to liquidate a dealer option at a favorable
price at any time prior to expiration. The inability to enter into a closing
transaction may result in a material loss to the Fund. Until a Fund, as a
covered OTC call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
to cover the written option until the option expires or is exercised. This
requirement may impair a Fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous
FUTURES ACTIVITIES. Each Fund may enter into foreign currency,
interest rate and stock index futures contracts and purchase and write (sell)
related options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. The Aggressive Equity and Global Independence Funds may also enter
into futures contracts on precious metals and purchase and sell related options
on precious metals. These futures contracts are standardized contracts for the
future delivery of a foreign currency, precious metal, an interest rate
sensitive security or, in the case of index futures contracts or certain other
futures contracts, are settled in cash with reference to a specified multiplier
times the change in the specified index. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract. These transactions may be entered into for "bona fide
hedging" purposes as defined in CFTC regulations and other permissible purposes
including (i) for the purpose of hedging against a decline in value of a Fund's
current or anticipated portfolio holdings, (ii) as a substitute for purchasing
or selling portfolio securities or (iii) in an attempt to generate income to
offset expenses or increase return. Aggregate initial margin and premiums
(discussed below) required to establish positions other than those considered to
be "bona fide hedging" by the CFTC will not exceed 5% of the Fund's net asset
value after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into. The Funds reserve the right to engage in
transactions involving futures contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from time to time and in accordance
with a Fund's policies. There is no overall limit on the percentage of Fund
assets that may be at risk with respect to futures activities.
FUTURES CONTRACTS. A foreign currency futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a specified price, date, time and
place. A precious metals futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a precious
metal at a specified price, date, time and place. An interest rate futures
contract provides for the future sale by one party and the purchase by the other
party of a certain amount of a specific interest rate sensitive financial
instrument (debt security) at a specified price, date, time and place.
Securities indexes are capitalization weighted indexes which reflect the market
value of the securities represented in the indexes. A securities index
futures contract is an agreement to be settled by delivery of an amount of cash
equal to a
6
<PAGE>
specified multiplier times the difference between the value of the index at the
close of the last trading day on the contract and the price at which the
contract is made.
No consideration is paid or received by a Fund upon entering into a
futures contract. Instead, a Fund is required to segregate with its custodian
an amount of cash or securities acceptable to the broker, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to a
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if a Fund fails to meet its contractual obligations. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the currency, precious metal, financial instrument or stock index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market." A Fund will also incur brokerage costs in connection with
entering into futures transactions.
At any time prior to the expiration of a futures contract, a Fund may
elect to close the position by taking an opposite position, which will operate
to terminate a Fund's existing position in the contract. Positions in futures
contracts and options on futures contracts (described below) may be closed out
only on the exchange on which they were entered into (or through a linked
exchange). No secondary market for such contracts exists. Although each Fund
intends to enter into futures contracts only if there is an active market for
such contracts, there is no assurance that an active market will exist at any
particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for specified
periods during the day. It is possible that futures contract prices could move
to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a Fund to substantial losses. In such event,
and in the event of adverse price movements, a Fund would be required to make
daily cash payments of variation margin. In such situations, if a Fund had
insufficient cash, it might have to sell securities to meet daily variation
margin requirements at a time when it would be disadvantageous to do so. In
addition, if the transaction is entered into for hedging purposes, in such
circumstances a Fund may realize a loss on a futures contract or option that is
not offset by an increase in the value of the hedged position. Losses incurred
in futures transactions and the costs of these transactions will affect a Fund's
performance.
OPTIONS ON FUTURES CONTRACTS. Each Fund may purchase and write put
and call options on foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. The Aggressive Equity Fund and the Global
Independence Fund may also purchase and write put and call options on precious
metals futures contracts and may enter into closing transactions with respect to
such options to terminate existing positions. There is no
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guarantee that such closing transactions can be effected; the ability to
establish and close out positions on such options will be subject to the
existence of a liquid market.
An option on a currency, precious metal, interest rate or stock index
futures contract, as contrasted with the direct investment in such a contract,
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time prior
to the expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of each
Fund. The CFTC has recently adopted rules that will permit exchanges to use
futures-style margining with respect to options on futures upon approval by the
CFTC.
CURRENCY EXCHANGE TRANSACTIONS. The value in U.S. dollars of the
assets of a Fund that are invested in foreign securities may be affected
favorably or unfavorably by a variety of factors not applicable to investment in
U.S. securities, and a Fund may incur costs in connection with conversion
between various currencies. Currency exchange transactions may be from any
non-U.S. currency into U.S. dollars or into other appropriate currencies. Each
Fund will conduct its currency exchange transactions (i) on a spot (I.E., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on such contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency, (iv) by purchasing exchange-traded currency options or (v) by
engaging in currency swaps. Risk associated with currency forward contracts and
purchasing currency options are similar to those described herein for futures
contracts and securities and stock index options. In addition, the use of
currency transactions could result in losses from the imposition of foreign
exchange controls, suspension of settlement or other governmental actions or
unexpected events.
FORWARD CURRENCY CONTRACTS. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.
8
<PAGE>
At or before the maturity of a forward contract, a Fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to enter into an offsetting
transaction. If a Fund retains the portfolio security and engages in an
offsetting transaction, a Fund, at the time of execution of the offsetting
transaction, will incur a gain or a loss to the extent that movement has
occurred in forward contract prices.
The OTC market in forward foreign currency exchange contracts offers
less protection against defaults by the other party to such instruments than is
available for currency instruments traded on an exchange. Such contracts are
subject to the risk that the counterparty to the contract will default on its
obligations. Since these contracts are not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive a Fund of unrealized
profits, transaction costs or the benefits of a currency hedge or force a Fund
to cover its purchase or sale commitments, if any, at the current market price.
Currency exchange rates may fluctuate significantly over short periods of time.
They generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different countries,
actual or perceived changes in interest rates and other complex factors as seen
from an international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the U.S. or abroad.
CURRENCY OPTIONS. Each Fund may purchase exchange-traded put and call
options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.
HEDGING. In addition to entering into options, futures and currency
exchange transactions for other purposes, including generating current income to
offset expenses or increase return, each Fund may enter into these transactions
as hedges to reduce investment risk, generally by making an investment expected
to move in the opposite direction of a portfolio position. A hedge is designed
to offset a loss in a portfolio position with a gain in the hedged position or
to mitigate against non-diversification risks; at the same time, however, a
properly correlated hedge will result in a gain in the portfolio position being
offset by a loss in the hedged position. As a result, the use of options,
futures, contracts and currency exchange transactions for hedging purposes could
limit any potential gain from an increase in the value of the position hedged.
In addition, the movement in the portfolio position hedged may not be of the
same magnitude as movement in the hedge. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of short
futures contracts entered into by a Fund, an increase in the value of the
futures contracts could only mitigate, but not totally offset, the decline in
the value of a Fund's assets.
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In hedging transactions based on an index, whether a Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock. The risk of imperfect
correlation increases as the composition of a Fund's portfolio varies from the
composition of the index. In an effort to compensate for imperfect correlation
of relative movements in the hedged position and the hedge, a Fund's hedge
positions may be in a greater or lesser dollar amount than the dollar amount of
the hedged position. Such "over hedging" or "under hedging" may adversely
affect a Fund's net investment results if market movements are not as
anticipated when the hedge is established. Stock index futures transactions may
be subject to additional correlation risks. First, all participants in the
futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which would distort the normal
relationship between the stock index and futures markets. Second, from the
point of view of speculators, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by CDC Investments still may not result in a successful
hedging transaction.
A Fund will engage in hedging transactions only when deemed advisable
by CDC Investments, and successful use by a Fund of hedging transactions will
be subject to CDC Investments' ability to predict trends in currency, interest
rate or securities markets, as the case may be, and to correctly predict
movements in the directions of the hedge and the hedged position and the
correlation between them, which predictions could prove to be inaccurate. This
requires different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be unsuccessful
to some degree because of unexpected market behavior or trends. Losses incurred
in hedging transactions and the costs of these transactions will affect a
Fund's performance.
To the extent that a Fund engages in the strategies described above,
the Fund may experience losses greater than if these strategies had not been
utilized. In addition to the risks described above, these instruments may be
illiquid and/or subject to trading limits, and the Fund may be unable to close
out a position without incurring substantial losses, if at all. The Fund is
also subject to the risk of a default by a counterparty to an off-exchange
transaction.
SWAPS. Each Fund may enter into swaps relating to indexes, currencies
and equity interests of issuers without limit. A swap transaction is an
agreement between a Fund and a counterparty to act in accordance with the terms
of the swap contract. Index swaps involve the exchange by a Fund with another
party of the respective amounts payable with respect to a notional principal
amount related to one or more indexes. Currency swaps involve
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the exchange of cash flows on a notional amount of two or more currencies based
on their relative future values. An equity swap is an agreement to exchange
streams of payments computed by reference to a notional amount based on the
performance of a basket of stocks or a single stock. Each Fund may enter into
these transactions to preserve a return or spread on a particular investment or
portion of its assets, to protect against currency fluctuations, as a duration
management technique or to protect against any increase in the price of
securities a Fund anticipates purchasing at a later date. Each Fund may also
use these transactions for speculative purposes, such as to obtain the price
performance of a security without actually purchasing the security in
circumstances, for example, the subject security is illiquid, is unavailable for
direct investment or available only on less attractive terms. Swaps have risks
associated with them including possible default by the counterparty to the
transaction, illiquidity and, where swaps are used as hedges, the risk that the
use of a swap could result in losses greater than if the swap had not been
employed. The Funds may only enter into swaps with counterparties that are
"eligible swap participants" as defined in CFTC Regulation Section 35.1 (b)(2).
Each Fund will usually enter into swaps on a net basis (I.E., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with a Fund receiving or paying, as the case may be,
only the net amount of the two payments). Swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of loss
with respect to swaps is limited to the net amount of payments that a Fund is
contractually obligated to make. If the counterparty to a swap defaults, a
Fund's risk of loss consists of the net amount of payments that a Fund is
contractually entitled to receive. Where swaps are entered into for good faith
hedging purposes, CDC Investments believes such obligations do not constitute
senior securities under the Investment Company Act of 1940, as amended (the
"1940 Act") and, accordingly, will not treat them as being subject to a Fund's
borrowing restrictions. Where swaps are entered into for other than hedging
purposes, a Fund will segregate an amount of cash or liquid securities having a
value equal to the accrued excess of its obligations over entitlements with
respect to each swap on a daily basis.
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON
FUTURES AND SWAPS. The Funds will comply with guidelines established by the
U.S. Securities and Exchange Commission (the "SEC") and other applicable
regulatory bodies with respect to coverage of forward currency contracts;
options written by the Funds on currencies, securities and securities indexes
and swaps; and currency, interest rate and index futures contracts and options
on these futures contracts. These guidelines may, in certain instances, require
segregation by a Fund of cash or liquid securities with its custodian or
designated sub-custodian to the extent the Fund's obligations with respect to
these strategies are not otherwise "covered" through ownership of the underlying
security, financial instrument or currency or by other portfolio positions or by
other means consistent with applicable regulatory policies. Segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to separate them. As a result, there is a
possibility that segregation of a large percentage of a Fund's assets could
impede portfolio management or a Fund's ability to meet redemption requests or
other current obligations.
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For example, a call option written by a Fund on securities may require
a Fund to hold the securities subject to the call (or securities convertible
into the securities without additional consideration) or to segregate assets (as
described above) sufficient to purchase and deliver the securities if the call
is exercised. A call option written by a Fund on an index may require a Fund to
own portfolio securities that correlate with the index or to segregate assets
(as described above) equal to the excess of the index value over the exercise
price on a current basis. A Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by a Fund. If a Fund holds a futures or forward contract, a Fund could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. A Fund may enter
into fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation), equals
its net obligation. Asset coverage may be achieved by other means when
consistent with applicable regulatory policies.
U.S. GOVERNMENT SECURITIES.
Each Fund may invest in debt obligations of varying maturities issued
or guaranteed by the U.S. government, its agencies or instrumentalities ("U.S.
Government Securities"). Direct obligations of the U.S. Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. U.S. Government Securities also include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home Loan
Administration, Export-Import Bank of the U.S., Small Business Administration,
Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association ("FNMA"), Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association. The
Funds may also invest in instruments that are supported by the right of the
issuer to borrow from the U.S. Treasury and instruments that are supported by
the credit of the instrumentality. Because the U.S. government is not obligated
by law to provide support to an instrumentality it sponsors, a Fund will invest
in obligations issued by such an instrumentality only if CDC Investments
determines that the credit risk with respect to the instrumentality does not
make its securities unsuitable for investment by a Fund.
MONEY MARKET OBLIGATIONS.
Each Fund is authorized to invest in short-term money market
obligations having remaining maturities of less than one year at the time of
purchase. These short-term instruments consist of U.S. Government Securities;
bank obligations (including certificates of deposit, time deposits and bankers'
acceptances of domestic or foreign banks, domestic savings and loans and similar
institutions) that are high quality investments or, if unrated, deemed by CDC
Investments to be high quality investments; commercial paper rated no lower than
A-2 by S&P or Prime-2 by Moody's or the equivalent from another major rating
service or, if unrated, of an issuer having an outstanding, unsecured debt issue
then rated within the three highest rating categories; and repurchase agreements
with respect to portfolio securities.
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BANK OBLIGATIONS. The Funds may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Funds may be subject to
additional investment risks, including future and political and economic
developments, the possible imposition of withholding taxes on interest income,
possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by each Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's or
A-1 by S&P, (b) issued by companies having an outstanding unsecured debt issue
currently rated at least A3 by Moody's or A- by S&P, or (c) if unrated,
determined by CDC Investments to be of comparable quality to those rated
obligations which may be purchased by the Fund.
OTHER SHORT-TERM CORPORATE OBLIGATIONS. These instruments include
variable amount master demand notes, which are obligations that permit a Fund to
invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between a Fund, as lender, and the borrower. These notes permit
daily changes in the amounts borrowed. Because these obligations are direct
lending arrangements between the lender and borrower, it is not contemplated
that such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are redeemable
at face value, plus accrued interest, at any time. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies, and a Fund may invest in them only if
at the time of an investment CDC Investments determines that such investment is
of comparable quality to those rated obligations which may be purchased by each
Fund.
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If CDC Investments determines that market conditions temporarily
warrant a defensive investment policy, each Fund may invest up to 100% of its
assets in money market instruments. The yield on such securities may be lower
than the yield on lower-rated, fixed-income securities.
FOREIGN INVESTMENTS. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are not typically associated with investing in U.S. issuers. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments positions. A
Fund may invest in securities of foreign governments (or agencies or
instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
FOREIGN CURRENCY EXCHANGE. Since the Funds may invest in securities
denominated in currencies other than the U.S. dollar, and since the Funds may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Funds may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of Fund assets denominated in that foreign currency. Changes
in foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders by the
Funds. The rate of exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the foreign exchange markets.
Changes in the exchange rate may result over time from the interaction of many
factors directly or indirectly affecting economic and political conditions in
the U.S. and a particular foreign country, including economic and political
developments in other countries. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow their
currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central bank or imposition of regulatory controls or taxes, to affect the
exchange rates of their currencies. The Funds may, but are not required to, use
hedging techniques with the objective of protecting against loss through the
fluctuation of the value of foreign currencies against the U.S. dollar,
particularly the forward market in foreign exchange, currency options and
currency futures.
INFORMATION. Many of the foreign securities held by the Funds will
not be registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally subject to financial reporting standards,
practices and requirements that are either not uniform or less rigorous than
those applicable to U.S. companies.
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FOREIGN MARKETS. Securities of some foreign companies are less liquid
and their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold, which may result in
increased exposure to market and foreign exchange fluctuations and increased
liquidity.
POLITICAL INSTABILITY. With respect to some foreign countries, there
is the possibility of expropriation, nationalization, or confiscatory taxation
and limitations on the use or removal of funds or other assets of a Fund,
including the withholding of dividends. Political or social instability, or
domestic developments could affect U.S. investments in those and neighboring
countries.
INCREASED EXPENSES. The operating expenses of a Fund, to the extent
it invests in foreign securities, may be higher than that of an investment
company investing exclusively in U.S. securities, since the expenses of the
Fund, such as the cost of converting foreign currency into U.S. dollars, the
payment of fixed brokerage commissions on foreign exchanges, custodial costs,
valuation costs and communication costs, may be higher than those costs incurred
by investment companies not investing in foreign securities. In addition,
foreign securities may be subject to foreign government taxes that would reduce
the net yield in such securities.
FOREIGN DEBT SECURITIES. Each of the Funds may invest in debt
securities (other than money market obligations) and preferred stocks that are
not convertible into common stock for the purpose of seeking capital
appreciation. Each Fund's holdings of debt securities will be considered
investment grade at the time of purchase, except that the Aggressive Equity Fund
and the Global Independence Fund may purchase a certain amount of below
investment grade securities (see "Below Investment Grade Securities"). A
security will be deemed to be investment grade if it is rated within the four
highest grades by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Service ("S&P") or, if unrated, is determined to be of comparable
quality by CDC Investments. The returns on foreign debt securities reflect
interest rates and other market conditions prevailing in those countries and the
effect of gains and losses in the denominated currencies against the U.S.
dollar, which have had a substantial impact on investment in foreign
fixed-income securities. The relative performance of various countries'
fixed-income markets historically has reflected wide variations relating to the
unique characteristics of each country's economy. Year-to-year fluctuations in
certain markets have been significant, and negative returns have been
experienced in various markets from time to time.
The foreign government securities in which the Funds may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the
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European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
Foreign government securities also include debt securities of
quasi-governmental agencies and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Union to reflect changes in relative values of the
underlying currencies.
EMERGING MARKETS. Investing in securities of issuers located in
"emerging markets" (less developed countries located outside of the U.S.)
involves not only the risks described above with respect to investing in foreign
securities, but also other risks, including exposure to economic structures that
are generally less diverse and mature than, and to political systems that can be
expected to have less stability than, those of developed countries. For
example, many investments in emerging markets have recently experienced
significant declines in value due to political and currency volatility in
emerging markets countries . Other characteristics of emerging markets that may
affect investment include certain national policies that may restrict investment
by foreigners in issuers or industries deemed sensitive to relevant national
interests and the absence of developed structures governing private and foreign
investments and private property. The typically small size of the markets for
securities of issuers located in emerging markets and the possibility of a low
or nonexistent volume of trading in those securities may also result in a lack
of liquidity and in price volatility of those securities.
DEPOSITARY RECEIPTS. The assets of each Fund may be invested in the
securities of foreign issuers in the form of American Depositary Receipts
("ADRs") and European Depositary Receipts ("EDRs") and certain of the above
risks of investing in foreign securities may be involved in investing in such
securities. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are receipts
issued in Europe typically by non-U.S. banks and trust companies that evidence
ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in U.S. securities markets and EDRs and
CDRs in bearer form are designed for use in European securities markets.
EURO CONVERSION. The introduction of a single European currency, the
euro, on January 1, 1999 for participating European nations in the Economic and
Monetary Union presents unique risks and uncertainties for investors in those
countries,
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including (i) the functioning of the payment and operational systems of banks
and other financial institutions; (ii) the creation of suitable clearing and
settlement payment schemes for the euro; (iii) the fluctuation of the euro
relative to non-euro currencies during the transition period from January 1,
1999 to December 31, 2000 and beyond; and (iv) whether the interest rate, tax
and labor regimes of the European countries participating in the euro will
converge over time. Further, the conversion of the currencies of other Economic
Monetary Union countries, such as the United Kingdom, and the admission of other
countries to the Economic and Monetary Union could adversely affect the euro.
These or other factors may cause market disruptions and could adversely affect
the value of foreign securities and currencies held by the Funds.
FIXED INCOME SECURITIES. The value of the securities held by a Fund,
and thus the net asset value of the shares of a Fund, generally will vary
inversely in relation to changes in prevailing interest rates. Thus, if
interest rates have increased from the time a debt or other fixed income
security was purchased, such security, if sold, might be sold at a price less
than its cost. Conversely, if interest rates have declined from the time such a
security was purchased, such security, if sold, might be sold at a price greater
than its cost. Also, the value of such securities may be affected by changes in
real or perceived creditworthiness of the issuers. Thus, if creditworthiness is
enhanced, the price may rise. Conversely, if creditworthiness declines, the
price may decline. A Fund is not restricted to any maximum or minimum time to
maturity in purchasing portfolio securities, and the average maturity of a
Fund's assets will vary based on CDC Investments' assessment of economic and
market conditions.
SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may invest in
securities of other investment companies to the extent permitted under the 1940
Act. Presently, under the 1940 Act, each Fund may hold securities of another
investment company in amounts which (i) do not exceed 3% of the total
outstanding voting stock of such company, (ii) do not exceed 5% of the value of
each Fund's total assets and (iii) when added to all other investment company
securities held by each Fund, do not exceed 10% of the value of each Fund's
total assets.
Standard & Poor's Depositary Receipts ("SPDRs"). Each Fund may
purchase interests in a unit investment trust holding a portfolio of securities
linked to the S&P 500 Index. SPDRs closely track the underlying portfolio of
securities, trade like a share of common stock and pay periodic dividends
proportionate to those paid by the portfolio of stocks that comprise the S&P 500
Index. SPDRs trade on the American Stock Exchange like shares of common stock.
As a holder of interests in a unit investment trust, a Fund would indirectly
bear its ratable share of that unit investment trust's expenses. At the same
time, a Fund would continue to pay its own management and advisory fees and
other expenses, as a result of which a Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in such unit
investment trusts. The liquidity of small holdings of SPDRs will depend upon
the existence and liquidity of a secondary market. The price of SPDRs is
derived from and based upon the securities held by the unit investment trust.
Accordingly, the level of risk
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involved in the purchase or sale of a SPDR is similar to the risk involved in
the purchase or sale of traditional common stock, with the exception that the
pricing mechanism for SPDRs is based on a basket of stock. Disruptions in the
markets for the securities underlying SPDRs purchased or sold by a Fund could
result in losses on SPDRs.
WHEN-ISSUED SEChURITIES, DELAYED-DELIVERY TRANSACTIONS AND FORWARD
COMMITMENTS. Each Fund may purchase securities on a "when-issued" basis, for
delayed delivery (I.E., payment or delivery occur beyond the normal settlement
date at a stated price and yield) or on a forward commitment basis in an amount
up to 20% of its total assets. Each Fund does not intend to engage in these
transactions for speculative purposes, but only in furtherance of its investment
objectives. These transactions occur when securities are purchased or sold by a
Fund with payment and delivery taking place in the future to secure what is
considered an advantageous yield and price to a Fund at the time of entering
into the transaction. The payment obligation and the interest rate that will be
received on when-issued securities are fixed at the time the buyer enters into
the commitment. Due to fluctuations in the value of securities purchased or
sold on a when-issued, delayed-delivery basis or forward commitment basis, the
prices obtained on such securities may be higher or lower than the prices
available in the market on the dates when the investments are actually delivered
to the buyers. When-issued securities may include securities purchased on a
"when, as and if issued" basis under which the issuance of the security depends
on the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring.
When a Fund agrees to purchase when-issued, delayed-delivery
securities or securities on a forward commitment basis, its custodian will set
aside cash or liquid securities equal to the amount of the commitment in a
segregated account. Normally, the custodian will set aside portfolio securities
to satisfy a purchase commitment, and in such a case a Fund may be required
subsequently to place additional assets in the segregated account in order to
ensure that the value of the account remains equal to the amount of a Fund's
commitment. The assets contained in the segregated account will be
marked-to-market daily. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. When a Fund engages in
when-issued, delayed-delivery or forward commitment transactions, it relies on
the other party to consummate the trade. Failure of the seller to do so may
result in a Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities
from a bank or recognized securities dealer and simultaneously commit to resell
the securities 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 securities ("repurchase agreements"). Such Fund would maintain
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 would be, in effect, secured by such securities. If the value of such
securities were less than the repurchase price, plus interest, the other party
to the agreement would be required to provide additional collateral so that at
all times the collateral is at least 102% of the repurchase price plus accrued
interest. Default by or bankruptcy of a seller would expose a Fund to possible
loss because of
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adverse market action, expenses and/or delays in connection with the disposition
of the underlying obligations. The financial institutions with which a Fund may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers, if such banks and non-bank dealers are deemed
creditworthy by CDC Investments. CDC Investments will continue to monitor
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement to equal at least 102% of the repurchase
price (including accrued interest). In addition, CDC Investments will require
that the value of this collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default, be equal to 102% or
greater than the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
CDC Investments will mark-to-market daily the value of the securities. There
are no percentage limits on a Fund's ability to enter into repurchase
agreements. Repurchase agreements are considered to be loans by the Fund under
the 1940 Act.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Each Fund may enter
into reverse repurchase agreements with the same parties with whom it may enter
into repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by a Fund pursuant to its agreement to repurchase them at a
mutually agreed upon date, price and rate of interest. At the time a Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). A Fund's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities a Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's obligation to
repurchase the securities, and a Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.
Each Fund also may enter into "dollar rolls," in which a Fund sells
fixed-income securities for delivery in the current month and simultaneously
contracts to repurchase similar but not identical (same type, coupon and
maturity) securities on a specified future date. During the roll period, a Fund
would forego principal and interest paid on such securities. A Fund would be
compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. At the time a Fund enters into a dollar roll
transaction, it will segregate with an approved custodian, cash or liquid
securities having a value not less than the repurchase price (including accrued
interest) and will subsequently monitor the segregated assets to ensure
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that their value is maintained. Reverse repurchase agreements and dollar rolls
that are accounted for as financings are considered to be borrowings under the
1940 Act.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government and one or more financial institutions ("Lenders"). The
majority of the Funds' investments in Loans are expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in a
Fund having a contractual relationship only with the Lender, not with the
borrower. A participating Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In connection with purchasing Participations, a Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan ("Loan Agreement"), nor any
rights of set-off against the borrower, and a Fund may not directly benefit from
any collateral supporting the Loan in which it has purchased the Participation.
As a result, participating Funds will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, a Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Funds will acquire Participations only if the
Lender interpositioned between the Funds and the borrower is determined by CDC
Investments to be creditworthy.
ZERO COUPON SECURITIES. Each Fund may invest up to 20% of its total
assets in "zero coupon" U.S. Treasury, foreign government and U.S. and foreign
corporate debt securities, which are bills, notes and bonds that have been
stripped of their unmatured interest coupons and custodial receipts or
certificates of participation representing interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its holder
prior to maturity. Accordingly, such securities usually trade at a deep
discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities that make current distributions of interest
and may be more, speculative than such other securities. Accordingly, the
values of these securities may be highly volatile as interest rates rise or
fail. Redemption of shares of a Fund that require it to sell zero coupon
securities prior to maturity may result in capital gains or losses that are
substantial. Each Fund anticipates that it will not normally hold zero coupon
securities to maturity. Federal tax law requires that a holder of a zero coupon
security accrue a portion of the discount at which the security was purchased as
income each year, even though the holder receives no interest payment on the
security during the year. Such accrued discount will be included in determining
the amount of dividends a Fund must pay each year and, in order to generate cash
necessary to pay such dividends, a Fund may liquidate portfolio securities at a
time when it would not otherwise have done so.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture,
note, preferred stock or other security that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at
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a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they ordinarily provide a stable stream
of income with generally higher yields than those of common stocks of the same
or similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. While no securities investment is completely without
risk, investments in convertible securities generally entail less risk than the
corporation's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed-income security. Convertible securities have unique
investment characteristics in that they generally (1) have higher yields than
common stocks, but lower yields than comparable non-convertible securities, (2)
are less subject to fluctuation in value than the underlying stock since they
have fixed-income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. Most
convertible securities currently are issued by U.S. companies, although a
substantial Eurodollar convertible securities market has developed, and the
markets for convertible securities denominated in local currencies are
increasing. Subsequent to purchase by a Fund, convertible securities may cease
to be rated or a rating may be reduced below the minimum required for purchase
by a Fund. Neither event will require sale of such securities, although CDC
Investments will consider such event in its determination of whether a Fund
should continue to hold the securities.
The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may have an
effect on the convertible security's investment value. The conversion value of
a convertible security is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible security is governed principally by its investment
value. Generally the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. A convertible
security generally will sell at a premium over its conversion value by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed-income security.
A convertible security might be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for redemption,
the Fund will be required to permit the issuer to redeem the security, convert
it into the underlying common stock or sell it to a third party. The Funds will
invest in convertible securities without regard to their credit rating.
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MORTGAGE-BACKED SECURITIES. Each Fund may invest in mortgage-backed
securities issued by U.S. government entities, such as GNMA, FNMA or FHLMC. In
addition, a Fund may invest in mortgage-backed securities sponsored by U.S.
issuers as well as non-governmental issuers. The Aggressive Equity Fund and the
Global Independence Fund may also invest in mortgage-backed securities of
foreign issuers. Non-government issued mortgage-backed securities may offer
higher yields than those issued by government entities, but may be subject to
greater price fluctuations. Mortgage-backed securities represent direct or
indirect participations in, or are secured by and payable from, mortgage loans
secured by real property. The mortgages backing these securities include, among
other mortgage instruments, conventional 30-year fixed-rate mortgages, 15-year
fixed-rate mortgages, graduated payment mortgages and adjustable rate mortgages.
Although there may be government or private guarantees on the payment of
interest and principal of these securities, the guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates, nor do the guarantees extend to the yield or value of a
Fund's shares. These securities generally are "pass-through" instruments,
through which the holders receive a share of all interest and principal payments
from the mortgages underlying the securities, net of certain fees. Some
mortgage-backed securities, such as collateralized mortgage obligations
("CMOs"), make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond).
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. At present, pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of falling interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-backed securities. Conversely, in periods of rising rates the
rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting a Fund's
yield.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to
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the holder may vary from the coupon rate, even if adjustable, if the
mortgage-backed securities are purchased or traded in the secondary market at a
premium or discount. In addition, there is normally some delay between the time
the issuer receives mortgage payments from the servicer and the time the issuer
makes the payments on the mortgage-backed securities, and this delay reduces the
effective yield to the holder of such securities.
ASSET-BACKED SECURITIES. Each Fund may also invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, pools of consumer loans on assets such as motor vehicle installment sales,
installment loan contracts, leases of various types of real and personal
property and receivables from revolving credit (credit card) agreements. Such
assets are securitized through the use of trusts and special purpose
corporations. Payments or distributions of principal and interest ultimately
depend on payments in respect of the underlying loans by individuals and may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution unaffiliated
with the trust or corporation.
Asset-backed securities present certain risks that are not presented
by other securities in which a Fund may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. In addition, there is no assurance that the security interest in
the collateral can be realized. The remaining maturity of any asset-backed
security a Fund invests in will be 397 days or less. A Fund may purchase
asset-backed securities that are unrated.
STRUCTURED NOTES. The Funds may invest in structured notes. The
distinguishing feature of a structured note is that the amount of interest
and/or principal payable on the notes is based on the performance of a benchmark
asset or market other than fixed-income securities or interest rates. Examples
of a benchmark include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows a Fund to gain exposure
to the benchmark asset or market, such as investments in certain emerging
markets that restrict investment by foreigners. The structured note fixes the
maximum loss that a Fund may experience in the event that the market does not
perform as expected. The performance tie can be a straight relationship or
leveraged, although CDC Investments generally will not use leverage in its
structured note strategies. Depending on the terms of the note, a Fund may
forego all or part of the interest and principal that would be payable on a
comparable conventional note; a Fund's loss cannot exceed this foregone interest
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and/or principal. An investment in a structured note involves risks similar to
those associated with a direct investment in the benchmark asset. Structured
notes will be treated as illiquid securities for investment limitation purposes.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. Each Fund may not invest
more than 15% of its net assets in non-publicly traded and illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market, repurchase agreements which have a maturity of longer than
seven days, certain Rule 144A Securities (as described below) and time deposits
maturing in more than seven days. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Companies whose securities are
not publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days
without borrowing. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
RULE 144A SECURITIES. Each Fund may purchase securities that are not
registered under the Securities Act, but that can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the Securities Act
adopted by the SEC. Rule 144A allows for a broader institutional trading market
for securities otherwise subject to restriction on resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional
buyers. CDC Investments anticipates that the market for certain restricted
securities such as institutional
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commercial paper will expand further as a result of this regulation and use of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc.
An investment in Rule 144A Securities will be considered illiquid and
therefore subject to each Fund's limit on the purchase of illiquid securities
unless the Trustees or their delegates determines that the Rule 144A Securities
are liquid. In reaching liquidity decisions, the Trustees and its delegates may
consider, INTER ALIA, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (E.G., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer). This investment practice
could have the effect of increasing the level of illiquidity in the Funds to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A Securities. The Trustees of each Fund will carefully
monitor any investments by a Fund in Rule 144A Securities. The Trustees may
adopt guidelines and delegate to CDC Investments the daily function of
determining and monitoring the liquidity of Rule 144A Securities, although the
Trustees will retain ultimate responsibility for any determination regarding
liquidity.
Rule 144A Securities may involve a high degree of business and
financial risk and may result in substantial losses. These securities may be
less liquid than publicly traded securities, and a Fund may take longer to
liquidate these positions than would be the case for publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized on such sales could be less than those originally paid by a
Fund. Further, companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. A Fund's investment in
illiquid securities is subject to the risk that should a Fund desire to sell any
of these securities when a ready buyer is not available at a price that is
deemed to be representative of their value, the value of a Fund's net assets
could be adversely affected.
RIGHTS OFFERINGS AND PURCHASE WARRANTS. Each Fund may invest up to
10% of its net assets in rights and warrants to purchase newly created equity
securities consisting of common and preferred stock. The equity security
underlying a right or warrant is authorized at the time the right or warrant is
issued or is issued together with the right or warrant.
Investing in rights and warrants can provide a greater potential for
profit or loss than an equivalent investment in the underlying security, and,
thus, can be a speculative investment. At the time of issue, the cost of a
warrant is substantially less than the cost of the underlying security itself,
and price movements on the underlying security are generally magnified in the
price movements of the warrant. The value of a right or warrant may decline
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because of a decline in the value of the underlying security, the passage of
time, changes in interest rates or in the dividend or other policies of the
company whose equity underlies the warrant or a change in the perception as to
the future price of the underlying security, or any combination thereof. An
investor's risk increases in the event of a decline in the value of the
underlying security and can result in a complete loss of the amount invested in
a warrant. In addition, the price of a warrant tends to be more volatile than,
and may not correlate exactly to, the price of the underlying security. If the
market price of the underlying security is below the exercise price of the
warrant on its expiration date, the warrant with generally expire without value.
Rights and warrants generally pay no dividends and confer no voting or other
rights other than to purchase the underlying security.
BORROWING. Each Fund may borrow up to 33 1/3% of its total assets
(including the amount borrowed) for temporary or emergency purposes, including
to meet portfolio redemption requests so as to permit the orderly disposition of
portfolio securities or to facilitate settlement transactions on portfolio
securities. Investments (including roll-overs) will not be made when borrowings
exceed 5% of a Fund's total assets. Although the principal of such borrowings
will be fixed, a Fund's assets may change in value during the time the borrowing
is outstanding. The Funds expect that some of their borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with a
suitable subcustodian, which may include the lender.
U.S. CORE EQUITY FUND ONLY
SHORT SELLING. The Fund may from time to time sell securities short.
A short sale is a transaction in which the Fund sells borrowed securities it
does not own in anticipation of a decline in the market price of the securities.
The current market value of the securities sold short (excluding short sales
"against the box") will not exceed 10% of the Fund's total assets.
To deliver the securities to the buyer, the Fund must arrange through
a broker to borrow the securities and, in so doing, the Fund becomes obligated
to replace the securities borrowed at their market price at the time of
replacement, whatever that price may be. The Fund will make a profit or incur a
loss as a result of a short sale depending on whether the price of the
securities decreases or increases between the date of the short sale and the
date on which the Fund purchases the security to replace the borrowed securities
that have been sold. The amount of any loss would be increased (and any gain
decreased) by any premium or interest the Fund is required to pay in connection
with a short sale. The Fund may have to pay a premium to borrow the securities
and must pay any dividends or interest payable on the securities until they are
replaced.
The Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured by cash or liquid securities deposited as
collateral with the broker. In addition, the Fund will segregate with its
custodian or a qualified subcustodian an amount of cash or liquid securities
equal to the difference, if any, between (i) the market value of the
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securities sold at the time they were sold short and (ii) any cash or liquid
securities deposited as collateral with the broker in connection with the short
sale (not including the proceeds of the short sale). Until it replaces the
borrowed securities, the Fund will maintain the segregated account daily at a
level so that (a) the amount deposited in the account plus the amount deposited
with the broker (not including the proceeds form the short sale) will equal the
current market value of the securities sold short and (b) the amount deposited
in the account plus the amount deposited with the broker (not including the
proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short.
SHORT SALES "AGAINST THE BOX". The Fund may enter into a short sale
of securities such that when the short position is open a fund owns an equal
amount of the securities sold short or owns preferred stocks or debt securities,
convertible or exchangeable without payment of further consideration, into an
equal number of securities sold short. This kind of short sale, which is
referred to as one "against the box," may be entered into by the Fund to, for
example, lock in a sale price for the security a Fund does not wish to sell
immediately. The Fund will segregate with its custodian or a qualified
subcustodian, the securities sold short or convertible or exchangeable preferred
stocks or debt securities in connection with short sales against the box.
The Fund may make a short sale as a hedge, when it believes that the
price of a security may decline in the value of a security owned by the Fund (or
a security convertible or exchangeable for such security). In such case, any
future losses in the Fund's long position should be offset by a gain in the
short position and, conversely, any gain in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold relative to the amount the Fund owns. There will be certain
additional transaction costs associated with short sales against the box, but
the Fund will endeavor to offset these costs with the income from the investment
of the cash proceeds of short sales.
If the Fund effects a short sale of securities at a time when it has
an unrealized gain in the securities, it may be required to recognize that gain
as if it had actually sold the securities (as a "constructive sale") on the date
it effects the short sale. However, such constructive sale treatment may not
apply if the Fund closes out the short sale with securities other than
appreciated securities held at the time of the short sale and if certain other
conditions are satisfied. Uncertainty regarding the tax consequences of
effecting short sales may limit the extent to which the Fund may effect short
sales.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Trustees. These loans, if and when made, may not exceed 50% of the
Fund's total assets (including the loan collateral) taken at value. The Fund
will not lend portfolio securities to affiliates of CDC Investments unless it
has applied for and received specific authority to do so from the SEC. Loans of
portfolio securities will be collateralized by cash or liquid securities, which
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the
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loan would be for the account of the Fund. From time to time, the Fund may
return a part of the interest earned from the investment of collateral received
for securities loaned to the borrower and/or a third party that is unaffiliated
with the Fund and that is acting as a "finder."
By lending its securities, the Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. Government Securities are used as collateral. The Fund will
adhere to the following conditions whenever its portfolio securities are loaned:
(i) the Fund must receive at least 100% cash collateral or equivalent securities
of the type discussed in the preceding paragraph from the borrower; (ii) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (iii) the Fund must be able
to terminate the loan at any time; (iv) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
on the loaned securities and any increase in market value; (v) the Fund may pay
only reasonable custodian fees in connection with the loan; and (vi) voting
rights on the loaned securities may pass to the borrower, provided, however,
that if a material event adversely affecting the investment occurs, the Trustees
must terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon the Fund's ability to
recover the loaned securities or dispose of the collateral for the loan.
AGGRESSIVE EQUITY FUND AND GLOBAL INDEPENDENCE FUND ONLY
NON-DIVERSIFIED STATUS. The Aggressive Equity and Global Independence
Funds are classified as non-diversified investment companies under the 1940 Act,
which means that a Fund is not limited by the 1940 Act in the proportion of its
assets that it may invest in the obligations of a single issuer. Each Fund
will, however, comply with diversification requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company. As a non-diversified investment company, a Fund may invest
a greater proportion of its assets in the obligations of a small number of
issuers and, as a result, may be subject to greater risk with respect to
portfolio securities. To the extent that a Fund assumes large positions in the
securities of a small number of issuers, its return may fluctuate to a greater
extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.
BELOW INVESTMENT GRADE SECURITIES. Each of these Funds may invest its
assets in non-investment grade securities (securities that are rated below the
fourth highest grade at the time of purchase by Moody's or S&P, or, if unrated,
deemed by CDC Investments to be of comparable quality). Subsequent to its
purchase by a Fund, an issue of securities may cease to be rated or its rating
may be reduced. Neither event will require a sale of such securities by a Fund,
although CDC Investments will consider such event in its determination of
whether a Fund should continue to hold the securities. The widespread expansion
of government, consumer and corporate debt within the economy has made the
corporate sector, especially cyclically sensitive industries, more vulnerable to
economic downturns or increased interest
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rates. Because lower-rated securities involve issuers with weaker credit
fundamentals (such as debt-to-equity ratios, interest charge coverage, earnings
history and the like), an economic downturn, or increases in interest rates,
could severely disrupt the market for lower-rated securities and adversely
affect the value of outstanding securities and the ability of issuers to repay
principal and interest.
The market values of below investment grade securities and unrated
securities of comparable quality tend to react less to fluctuations in interest
rate levels than do those of investment grade securities and the market values
of certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than higher-quality
securities. In addition, these securities generally present a higher degree of
credit risk. Issuers of these securities are often highly leveraged and may not
have more traditional methods of financing available to them so that their
ability to service their obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired. The risk of loss
due to default by such issuers is significantly greater because below investment
grade securities generally are unsecured and frequently are subordinated to
prior payment of senior indebtedness. If the issuer of a security owned by a
Fund defaulted, a Fund could incur additional expenses in seeking recovery with
no guarantee of recovery. Also, a recession could disrupt severely the market
for such securities and may adversely affect the value of such securities and
the ability of the issuers of such securities to repay principal and pay
interest thereon. Lower-rated securities also present risks based on payment
expectations. For example, lower-rated securities may contain redemption or
call provisions. If an issuer exercises these provisions in a declining
interest rate market, a Fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors.
An economic recession could disrupt severely the market for such
securities and may adversely affect the value of such securities to repay
principal and pay interest thereon. The Funds may have difficulty disposing of
certain of these securities because there may be a thin trading market. Because
there is no established retail secondary market for many of these securities,
the Funds anticipate that these securities could be sold only to a limited
number of dealers or institutional investors. To the extent a secondary trading
market for these securities does exist, it generally is not as liquid as the
secondary market for investment grade securities. The lack of a liquid
secondary market, as well as adverse publicity and investor perception with
respect to these securities, may have an adverse impact on market price and a
Fund's ability to dispose of particular issues when necessary to meet liquidity
needs or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Funds to obtain
accurate market quotations for purposes of valuing the Funds and calculating net
asset value.
The market value of securities rated below investment grade is more
volatile than that of investment grade securities. Factors adversely impacting
the market value of these securities will adversely impact a Fund's net asset
value. The Funds will rely on the judgment, analysis and experience of CDC
Investments in evaluating the creditworthiness of
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an issuer. In this evaluation, CDC Investments will consider, among other
things, the issuer's financial resources, its sensitivity to economic conditions
and trends, its operating history, the quality of the issuer's management and
regulatory matters. Normally, below investment grade securities and comparable
unrated securities are not intended for short-term investment. A Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings of such
securities.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 8 may not be changed
without the affirmative vote of the holders of a majority of each Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more
of the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of a Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares. Investment limitations 9 through 14 may be
changed by a vote of the Trustees at any time.
Each Fund may not:
1. Borrow money except that a Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by a Fund may not exceed 33-1/3% of the value of a Fund's
total assets (including the amount borrowed) at the time of such borrowing. For
purposes of this restriction, short sales and the entry into currency
transactions, options, futures contracts, options on futures contracts, forward
commitment transactions and dollar roll transactions that are not accounted for
as financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause 25% or more of a value
of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that to the extent the Fund's benchmark is concentrated in a
particular industry, the Fund will be concentrated in that industry. This
limitation does not apply to the purchase of U.S. Government Securities.
3. With respect to the U.S. Core Equity Fund only, purchase the
securities of any issuer if as a result more than 5% of the value of a Fund's
total assets would be invested in the securities of such issuer, except that
this 5% limitation does not apply to U.S. Government Securities and except that
up to 25% of the value of a Fund's total assets may be invested without regard
to this 5% limitation.
4. Make loans, except that a Fund may purchase or hold fixed-income
securities, including structured securities, and enter into repurchase
agreements. The U.S. Core Equity Fund may also lend its portfolio securities in
an amount not to exceed 50% of its total assets.
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5. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with a Fund's investment objective, policies and limitations may be
deemed to be underwriting.
6. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that a Fund may invest in (a)
securities secured by real estate, mortgages or interests therein and (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs.
7. Invest in commodities, except that the Funds may purchase and
sell futures contracts, including those relating to securities, currencies and
indices, and options on futures contracts, securities, currencies or indices,
and purchase and sell currencies on a forward commitment or delayed-delivery
basis and enter into stand-by commitments, and, in the case of the Aggressive
Equity and Global Independence Funds, purchase or sell contracts relating to the
future delivery of precious metals.
8. Issue any senior security except as permitted in a Fund's
investment limitations.
9. Purchase securities on margin, except that a Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.
10. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange, or as otherwise permitted under the 1940 Act.
11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow and in connection with the writing of covered put
and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
12. Invest more than 15% of a Fund's net assets in securities which
may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.
13. Invest in rights or warrants (other than rights or warrants
acquired by a Fund as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost or
market) would exceed 10% of the value of a Fund's net assets.
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14. Make additional investments (including roll-overs) if a Fund's
borrowings exceed 5% of its net assets.
If a percentage restriction (other than the percentage limitation set
forth in No. 1 and No. 12) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of a Fund's assets will not
constitute a violation of such restriction.
PORTFOLIO VALUATION
The Prospectus discusses the time at which the net asset value of each
Fund is determined for purposes of sales and redemptions. The following is a
description of the procedures used by each Fund in valuing its assets.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
as of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the
value of the securities will be taken to be the highest bid quotation on the
exchange or market. Options are generally valued at the last sale price or, in
the absence of a last sale price, the last bid price. The value of a futures
contract equals the unrealized gain or loss on the contract that is determined
by marking it to the current settlement price for a like contract acquired on
the day on which the futures contract is being valued. A settlement price may
not be used if the market makes a limit move with respect to a particular
commodity. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Short-Term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Trustees. Amortized cost involves valuing a portfolio instrument at its initial
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be
used with respect to other debt obligations with 60 days or less remaining to
maturity. Notwithstanding the foregoing, in determining the market value of
portfolio investments, a Fund may employ outside organizations (a "Price
Service") which may use a matrix, formula or other objective method that takes
into consideration market indexes, matrices, yield curves and other specific
adjustments. The procedures of Pricing Services are reviewed periodically by
the officers of each Fund under the general supervision and responsibility of
the Trustees, which may replace a Pricing Service at any time. Securities,
options and futures contracts for which market quotations are not available and
certain other assets of a Fund will be valued at their fair value as determined
in good faith pursuant to consistently applied procedures established by the
Trustees. In addition, the Trustees or their delegates may value a security at
fair value if they determine that such security's value determined by the
methodology set forth above does not reflect its fair value.
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Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(I.E., a day on which the New York Stock Exchange (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New
York and days on which a Fund's net asset value is not calculated. As a result,
calculation of a Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain foreign portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of regular
trading on the NYSE will not be reflected in a Fund's calculation of net asset
value unless the Trustees or their delegates deem that the particular event
would materially affect net asset value, in which case an adjustment may be
made. All assets and liabilities initially expressed in foreign currency values
will be converted into U.S. dollar values at the prevailing rate as quoted by a
Pricing Service. If such quotations are not available, the rate of exchange
will be determined in good faith pursuant to consistently applied procedures
established by the Trustees.
PORTFOLIO TRANSACTIONS
CDC Investments is responsible for establishing, reviewing and, where
necessary, modifying each Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales
may be effected on a securities exchange or over-the-counter, depending on where
it appears that the best price or execution will be obtained. The purchase
price paid by a Fund to underwriters of newly issued securities usually includes
a concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the price
of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.
CDC Investments will select specific portfolio investments and effect
transactions for each Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions, CDC
Investments will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of a broker or dealer and the reasonableness
of the commission, if any, for the specific transaction and on a continuing
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<PAGE>
basis. CDC Investments may, in its discretion, effect transactions in portfolio
securities with dealers who provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to
each Fund and/or other accounts over which CDC Investments exercises investment
discretion. CDC Investments may place portfolio transactions with a broker or
dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if CDC Investments determines in good faith that such amount of
commission was reasonable in relation to the value of such brokerage and
research services provided by such broker or dealer viewed in terms of either
that particular transaction or of the overall responsibilities of CDC
Investments. Research and other services received may be useful to CDC
Investments in serving both a Fund and its other clients and, conversely,
research or other services obtained by the placement of business of other
clients may be useful to CDC Investments in carrying out its obligations to each
Fund. Research may include furnishing advice, either directly or through
publications or writings, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, tading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research analysts,
corporate management personnel, industry experts, economists and government
officials; comparative performance evaluation and technical measurement services
and quotation services; and products and other services (such as third party
publications, reports and analyses, and computer and electronic access,
equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist CDC Investments in carrying out its responsibilities. Research received
from brokers or dealers is supplemental to CDC Investments' own research
program. The fees to CDC Investments under its advisory agreement with each
Fund are not reduced by reason of its receiving any brokerage and research
services.
Investment decisions for each Fund concerning specific portfolio
securities are made independently from those for other clients advised by CDC
Investments. Such other investment clients may invest in the same securities as
the Funds. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which CDC Investments believes to be equitable to each client, including
the Funds. In some instances, this investment procedure may adversely affect
the price paid or received by a Fund or the size of the position obtained or
sold for the Funds. To the extent permitted by law, CDC Investments may
aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for such other investment clients in order to obtain best
execution.
In no instance will portfolio securities be purchased from or sold to
CDC Investments or its affiliates. In addition, a Fund will not give preference
to any institutions with whom it enters into distribution or shareholder
servicing agreements concerning the provision of distribution services or
support services.
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Transactions for a Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, a Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting
as principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.
Each Fund may participate, if and when practicable, in bidding for the
purchase of securities for its portfolio directly from an issuer in order to
take advantage of the lower purchase price available to members of such a group.
A Fund will engage in this practice, however, only when CDC Investments, in its
sole discretion, believes such practice to be otherwise in a Fund's interest.
PORTFOLIO TURNOVER
Each Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when a Fund deems it
desirable to sell or purchase securities. Each Fund's portfolio turnover rate
is calculated by the value of the securities purchased or sold, excluding all
securities whose maturities at the time of acquisition were one year or less,
divided by the average monthly value of such securities owned during the year.
Based on this calculation, instruments, including options and futures contracts,
with remaining maturities of less than one year are excluded from the portfolio
turnover rate.
Certain practices that may be employed by each Fund could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Fund may be higher than mutual funds having
a similar objective that do not use these strategies.
While it is not possible to predict the Funds' portfolio turnover
rates, the U.S. Core Equity Fund expects its turnover rate for its first year of
operation to total approximately 120% and each of the Aggressive Equity Fund and
the Global Independence Fund expects its first year turnover rate to total
approximately 100%. High portfolio turnover rates (100% or more) may result in
dealer markups or underwriting commissions as well as other transaction costs,
including correspondingly higher brokerage commissions. In addition, short-term
gains realized from portfolio turnover may be taxable to shareholders as
ordinary income.
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MANAGEMENT OF THE FUNDS
OFFICERS AND TRUSTEES
Each Fund's business and affairs is managed by its Trustees in
accordance with the law of the State of Delaware. The Trustees elect officers
who are responsible for the day-to-day operations of each Fund and who execute
policies formulated by the Trustees.
The names (and ages) of the Trustees and officers of the Trust, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below. Unless otherwise indicated,
the address of each officer is 9 West 57th Street, New York, New York 10019.
Bluford H. Putnam, Ph.D.* (48) PRESIDENT, CHIEF INVESTMENT OFFICER
AND TRUSTEE.
President of CDC Investments since
1997; Managing Director and Chief
Investment Officer for Equities and
Asset Allocation with the Global
Investment Management Department of
Bankers Trust Company in New York from
1994 to 1997; President of Putnam &
Associates, Inc. from 1991 to 1994.
Mike West (42) TRUSTEE.
Institute of Statistics and Decision The Arts and Sciences Professor of
Sciences Duke University Statistics and Decision Sciences and
Durham, NC 27708-0251 Director of the Institute of
Statistics and Decision Sciences, Duke
University.
Arnold Zellner (72) TRUSTEE.
The University of Chicago H.G.B. Alexander Distinguished Service
Graduate School of Business Professor Emeritus of Economics and
1101 East 58th Street Statistics - Graduate School of
Chicago, IL 60637 Business, University of Chicago; From
1984 to 1996, H.G.B. Alexander
Distinguished Service Professor -
Graduate School of Business,
University of Chicago.
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D. Sykes Wilford, Ph.D (49) VICE PRESIDENT AND INVESTMENT OFFICER.
Managing Director of CDC Investments;
Chief Investment Officer of Bankers
Trust Private Bank and Managing
Director of Bankers Trust Global
Investment Management from 1994 to
1997; Managing Director of Chase
Investment Bank, Ltd., London from
1992 to 1994; Managing Director of
Chase Manhattan Bank from 1988 to
1992.
Jose Quintana (48) VICE PRESIDENT AND INVESTMENT OFFICER.
Managing Director of CDC Investments;
Vice President and Head of
Quantitative Research for the
Strategic Asset Allocation team in the
Global Investment Management Group of
Bankers Trust Company from 1994 to
1997; Vice President in the Global
Risk Management Sector of Chase
Manhattan Bank from 1992 to 1994.
Vice President at Chase Investors
Management Corporation from 1988 to
1992; Staff Supervisor for AT&T's
Market Analysis and Forecasting
Directorate from 1987 to 1988.
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C. Peter Paterno (36) TREASURER.
Vice President of CDC Investments;
Financial Consultant from 1995 to
1997; Managing Director and Head of
Trading, Putnam & Associates from 1993
to 1994; Director, Panther Capital
Advisers, Ltd. in 1992; Vice
President, Proprietary Fixed Income
Trading, Merrill Lynch International
Ltd. from 1991 to 1992; Manager,
International Arbitrage, Kleinwort
Benson Ltd. from 1989 to 1991;
Research Analyst in the International
Fixed Income Strategy and Economics
Group at Morgan Stanley & Co.,
Incorporated from 1986 to 1989.
Rachel D. Manney (31) SECRETARY.
Vice President of CDC Investments;
Vice President, BEA Associates from
1992 to 1997; Senior Associate,
Coopers & Lybrand, LLP from 1989 to
1992.
The Trust pays Trustees who are not "affiliated persons" (as defined in the 1940
Act) of CDC Investments, its administrator or distributor an annual fee of
$10,000 and $3,000 for each meeting attended by the Trustee for services as
Trustee, and each such Trustee is reimbursed for expenses incurred with the
Trustee's attendance at meetings.
TRUSTEES' TOTAL COMPENSATION:
Name of Trustee From the Trust+
Bluford H. Putnam* None
Mike West $22,000
Arnold Zellner $22,000
- --------------------
+ Amounts shown are estimates of payments to be made for the Trust's first
full fiscal year ending October 31, 1999 pursuant to existing
arrangements.
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* Mr. Putnam receives compensation as an affiliate of CDC Investments and,
accordingly, receive no compensation from the Trust.
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS.
CDC Investments will hold all of the shares of each Fund on the date
the Trust's Registration Statement becomes effective. The shares were issued to
CDC Investments for providing the initial seed capital to the Trust. It is
anticipated that shortly after the Trust's Registration Statement becomes
effective, CIMCO Holdings LLC ("CIMCO"), a Delaware limited liability company,
will invest approximately $25 million in each Fund. Master Holdings, a Cayman
Islands corporation, is the majority shareholder of CIMCO and CDC Investments is
a minority shareholder of CIMCO. CDC Group, Paris is the majority shareholder
of Master Holdings. CDC Investments is a wholly-owned subsidiary of CDC Group,
Paris. So long as CDC Investments or CIMCO owns more than 25% of the
outstanding voting securities of a Fund, it may be deemed to control the Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
CDC Investments, located at 9 West 57th Street, 35th Floor, New York,
New York 10019, serves as investment adviser to each Fund pursuant to separate
written agreements (the "Advisory Agreements"). The Adviser is doing business
in New York under the name "CDC Investments".
MANAGEMENT FEES
As described in the Prospectus, the U.S. Core Equity Fund pays the
Adviser a basic fee of 1.00%, and the Aggressive Equity Fund and the Global
Independence Fund each pay the Adviser a basic fee of 1.50%, of the respective
Fund's average daily net assets. This basic management fee may be adjusted
upward or downward by applying an adjustment formula (the "Performance
Adjustment"). The Performance Adjustment is calculated monthly by comparing the
Fund's investment performance to a target during the most recent twelve-month
period. The target for the U.S. Core Equity Fund and the Aggressive Equity Fund
is the investment record of the S&P 500 Index, and the target for the Global
Independence Fund is the investment record of the 90-day U.S. Treasury bill
rate. The difference between the Fund's performance compared to the performance
of the relevant target is multiplied by a Performance Adjustment of 25% (as an
annual rate). The Performance Adjustment is then added or subtracted from the
basic fee. The maximum annualized Performance Adjustment is 1.00% for the U.S.
Core Equity Fund and 1.50% for the Aggressive Equity Fund and the Global
Independence Fund.
CHOICE OF PERFORMANCE BENCHMARK
In the case of most equity strategies, the performance benchmark may
contain much of the risk to the investor, depending on how tightly or loosely
the adviser attempts to either track the benchmark or provide excess returns
above the return provided by the benchmark. The risks taken in a given
portfolio strategy will need to be measured in terms of
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the total risk of the whole fund, as well as the risks taken in the attempt to
earn excess returns above the benchmark. In this latter case, one is
conceptually separating the fund into two portfolios, in which one matches the
benchmark and the other provides the excess return above the benchmark (noting
that the excess return can be negative if the strategy does not work as
planned). The adviser will need to measure and understand how the expected
returns and risks in the strategy designed to produce excess returns are
correlated, if at all, to the expected returns and risks inherent in the
performance benchmark. All of these concerns will have a bearing on the total
risk being accepted by the investor in a fund, and they are driven in part by
the choice of the benchmark and in part by the choice of strategies to
out-perform the benchmark.
In the case of mutual funds using "fulcrum" fee formulas to raise or
lower the base management fee depending on fund performance, such as the Funds,
the choice of benchmark is a critical factor to be considered by the investor.
With incentive fees using the fulcrum fee approach, the total management fee
paid to the adviser will depend on a base fee as a percentage of assets under
management as well as a performance adjustment that will add to or subtract from
the base management fee depending explicitly on the magnitude of positive excess
returns above the benchmark or the magnitude of negative excess returns below
the benchmark. The design of the "fulcrum" around which the incentive fees
either add to or subtract from the base management fees hinges on the choice of
the benchmark. The investor, by buying shares of a fund utilizing fulcrum fees,
is providing incentives to the adviser to strive for higher excess returns and
to take additional risks. The adviser, when taking additional risks in order to
attempt to gain excess returns above the benchmark, knows that the total
management fees can rise or fall depending on performance. To a limited extent,
then, the adviser will benefit when the investor benefits, and the adviser will
suffer a detriment when the investor suffers a below-benchmark performance.
The formula used in the Funds for calculating the fulcrum fees is
discussed in more detail, with examples, in the Prospectus. Basically, the
total management fee can range from 0.00% (zero) to 2.00% of assets under
management in the case of the U.S. Core Equity Fund, and from 0.00% to 3.00% in
the case of the Aggressive Equity Fund and the Global Independence Fund. In the
case of the U.S. Core Equity Fund, if the Fund underperforms its benchmark by
4%, over a 12-month period, the minimum management fee of 0.00% (zero) will
apply. Correspondingly, if the Fund overperforms its benchmark by 4%, the
maximum total management fee of 2.00% will apply. In the case of the Aggressive
Equity Fund and the Global Independence Fund, if a Fund underperforms its
benchmark by 6%, over a 12-month period, the minimum management fee of 0.00%
(zero) will apply. Correspondingly, if a Fund overperforms its benchmark by 6%,
the maximum total management fee of 3.00% will apply.
Therefore, investors in the Funds should pay special attention to the
choice of benchmark since it plays a critical role in determining the total risk
of the Fund as well as the management fees charged by the Fund. The choice of
the benchmark for each Fund depends on a number of factors, including the
objectives of the Fund, the universe of securities and other investments which
the Adviser plans to utilize, the level of risks expected to be taken, and the
ability of the portfolio to develop strategies that attempt to out-perform the
benchmark.
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In the case of the U.S. Core Equity Fund and the Aggressive Equity
Fund, the performance benchmark is the S&P 500 Index. Both of these Funds are
designed to give the investor a basic exposure to the U.S. equity market. The
S&P 500 Index is one of several established indexes that provide a good measure
of the core U.S. equity market. Other indexes cover the stocks of more
companies, but these additional company stocks are often very small and trade in
a relatively less liquid manner. In most market conditions, the S&P 500 Index
has a capitalization that includes 70% or more of other broad-based U.S. equity
indexes. In addition, the S&P 500 Index has a deep and liquid futures market
associated with it, giving the Adviser an effective tool for hedging the risks
of cash inflows and outflows in the funds, as well as managing other portfolio
risks or designing efficient strategies to enhance returns.
In the case of the Global Independence Fund, the performance benchmark
is the 90-day U.S. Treasury bill rate. The Global Independence Fund has several
characteristics that make this low risk benchmark appropriate. First, the
Global Independence Fund has a portfolio strategy that attempts to earn returns
in any market environment, whether the equity markets are rising or falling or
whether prices on U.S. Treasury debt securities are rising or falling.
Secondly, these strategies, for the most part, do not involve taking much
credit-related risk, but are focused on relative value and directional exposures
in the equity indexes, government bond markets and currencies of the major
industrial countries. To accomplish the efficient implementation of these
strategies, use may be made of exchange-traded futures contracts associated with
well-known equity indexes and actively-traded government bonds. As such,
regulatory practices often will require that a percentage of the Fund's assets
be held as U.S. Treasury bills as part of the margin requirements for accessing
these exchange-traded futures contracts.
In addition, the Global Independence Fund employs a portfolio approach
that tries, in part, to implement a set of concepts and theories based on modern
portfolio theory, in which the concept of the risk-free interest rate plays a
critical role. The U.S. Treasury bill rate is generally acknowledged in most
academic circles to represent a risk-free interest rate. Nothing, of course,
that earns a return is truly risk-free, but the U.S. Treasury is generally the
standard for low credit risk, and short-term U.S. Treasury bills contain very
little directional interest rate risk (interest rate duration risk). Thus, the
90-day U.S. Treasury bill rate is an appropriate benchmark or target for a fund
that attempts to be independent of the general moves in equities or interest
rates and does not employ strategies primarily dependent on credit risk.
The only real competitor to the U.S. Treasury bill rate as a
"risk-free" interest rate benchmark is the 90-day London Interbank Offered Rate,
or LIBOR. This interest rate is offered by commercial and investment banks as
the interest rate on deposits from large institutional investors. It is not
without credit risk, regardless of how small that risk may sometimes seem.
Large global banks can and do lose money from time to time in certain market
environments. Large global banks can and do see their credit ratings change,
which will often affect the interest rates they must pay for borrowed funds.
The liquidity of the LIBOR market can be affected by adverse events in the
financial marketplace, widening the
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yield spread between the LIBOR maturity curve and the corresponding U.S.
Treasury yield curve. There is real risk in the LIBOR swap yield curve for
different maturities. For example, advisers that seek to insulate their funds
from directional interest rate risk must choose between futures hedging based on
the U.S. Treasury market and swaps hedging based on the LIBOR curve, and the
resulting performance difference on a few occasions can be material.
For all these reasons, CDC Investments has chosen the 90-day U.S.
Treasury bill rate as the benchmark for the Global Independence Fund. Investors
should note, however, that investments made in the London Interbank deposit
market at LIBOR would provide a small spread over the U.S. Treasury bill rate
and potentially help the Adviser earn additional fees as part of the "fulcrum"
fee formula, assuming the overall strategy produced excess returns.
Under the Advisory Agreements, CDC Investments will not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which the Advisory Agreements relate. The
Advisory Agreements for the Funds were approved on January 7, 1999 by a vote of
the Trustees, including a majority of those Trustees who are not parties to the
Advisory Agreements or interested persons (as defined in the 1940 Act) of such
parties. The Advisory Agreements were also approved by each Fund's initial
shareholder. The Advisory Agreements are terminable by vote of the Trustees or
by the holders of a majority of the outstanding voting securities of the
relevant Fund, and at any time without penalty, on 60 days' written notice to
CDC Investments. The Advisory Agreements may also be terminated by CDC
Investments on 90 days' written notice to a Fund. The Advisory Agreements
terminate automatically in the event of an assignment.
State Street Bank and Trust Company located at 222 Franklin Street,
Boston, Massachusetts 02110, serves as administrator (the "Administrator") to
each Fund pursuant to separate written agreements. The Administrator provides
shareholder liaison services to each Fund, including responding to shareholder
inquiries and providing information on shareholder investments. The
Administrator also performs a variety of other services, including furnishing
certain executive and administrative services, acting as liaison between the
Funds and their various service providers, furnishing certain corporate
secretarial services, which include preparing materials for meetings of the
Trustees, assisting with proxy statements and annual and semiannual reports,
assisting in the preparation of tax returns and monitoring and developing
certain compliance procedures for the Funds. The Administrator also calculates
each Fund's net asset value, provides all accounting services for each Fund and
assists in related aspects of each Fund's operations. As compensation, each
Fund will pay the Administrator a fee calculated at an annual rate of 0.05% of
its average daily net assets, subject to a minimum annual fee of $75,000 per
Fund and an additional annual fee of $3,500 per Class if more than one Class of
shares is operational in a Fund.
Each class of shares of a Fund bears its proportionate share of fees
payable to CDC Investments and the Administrator in the proportion that its
assets bear to the aggregate assets of a Fund at the time of calculation. These
fees are calculated at an annual rate based on
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a percentage of a Fund's average daily net assets. CDC Investments or the
Administrator may voluntarily waive a portion of their fees from time to time
and temporarily limit the expenses to be borne by a Fund.
DISTRIBUTION AND SHAREHOLDER SERVICING
Funds Distributor, Inc., located at 60 State Street, Suite 1300,
Boston, Massachusetts 02109 (the "Distributor") serves as the distributor of the
shares of each Fund under a Distribution Agreement. Pursuant to the
Distribution Agreement, the Distributor receives no compensation for services as
the distributor.
INVESTOR SHARES. Each Fund has entered into a Shareholder Servicing
and Distribution Plan (the "12b-1 Plan") pursuant to Rule 12b-1 under the 1940
Act, under which each Fund will pay the Distributor, in consideration for
Services (as defined below), a fee calculated at an annual rate of 0.25% of the
average daily net assets of each Fund's Investor shares for certain Services (as
defined below) that pertain only to Investor shares. Services include: (i) the
sale of the Investor shares, as set forth in the 12b-1 Plan ("Selling
Services"), (ii) ongoing servicing and/or maintenance of the accounts of the
Investor shares, as set forth in the 12b-1 Plan ("Shareholder Services"), and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the sale of the Investor shares, as set forth in the 12b-1
Plan ("Administrative Services" and collectively with Selling Services and
Administrative Services, "Services") including, without limitation, (a) payments
reflecting an allocation of overhead and other office expenses of the
Distributor related to providing Services; (b) payments made to, and
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Investor shares including, but not limited to,
office space and equipment, telephone facilities, answering routine inquiries
regarding a Fund, and providing any other Shareholder Services; (c) payments
made to compensate selected dealers or other authorized persons for providing
any Services; (d) costs relating to the formulation and implementation of
marketing and promotional activities for the Investor shares, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising, and related travel and entertainment expenses;
(e) costs of printing and distributing prospectuses, statements of additional
information and reports of the Funds to prospective shareholders of the Funds;
and (f) costs involved in obtaining whatever information, analyses and reports
with respect to marketing and promotional activities that the Funds may, from
time to time, deem advisable.
Pursuant to the 12b-1 Plan, the Distributor will provide each Fund's
Trustees with periodic reports of amounts expended under the 12b-1 Plan and the
purpose for which the expenditures were made.
INSTITUTIONAL SHARES. A 12b-1 Plan has not been adopted with respect
to the Institutional shares of each Fund. Accordingly, the Institutional shares
will not pay any 12b-1 fees to the Distributor.
GENERAL. The 12b-1 Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the Trustees,
including a majority of the Trustees
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who are not interested persons of each Fund and who have no direct or indirect
financial interest in the operation of the Distribution Plan ("Independent
Trustees"). Any material amendment of the Distribution Plan would require the
approval of the Trustees in the manner described above. The Distribution Plan
may not be amended to increase materially the amount to be spent under it
without shareholder approval of the Investor shares. The Distribution Plan may
be terminated at any time, without penalty, by vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities of the Investor shares of each Fund.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian") acts as
custodian for each Fund and also acts as the custodian for each Fund's foreign
securities pursuant to written Custodian Agreements (the "Custodian Agreement").
The Custodian will (i) maintain a separate account or accounts in the name of
each Fund, (ii) hold and transfer portfolio securities on account of each Fund,
(iii) accept receipts and disbursements of money on behalf of each Fund, (iv)
collect and receive all income and other payments and distributions for the
account of each Fund's portfolio securities and (v) make periodic reports to the
Trustees concerning each Fund's custodial arrangements. The Custodian is
authorized to select one or more foreign banking institutions and foreign
securities depositories to serve as sub-custodian on behalf of the Funds,
provided that the Custodian remains responsible for the performance of all its
duties under the Custodian Agreement and holds the Funds harmless from the
negligent acts and omissions of any sub-custodian. For its services to the
Funds under the Custodian Agreement, the Custodian receives a fee which is
calculated based upon each Fund's average daily gross assets, exclusive of
transaction charges and out-of-pocket expenses, which are also charged to the
Funds.
State Street Bank and Trust Company (the "Transfer Agent") also serves
as each Fund's shareholder servicing, transfer and dividend disbursing agent
pursuant to written Transfer Agency and Service Agreements, under which the
Transfer Agent (i) issues and redeems shares of the Funds, (ii) addresses and
mails all communications by the Funds to record owners of each Fund's shares,
including reports to shareholders, dividend and distribution notices and proxy
material for meetings of shareholders, (iii) maintains shareholder accounts and,
if requested, sub-accounts and (iv) makes periodic reports to the Trustees
concerning the Transfer Agent's operations with respect to the Funds.
CAPITAL STOCK
The Trust Instrument authorizes the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of which an
unlimited number are designated Investor shares and an unlimited number are
designated Institutional shares. The Trust Instrument currently has three
separate series: U.S. Core Equity Fund, Aggressive Equity Fund, and Global
Independence Fund. Each Fund will be comprised of both Institutional shares and
Investor shares. Institutional shares are sold directly by the Funds'
distributor and may be purchased by endowments, foundations and plan sponsors of
401(a), 401(k), 457 and
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403(b) plans and by individuals. Investor shares may be purchased by
intermediary financial institutions (including broker-dealers, investment
advisers, financial planners, banks and insurance companies), and certain
individual retirement accounts and individuals. Investment professionals may
purchase Investor shares for discretionary or non-discretionary accounts
maintained by individuals.
Under the Trust Instrument, the Trustees have the power (without
shareholder approval) to classify or reclassify any unissued shares of the Trust
into one or more additional classes by setting or changing in any one or more
respects their relative rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption. The Trustees
may similarly classify or reclassify any class of the Trust's shares into one or
more series and, without shareholder approval, may increase the number of
authorized shares of the Trust.
All shareholders of a Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Trustees can elect all Trustees. Shares are transferable
but have no preemptive, conversion or subscription rights.
Investors in each Fund are entitled to one vote for each full share
held and fractional votes for fractional shares held. Shareholders of each Fund
will vote in the aggregate except where otherwise required by law and except
that the Investor Class will vote separately on certain matters pertaining to
its distribution and shareholder servicing arrangements. There will normally be
no meetings of investors for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees holding office have been
elected by investors. Investors of record of no less than two-thirds of the
outstanding shares of the Trust may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for the
purpose. A meeting will be called for the purpose of voting on the removal of a
Trustee at the written request of holders of 10% of the outstanding shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of each Fund's shares is equal to the per share net
asset value of the relevant class of shares of each Fund.
Under the 1940 Act, each Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (Each Fund may also suspend or postpone the recordation of
an exchange of its shares upon the occurrence of any of the foregoing
conditions.)
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If a shareholder's account falls below $500, a Fund may ask the
shareholder to increase its balance. If the balance remains below $500 after 45
days, a Fund may close a shareholder's account and redeem the proceeds to the
shareholder.
If the Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. Each Fund intends to comply with Rule 18f-1 promulgated under the
1940 Act with respect to redemptions in kind.
AUTOMATIC CASH WITHDRAWAL PLAN. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of each Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in a Fund, there will be a reduction
in the value of the shareholder's investment and continued withdrawal payments
may reduce the shareholder's investment and ultimately exhaust it. Withdrawal
payments should not be considered as income from investment in a Fund. All
dividends and distributions on shares in the Plan are automatically reinvested
at net asset value in additional shares of a Fund.
EXCHANGE PRIVILEGE
An exchange privilege among the Funds is available to investors.
Investors can exchange their Investor and Institutional shares for Investor and
Institutional shares of other funds advised by CDC Investments.
This exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Investor shares or
Institutional shares being acquired, as relevant, may legally be sold.
Shareholders may exchange $1,000,000 or more of the Institutional shares and
$2,500 or more of the Investor shares from one fund into the same class of
shares of another fund. There is no minimum for retirement accounts. Prior to
any exchange, shareholders should obtain and review a copy of the current
prospectus of the relevant class of each fund into which an exchange is being
considered.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same day,
at a price as described above, in shares of the relevant class of the fund being
acquired. Each Fund may refuse any purchase or exchange request that could
adversely affect a Fund or its operations, including those from any individual
or group who, in a Fund's view, is likely to engage in excessive trading
(usually defined as more than four exchange out of a Fund within a calendar
year), and any purchase or
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exchange request in excess of 1% of a Fund's total assets. Each Fund may also
(i) change or discontinue its exchange privilege or temporarily suspend this
privilege during unusual market conditions; (ii) change its minimum investment
amounts; (iii) delay sending out redemption proceeds for up to seven days if
doing so sooner would adversely affect a Fund (this generally applies only in
cases of very large redemptions, excessive trading or during unusual market
conditions); and (iv) make a "redemption in kind" -- payment in portfolio
securities rather than cash -- if the amount an investor is redeeming is large
enough to affect a Fund's operations. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is a summary of the material U.S. federal income tax
considerations regarding the purchase, ownership and disposition of shares in
each Fund. Each prospective shareholder is urged to consult his own tax adviser
with respect to the specific federal, state, local and foreign tax consequences
of investing in a Fund. The summary is based on the laws in effect on the date
of this Statement of Additional Information, which are subject to change.
THE FUNDS AND THEIR INVESTMENTS
Each Fund intends to qualify to be treated as a regulated investment
company each taxable year under the Code. To so qualify, a Fund must, among
other things: (a) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; and (b) diversify its holdings so that, at the
end of each quarter of a Fund's taxable year, (i) at least 50% of the market
value of a Fund's assets is represented by cash, securities of other regulated
investment companies, U.S. government securities and other securities, with such
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of a Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than U.S. government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that a Fund controls and are determined to be engaged in the
same or similar trades or businesses or related trades or businesses.
As a regulated investment company, each Fund will not be subject to
U.S. federal income tax on its net investment income (I.E., income other than
its net realized long- and short-term capital gains) and its net realized long-
and short-term capital gains, if any, that it distributes to its shareholders,
provided that an amount equal to at least 90% of the sum of its investment
company taxable income (I.E., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its net realized
short-term capital losses (including any capital loss carryovers), plus or minus
certain other adjustments as specified in
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the Code) and its net tax-exempt income for the taxable year is distributed, but
will be subject to tax at regular corporate rates on any taxable income or gains
that it does not distribute. No more than 10% of each Fund's gross income may
be from nonqualifying sources, including income from investments in physical
commodities and related options in the case of the Aggressive Equity and Global
Independence Funds. A Fund may therefore need to limit the extent to which it
makes such investments in order to qualify as a regulated investment company.
Furthermore, each Fund will be subject to a U.S. corporate income tax with
respect to such distributed amounts in any year that it fails to qualify as a
regulated investment company or fails to meet this distribution requirement.
The Code imposes a 4% nondeductible excise tax on each Fund to the
extent a Fund does not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this purpose, however, any income
or gain retained by a Fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution, as
the case may be, from the previous year. Each Fund anticipates that it will pay
such dividends and will make such distributions as are necessary in order to
avoid the application of this tax.
With regard to a Fund's investments in foreign securities, exchange
control regulations may restrict repatriations of investment income and capital
or the proceeds of securities sales by foreign investors such as a Fund and may
limit a Fund's ability to pay sufficient dividends and to make sufficient
distributions to satisfy the 90% and excise tax distribution requirements.
If, in any taxable year, a Fund fails to qualify as a regulated
investment company under the Code, it would be taxed in the same manner as an
ordinary corporation and distributions to its shareholders would not be
deductible by a Fund in computing its taxable income. In addition, in the event
of a failure to qualify, a Fund's distributions, to the extent derived from a
Fund's current or accumulated earnings and profits, would constitute dividends
(eligible for the corporate dividends-received deduction) which are taxable to
shareholders as ordinary income, even though those distributions might otherwise
(at least in part) have been treated in the shareholders' hands as long-term
capital gains. If a Fund fails to qualify as a regulated investment company in
any year, it must pay out its earnings and profits accumulated in that year in
order to qualify again as a regulated investment company. In addition, if a
Fund failed to qualify as a regulated investment company for a period greater
than one taxable year, a Fund may be required to recognize any net built-in
gains (the excess of the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had been liquidated) in
order to qualify as a regulated investment company in a subsequent year.
Each Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among
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other things, may affect the character of gains and losses realized by a Fund
(I.E., may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to a Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require a Fund to mark-to-market
certain types of the positions in its portfolio (I.E., treat them as if they
were closed out) and (b) may cause a Fund to recognize income without receiving
cash with which to pay dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding income and excise taxes.
Each Fund will monitor its transactions, will make the appropriate tax elections
and will make the appropriate entries in its books and records when it engages
in a short sale against the box or acquires any foreign currency, forward
contract, option, futures contract or hedged investment in order to mitigate the
effect of these rules and prevent disqualification of a Fund as a regulated
investment company.
Each Fund's investments in zero coupon securities, if any, may create
special tax consequences. Zero coupon securities do not make interest payments,
although a portion of the difference between a zero coupon security's face value
and its purchase price is imputed as income to a Fund each year even though a
Fund receives no cash distribution until maturity. Under the U.S. federal tax
laws, a Fund will not be subject to tax on this income if it pays dividends to
its shareholders substantially equal to all the income received from, or imputed
with respect to, its investments during the year, including its zero coupon
securities. These dividends ordinarily will constitute taxable income to the
shareholders of each Fund.
PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to U.S. federal income tax on a portion
of any "excess distribution" or gain from the disposition of such shares even if
such income is distributed as a taxable dividend by a Fund to its shareholders.
Additional charges in the nature of interest may be imposed on a Fund in respect
of deferred taxes arising from such distributions or gains. If a Fund were to
invest in a PFIC and elected to treat the PFIC as a "qualified electing fund"
under the Code, in lieu of the foregoing requirements, a Fund might be required
to include in income each year a portion of the ordinary earnings and net
capital gains of the qualified electing fund, even if not distributed to a Fund,
and such amounts would be subject to the 90% and excise tax distribution
requirements described above. In order to make this election, a Fund would be
required to obtain certain annual information from the passive foreign
investment companies in which it invests, which may be difficult or not possible
to obtain.
Recently, legislation was enacted that provides a mark-to-market
election for regulated investment companies effective for taxable years
beginning after December 31, 1997. This election would result in a Fund being
treated as if it had sold and repurchased all of the PFIC stock at the end of
each year. In this case, a Fund would report gains as ordinary income and would
deduct losses as ordinary losses to the extent of previously recognized gains.
The election, once made, would be effective for all subsequent taxable years of
a Fund, unless revoked with the consent of the Internal Revenue Service (the
"IRS"). By making the election, a Fund could potentially ameliorate the adverse
tax consequences with respect to its ownership of shares in a PFIC, but in any
particular year may be required to recognize income
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in excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC company stock. A Fund may have to distribute this
"phantom" income and gain to satisfy its distribution requirement and to avoid
imposition of the 4% excise tax. Each Fund will make the appropriate tax
elections, if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.
TAXATION OF UNITED STATES SHAREHOLDERS
DIVIDENDS AND DISTRIBUTIONS. Each Fund intends to distribute annually to
its shareholders substantially all of its investment company taxable income, and
any net realized long-term capital gains in excess of net realized short-term
capital losses (including any capital loss carryovers). Each Fund currently
expects to distribute any excess annually to its shareholders. However, if a
Fund retains for investment an amount equal to all or a portion of its net
long-term capital gains in excess of its net short-term capital losses and
capital loss carryovers, it will be subject to a corporate tax (currently at a
rate of 35%) on the amount retained. In that event, a Fund intends to designate
such retained amounts as undistributed capital gains in a notice to its
shareholders who (a) will be required to include in income for United States
federal income tax purposes, as long-term capital gains, their proportionate
shares of the undistributed amount, (b) will be entitled to credit their
proportionate shares of the 35% tax paid by the Fund on the undistributed amount
against their United States federal income tax liabilities, if any, and to claim
refunds to the extent their credits exceed their liabilities, if any, and (c)
will be entitled to increase their tax basis, for United States federal income
tax purposes, in their shares by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's income. Organizations
or persons not subject to federal income tax on such capital gains will be
entitled to a refund of their pro rata share of such taxes paid by a Fund upon
filing appropriate returns or claims for refund with the IRS. Any dividend
declared by a Fund in October, November or December of any calendar year and
payable to shareholders of record on a specified date in such a month shall be
deemed to have been received by each shareholder on December 31 of such calendar
year and to have been paid by a Fund not later than such December 31, provided
that such dividend is actually paid by a Fund during January of the following
calendar year.
Dividends of net investment income and distributions of net realized
short-term capital gains are taxable to a U.S. shareholder as ordinary income,
whether paid in cash or in shares. Distributions of net-long-term capital
gains, if any, that a Fund designates as capital gains dividends are taxable as
long-term capital gains, whether paid in cash or in shares and regardless of how
long a shareholder has held shares of a Fund. Dividends and distributions paid
by a Fund (except for the portion thereof, if any, attributable to dividends on
stock of U.S. corporations received by a Fund) will not qualify for the
deduction for dividends received by corporations. Distributions in excess of a
Fund's current and accumulated earnings and profits will, as to each
shareholder, be treated as a tax-free return of capital, to the extent of a
shareholder's basis in his shares of a Fund, and as a capital gain thereafter
(if the shareholder holds his shares of a Fund as capital assets).
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Shareholders receiving dividends or distributions in the form of
additional shares should be treated for U.S. federal income tax purposes as
receiving a distribution in the amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
just purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to them.
If a Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included in
a Fund's gross income not as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to such dividends (I.E., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date a Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, a Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
SALES OF SHARES. Upon the sale or exchange of his shares, a
shareholder will realize a taxable gain or loss equal to the difference between
the amount realized and his basis in his shares. Such gain or loss will be
treated as capital gain or loss, if the shares are capital assets in the
shareholder's hands, and will be long-term capital gain or loss if the shares
are held for more than one year and short-term capital gain or loss if the
shares are held for one year or less. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains distributions
in a Fund, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of the shares. In such a case, the basis of the shares
acquired will be increased to reflect the disallowed loss. Any loss realized by
a shareholder on the sale of a Fund share held by the shareholder for six months
or less will be treated for U.S. federal income tax purposes as a long-term
capital loss to the extent of any distributions or deemed distributions of
long-term capital gains received by the shareholder with respect to such share.
BACKUP WITHHOLDING. Each Fund may be required to withhold, for U.S.
federal income tax purposes, 31% of the dividends, distributions and
redemption proceeds payable to shareholders who fail to provide a Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the IRS that they are subject to backup
withholding. Certain shareholders are exempt from backup withholding. Backup
withholding is not an additional tax and any amount withheld may be credited
against a shareholder's U.S. federal income tax liabilities.
NOTICES. Shareholders will be notified annually by each Fund as to
the U.S. federal income tax status of the dividends, distributions and deemed
distributions attributable
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to undistributed capital gains (discussed above in "The Funds and Their
Investments") made by a Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of a
Fund's taxable year regarding the U.S. federal income tax status of certain
dividends, distributions and deemed distributions that were paid (or that are
treated as having been paid) by a Fund to its shareholders during the preceding
taxable year.
OTHER TAXATION
Distributions also may be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
THE FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE FUNDS.
DETERMINATION OF PERFORMANCE
From time to time, a Fund may quote the total return of its Investor
shares and/or Institutional shares in advertisements or in reports and other
communications to shareholders. These total return figures show the average
percentage change in value of an investment in the Investor and/or Institutional
shares from the beginning of the measuring period to the end of the measuring
period. The figures reflect changes in the price of the Investor and/or
Institutional shares assuming that any income dividends and/or capital gain
distributions made by a Fund during the period were reinvested in Investor
and/or Institutional shares of a Fund. Total return will be shown for recent
one-, five- and ten-year periods, and may be shown for other periods as well
(such as from commencement of a Fund's operations or on a year-by-year,
quarterly or current year-to-date basis). These figures are calculated by
finding the average annual compounded rates of return for the one-, five- and
ten- (or such shorter period as the relevant class of shares has been offered)
year periods that would equate the initial amount invested to the ending
redeemable value according to the following formula: P (1 + T) to the power
of n = ERV. For purposes of this formula, "P" is a hypothetical investment of
$1,000; "T" is average annual total return; "n" is number of years; and "ERV"
is the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five- or ten-year periods (or fractional portion
thereof). Total return or "T" is computed by finding the average annual change
in the value of an initial $1,000 investment over the period and assumes that
all dividends and distributions are reinvested during the period.
When considering average total return figures for periods longer than
one year, it is important to note that the annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one
year, investors should bear in mind that each Fund seeks long-term appreciation
and that such return may not be representative of any Fund's return over a
longer market cycle. Each Fund may also advertise aggregate total return
figures of its Investor and/or Institutional shares for various periods,
representing the cumulative change in value of an investment in the Investor
and/or Institutional shares for the specific period (again reflecting changes in
share prices and assuming reinvestment of dividends and distributions).
Aggregate
52
<PAGE>
and average total returns may be shown by means of schedules, charts or graphs
and may indicate various components of total return (I.E., change in value of
initial investment, income dividends and capital gain distributions). Investors
should note that total return figures are based on historical earnings and are
not intended to indicate future performance.
Each Fund may advertise, from time to time, comparisons of the
performance and the expense ratio of its Investor shares and/or Institutional
shares with that of one or more other mutual funds with similar investment
objectives. Each Fund may advertise average annual calendar year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph, except that the relevant measuring period
would be the number of months that have elapsed in the current calendar year or
most recent three months, as the case may be. Investors should note that this
performance may not be representative of a Fund's total return in longer market
cycles.
The performance of a class of Fund shares will vary from time to time
depending upon market conditions, the composition of a Fund's portfolio and
operating expenses allocable to it. As described above, total return is based
on historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, a Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by institutions or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in a Fund's total return, and such fees, if charged,
will reduce the actual return received by customers on their investments.
In its reports, investor communications or advertisements, each Fund
may include: (i) its total return performance; (ii) its performance compared
with various indexes or other mutual funds; (iii) published evaluations by
nationally recognized ranking services and financial publications; (iv) updates
concerning its strategies and portfolio investments; (v) its goals, risk factors
and expenses compared with other mutual funds; (vi) analysis of its investments
by industry, country, credit quality and other characteristics; (vii) a
discussion of the risk/return continuum relating to different investments;
(viii) the potential impact of adding foreign stocks to a domestic portfolio;
(ix) the general biography or work experience of the portfolio managers of the
Funds; (x) portfolio manager commentary or market updates; (xi) discussion of
macroeconomic factors affecting the Fund and its investments; and (xii) other
information of interest to investors.
INDEPENDENT AUDITORS AND COUNSEL
Deloitte & Touche LLP, with principal offices at Two World Financial
Center, New York, New York 10281-1414, serves as the independent auditors for
the Trust. The statements of assets and liabilities of each Fund, as of [
], 1999, that appear in this Statement of Additional Information have been
audited by Deloitte & Touche LLP, whose report thereon appears elsewhere herein
and has been included herein in reliance upon the
53
<PAGE>
report of such firm of independent auditors given upon their authority as
experts in accounting and auditing.
Willkie Farr & Gallagher serves as counsel for the Trust, as well as
counsel to CDC Investments.
FINANCIAL STATEMENTS
Each Fund's financial statement follows the Independent Auditors'
Report.
54
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by Standard and Poor's Ratings Services
("S&P") indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
CORPORATE BOND RATINGS
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Although it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in higher
rated categories.
BB, B and CCC - Debt rated BB and B are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality
<PAGE>
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.
To provide more detailed indications of credit quality, the ratings
may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The following summarizes the ratings used by Moody's for corporate
bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest
A-2
<PAGE>
payments are protected by a large or exceptionally stable margin and principal
is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B." The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
Caa - Bonds that are rated Caa are of poor standing. These issues may
be in default or present elements of danger may exist with respect to principal
or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C comprise the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-3
<PAGE>
PART C
OTHER INFORMATION
Item 23. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- -------------- ---------------------------
<S> <C>
(a)(1) Certificate of Trust. *
(2) Trust Instrument.*
(b) By-Laws. *
(c) Form of Share Certificates.
(d) Form of Investment Advisory Agreement with CDC Investment
Management Corporation.
(e) Form of Distribution Agreement with Funds Distributor, Inc.
(f) Not applicable.
(g) Form of Custodian Agreement with State Street Bank and Trust
Company.
(h)(1) Form of Transfer Agency and Service Agreement with State
Street Bank and Trust Company.
(2) Form of Administration Agreement with State Street Bank and
Trust Company.
(i)(1) Opinion and Consent of Willkie Farr & Gallagher, counsel to
Registrant. **
(2) Opinion and Consent of Richards, Layton & Finger, Delaware
counsel to Registrant. **
(j) Consent of Deloitte & Touche LLP, Independent Auditors. **
(k) Not applicable.
(l) Purchase Agreement. **
(m)(1) Shareholder Servicing and Distribution Plan.
(2) Shareholder Servicing and Distribution Agreement.
(n) Not applicable.
(o) 18f-3 Plan.
</TABLE>
* Incorporation by reference to Registrant's Registration Statement on Form
N-1A filed on October 28, 1998 (Securities Act File No. 333-66279).
** To be filed by amendment.
C-1
<PAGE>
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT
All of the outstanding shares of common stock of Registrant on the
date Registrant's Registration Statement becomes effective will be owned by CDC
Investment Management Corporation, which will have contributed Registrant's
initial seed capital.
It is anticipated that shortly after the Trust's Registration
Statement becomes effective, CIMCO Holdings LLC, ("CIMCO"), a Delaware limited
liability company, will invest approximately $25 million in each of the U.S.
Core Equity Fund, the Aggressive Equity Fund and the Global Independence Fund
(each a "Fund" and collectively the "Funds"). Master Holdings, a Cayman Islands
corporation, is the majority shareholder of CIMCO and CDC Investments is a
minority shareholder of CIMCO. CDC Group, Paris is the majority shareholder of
Master Holdings. CDC Investments is a wholly-owned subsidiary of CDC Group,
Paris.
Item 25. INDEMNIFICATION
Under Article X of the Trust Instrument (the "Instrument"), the
Trustees and officers of Registrant shall not have any liability to Registrant
or its stockholders for money damages, to the fullest extent permitted by
Delaware law. This limitation on liability applies to events occurring at the
time a person serves as a Trustee or officer of Registrant whether or not such
person is a Trustee or officer at the time of any proceeding in which liability
is asserted. No provision of Article X shall protect or purport to protect any
Trustee or officer of Registrant against any liability to Registrant or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Registrant shall indemnify and advance
expenses to its currently acting and its former Trustee to the fullest extent
that indemnification of Trustees and advancement of expenses to Directors is
permitted by Delaware law.
Registrant shall indemnify and advance expenses to its officers to the
same extent as its Trustees and to such further extent as is consistent with
such law.
Article X of the Instrument and Article VIII of the Bylaws authorize
Registrant to obtain insurance on behalf of its Trustees, officers and
employees, including any such person who was serving at the request of the
Registrant as a Trustee, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
and claimed by such person in such capacity, whether or not Registrant would
have the power to indemnify such person against such liability. Registrant may
not, however, obtain insurance
C-2
<PAGE>
that protects or purports to protect any Trustee, officer or employee against
any liability to Registrant or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Additionally, with respect to indemnification against liability
incurred by Registrant's distributor, reference is made to the form of
Distribution Agreement filed herewith. With respect to indemnification against
liability incurred by Registrant's investment manager, reference is made to the
form of Investment Advisory Agreement filed herewith.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Registrant is managed by CDC Investment Management Corporation ("CDC
Investments"). CDC Investments is an established leader in providing
alternative investment strategies for institutional clients. CDC Investments
currently has approximately $3 billion in assets under management and provides
asset management services to large European, Asian and North American financial
institutions, family offices, fund of funds, pension funds and other investors.
The list required by this Item 26 of officers and directors of CDC Investments
together with information as to their other businesses, professions, vocations
or employment of a substantial nature during the past two years is incorporated
by reference to Schedules A and D of Form ADV filed by CDC Investments (SEC File
No. 801-42137) pursuant to the Advisers Act.
Item 27. PRINCIPAL UNDERWRITER
(a) Funds Distributor, Inc. serves as distributor for Registrant, as
well as for: American Century California Tax-Free and Municipal Funds, American
Century Capital Portfolios, Inc., American Century Government Income Trust,
American Century International Bond Funds, American Century Investment Trust,
American Century Municipal Trust, American Century Mutual Funds, Inc., American
Century Premium Reserves, Inc., American Century Quantitative Equity Funds,
American Century Strategic Asset Allocations, Inc., American Century Target
Maturities Trust, American Century Variable Portfolios, Inc., American Century
World Mutual Funds, Inc., The Brinson Funds, Dresdner RCM Capital Funds, Inc.,
Dresdner RCM Equity Funds, Inc., Harris Insight Funds Trust, HT Insight Funds,
Inc. d/b/a Harris Insight Funds,J.P. Morgan Institutional Funds, J.P. Morgan
Funds, JPM Series Trust, JPM Series Trust II, LaSalle Partners Funds, Inc.,
Kobrick Investment Trust, Merrimac Series, Monetta Fund, Inc., Monetta Trust,
The Montgomery Funds I, The Montgomery Funds II, The Munder Framlington Funds
Trust, The Munder Funds Trust, The Munder Funds, Inc., National Investors Cash
Management Fund, Inc., Orbitex Group of Funds, SG Cowen Funds, Inc., SG Cowen
Income + Growth Fund, Inc., SG Cowen Standby Reserve Fund, Inc., SG Cowen
Standby Tax-Exempt Reserve Fund, Inc., SG Cowen Series
C-3
<PAGE>
Funds, Inc., St. Clair Funds, Inc., The Skyline Funds, Waterhouse Investors
Family of Funds, Inc. and WEBS Index Fund, Inc.
(b) The information required by this Item 27 relating to each
director, officer or partner of Funds Distributor, Inc. is incorporated by
reference to Schedule A of Form BD filed by Funds Distributor, Inc. (SEC File
No. 8-20518) pursuant to the Securities Exchange Act of 1934.
(c) None.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
(1) CDC Investment Management Corporation
9 West 57th Street, 35th Floor
New York, New York 10019
(records relating to its functions as investment adviser;
Registrant's Certificate of Trust, Trust Instrument, By-laws and
minute books)
(2) State Street Bank and Trust Company
222 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as
administrator and fund accounting agent)
(3) Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
(records relating to its functions as distributor)
(4) State Street Bank and Trust Company
222 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian)
(5) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as transfer agent)
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State of
New York, on this 22nd day of March, 1999.
CDC MPT+ FUNDS
By: /s/ Bluford H. Putnam
------------------------------------------
Bluford H. Putnam
President and Chief Investment Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Trustees of CDC
MPT+ Funds, a Delaware business trust, hereby make, constitute and appoint each
of Bluford H. Putnam, Rachel D. Manney and C. Peter Paterno, as his agent and
attorney-in-fact for the purpose of executing in his name, (a) in his personal
capacity or (b) in his capacity as a Trustee of CDC MPT+ Funds, all documents,
certificates, instruments, statements, filings and agreements ("documents") to
be filed with or delivered to any foreign or domestic governmental or regulatory
body or required or requested by any other person or entity pursuant to any
legal or regulatory requirement, and any other documents relating or ancillary
thereto, including but not limited to, all documents relating to filings with
the United States Securities and Exchange Commission (the "SEC") pursuant to the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, and the
Investment Company Act of 1940, as amended (collectively, the "Acts"), and the
rules and regulations promulgated thereunder, including any registration
statements (including amendments thereto) on Form N-1A required to be filed with
the SEC pursuant to the Acts. All past acts of attorney-in-fact in furtherance
of the foregoing are hereby ratified and confirmed.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment has been signed below by the following persons in the capacities and
on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Bluford H. Putnam Trustee, President and March 22, 1999
- ----------------------- Chief Investment Officer
Bluford H. Putnam
/s/ Mike West Trustee March 22, 1999
- -----------------------
Mike West
/s/ Arnold Zellner Trustee March 22, 1999
- -----------------------
Arnold Zellner
/s/ C. Peter Paterno Treasurer March 22, 1999
- -----------------------
C. Peter Paterno
/s/ Rachel D. Manney Secretary March 22, 1999
- -----------------------
Rachel D. Manney
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- --------------------
<S> <C>
(c) Form of Share Certificates.
(d) Form of Investment Advisory Agreement with CDC Investment
Management Corporation.
(e) Form of Distribution Agreement with Funds Distributor, Inc.
(g) Form of Custodian Agreement with State Street Bank and Trust
Company.
(h)(1) Form of Transfer Agency and Service Agreement with State Street
Bank and Trust Company.
(2) Form of Administration Agreement with State Street Bank and Trust
Company.
(m)(1) Shareholder Servicing and Distribution Plan.
(2) Shareholder Servicing and Distribution Agreement.
(n) Not applicable.
(o) 18f-3 Plan.
</TABLE>
<PAGE>
FORM OF SHARE CERTIFICATE
NUMBER UNITS
- ------- ------
CDC MPT+ FUNDS
A DELAWARE BUSINESS TRUST
This Certifies that ______________________________________________ is the owner
of ___________________________________________________________________ Units of
CDC MPT+ FUNDS
fully paid and non-assessable, transferable only on the books of the Business
Trust in person or by Attorney, upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Business Trust has caused this Certificate to be
signed by its duly authorized officers, and its Seal to be hereunto affixed this
_________________ day of __________________________ A.D. 19 ____.
- ------------------------------- ---------------------------------
SECRETARY PRESIDENT
<PAGE>
FORM OF
INVESTMENT ADVISORY AGREEMENT
______________ ___, 1999
CDC Investment Management Corporation
9 West 57th Street, 35th Floor
New York, New York 10019
Dear Sirs:
CDC MPT+ Funds (the "Trust"), a business trust organized and existing
under the laws of the State of Delaware, is an open-end, management investment
company that currently offers three portfolios, one of which is the
_________________ Fund (the "Fund"). The Trust on behalf of the Fund herewith
confirms its agreement with CDC Investment Management Corporation (the
"Adviser") as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ the capital of the Fund by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Trust Instrument, as may be amended from time to time, and in
its Prospectus and Statement of Additional Information relating to the Fund as
from time to time in effect (the "Prospectus" and "SAI," respectively), and in
such manner and to such extent as may from time to time be approved by the Board
of Trustees of the Trust. Copies of the Trust's Prospectus and SAI have been or
will be submitted to the Adviser. The Trust desires to employ and hereby
appoints the Adviser to act as investment adviser to the Fund. The Adviser
accepts the appointment and agrees to furnish the services for the compensation
set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision and direction of the Board of Trustees of
the Trust, the Adviser will (a) act in strict conformity with the Trust
Instrument, the Investment Company Act of 1940 (the "1940 Act") and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Fund in accordance with the Fund's investment objective and
policies as stated in the Trust's Prospectus and SAI relating to the Fund, (c)
make investment decisions for the Fund, (d) place purchase and sale orders for
securities on behalf of the Fund, (e) exercise voting rights in respect of Fund
securities and other investments for the Fund, (f) pledge or assign assets of
the Fund and aggregate orders on behalf of the Fund with orders entered by the
Adviser on behalf of other clients of the Adviser to the extent consistent with
applicable law and (g) monitor and evaluate the services provided by the Fund's
investment sub-adviser(s), if any, under the terms of the applicable investment
<PAGE>
sub-advisory agreement(s). In providing those services, the Adviser will
provide investment research and supervision of the Fund's investments and
conduct a continual program of investment, evaluation and, if appropriate, sale
and reinvestment of the Fund's assets. In addition, the Adviser will furnish
the Trust with whatever statistical information the Trust may reasonably request
with respect to the securities that the Fund may hold or contemplate purchasing.
Subject to the approval of the Board of Trustees of the Trust and
where required, the Trust's shareholders, the Adviser may engage an investment
sub-adviser or sub-advisers to provide advisory services in respect of the Fund
and may delegate to such investment sub-adviser(s) the responsibilities
described in subparagraphs (b) through (f) above. In the event that an
investment sub-adviser's engagement has been terminated, the Adviser shall be
responsible for furnishing the Fund with the services required to be performed
by such investment sub-adviser(s) under the applicable investment sub-advisory
agreements or arranging for a successor investment sub-adviser(s) to provide
such services on terms and conditions acceptable to the Trust and the Trust's
Board of Trustees and subject to the requirements of the 1940 Act.
3. BROKERAGE
In executing transactions for the Fund, selecting brokers or dealers
and negotiating any brokerage commission rates, the Adviser will use its best
efforts to seek the best overall terms available. In assessing the best overall
terms available for any portfolio transaction, the Adviser will consider all
factors it deems relevant including, but not limited to, breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and for transactions executed through
the broker or dealer in the aggregate. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, the Adviser may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as the same may from time to time be amended) provided to the Fund and/or other
accounts over which the Adviser or an affiliate exercises investment discretion.
4. INFORMATION PROVIDED TO THE TRUST
The Adviser will keep the Trust informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Trust from time
to time with whatever information the Adviser believes is appropriate for this
purpose.
5. STANDARD OF CARE; INDEMNIFICATION
<PAGE>
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2, 3 and 4 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Trust or the Fund or to shareholders of the Trust
or the Fund to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Adviser's reckless disregard of its obligations and
duties under this Agreement ("disabling conduct"). The Fund will indemnify the
Adviser against, and hold it harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) not
resulting from disabling conduct by the Adviser. Indemnification shall be made
only following: (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the Adviser was not liable by reason
of disabling conduct or (ii) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Adviser was not liable
by reason of disabling conduct by (a) the vote of a majority of a quorum of
Trustees of the Fund who are neither "interested persons" of the Fund nor
parties to the proceeding ("disinterested non-party Trustees") or (b) an
independent legal counsel in a written opinion. The Adviser shall be entitled
to advances from the Fund for payment of the reasonable expenses incurred by it
in connection with the matter as to which it is seeking indemnification in the
manner and to the fullest extent permissible under Delaware Law. The Adviser
shall provide to the Fund a written affirmation of its good faith belief that
the standard of conduct necessary for indemnification by the Fund has been met
and a written undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In addition, at least
one of the following additional conditions shall be met: (a) the Adviser shall
provide security in form and amount acceptable to the Fund for its undertaking;
(b) the Fund is insured against losses arising by reason of the advance; or (c)
a majority of a quorum of disinterested non-party Trustees, or independent legal
counsel, in a written opinion, shall have determined, based on a review of facts
readily available to the Fund at the time the advance is proposed to be made,
that there is reason to believe that the Adviser will ultimately be found to be
entitled to indemnification.
6. LIMITATION OF LIABILITY
The Trust and the Adviser agree that the obligations of the Trust
under this Agreement will not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future, of the
Trust, individually, but are binding only upon the assets and property of the
Fund, as provided in the Trust Instrument. The execution
<PAGE>
and delivery of this Agreement have been authorized by the Trustees of the
Trust, and signed by an authorized officer of the Trust, acting as such, and
neither the authorization by the Trustees nor the execution and delivery by the
officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the trust
property of the Trust as provided in the Trust Instrument. No series of the
Trust, including the Fund, will be liable for any claims against any other
series.
7. COMPENSATION
(a) The Fund shall pay to the Adviser and the Adviser agrees to
accept, as full compensation for all investment advisory services furnished or
provided to the Fund pursuant to this Agreement, an investment advisory fee at
the annual rate set forth in the Description of Fees attached hereto as APPENDIX
A.
(b) The investment advisory fee shall be accrued daily by the Fund
and paid to the Adviser on the fifth business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the
fifth business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated before the end of any month, the fee to the Adviser shall be prorated
for the portion of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
8. EXPENSES
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement, including the fees payable to any
investment sub-adviser engaged pursuant to paragraph 2 of this Agreement. The
Fund will bear its proportionate share of certain other expenses to be incurred
in its operation, including: investment advisory and administration fees;
taxes, interest, brokerage fees and commissions, if any; fees of Trustees of the
Trust who are not officers, trustees, or employees of the Adviser or any of its
affiliates; fees of any pricing service employed to value shares of the Fund;
Securities and Exchange Commission fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the Fund's
proportionate share of insurance premiums; outside auditing and legal expenses;
costs of maintenance of the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses; costs
of preparing and printing prospectuses and statements of additional information
for regulatory purposes and for
<PAGE>
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Trust; and any extraordinary expenses.
The Fund will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Fund is a party and of
indemnifying officers and Trustees of the Trust with respect to such litigation
and other expenses as determined by the Trustees.
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Trust has no objection to the Adviser so acting, provided
that whenever the Fund and one or more other accounts or investment companies or
portfolios advised by the Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each entity. The Trust recognizes
that in some cases this procedure may adversely affect the size of the position
obtainable for the Fund. In addition, the Trust understands that the persons
employed by the Adviser to assist in the performance of the Adviser's duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature, provided that doing
so does not adversely affect the ability of the adviser to perform its services
under this Agreement.
10. TERM OF AGREEMENT
This Agreement shall continue until December 31, 2000 and thereafter
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (a) the Board of
Trustees of the Trust or (b) a vote of a "majority" (as defined in the 1940 Act)
of the Trust's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Trust or by vote of holders of a
majority of the Fund's outstanding voting securities, or upon 90 days' written
notice, by the Adviser. This Agreement will also terminate automatically in the
event of its assignment (as defined in said Act).
<PAGE>
11. REPRESENTATION BY THE TRUST
The Trust represents that a copy of its Certificate of Trust and Trust
Instrument, each dated October 8, 1998, together with all amendments thereto,
are on file in the State of Delaware.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
12. POWER OF ATTORNEY
The Trust hereby grants to the Adviser or any authorized person of the
Adviser (an "Authorized Person") the authority to act as its attorney-in-fact
under power of attorney for purposes of accomplishing on its behalf and on
behalf of the Fund any matters which are properly the subject of this Agreement,
including (i) to negotiate, execute, enter into and deliver, on behalf of the
Fund any and all agreements, consents, authorizations, assignments, revocations,
instructions or other instruments which such Authorized Person may think useful
for the sale, transfer, withdrawal or pledge of securities, the making of any
loans or borrowings of securities, the management of the Fund's assets or
generally the accomplishment of any of the purposes enumerated herein or in the
Trust's Prospectus and Statement of Additional Information relating to the Fund;
(ii) to sign or give any order or directions in writing to the Fund's
Administrator or any other service provider at any time for the purchase,
whether from or through the Fund's custodian or otherwise, of any securities or
other assets which may be held by the custodian at any time for or on behalf of
the Fund, whether in safekeeping, as security or otherwise, and for the
collection, deposit, withdrawal, investment or other disposition of all or any
of the proceeds thereof and/or of any dividends, interest or other amounts which
may be declared and/or paid relative thereto; and (iii) in general, to sign any
agreements, make any representations, give any directions or perform any other
acts (which the Fund may do through an attorney-in-fact), incidental to or
deemed by the Adviser to be necessary or proper in exercising any powers hereby
conferred. The Trust intends for this general power of attorney to be construed
in the broadest possible manner and for third parties to accept and rely upon
this power of attorney granted to the Adviser duly without further written
assurances from the Trust.
13. MISCELLANEOUS
The Trust recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"CDC" as
<PAGE>
part of their names, and that the Adviser or its affiliates may enter into
advisory or other agreements with such other corporations and trusts. If the
Adviser ceases to act as the investment adviser of the Fund's shares, the Trust
agrees that, at the Adviser's request, the Trust's license to use the words
"CDC" will terminate and that the Trust will take all necessary action to change
the name of the Trust and the Fund to names not including the words "CDC."
Very truly yours,
CDC MPT+ FUNDS
By:
-----------------------
Name:
----------------
Title:
---------------
Accepted:
CDC INVESTMENT MANAGEMENT CORPORATION
By:
-----------------------
Name:
----------------
Title:
---------------
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of the ______ day of ________, 1999 by and
between each of the open-end investment management companies listed on Schedule
A, attached hereto, together with all other open-end management investment
companies subsequently established and made subject to this Agreement in
accordance with Section 4.3 below (each a "Fund", collectively the "Funds") and
Funds Distributor, Inc., a Massachusetts corporation ("FDI").
WHEREAS, the shares of beneficial shares of each of the Funds is currently
divided into a number of separate series of shares, or funds, each corresponding
to a distinct portfolio of securities (each a "Series"), and many of which are
also divided into multiple classes of shares. For purposes of this Agreement
the term "Shares" shall mean the authorized shares of the relevant Series, if
any, and otherwise shall mean the Fund's authorized shares;
WHEREAS, FDI is registered as a broker-dealer with the Securities and
Exchange Commission ("SEC") under the Securities and Exchange Act of 1934 (the
"1934 Act") and is a member of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, CDC Investment Management Corporation ("Adviser") is the
registered investment adviser to the Funds pursuant to the investment advisory
agreements between Adviser and the Funds;
WHEREAS, the Board of Trustees of the Funds wishes to engage FDI to act as
the distributor for the Funds and FDI is willing to render such services;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR
1.1 FDI will act as agent for the distribution of Shares covered by, and
in accordance with, the registration statement then in effect under the
Securities Act of 1933, as amended (the "1933 Act"), and will transmit promptly
any orders received by FDI for purchase or redemption of Shares to the Transfer
and Dividend Disbursing Agent for the Fund of which the Fund has notified FDI in
writing.
1.2 FDI agrees to use its best efforts to solicit orders for the sale of
Shares in accordance with the terms and conditions of the registration
statement. It is contemplated that FDI may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing FDI will act only on its own behalf as principal.
1.3 FDI shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, the
Investment Company Act of 1940, as amended (the "1940 Act"), the 1933 Act, 1934
Act and the Rules of the NASD, and the Funds'
1
<PAGE>
Declaration of Trust and By-Laws. FDI represents and warrants that it is and
shall continue to be during the term of this Agreement, a broker-dealer
registered with the SEC and that it is registered with the relevant securities
regulatory agencies in all fifty states, the District of Columbia and Puerto
Rico. FDI also represents and warrants that it is a member of the NASD.
1.4 FDI shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
to the extent such materials are submitted to FDI for such filing and shall
obtain such approvals for their use as may be required by the SEC, the NASD
and/or state securities administrators.
1.5 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind deemed by the parties hereto to render sales of a Fund's Shares not in the
best interest of the Fund, the parties hereto may decline to accept any orders
for, or make any sales of, any Shares until such time as those parties deem it
advisable to accept such orders and to make such sales and each party shall
advise promptly the other party of any such determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the 1933 Act and all expenses in connection with
maintaining facilities for the issue and transfer of Shares and for supplying
information, prices and other data to be furnished by the Fund hereunder, and
all expenses in connection with the preparation and printing of the Fund's
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders; provided, however, that the Fund shall not
pay any of the costs of advertising or promotion for the sale of Shares, except
as authorized by a plan adopted pursuant to Rule 12b-1 under the 1940 Act. FDI
shall also be entitled to compensation for FDI's services as provided in any
Distribution Plan adopted as to any Series and class of the Fund's Shares
pursuant to Rule 12b-1.
1.7 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as FDI may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification provided however that the Fund
will not be required to qualify to do business as a foreign corporation in any
jurisdiction. FDI shall pay all expenses connected with its own qualification
as a dealer under state or Federal laws and, except as otherwise specifically
provided in this Agreement, all other expenses incurred by FDI in connection
with the sale of Shares as contemplated in this Agreement.
1.8 The Fund shall furnish FDI from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as FDI may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct in all material respects. The
Fund also shall furnish FDI upon request with: (a) semi-annual reports and
annual audited reports of the Fund's books and accounts made by independent
public accountants regularly retained by the Fund, (b) quarterly earnings
statements prepared by the Fund, (c) a monthly
2
<PAGE>
itemized list of the securities in the Fund's or, if applicable, each Series'
portfolio, (d) monthly balance sheets as soon as practicable after the end of
each month, and (e) from time to time such additional information regarding the
Fund's financial condition as FDI may reasonably request.
1.9 The Fund represents to FDI that all registration statements and
prospectuses filed by the Fund with the SEC under the 1933 Act and under the
1940 Act with respect to the Shares have been prepared in conformity with the
requirements of said Acts and rules and regulations of the SEC thereunder. As
used in this Agreement the terms "registration statement" and "prospectus" shall
mean any registration statement and prospectus, including the statement of
additional information incorporated by reference therein, filed with the SEC and
any amendments and supplements thereto which at any time shall have been filed
with the SEC. The Fund represents and warrants to FDI that any registration
statement and prospectus, when such registration statement becomes effective,
will contain all statements required to be stated therein in conformity with
said Acts and the SEC's rules and regulations; that all statements of fact
contained in any such registration statement and prospectus will be true and
correct in all material respects when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading. The Fund may, but
shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from FDI to do so and such
request relates to language regarding the distribution of Fund Shares or
information pertaining to FDI, FDI may, at its option, terminate this Agreement
in accordance with Section 3 of this Agreement or decline to make offers of the
Fund's securities until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus without
giving FDI reasonable notice thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the Fund's right to file at
any time such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Fund may deem advisable, such right
being in all respects absolute and unconditional.
1.10 The Fund authorizes FDI and any dealers with whom FDI has entered
into dealer agreements to use any prospectus in the form furnished by the Fund
in connection with the sale of Shares. The Fund agrees to indemnify, defend and
hold FDI, its several officers and directors, and any person who controls FDI
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
reasonable cost of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in connection therewith)
which FDI, its officers and directors, or any such controlling persons, may
incur under the 1933 Act, the 1940 Act, or common law or otherwise, arising out
of or on the basis of any untrue statement, or alleged untrue statement, of a
material fact required to be stated in either any registration statement or any
prospectus or any statement of additional information, or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in any registration statement, any prospectus or any statement of
additional information or necessary to make the statements in any
3
<PAGE>
of them in light of the circumstances under which they were made not misleading,
except that the Fund's agreement to indemnify FDI, its officers or directors,
and any such controlling person will not be deemed to cover any such claim,
demand, liability or expense to the extent that it arises out of or is based
upon any such untrue statement, alleged untrue statement, omission or alleged
omission made in any registration statement, any prospectus or any statement of
additional information in reliance upon information furnished by FDI, its
officers, directors or any such controlling person to the Fund or its
representatives for use in the preparation thereof, provided in each case any
information so provided has not been changed in any way, and except that the
Fund's agreement to indemnify FDI and the Fund's representations and warranties
set out in paragraph 1.9 of this Agreement will not be deemed to cover any
liability to the Funds or their shareholders to which FDI would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement ("Disqualifying Conduct"). The
Fund's agreement to indemnify FDI, its officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon the Fund's being
notified of any action brought against FDI, its officers or directors, or any
such controlling person, such notification to be given by letter, by facsimile
or by telegram addressed to the Fund at its address set forth below within a
reasonable period of time after the summons or other first legal process shall
have been served. The failure so to notify the Fund of any such action shall
not relieve the Fund from any liability which the Fund may have to the person
against whom such action is brought by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, (i) except to the extent the
Fund's ability to defend such action has been materially adversely affected by
such failure, or (ii) otherwise than on account of the Fund's indemnity
agreement contained in this paragraph 1.10. The Fund will be entitled to assume
the defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of good standing
chosen by the Fund and approved by FDI. In the event the Fund elects to assume
the defense of any such suit and retain counsel of good standing approved by
FDI, the defendant or defendants in such suit shall bear the fees and expenses
of any additional counsel retained by any of them; but in case the Fund does not
elect to assume the defense of any such suit, the Fund will reimburse FDI, its
officers and directors, or the controlling person or persons named as defendant
or defendants in such suit, for the reasonable fees and expenses of any counsel
retained by FDI or them, subject to the right of the Fund to assume the defense
of such suit with counsel of good standing at any time prior to settlement or
final determination thereof. The Fund's indemnification agreement contained in
this paragraph 1.10 and the Fund's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of FDI, its officers and directors, or any
controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to FDI's benefit, to the benefit
of FDI's several officers and directors, and their respective estates, and to
the benefit of any controlling persons and their successors. The Fund agrees
promptly to notify FDI of the commencement of any litigation or proceedings
against the Fund or any of its officers or Board members in connection with the
issue and sale of Shares.
1.11 FDI agrees to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the reasonable cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Fund, its
officers or
4
<PAGE>
Board members, or any such controlling person, may incur under the 1933 Act, the
1940 Act, or under common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or Board members, or
such controlling person resulting from such claims or demands, (a) shall arise
out of or be based upon any unauthorized sales literature, advertisements,
information, statements or representations or any Disqualifying Conduct in
connection with the offering and sale of any Shares, or (b) shall arise out of
or be based upon any untrue, or alleged untrue, statement of a material fact
contained in information furnished in writing by FDI to the Fund specifically
for use in the Fund's registration statement and used in the answers to any of
the items of the registration statement or in the corresponding statements made
in the prospectus or statement of additional information, or shall arise out of
or be based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by FDI to the Fund and
required to be stated in such answers or necessary to make such information, in
light of the circumstances under which it was made not misleading, provided in
each case any information so provided has not been changed in any way. FDI's
agreement to indemnify the Fund, its officers and Board members, and any such
controlling person, as aforesaid, is expressly conditioned upon FDI being
notified of any action brought against the Fund, its officers or Board members,
or any such controlling person, such notification to be given by letter, by
facsimile or by telegram addressed to FDI at its address set forth below within
a reasonable period of time after the summons or other first legal process shall
have been served. FDI shall have the right to control the defense of such
action, with counsel of its own choosing, satisfactory to the Fund, if such
action is based solely upon such alleged misstatement or omission on FDI's part,
and in any other event the Fund, its officers or Board members, or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify FDI of
any such action shall not relieve FDI from any liability which FDI may have to
the Fund, its officers or Board members, or to such controlling person by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission (i) except to the extent FDI's ability to defend such action has been
materially adversely affected by such failure, or (ii) otherwise than on account
of FDI's indemnity agreement contained in this paragraph 1.11. This agreement
of indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. FDI agrees promptly to
notify the Fund of the commencement of any litigation or proceedings against FDI
or any of its officers or directors in connection with the issue and sale of
Shares.
1.12 No Shares shall be offered by either FDI or the Fund under any of
the provisions of this Agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10 of said
Act, as amended, is not on file with the SEC; provided, however, that nothing
contained in this paragraph 1.12 shall in any way restrict or have an
application to or bearing upon the Fund's obligation to repurchase any Shares
from any shareholder in accordance with the provisions of the Fund's prospectus
or charter documents.
5
<PAGE>
1.13 The Fund agrees to advise FDI immediately in writing:
(a) of any request by the SEC for amendments to the registration statement
or prospectus then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement or prospectus then in effect or
the initiation of any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement of a
material fact made in the registration statement or prospectus then in effect or
which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading in any
material respect; and
(d) of all actions of the SEC with respect to any amendments to any
registration statement or prospectus which may from time to time be filed with
the SEC.
2. OFFERING PRICE
Shares of any class of the Fund offered for sale by FDI shall be offered at
a price per share (the "Offering Price") equal to (a) the net asset value
(determined in the manner set forth in the Fund's registration statement) plus
(b) a sales charge, if any and except to those persons set forth in the then-
current prospectus, which shall be the percentage of the Offering Price of such
Shares as set forth in the Fund's then-current prospectus. The Offering Price,
if not an exact multiple of one cent, shall be adjusted to the nearest cent. In
addition, if applicable, Shares of any class of the Fund offered for sale by FDI
may be subject to a contingent deferred sales charge as set forth in the Fund's
then-current prospectus. FDI shall be entitled to receive any sales charge or
contingent deferred sales charge in respect of the Shares. Any payments to
dealers shall be governed by a separate agreement between FDI and such dealer
and the Fund's then-current prospectus.
3. TERM
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial two-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable with respect to a Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Trustees, by vote of a majority
of the outstanding voting securities of such Fund, or by FDI. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the 1940 Act). FDI agrees to notify the Fund immediately
upon the event of its expulsion or suspension by the NASD. This
6
<PAGE>
Agreement will automatically and immediately terminate in the event of FDI's
expulsion or suspension by the NASD.
4. LIMITATION OF LIABILITY.
The Trust and the Adviser agree that the obligations of CDC MPT+ Funds (the
"Trust") under this Agreement will not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Trust, individually, but are binding only upon the assets and
property of the relevant Fund, as provided in the Trust Instrument. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust, and signed by an authorized officer of the Trust, acting as such, and
neither the authorization by the Trustees nor the execution and delivery by the
officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the trust
property of the Trust as provided in the Trust Instrument. No Series of the
Trust, including the Funds, will be liable for any claims against any other
Series.
5. MISCELLANEOUS
5.1 The Fund recognizes that, except to the extent otherwise agreed to
by the parties hereto, FDI's directors, officers and employees may from time to
time serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that FDI or FDI's
affiliates may enter into distribution or other agreements with other
corporations and trusts.
5.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
5.3 This Agreement and the Schedules forming a part hereof may be
amended at any time by a writing signed by each of the parties hereto. In the
event that the Board members of any additional funds indicate by vote that such
funds are to be made parties to this Agreement, whether such funds were in
existence at the time of the effective date of this Agreement or subsequently
formed, Schedule A hereto shall be amended to reflect the addition of such new
funds and such new funds shall thereafter become parties hereto. In the event
that any of the Funds listed on Schedule A terminates its registration as a
management investment company, or otherwise ceases operations, Schedule A shall
be amended to reflect the deletion of such Fund and its various classes.
5.4 This Agreement shall be governed by the internal laws of The
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
5.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
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5.6 Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the Fund at the following address: c/o CDC
Investment Management Corporation, 9 West 57th Street, 35th Floor, New York, NY
10019, Attention: _________________, with a copy to Willkie Farr & Gallagher,
787 Seventh Avenue, New York, NY 10019, Attention: Daniel Schloendorn, Esq. and
to FDI at the following address: 60 State Street, Suite 1300, Boston, MA 02109,
Attention: President, with a copy to General Counsel, or at such other address
as the parties may from time to time specify in writing to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement by a duly
authorized representative of the parties hereto.
CDC MPT+ FUNDS
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
FUNDS DISTRIBUTOR, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
8
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SCHEDULE A
CDC MPT+ FUNDS
U.S. Core Equity Fund
Aggressive Equity Fund
Global Independence Fund
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CUSTODIAN AGREEMENT
This Agreement between CDC FAMILY OF FUNDS a business trust organized and
existing under the laws of The Commonwealth of Massachusetts (the "FUND"), and
STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company (the
"CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to 3 series,
U.S. EQUITY PERFORMANCE FUND, U.S. EQUITY PLUS GLOBAL MANAGEMENT FUND AND GLOBAL
ENHANCED MANAGEMENT FUND (such series together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Section 18, be referred to herein as the "PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). The Fund on behalf of the Portfolio(s) agrees
to deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section
6 hereof), the Custodian shall on behalf of the applicable Portfolio(s) from
time to time employ one or more sub-custodians located in the United States, but
only in accordance with an applicable vote by the Board of Trustees of the Fund
(the "BOARD") on behalf of the applicable Portfolio(s), and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such
<PAGE>
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedules A and B hereto but only in accordance with the applicable provisions
of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT
PAPER") which is deposited and/or maintained in the Direct Paper System of the
Custodian (the "DIRECT PAPER SYSTEM") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by
the Portfolio;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions of Section
2.8 hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration
is to be delivered to the Custodian;
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6) To the issuer thereof, or its agent, for transfer into
the name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.7 or into the name or
nominee name of any sub-custodian appointed pursuant to Section
1; or for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face amount or
number of units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such securities,
or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian and
the Fund on behalf of the Portfolio, which may be in the form of
cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable
or responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any
borrowing by the Fund on behalf of the Portfolio requiring a
pledge of assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
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12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission ("CFTC") and/or any
contract market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the
Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
for the Fund (the "TRANSFER AGENT") for delivery to such
Transfer Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time in
the currently effective prospectus and statement of additional
information of the Fund related to the Portfolio (the
"PROSPECTUS"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper purpose, BUT ONLY upon receipt of
Proper Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper trust purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the
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Custodian shall utilize its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by
the Custodian for a Portfolio may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; PROVIDED,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board. Such
funds shall be deposited by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for the account
of the Portfolio but only (a) against
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the delivery of such securities or evidence of title to such
options, futures contracts or options on futures contracts to the
Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under
the 1940 Act to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a U.S. Securities
System, in accordance with the conditions set forth in Section
2.8 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.9; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as
set forth in Section 5 hereof;
4) For the payment of any expense or liability incurred by
the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of
Proper Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment, setting forth the purpose
for which such payment is to be made,
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declaring such purpose to be a proper trust purpose, and naming
the person or persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; PROVIDED, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
U.S. Securities System provided that such securities are
represented in an account of the Custodian in the U.S. Securities
System (the "U.S. SECURITIES SYSTEM ACCOUNT") which account
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities
of the Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been transferred
to the U.S. Securities System Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the U.S. Securities System that
payment for such securities has been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of the Portfolio. Copies of all advices from the
U.S. Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained for
the Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf of the Portfolio
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copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) [Reserved.];
6) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund for
the benefit of the Portfolio for any loss or damage to the
Portfolio resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has
not been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are represented
in the Direct Paper System Account, which account shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer of
securities to the account of the Portfolio. The
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Custodian shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of
the Portfolio, in the form of a written advice or notice, of
Direct Paper on the next business day following such transfer and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transaction in the
Direct Paper System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release of the SEC,
or interpretative opinion of the staff of the SEC, relating to the maintenance
of segregated accounts by registered investment companies and (iv) for other
proper trust purposes, BUT ONLY, in the case of clause (iv), upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio, setting
forth the purpose or purposes of such segregated account and declaring such
purpose(s) to be a proper trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
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SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund
for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1 DEFINITIONS. The following capitalized terms shall have the
indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of
Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
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"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Fund, by resolution adopted by the Board, hereby delegates to the Custodian with
respect to the Portfolios, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Section 3 with respect to Foreign Assets of
the Portfolios held outside the United States, and the Custodian hereby accepts
such delegation, as Foreign Custody Manager with respect to the Portfolios.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the Agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this Contract, which
Schedule B may be amended from time to time by the Foreign Custody Manager. The
Foreign Custody Manager will provide amended versions of Schedules A and B in
accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the
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delegation by the Board on behalf of the Portfolios to the Custodian as Foreign
Custody Manager for that country shall be deemed to have been withdrawn and the
Custodian shall immediately cease to be the Foreign Custody Manager of the
Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time. In performing its delegated responsibilities as
Foreign Custody Manager to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be held by that
Eligible Foreign Custodian, after considering all factors relevant to the
safekeeping of such assets, including, without limitation the factors specified
in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian (or the rules or established practices and procedures in the
case of an Eligible Foreign Custodian selected by the Foreign Custody Manager
which is a foreign securities depository or clearing agency that is not a
Mandatory Securities Depository). In the event the Foreign Custody Manager
determines that the custody arrangements with an Eligible Foreign Custodian it
has selected are no longer appropriate, the Foreign Custody Manager shall notify
the Board in accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board shall be deemed to have considered and
determined to accept such
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Country Risk as is incurred by placing and maintaining the Foreign Assets in
each country for which the Custodian is serving as Foreign Custody Manager of
the Portfolios. The Fund, on behalf of the Portfolios, and the Board shall be
deemed to be monitoring on a continuing basis such Country Risk to the extent
that the Board considers necessary or appropriate. The Fund and the Custodian
each expressly acknowledge that the Foreign Custody Manager shall not be
delegated any responsibilities under this Section 3 with respect to Mandatory
Securities Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board amended Schedules A or B at the end of the calendar
quarter in which an amendment to either Schedule has occurred. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Section 3 after the occurrence of the material change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios.
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody
Manager of the Portfolios shall be effective as of the date of execution of this
Agreement and shall remain in effect until terminated at any time, without
penalty, by written notice from the terminating party to the non-terminating
party. Termination will become effective thirty (30) days after receipt by the
non-terminating party of such notice. The provisions of Section 3.3 hereof
shall govern the delegation to and termination of the Custodian as Foreign
Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
PORTFOLIOS HELD OUTSIDE OF THE UNITED STATES
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SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN SECURITIES. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the
Portfolios in accordance with commercially reasonable market practice in
the country where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of receiving later
payment; or (B) in the case of a sale effected through a Foreign Securities
System in accordance with the rules governing the operation of the Foreign
Securities System;
(ii) in connection with any repurchase agreement related to
foreign securities;
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(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market custom; PROVIDED
that in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except as may
arise from the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement;
(viii) in the case of warrants, rights or similar foreign
securities, the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing
by the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures
contracts, including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, BUT ONLY upon receipt of
Proper Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made, declaring
such purpose to be a
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proper trust purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the
Portfolio, unless otherwise directed by Proper Instructions, by
(A) delivering money to the seller thereof or to a dealer
therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such foreign
securities; or (B) in the case of a purchase effected through a
Foreign Securities System, in accordance with the rules governing
the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or
surrender of foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the
Portfolio, including but not limited to the following payments:
interest, taxes, investment advisory fees, transfer agency fees,
fees under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or
foreign exchange contracts for the Portfolio, including
transactions executed with or through the Custodian or its
Foreign Sub-Custodians;
(v) in connection with trading in options and futures
contracts, including delivery as original margin and variation
margin;
(vii) in connection with the borrowing or lending of
foreign securities; and
(viii) for any other proper purpose, BUT ONLY upon receipt
of Proper Instructions specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and naming
the person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and
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procedures in the country or market in which the transaction occurs, including,
without limitation, delivering Foreign Assets to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) with the expectation
of receiving later payment for such Foreign Assets from such purchaser or
dealer.
The Custodian shall provide to the Board the information with respect to
custody and settlement practices in countries in which the Custodian employs a
Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule C hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule C from time to
time, provided that no such revision shall result in the Board being provided
with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts opened and maintained outside the
United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Portfolio.
SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
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SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Agreement, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may have the effect of severely limiting the
ability of the Fund to exercise shareholder rights.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES
SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Portfolios shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Portfolios have not been made whole for any such loss,
damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall
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be to use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of countries for which the Fund has
provided such information.
SECTION 4.12 CONFLICT. If the Custodian is delegated the responsibilities
of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the
event of any conflict between the provisions of Sections 3 and 4 hereof, the
provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares thereof issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund on behalf
of each such Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance
with such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the Fund
and the Custodian agree to security procedures, including but not limited to,
the security procedures selected by the Fund in the Funds Transfer Addendum
attached hereto. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant
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to any three-party agreement which requires a segregated asset account in
accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties
under this Agreement, PROVIDED that all such payments shall be
accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Portfolio except as otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Fund ("CERTIFIED RESOLUTION") as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board as
described in such resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute
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the net asset value per Share of the outstanding Shares or, if directed in
writing to do so by the Fund on behalf of the Portfolio, shall itself keep such
books of account and/or compute such net asset value per Share. If so directed,
the Custodian shall also calculate daily the net income of the Portfolio as
described in the Prospectus and shall advise the Fund and the Transfer Agent
daily of the total amounts of such net income and, if instructed in writing by
an officer of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The calculations
of the net asset value per Share and the daily income of each Portfolio shall be
made at the time or times described from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements thereof.
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SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System, relating to the services provided by the
Custodian under this Agreement; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be without liability to
the Fund and the Portfolios for any loss, liability, claim or expense resulting
from or caused by anything which is (A) part of Country Risk (as defined in
Section 3 hereof), including without limitation, nationalization, expropriation,
currency restrictions, or acts of war, revolution, riots or terrorism, or (B)
part of the "prevailing country risk" of the Portfolios, as such term is used
in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other
similar terms are now or in the future interpreted by the SEC or by the staff of
the Division of Investment Management thereof.
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Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account
23
<PAGE>
of the applicable Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent necessary
to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; PROVIDED,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by
the Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined
in the 1940 Act, doing business in Boston,
24
<PAGE>
Massachusetts, or New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian on behalf of each applicable Portfolio and all instruments held by
the Custodian relative thereto and all other property held by it under this
Agreement on behalf of each applicable Portfolio, and to transfer to an account
of such successor custodian all of the securities of each such Portfolio held in
any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, PROVIDED that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to U.S. EQUITY PERFORMANCE FUND, U.S. EQUITY PLUS GLOBAL MANAGEMENT
FUND AND GLOBAL ENHANCED MANAGEMENT FUND with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
25
<PAGE>
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given hereunder
may be delivered in person to the offices of the parties as set forth herein
during normal business hours or delivered prepaid registered mail or by telex,
cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: CDC FAMILY OF FUNDS
9 west 57th Street
New York, New York 10019
Attention: Rachel Manney, Vice President
Telephone: 212-891-1848
Telecopy: 212-891-6113
To the Custodian: STATE STREET BANK AND TRUST COMPANY
150 Newport Avenue/AFB2
North Quincy, Massachusetts 02171
Attention: James Ross
Telephone: 617-985-3760
Telecopy: 617-985-4867
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
26
<PAGE>
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. DATA ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the Data
Access Services Addendum attached hereto.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Fund to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide
this information to requesting companies. If the Fund tells the Custodian
"yes" or does not check either "yes" or "no" below, the Custodian is required
by the rule to treat the Fund as consenting to disclosure of this information
for all securities owned by the Fund or any funds or accounts established by the
Fund. For the Fund's protection, the Rule prohibits the requesting company from
using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
27
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of *[date].
CDC FAMILY OF FUNDS FUND SIGNATURE ATTESTED TO BY:
By: By:
------------------------ --------------------
Name: Name:
------------------------ --------------------
Title: Title: *[Secretary/Ass't Secretary]
----------------------- -----------------------------
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: By:
------------------------- --------------------
Name: Ronald E. Logue Name:*[attorney's name]
------------------------ --------------------
Title:Executive Vice President Title:*[attorney's title]
------------------------ -------------------
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. Deposito Central de
Valores S.A.
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
Cyprus Barclays Bank Plc. --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for
Monitoring
Transactions in
Securities in
Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
2
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Iceland Icebank Ltd.
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities
Depository Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
3
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
4
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodni Banka, A.S. --
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
5
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
6
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY
DEPOSITORIES
INTERSETTLE (for EASDAQ Securities)
7
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de
Depot et de Virement de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao
e Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB CLIENTS PRESENTLY USE CBLC
Central de Custodia e de Liquidacao
Financeira de Titulos
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central
of China Clearing and Registration
Corporation
Shenzhen Securities Central
Clearing
Costa Rica Central de Valores S.A. (CEVAL)
Croatia Ministry of Finance
National Bank of Croatia
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Czech Republic Stredisko cennych papirua
Czech National Bank
Denmark Vaerdipapircentralen (the Danish
Securities Center)
Egypt Misr Company for Clearing,
Settlement, and Central Depository
Estonia Eesti Vaartpaberite
Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[MANDATORY FOR GOV'T BONDS ONLY;
SSB DOES NOT USE FOR OTHER
SECURITIES]
India The National Securities Depository
Limited
2
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange
Clearing House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de
Reglement
Jamaica The Jamaican Central Securities
Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository
Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center
of Financial Instruments for
Lebanon and the Middle East
(MIDCLEAR) S.A.L.
The Central Bank of Lebanon
3
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Lithuania The Central Securities Depository
of Lithuania
Malaysia The Malaysian Central Depository
Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and
Safekeeping System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V.
(NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of
Pakistan Limited
Peru Caja de Valores y Liquidaciones
S.A. (CAVALI)
4
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Philippines The Philippines Central Depository,
Inc.
The Registry of Scripless
Securities (ROSS) of the Bureau of
the Treasury
Poland The National Depository of
Securities (Krajowy Depozyt
Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios
(Central)
Romania National Securities Clearing,
Settlement and Depository Co.
Bucharest Stock Exchange Registry
Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana, Central de
Anotaciones en Cuenta
5
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Sri Lanka Central Depository System
(Pvt) Limited
Sweden Vardepapperscentralen AB
(the Swedish Central Securities
Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne
Interprofessionelle de
Compensation et de Depot de
Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
6
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
7
<PAGE>
SCHEDULE C
MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
(FREQUENCY)
THE GUIDE TO CUSTODY IN WORLD MARKETS An overview of safekeeping and
(annually) settlement practices and procedures
in each market in which State
Street Bank and Trust Company
offers custodial services.
GLOBAL CUSTODY NETWORK REVIEW Information relating to the
(annually) operating history and structure of
depositories and subcustodians
located in the markets in which
State Street Bank and Trust Company
offers custodial services,
including transnational
depositories.
GLOBAL LEGAL SURVEY With respect to each market in
(annually) which State Street Bank and Trust
Company offers custodial services,
opinions relating to whether local
law restricts (i) access of a
fund's independent public
accountants to books and records of
a Foreign Sub-Custodian or Foreign
Securities System, (ii) the Fund's
ability to recover in the event of
bankruptcy or insolvency of a
Foreign Sub-Custodian or Foreign
Securities System, (iii) the Fund's
ability to recover in the event of
a loss by a Foreign Sub-Custodian
or Foreign Securities System, and
(iv) the ability of a foreign
investor to convert cash and cash
equivalents to U.S. dollars.
SUBCUSTODIAN AGREEMENTS Copies of the subcustodian
(annually) contracts State Street Bank and
Trust Company has entered into with
each subcustodian in the markets
in which State Street Bank and
Trust Company offers subcustody
services to its US mutualfund
clients.
Network Bulletins (weekly): Developments of interest to
investors in the markets in which
State Street Bank and Trust Company
offers custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which
State Street Bank and Trust Company
offers custodial services which
exhibit special custody risks,
developments which may impact State
Street's ability to deliver
expected levels of service.
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between CDC Family of Funds (the "Customer") and State Street
Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
the Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") dated as of *________________, 199_;
WHEREAS, State Street has developed and utilizes proprietary accounting and
other systems, including State Street's proprietary Multicurrency HORIZON-SM-
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
(a) SYSTEM. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZON-SM- Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third parties approved
by State Street that serve as investment advisors or investment managers or in
other service capacities to the Customer such as the Customer's independent
auditors (each, an "Investment Advisor"), solely with respect to the Customer,
or on any designated substitute or back-up equipment configuration with State
Street's written consent, such consent not to be unreasonably withheld.
(b) DATA ACCESS SERVICES. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
(c) ADDITIONAL SERVICES. State Street may from time to time agree to make
available to the Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System"
<PAGE>
shall include, and this Agreement shall govern, the Customer's access to and use
of any additional System made available by State Street and/or accessed by the
Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the Data
Access Services provided under this Agreement, the Customer will have access,
through the Data Access Services, to Customer Data and to functions of State
Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. DESIGNATED EQUIPMENT; DESIGNATED LOCATION. The System and the Data Access
Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in New York, New York ("Designated Location").
b. DESIGNATED CONFIGURATION; TRAINED PERSONNEL. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Agreement. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.
c. SCOPE OF USE. The Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. The Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. OTHER LOCATIONS. Except in the event of an emergency or of a planned
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at the
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<PAGE>
Designated Location may be transferred to a different location only upon the
prior written consent of State Street. In the event of an emergency or System
shutdown, the Customer may use any back-up site included in the Designated
Configuration or any other back-up site agreed to by State Street, which
agreement will not be unreasonably withheld. The Customer may secure from State
Street the right to access the System or the Data Access Services through
computer and telecommunications facilities or devices complying with the
Designated Configuration at additional locations only upon the prior written
consent of State Street and on terms to be mutually agreed upon by the parties.
e. TITLE. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. NO MODIFICATION. Without the prior written consent of State Street, the
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. SECURITY PROCEDURES. The Customer shall comply with data access operating
standards and procedures and with user identification or other password control
requirements and other security procedures as may be issued from time to time by
State Street for use of the System on a remote basis and to access the Data
Access Services. The Customer shall have access only to the Customer Data and
authorized transactions agreed upon from time to time by State Street and, upon
notice from State Street, the Customer shall discontinue remote use of the
System and access to Data Access Services for any security reasons cited by
State Street; provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by the Customer)
after such discontinuance, assume responsibility to provide accounting services
under the terms of the Custodian Agreement.
h. INSPECTIONS. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to the Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. PROPRIETARY INFORMATION. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it in
a
3
<PAGE>
manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Agreement. The Customer shall
use all commercially reasonable efforts to assist State Street in identifying
and preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. COOPERATION. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. INJUNCTIVE RELIEF. The Customer acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. SURVIVAL. The provisions of this Section 4 shall survive the termination of
this Agreement.
5. LIMITATION ON LIABILITY
a. LIMITATION ON AMOUNT AND TIME FOR BRINGING ACTION. The Customer agrees
that any liability of State Street to the Customer or any third party arising
out of State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount of custody fees paid by the Customer
for the preceding 24 months. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. LIMITED WARRANTIES. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c. THIRD-PARTY DATA. Organizations from which State Street may obtain certain
data included in the System or the Data Access Services are solely responsible
for the contents of such data, and
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State Street shall have no liability for claims arising out of the contents of
such third-party data, including, but not limited to, the accuracy thereof.
d. REGULATORY REQUIREMENTS. As between State Street and the Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. FORCE MAJEURE. Neither party shall be liable for any costs or damages due
to delay or nonperformance under this Agreement arising out of any cause or
event beyond such party's control, including without limitation, cessation of
services hereunder or any damages resulting therefrom to the other party, or the
Customer as a result of work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use by
the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor and (ii) any loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely on the validity
and authenticity of Client Originated Electronic Financial Instructions without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. TRAINING. State Street agrees to provide training, at a designated State
Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all
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<PAGE>
operators of the System and the Data Access Services, designated by the
Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. INSTALLATION AND CONVERSION. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services at
the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. TERM OF AGREEMENT. This Agreement shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. TERMINATION OF AGREEMENT. Either party may terminate this Agreement
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Agreement by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Agreement and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. TERMINATION OF THE RIGHT TO USE. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for
any reason, the Customer shall return to State Street all copies of
documentation and other Proprietary Information in its possession; provided,
however, that in the event that either party terminates this Agreement or the
Custodian Agreement for any reason other
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<PAGE>
than the Customer's breach, State Street shall provide the Data Access Services
for a period of time and at a price to be agreed upon by the parties.
11. MISCELLANEOUS
a. ASSIGNMENT; SUCCESSORS. This Agreement and the rights and obligations of
the Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. SURVIVAL. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. ENTIRE AGREEMENT. This Agreement and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Agreement is not intended to supersede or modify the duties
and liabilities of the parties hereto under the Custodian Agreement or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing waiver.
d. SEVERABILITY. If any provision or provisions of this Agreement shall be
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. GOVERNING LAW. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
7
<PAGE>
ATTACHMENT A
Multicurrency HORIZON-SM- Accounting System
SYSTEM PRODUCT DESCRIPTION
I. The Multicurrency HORIZON-SM- Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest-Registered Trademark- is designed to provide customer access
to the following information maintained on The Multicurrency HORIZON-SM-
Accounting System: 1) cash transactions and balances; 2) purchases and sales;
3) income receivables; 4) tax refund receivables; 5) daily priced positions;
6) open trades; 7) settlement status; 8) foreign exchange transactions; 9)
trade history, and 10) daily, weekly and monthly evaluation services.
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<PAGE>
ATTACHMENT B
*DESIGNATED CONFIGURATION
9
<PAGE>
ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as
Investment Advisor to CDC Family of Funds (the "Customer") it will have access
to State Street Bank and Trust Company's ("State Street") Multicurrency
HORIZON-SM- Accounting System and other information systems (collectively, the
"System").
The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
CDC INVESTMENT MANAGEMENT CORP.
By:
--------------------------------
Title:
-----------------------------
Date:
-------------------------------
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<PAGE>
UNDERTAKING
The Undersigned understands that in the course of its employment as
[*service provider] *[name of fund] (the "Customer") it will have access to
State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON-SM-
Accounting System and other information systems (collectively, the "System").
The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
*[NAME OF SERVICE PROVIDER]
By:
-------------------------------
Title:
----------------------------
Date:
------------------------------
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<PAGE>
ATTACHMENT D
SUPPORT
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. TELEPHONE SUPPORT. The Customer Designated Persons may contact State
Street's Multicurrency HORIZON-SM- Help Desk and Customer Assistance Center
between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for
the purpose of obtaining answers to questions about the use of the System, or to
report apparent problems with the System. From time to time, the Customer shall
provide to State Street a list of persons, not to exceed five in number, who
shall be permitted to contact State Street for assistance (such persons being
referred to as "the Customer Designated Persons").
b. TECHNICAL SUPPORT. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. MAINTENANCE SUPPORT. State Street shall use commercially
reasonable efforts to correct system functions that do not work according to the
System Product Description as set forth on Attachment A in priority order in the
next scheduled delivery release or otherwise as soon as is practicable.
d. SYSTEM ENHANCEMENTS. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. CUSTOM MODIFICATIONS. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. LIMITATION ON SUPPORT. State Street shall have no obligation to
support the Customer's use of the System: (i) for use on any computer
equipment or telecommunication facilities which does not conform to the
Designated Configuration or (ii) in the event the Customer has modified the
System in breach of this Agreement.
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<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CDC MPT + FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Terms of Appointment and Duties . . . . . . . . . . . . . . . . . . . . .1
2. Third Party Administrators for Defined Contribution Plans . . . . . . . .4
3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
4. Representations and Warranties of the Transfer Agent. . . . . . . . . . .6
5. Representations and Warranties of the Fund. . . . . . . . . . . . . . . .6
6. Wire Transfer Operating Guidelines. . . . . . . . . . . . . . . . . . . .7
7. Data Access and Proprietary Information . . . . . . . . . . . . . . . . .8
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. Standard of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. Covenants of the Fund and the Transfer Agent. . . . . . . . . . . . . . 12
13. Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . 12
14. Assignment and Third Party Beneficiaries. . . . . . . . . . . . . . . . 13
15. Subcontractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. Limitations of Liability of the Trustees and Shareholders . . . . . . . 16
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1999, by and between CDC MPT +
FUNDS, a Delaware business trust, having its principal office and place of
business at 9 West 57th Street, 35th Floor, New York, New York (the "Fund"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund intends to initially offer shares in three series (3), such
series shall be named in the attached Schedule A which may be amended by the
parties from time to time (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with SECTION 17, being herein referred to as a "Portfolio", and
collectively as the "Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. TERMS OF APPOINTMENT AND DUTIES
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby employs
and appoints the Transfer Agent to act as, and the Transfer Agent agrees
to act as its transfer agent for the Fund's authorized and issued shares
of its beneficial interest, $ .001 par value, ("Shares"), dividend
disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plan provided
to the shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund on behalf
of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program. In accordance with
procedures established from time to time by agreement between the Fund
on behalf of each of the Portfolios, as applicable and the Transfer
Agent, the Transfer Agent agrees that it will perform the following
services:
(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to the
Custodian;
<PAGE>
(d) In respect to the transactions in items (a), (b) and (c) above,
the Transfer Agent shall execute transactions directly with
broker-dealers authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(h) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Transfer Agent
of indemnification satisfactory to the Transfer Agent and protecting the
Transfer Agent and the Fund, and the Transfer Agent at its option, may
issue replacement certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(i) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of Shares of the
Fund which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. The Transfer Agent shall also provide the
Fund on a regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, the
Transfer Agent shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plan (including without limitation
any periodic investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing Shareholder proxies, Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
U.S. resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and
2
<PAGE>
mailing confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders, and providing Shareholder account
information.
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily
record and produce a daily report for the Fund of all transactions and
receipts and disbursements of money and securities and deliver a copy of
such report for the Fund for each business day to the Fund no later than
9:00 AM Eastern Time, or such earlier time as the Fund may reasonably
require, on the next business day.
(c) "BLUE SKY" REPORTING. The Fund shall (i) identify to the
Transfer Agent in writing those transactions and assets to be treated as
exempt from blue sky reporting for each State; and (ii) verify the
establishment of transactions for each State on the system prior to
activation and thereafter monitor the daily activity for each State.
The responsibility of the Transfer Agent for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and providing a
system which will enable the Fund to monitor the total number of Shares
sold in each State.
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). (i)
accept and effectuate the registration and maintenance of accounts
through Networking and the purchase, redemption, transfer and exchange
of shares in such accounts through Fund/SERV (networking and Fund/SERV
being programs operated by the NSCC on behalf of NSCC's participants,
including the Fund), in accordance with, instructions transmitted to and
received by the Transfer Agent by transmission from NSCC on behalf of
broker-dealers and banks which have been established by, or in
accordance with the instructions of authorized persons, as hereinafter
defined on the dealer file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of transactions between
the Fund and NSCC (acting on behalf of its broker-dealer and bank
participants); (iii) provide account and transaction information from
the affected Fund's records on DST Systems, Inc. computer system TA2000
("TA2000 System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain Shareholder accounts
on TA2000 System through Networking.
(e) NEW PROCEDURES. New procedures as to who shall provide certain
of these services in Section 1 may be established in writing from time
to time by agreement between the Fund and the Transfer Agent. The
Transfer Agent may at times perform only a portion of these services and
the Fund or its agent may perform these services on the Fund's behalf.
3
<PAGE>
(f) ADDITIONAL TELEPHONE SUPPORT SERVICES. If the parties elect to
have the Transfer Agent provide ADDITIONAL telephone support services
under this Agreement, the parties will agree to such services, fees and
sub-contracting as stated in Schedule 1.2(f) entitled "Telephone Support
Services" attached hereto.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 The Fund may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan or
Plans") for the benefit of the individual Plan participants (the "Plan
Participant or Plan Participants"), such Plan(s) being qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended ("Code")
and administered by third party administrators which may be plan
administrators as defined in the Employee Retirement Income Security Act
of 1974, as amended(the "TPA(s)").
2.2 In accordance with the procedures established in the initial Schedule
2.1 entitled "Third Party Administrator Procedures", as may be amended
by the Transfer Agent and the Fund from time to time ("Schedule 2.1"),
the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name
of the Trustees, Plans or TPAs as the case may be as omnibus accounts;
(b) Maintain each such omnibus account on its records in the name of
the TPA or its designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under SECTION 1 as transfer agent of the
Funds and not as a record-keeper for the Plans.
2.3 Transactions identified under SECTION 2 of this Agreement shall be
deemed exception services ("Exception Services") when such transactions:
(a) Require the Transfer Agent to use methods and procedures other
than those usually employed by the Transfer Agent to perform services
under SECTION 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after
the commencement of the nightly processing cycle of the TA2000 System;
or
(c) Require more manual intervention by the Transfer Agent, either
in the entry of data or in the modification or amendment of reports
generated by the TA2000 System than is usually required by
non-retirement plan and pre-nightly transactions.
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<PAGE>
3. FEES AND EXPENSES
3.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees to pay the Transfer Agent an annual
maintenance fee for each Shareholder account as set forth in the
attached fee schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under SECTION 3.2 below may be changed
from time to time subject to mutual written agreement between the Fund
and the Transfer Agent.
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under SECTION 3.1
above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Transfer Agent for the
items set out in Schedule 3.1 attached hereto. In addition, any other
expenses incurred by the Transfer Agent at the request or with the
consent of the Fund, will be reimbursed by the Fund on behalf of the
applicable Portfolio.
3.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the
Transfer Agent by the Fund at least seven (7) days prior to the mailing
date of such materials.
3.4 INVOICES. The Fund agrees on behalf of the applicable Portfolio to pay
all fees and reimbursable expenses within thirty (30) days following the
receipt of the respective billing notice, except for any fees or
expenses which are subject to good faith dispute. In the event of such
a dispute, the Fund may only withhold that portion of the fee or expense
subject to the good faith dispute. The Fund shall notify the Transfer
Agent in writing within twenty-one (21) calendar days following the
receipt of each billing notice if the Fund is disputing any amounts in
good faith. If the Fund does not provide such notice of dispute within
the required time, the billing notice will be deemed accepted by the
Fund.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and
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personnel to perform its duties and obligations under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
5.2 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
5.3 All proceedings required by said Declaration of Trust and By-Laws have
been taken to authorize it to enter into and perform this Agreement.
5.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders
in compliance with the Security Procedure and with the Fund instructions
on the execution date provided that such payment order is received by
the customary deadline (4:00 p.m. E. T.) for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after the customary deadline will be deemed to
have been received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated on
the Fund Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict
access to confidential information relating to the Security Procedure to
authorized persons as communicated to the Transfer Agent in writing.
The Fund must notify the Transfer Agent immediately if it has reason to
believe
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<PAGE>
unauthorized persons may have obtained access to such information or
of any change in the Fund's authorized personnel. The Transfer Agent
shall verify the authenticity of all Fund instructions according to
the Security Procedure.
6.3 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
6.4 The Transfer Agent reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of the Transfer Agent's
receipt of such payment order; (b) if initiating such payment order
would cause the Transfer Agent, in the Transfer Agent's sole judgement,
to exceed any volume, aggregate dollar, network, time, credit or similar
limits which are applicable to the Transfer Agent; or (c) if the
Transfer Agent, in good faith, is unable to satisfy itself that the
transaction has been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance with
the Security Procedure provided that such requests are received in a
timely manner affording the Transfer Agent reasonable opportunity to
act. However, the Transfer Agent assumes no liability if the request
for amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order provided that the Transfer Agent complies
with the payment order instructions as received and the Transfer Agent
complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and
not for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment order,
unless the Transfer Agent is notified of the unauthorized payment order
within thirty (30) days of notification by the Transfer Agent of the
acceptance of such payment order. In no event (including failure to
execute a payment order) shall the Transfer Agent be liable for special,
indirect or consequential damages, even if advised of the possibility of
such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Transfer Agent will act as an Originating Depository
Financial Institution and/or receiving depository Financial Institution,
as the case may be, with respect to such entries. Credits given by the
Transfer Agent with respect to an ACH credit entry are provisional until
the Transfer Agent receives final settlement for such entry from the
Federal Reserve Bank. If the Transfer Agent does not receive such final
settlement, the Fund agrees that the Transfer Agent shall receive a
refund of the amount credited to the Fund in connection with such entry,
and the party making payment to the Fund via such entry shall not be
deemed to
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<PAGE>
have paid the amount of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of which may
be delivered through the Transfer Agent's proprietary information
systems, or by facsimile or call-back. Fund must report any objections
to the execution of an order within thirty (30) days.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Transfer Agent as
part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Transfer Agent on databases under
the control and ownership of the Transfer Agent or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of
substantial value to the Transfer Agent or other third party. In no
event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the
Transfer Agent and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents to:
(a) Use such programs and databases (i) solely on the Fund's
computers, or (ii) solely from equipment at the location agreed to
between the Fund and the Transfer Agent and (iii) solely in accordance
with the Transfer Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in
the normal course or performing processing on the Fund's computer(s)),
the Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained,
to inform in a timely manner of such fact and dispose of such
information in accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from
the Transfer Agent's computer to the Fund's terminal to be retransmitted
to any other computer terminal or other device except as expressly
permitted by the Transfer Agent (such permission not to be unreasonably
withheld);
(e) Allow the Fund to have access only to those authorized
transactions as agreed to between the Fund and the Transfer Agent; and
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<PAGE>
(f) Honor all reasonable written requests made by the Transfer Agent
to protect at the Transfer Agent's expense the rights of the Transfer
Agent in Proprietary Information at common law, under federal copyright
law and under other federal or state law.
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release by the Transfer Agent; or (iii) are already in the
possession of the receiving party at the time or receipt without
obligation of confidentiality or breach of this Agreement.
7.3 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data and
the Fund agrees to make no claim against the Transfer Agent arising out
of the contents of such third-party data, including, but not limited to,
the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON
AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to: (i)
effect the transfer or movement of cash or Shares; or (ii) transmit
Shareholder information or other information, then in such event the
Transfer Agent shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry
as long as such instruction is undertaken in conformity with security
procedures established by the Transfer Agent from time to time.
7.6 Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this SECTION 7. The obligations of this
Section shall survive any earlier termination of this Agreement.
8. INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without negligence or
willful misconduct;
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<PAGE>
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the
Fund hereunder;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or
services, which are received by the Transfer Agent or its agents or
subcontractors by machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by the Fund,
and which have been prepared, maintained or performed by the Fund or any
other person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar; (ii) any instructions or
requests of the Fund or any of its officers; (iii) any instructions or
opinions of legal counsel with respect to any matter arising in
connection with the services to be performed by the Transfer Agent under
this Agreement which are provided to the Transfer Agent after
consultation with such legal counsel; or (iv) any paper or document,
reasonably believed to be genuine, authentic, or signed by the proper
person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be registered
or in violation of any stop order or other determination or ruling by
any federal or any state agency with respect to the offer or sale of
such Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Fund's demand deposit account maintained
by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements required by
the National Securities Clearing Corporation (the "NSCC") required by
the NSCC for the transmission of Fund or Shareholder data through the
NSCC clearing systems.
8.2 In order that the indemnification provisions contained in this SECTION 8
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Transfer Agent, the Transfer Agent shall
promptly notify the Fund of such assertion, and shall keep the Fund
advised with respect to all developments concerning such claim. The
Fund shall have the option to participate with the Transfer Agent in the
defense of such claim or to defend against said claim in its own name or
in the name of the Transfer Agent. The Transfer Agent shall in no case
confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Transfer Agent except with the Fund's
prior written consent.
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9. STANDARD OF CARE
9.1 The Transfer Agent shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees, except as provided in SECTION 9.2
below.
9.2 In the case of Exception Services as defined in SECTION 2.3 herein, the
Transfer Agent shall be held to a standard of gross negligence and
encoding and payment processing errors shall not be deemed negligence.
10. YEAR 2000
The Transfer Agent will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the available
technology to offer products that are Year 2000 ready, including, but
not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date
values, and interface values that reflect the date issues arising
between now and the next one-hundred years, and if any changes are
required, the Transfer Agent will make the changes to its products at a
price to be agreed upon by the parties and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
11. CONFIDENTIALITY
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost figures
and projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of the Transfer Agent or of
the Fund, used or gained by the Transfer Agent or the Fund during
performance under this Agreement. The Fund and the Transfer Agent
further covenant and agree to retain all such knowledge and information
acquired during and after the term of this Agreement respecting such
lists, trade secrets, or any secret or confidential information
whatsoever in trust for the sole benefit of the Transfer Agent or the
Fund and their successors and assigns. In the event of breach of the
foregoing by either party, THE REMEDIES PROVIDED BY SECTION 7.3 shall be
available to the party whose confidential information is disclosed. The
above prohibition of disclosure shall not apply to the extent that the
Transfer Agent must disclose such data to its sub-contractor or Fund
agent for purposes of providing services under this Agreement.
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<PAGE>
11.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the
Transfer Agent will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such
inspection. The Transfer Agent expressly reserves the right, however,
to exhibit the Shareholder records to any person whenever it is advised
by legal counsel that it may be held liable for the failure to exhibit
the Shareholder records to such person or if required by law or court
order.
12. COVENANTS OF THE FUND AND THE TRANSFER AGENT
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and
all amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
To the extent required by Section 31 of the Investment Company Act of
1940, as amended, and the Rules thereunder, the Transfer Agent agrees
that all such records prepared or maintained by the Transfer Agent
relating to the services to be performed by the Transfer Agent hereunder
are the property of the Fund and will be preserved, maintained and made
available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
13. TERMINATION OF AGREEMENT
13.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio. Additionally,
the Transfer Agent reserves the right to charge for any
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<PAGE>
other reasonable expenses associated with such termination and a charge
equivalent to the average of three (3) months' fees. Payment of such
expenses or costs shall be in accordance with SECTION 3.4 of this
Agreement.
13.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws
or regulations.
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES.
14.1 Except as provided in SECTION 15.1 below and the Additional Telephone
Support Services Schedule 1.2(f) attached, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party. Any attempt to do so in
violation of this Section shall be void. Unless specifically stated to
the contrary in any written consent to an assignment, no assignment will
release or discharge the assignor from any duty or responsibility under
this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than the Transfer Agent and the Fund, and the
duties and responsibilities undertaken pursuant to this Agreement shall
be for the sole and exclusive benefit of the Transfer Agent and the
Fund. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Transfer Agent and the Fund. Other than as
provided in SECTION 15.1 and Schedule 1.2(f), neither party shall make
any commitments with third parties that are binding on the other party
without the other party's prior written consent.
15. SUBCONTRACTORS
15.1 The Transfer Agent may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended, (ii) a BFDS subsidiary
duly registered as a transfer agent or (iii) a BFDS affiliate duly
registered as a transfer agent; provided, however, that the Transfer
Agent shall be fully responsible to the Fund for the acts and omissions
of BFDS or its subsidiary or affiliate as it is for its own acts and
omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions or
omissions to act of unaffiliated third parties such as by way of example
and not limitation, Airborne Services, Federal Express, United Parcel
Service, the U.S. Mails, the NSCC and telecommunication companies,
provided, if the Transfer Agent selected such company, the Transfer
Agent shall have
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exercised due care in selecting the same.
16. MISCELLANEOUS
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable
to the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or
failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty,
liability, and limits thereon, and confidentiality and/or protections of
proprietary rights and trade secrets shall survive the termination of
this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or
ambiguity between the terms and conditions contained in this Agreement
and any Schedules or attachments hereto, the terms and conditions
contained in this Agreement shall take precedence.
16.8 WAIVER. No waiver by either party or any breach or default of any of
the covenants or conditions herein contained and performed by the other
party shall be construed as a waiver of any succeeding breach of the
same or of any other covenant or condition.
16.9 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16.10 COUNTERPARTS. This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
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16.11.REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any such
reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party
in the regular course of business, and that any enlargement, facsimile
or further reproduction shall likewise be admissible in evidence.
16.12 NOTICES. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
Attention: Legal Department
Facsimile: (617) 774-2287
(b) If to the Fund, to:
CDC MPT + Funds
c/o CDC Investment Management Corporation
9 West 57th Street, 35th Floor
New York, New York 10019
Attention:
Facsimile: ( ) -
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Transfer Agent render services as transfer agent under the
terms hereof, it shall so notify the Transfer Agent in writing, and if
the Transfer Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that
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the obligations of this instrument are not binding upon any of the
Trustees or Shareholders individually but are binding only upon the
assets and property of the Fund.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
CDC MPT + FUNDS
BY:
-------------------------------------
ATTEST:
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
-------------------------------------
Executive Vice President
ATTEST:
- -----------------------------------
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<PAGE>
SCHEDULE A
U.S. Core Equity Fund
Aggressive Equity Fund
Global Independence Fund
CDC MPT + FUNDS STATE STREET BANK AND TRUST
COMPANY
BY: BY:
-------------------------------- -------------------------------------
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SCHEDULE 1.2(f)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated ____________
I. SERVICES
1. Transfer Agent and Telephone Support Functions
a. Answer telephone inquiries from [XXX 8 a.m. to 8 p.m. Boston time Monday
through Friday XXX] from [XXX existing customers and prospective
customers XXX] of the Fund [XXX for sales literature XXX] in accordance
with the telephone script provided by the Fund.
b. Answer questions pertaining thereto the extent that such questions are
answerable based upon the information supplied to the Transfer Agent by
the Fund.
c. [XXX As the Fund and the Transfer Agent may agree in writing, the
Transfer Agent will receive calls and take written transaction requests
from shareholders of the Fund. Transfer Agent transactions include:
[XXX telephone redemptions, account maintenance, exchanges, transfers,
confirmed purchases, account balances and general inquiries XXX]. Some
transactions may result in research which will be done by the Fund.
Other calls may be referred directly to the Fund. Fax any referrals to
[XXX name of company XXX] on the same day the telephone call is
received.XXX];
2. Incorporate new information into the above referenced script upon
written instructions from the Fund;
3. Maintain prospect detail information for six (6) months thereafter,
provide such information to the Fund in the form that the Fund may
reasonably request;
4. Send all literature orders for information from BFDS/DST [XXX [how?] [to
whom?] XXX] a minimum of [XXX one XXX] transmission per day;
5. Provide the Fund with a [XXX daily/weekly/monthly XXX] telephone report
detailing the calls received during the [XXX day/week/month XXX];
6. [XXX Provide the Fund with monthly conversion reports as selected by the
Fund from DST's standard report package. XXX]
7. TARGET SERVICE LEVELS: Average speed of answer is fifteen (15) seconds,
abandon rate of no more than 2%, and an overall service level of 85%.
The averages will be calculated on a weekly basis.
II. SUBCONTRACTORS
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1. The Transfer Agent may, without further consent on the part of the Fund,
subcontract ministerial telephone support services for the performance
hereof.
III. FEES
CDC MPT + FUNDS STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- -------------------------------------
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated ____________
1. On each Business Day, the TPA(s) shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption of
Shares; in each case based on the Plan's receipt of purchase orders and
redemption requests by Participants in proper form by the time required by
the terms of the Plan, but not later than the close of trading on the New
York Stock Exchange on such Business Day , as described from time to time
in that Fund's prospectus. Each Business Day on which the TPA receives
Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such Instructions,
to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Transfer Agent of the net amount of such
purchases or redemptions, as the case may be, for each of the Plans. In
the case of net purchases by any Plan, the TPA(s) shall instruct the
Trustees of such Plan to transmit the aggregate purchase price for Shares
by wire transfer to the Transfer Agent on (TD+1). In the case of net
redemptions by any Plan, the TPA(s) shall instruct the Fund's custodian to
transmit the aggregate redemption proceeds for Shares by wire transfer to
the Trustees of such Plan on (TD+1). The times at which such notification
and transmission shall occur on (TD+1) shall be as mutually agreed upon by
each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and price
for all transactions, and Share balances. The TPA(s) shall maintain on
behalf of each of the Plans a single master account with the Transfer Agent
and such account shall be in the name of that Plan, the TPA(s), or the
nominee of either thereof as the record owner of Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of Shares
and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan as
of the statement closing date, purchases and redemptions of Shares by the
Plan during the period covered by the statement, and the dividends and
other distributions paid to the Plan on Shares during the statement period
(whether paid in cash or reinvested in Shares).
<PAGE>
7. The TPA(s) shall, at the request and expense of each Fund, transmit to the
Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to each
Fund or any agent designated by it such periodic reports covering Shares of
each Plan as each Fund shall reasonably conclude are necessary to enable
the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders and
redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses, proxy
materials, periodic reports and other materials relating to each Fund be
furnished to Participants in which event the Transfer Agent or each Fund
shall mail or cause to be mailed such materials to Participants. With
respect to any such mailing, the TPA(s) shall, at the request of the
Transfer Agent or each Fund, provide at the TPA(s)'s expense complete and
accurate set of mailing labels with the name and address of each
Participant having an interest through the Plans in Shares.
CDC MPT + FUNDS STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- -------------------------------------
<PAGE>
SCHEDULE 3.1
FEES
Dated ____________
- --------------------------------------------------------------------------------
ANNUAL ACCOUNT SERVICE FEES
- --------------------------------------------------------------------------------
PER ACCOUNT FEE $ 13.00
CLOSED ACCOUNT FEE $ 1.80
BASE FEE (PER FUND/CLASS) $30,000
EACH CLASS IS CONSIDERED A FUND AND WILL BE BILLED ACCORDINGLY.
FEES ARE BILLABLE ON A MONTHLY BASIS AT THE RATE OF 1/12 OF THE ANNUAL FEE. A
CHARGE IS MADE FOR AN ACCOUNT IN THE MONTH THAT AN ACCOUNT OPENS OR CLOSES
THESE FEES WILL BE SUBJECT TO AN ANNUAL COST OF LIVING ADJUSTMENT BASED ON
REGIONAL CONSUMER PRICE INDEX.
- --------------------------------------------------------------------------------
ACTIVITY BASED FEES
- --------------------------------------------------------------------------------
NEW ACCOUNT SET-UP $ 5.00/EACH
MANUAL TRANSACTIONS $ 1.50/EACH
TELEPHONE CALLS $ 2.50/EACH
CORRESPONDENCE $ 1.50/EACH
RESEARCH REQUESTS $ 1.50/EACH
- --------------------------------------------------------------------------------
BANKING SERVICES
- --------------------------------------------------------------------------------
CHECKWRITING SETUP $ 5.00
CHECKWRITING (PER DRAFT) $ 1.00
ACH $ .35
- --------------------------------------------------------------------------------
OTHER FEES
- --------------------------------------------------------------------------------
INVESTOR PROCESSING $ .80/INVESTOR
12B-1 COMMISSIONS $ 1.20/ACCOUNT
- --------------------------------------------------------------------------------
CONVERSION FEES
- --------------------------------------------------------------------------------
PER ACCOUNT FEE $ 1.00
MINIMUM (PER COMPLEX) $ 25,000
- --------------------------------------------------------------------------------
IRA CUSTODIAL FEES
- --------------------------------------------------------------------------------
ANNUAL MAINTENANCE $ 10.00/ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
OUT-OF-POCKET EXPENSES BILLED AS INCURRED
- --------------------------------------------------------------------------------
OUT-OF-POCKET EXPENSES INCLUDE BUT ARE NOT LIMITED TO: CONFIRMATION STATEMENTS,
INVESTOR STATEMENTS, POSTAGE, FORMS, AUDIO RESPONSE, TELEPHONE, RECORDS
RETENTION, CUSTOMIZED PROGRAMMING / ENHANCEMENTS, FEDERAL WIRE, TRANSCRIPTS,
MICROFILM, MICROFICHE, AND EXPENSES INCURRED AT THE SPECIFIC DIRECTION OF THE
FUND.
CDC MPT + FUNDS STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- -------------------------------------
<PAGE>
ADMINISTRATION AGREEMENT
Agreement dated as of ____________, 1998 by and between State Street
Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and
the CDC Funds identified in Schedule A (the "Funds").
WHEREAS, the Funds are registered as an open-end, management
investment companies under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Funds desire to retain the Administrator to furnish
certain administrative services to the Funds, and the Administrator is willing
to furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Funds hereby appoint the Administrator to act as administrator
with respect to the Funds for purposes of providing certain administrative
services for the period and on the terms set forth in this Agreement. The
Administrator accepts such appointment and agrees to render the services stated
herein.
The Funds will initially consist of the portfolio(s) and/or class(es)
of shares (each an "Investment Fund") listed in Schedule A to this Agreement.
In the event that the Funds establishes one or more additional Investment Funds
with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Funds shall notify the Administrator in writing.
Upon written acceptance by the Administrator, such Investment Fund shall become
subject to the provisions of this Agreement to the same extent as the existing
Investment Funds, except to the extent that such provisions (including those
relating to the compensation and expenses payable by the Funds and their
Investment Funds) may be modified with respect to each additional Investment
Fund in writing by the Funds and the Administrator at the time of the addition
of the Investment Fund.
2. DELIVERY OF DOCUMENTS
The Funds will promptly deliver to the Administrator copies of each of
the following documents and all future amendments and supplements, if any:
a. The Funds' Declaration of Trust;
b. The Funds' currently effective registration
statement under the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the Funds' Prospectus(es) and
Statement(s) of Additional Information
<PAGE>
relating to all Investment Funds and all amendments and
supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board
of Trustees of the Funds (the "Board") authorizing (1) the Funds
to enter into this Agreement and (2) certain individuals on
behalf of the Funds to (a) give instructions to the Administrator
pursuant to this Agreement and (b) sign checks and pay expenses;
d. A copy of the investment advisory agreement
between the Funds and their investment adviser; and
e. Such other certificates, documents or opinions
which the Administrator may, in its reasonable discretion, deem
necessary or appropriate in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Funds that:
a. It is a Massachusetts trust company, duly
organized and existing under the laws of The Commonwealth of
Massachusetts;
b. It has the corporate power and authority to carry
on its business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been
instituted or threatened which would impair the Administrator's
ability to perform its duties and obligations under this
Agreement; and
e. Its entrance into this Agreement shall not cause a
material breach or be in material conflict with any other
agreement or obligation of the Administrator or any law or
regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE FUNDS
Each Fund represents and warrants to the Administrator that:
a. It is a business trust, duly organized, existing
and in good standing under the laws of The Commonwealth of
Massachusetts;
2
<PAGE>
b. It has the corporate power and authority under
applicable laws and by its Declaration of Trust and by-laws to
enter into and perform this Agreement;
c. All requisite proceedings have been taken to
authorize it to enter into and perform this Agreement;
d. It is an investment company properly registered
under the 1940 Act;
e. A registration statement under the 1933 Act and
the 1940 Act has been filed and will be effective and remain
effective during the term of this Agreement. Each Fund also
warrants to the Administrator that as of the effective date of
this Agreement, all necessary filings under the securities laws
of the states in which the Funds offer or sell their shares have
been made;
f. No legal or administrative proceedings have been
instituted or threatened which would impair the Funds' ability to
perform its duties and obligations under this Agreement;
g. Its entrance into this Agreement will not cause a
material breach or be in material conflict with any other
agreement or obligation of the Fund or any law or regulation
applicable to it; and
h. As of the close of business on the date of this
Agreement, each Fund is authorized to issue shares of beneficial
interest, and it will initially offer shares, in the authorized
amounts as set forth in Schedule A to this Agreement.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Funds and the review
and comment by the Funds' auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Trust and the
Administrator:
a. Oversee the determination and publication of each
Funds' net asset value in accordance with the Funds' policy as
adopted from time to time by the Board;
b. Oversee the maintenance by each Funds' custodian
of certain books and records of the Funds as required under Rule
31a-1(b) of the 1940 Act;
3
<PAGE>
c. Prepare each Funds' federal, state and local
income tax returns for review by the Funds' independent
accountants and filing by the Funds' treasurer;
d. Review calculation, submit for approval by
officers of each Fund and arrange for payment of each Funds'
expenses;
e. Prepare for review and approval by officers of
each Fund financial information for the Funds' semi-annual and
annual reports, proxy statements and other communications
required or otherwise to be sent to Fund shareholders, and
arrange for the printing and dissemination of such reports and
communications to shareholders;
f. Prepare for review by an officer of and legal
counsel for each Funds the Funds' periodic financial reports
required to be filed with the Securities and Exchange Commission
("SEC") on Form N-SAR and financial information required by Form
N-1A and such other reports, forms or filings as may be mutually
agreed upon;
g. Prepare reports relating to the business and
affairs of each Fund as may be mutually agreed upon and not
otherwise prepared by the Funds' investment adviser, custodian,
legal counsel or independent accountants;
h. Make such reports and recommendations to the Board
concerning the performance of the independent accountants as the
Board may reasonably request;
i. Make such reports and recommendations to the Board
concerning the performance and fees of each Funds' custodian and
transfer and dividend disbursing agent ("Transfer Agent") as the
Board may reasonably request or deems appropriate;
j. Oversee and review calculations of fees paid to
each Funds' investment adviser, custodian and Transfer Agent;
k. Consult with each Funds' officers, independent
accountants, legal counsel, custodian and Transfer Agent in
establishing the accounting policies of the Funds;
l. Respond to, or refer to each Funds' officers or
Transfer Agent, shareholder inquiries relating to the Funds;
m. Provide periodic testing of portfolios to assist
each Funds' investment adviser in complying with Internal Revenue
Code
4
<PAGE>
mandatory qualification requirements, the requirements of the
1940 Act and Fund prospectus limitations as may be mutually
agreed upon;
n. Perform Blue Sky services pursuant to the specific
instructions of the Funds and as detailed in Schedule B to this
Agreement.
The Administrator shall provide the office facilities and the personnel required
by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from each Fund such compensation for
the Administrator's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties
and initially set forth in the Fee Schedule to this Agreement. The fees are
accrued daily and billed monthly and shall be due and payable upon receipt of
the invoice. Upon the termination of this Agreement before the end of any
month, the fee for the part of the month before such termination shall be
prorated according to the proportion which such part bears to the full monthly
period and shall be payable upon the date of termination of this Agreement. In
addition, each Fund shall reimburse the Administrator for its out-of-pocket
costs incurred in connection with this Agreement.
Each Fund agrees promptly to reimburse the Administrator for any
equipment and supplies specially ordered by or for the Funds through the
Administrator and for any other expenses not contemplated by this Agreement that
the Administrator may incur on the Funds' behalf at the Funds' request or with
the Funds' consent.
Each Fund will bear all expenses that are incurred in its operation
and not specifically assumed by the Administrator. Expenses to be borne by the
Funds, include, but are not limited to: organizational expenses; cost of
services of independent accountants and outside legal and tax counsel (including
such counsel's review of the Funds' registration statement, proxy materials,
federal and state tax qualification as a regulated investment company and other
reports and materials prepared by the Administrator under this Agreement); cost
of any services contracted for by the Funds directly from parties other than the
Administrator; cost of trading operations and brokerage fees, commissions and
transfer taxes in connection with the purchase and sale of securities for the
Funds; investment advisory fees; taxes, insurance premiums and other fees and
expenses applicable to its operation; costs incidental to any meetings of
shareholders including, but not limited to, legal and accounting fees, proxy
filing fees and the costs of preparation, printing and mailing of any proxy
materials; costs incidental to Board meetings, including fees and expenses of
Board members; the salary and expenses of any officer, trustee or employee of
the Funds; costs incidental to the preparation, printing and distribution of the
Funds' registration statements and any amendments thereto and shareholder
reports; cost of typesetting and printing of prospectuses; cost of preparation
and filing of the Funds' tax returns, Form N-1A or N-2 and Form N-SAR, and all
notices, registrations and amendments associated with applicable federal and
state tax and securities laws; all applicable registration fees and filing fees
required under federal and state securities laws; fidelity bond and directors'
and officers' liability insurance; and cost of independent pricing services used
in computing the Funds' net asset value.
5
<PAGE>
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to each Fund for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of a Fund for
instructions and may consult with its own legal counsel or outside counsel for
the Fund or the independent accountants for the Fund at the expense of the Fund,
with respect to any matter arising in connection with the services to be
performed by the Administrator under this Agreement. The Administrator shall
not be liable, and shall be indemnified by each Fund, for any action taken or
omitted by it in good faith in reliance upon any such instructions or advice or
upon any paper or document believed by it to be genuine and to have been signed
by the proper person or persons. The Administrator shall not be held to have
notice of any change of authority of any person until receipt of written notice
thereof from the Fund. Nothing in this paragraph shall be construed as imposing
upon the Administrator any obligation to seek such instructions or advice, or to
act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only
such duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall
have no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless solely caused by or resulting from the gross negligence or willful
misconduct of the Administrator, its officers or employees. The Administrator
shall not be liable for any special, indirect, incidental, or consequential
damages of any kind whatsoever (including, without limitation, attorneys' fees)
under any provision of this Agreement or for any such damages arising out of any
act or failure to act hereunder. In any event, the Administrator's liability
under this Agreement shall be limited to its total annual compensation earned
and fees paid hereunder during the preceding twelve months for any liability or
loss suffered by the Funds including, but not limited to, any liability relating
to qualification of the Funds as a regulated investment company or any liability
relating to the Funds' compliance with any federal or state tax or securities
statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action or communication
disruption.
The Funds shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by it in the performance of its duties hereunder,
6
<PAGE>
or as a result of acting upon any instructions reasonably believed by it to have
been duly authorized by the Funds, provided that this indemnification shall not
apply to actions or omissions of the Administrator, its officers or employees in
cases of its or their own gross negligence or willful misconduct.
The indemnification contained herein shall survive the termination of
this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or
in connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Funds or their shareholders or shareholder accounts
and will not disclose the same to any person except at the request or with the
written consent of the Funds.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Each Fund assume full responsibility for complying with all
securities, tax, commodities and other laws, rules and regulations applicable to
it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator agrees that all records which it maintains for the Funds shall
at all times remain the property of the Funds, shall be readily accessible
during normal business hours, and shall be promptly surrendered upon the
termination of the Agreement or otherwise on written request. The Administrator
further agrees that all records which it maintains for the Funds pursuant to
Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by
Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as
provided above. Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Funds are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Funds
from time to time, have no authority to act or represent the Funds in any way or
otherwise be deemed an agent of the Funds.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its execution
and shall remain in full force and effect from the effective date for an
initial term of two years from the effective date and shall automatically
continue in full force and effect after such initial term unless either party
terminates this Agreement by written notice to the other party at least sixty
(60) days prior to the expiration of the initial term. Either party may
terminate this Agreement at any time after the initial term upon at least sixty
(60) days' prior written notice to the other party. Termination of this
Agreement with respect to any given Investment Fund shall in no way affect the
continued validity of this Agreement with respect
7
<PAGE>
to any other Investment Fund. Upon termination of
this Agreement, the Funds shall pay to the Administrator such compensation and
any reimbursable expenses as may be due under the terms hereof as of the date of
such termination, including reasonable out-of-pocket expenses associated with
such termination. This Agreement may be modified or amended from time to time
by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Funds: , Attn: , fax: ;
if to the Administrator: State Street Bank and Trust Company, 1776 Heritage
Drive, AFB-4, North Quincy, Massachusetts 02171, Attn: Fund Administration
Legal Department, fax: 617-537-2578.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without
the prior consent in writing of the other party, except that the Administrator
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
8
<PAGE>
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of
the Funds and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver nor shall it
deprive such party of the right thereafter to insist upon strict adherence to
that term or any term of this Agreement. Any waiver must be in writing signed
by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the
balance of the Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance it shall nevertheless remain
applicable to all other persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
THE CDC FAMILY OF FUNDS
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
STATE STREET BANK AND TRUST COMPANY
By:
-----------------------------------
Name: Kathleen C. Cuocolo
-----------------------------------
Title: Senior Vice President
-----------------------------------
10
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE A
LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES
Investment Fund Authorized Shares
CDC U.S. Core Equity Fund Unlimited
CDC Aggressive Growth Fund Unlimited
CDC Global Independence Fund Unlimited
11
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE B
Notice Filing with
State Securities Administrators
AT THE SPECIFIC DIRECTION OF THE FUNDS, THE ADMINISTRATOR WILL PREPARE REQUIRED
DOCUMENTATION AND MAKE NOTICE FILINGS IN ACCORDANCE WITH THE SECURITIES LAWS OF
EACH JURISDICTION IN WHICH FUND SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO
INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE FUNDS.
THE FUNDS SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (i) OF THOSE
JURISDICTIONS IN WHICH NOTICE FILINGS ARE TO BE SUBMITTED AND (ii) THE NUMBER OF
FUND SHARES TO BE PERMITTED TO BE SOLD IN EACH SUCH JURISDICTION. IN THE EVENT
THAT THE ADMINISTRATOR BECOMES AWARE OF (a) THE SALE OF FUND SHARES IN A
JURISDICTION IN WHICH NO NOTICE FILING HAS BEEN MADE OR (b) THE SALE OF FUND
SHARES IN EXCESS OF THE NUMBER OF FUND SHARES PERMITTED TO BE SOLD IN SUCH
JURISDICTION, THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE FUNDS, AND
IT SHALL BE THE FUNDS' RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE ACTION
AND INSTRUCT THE ADMINISTRATOR WITH RESPECT THERETO.
The Blue Sky services shall consist of the following:
1. Filing of Funds' Initial Notice Filings, as directed
by the Funds;
2. Filing of Funds' renewals and amendments as required;
3. Filing of amendments to the Funds' registration
statement where required;
4. Filing Fund sales reports where required;
5. Payment at the expense of the Funds of all Fund
Notice Filing fees;
6. Filing the Prospectuses and Statements of Additional
Information and any amendments or supplements thereto where
required;
7. Filing of annual reports and proxy statements where
required; and
8. The performance of such additional services as the
Administrator and the Funds may agree upon in writing.
Unless otherwise specified in writing by the Administrator, Blue Sky services by
the Administrator shall not include determining the availability of exemptions
under a jurisdiction's blue sky law. Any such determination shall be made by
the Funds or their legal counsel. In connection with the services described
herein, the Funds shall issue in favor of the Administrator a power of attorney
to submit
12
<PAGE>
Notice Filings on behalf of the Funds, which power of attorney shall be
substantially in the form of Exhibit I attached hereto.
13
<PAGE>
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of ____________, 1999 that the CDC U. S. Core
Equity Fund with principal offices at 9 West 57th Street, New York, New York
(the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST
COMPANY (the "Administrator") with principal offices at 225 Franklin Street,
Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were
itself acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of the Trust in
each jurisdiction in which Trust shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Trust applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgment of the Administrator in connection with the
registration of Trust shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue
Sky Administrator at the Administrator shall have authority to act on
behalf of the Trust with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
14
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of ____________, 1999 that the CDC Aggressive
Equity Fund with principal offices at 9 West 57th Street, New York, New York
(the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST
COMPANY (the "Administrator") with principal offices at 225 Franklin Street,
Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were
itself acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of the Trust in
each jurisdiction in which Trust shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Trust applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgment of the Administrator in connection with the
registration of Trust shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue
Sky Administrator at the Administrator shall have authority to act on
behalf of the Trust with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
15
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of ____________, 1999 that the CDC Global
Independence Fund with principal offices at 9 West 57th Street, New York, New
York (the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST
COMPANY (the "Administrator") with principal offices at 225 Franklin Street,
Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were
itself acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of the Trust in
each jurisdiction in which Trust shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Trust applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgment of the Administrator in connection with the
registration of Trust shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue
Sky Administrator at the Administrator shall have authority to act on
behalf of the Trust with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
16
<PAGE>
CDC MPT+ FUNDS
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
This Shareholder Servicing and Distribution Plan
("Plan") is adopted by CDC MPT+ Funds, a business trust organized
under the laws of State of Delaware (the "Trust"), with respect
to the shares of beneficial interest of each of the U.S. Core
Equity Fund, the Aggressive Equity Fund and the Global
Independence Fund (each, a "Fund") designated as Investor Shares
(the "Shares") pursuant to Rule 12b-1 (the "Rule") under the
Investment Company Act of 1940, as amended (the "1940 Act"),
subject to the following terms and conditions:
SECTION 1. AMOUNT OF PAYMENTS.
The Trust will pay each entity selected from time to
time to act as a distributor of the Shares (the "Distributor"),
for shareholder servicing and distribution services provided to
the Shares, an annual fee of .25% of the value of the average
daily net assets of the Shares. Fees to be paid with respect to
a Fund under this Plan will be calculated daily and paid monthly
by the Fund.
SECTION 2. SERVICES PAYABLE UNDER THE PLAN.
(a) The annual fee described above payable with
respect to the Funds is intended to compensate the Distributor,
or enable the Distributor to compensate other persons ("Service
Providers"), including any other distributor of Shares, for
providing (i) ongoing servicing and/or maintenance of the
accounts of holders of Shares ("Shareholder Services");
(ii) services that are primarily intended to result in, or that
are primarily attributable to, the sale of Shares ("Selling
Services"); and/or (iii) subtransfer agency services,
subaccounting services or administrative services with respect to
Shares ("Administrative Services"). Shareholder Services may
include, among other things, responding to inquiries
of prospective investors regarding the Funds and services to
shareholders not otherwise required to be provided by the Trust's
custodian or any administrator. Selling Services may include,
but are not limited to: the printing and distribution to
prospective investors in Shares of prospectuses and statements of
additional information describing the Funds; the preparation,
including printing, and distribution of sales literature, reports
and media advertisements relating to the Shares; providing
telephone services relating to the Funds; distributing Shares;
costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct
mail promotions and television, radio, newspaper, magazine and
other mass media advertising, and related travel and
entertainment expenses; and costs involved in obtaining whatever
information, analyses and reports with respect to marketing and
promotional activities that the Funds may, from time to time,
<PAGE>
deem advisable. In providing compensation for Selling Services
in accordance with this Plan, the Distributor is expressly
authorized (i) to make, or cause to be made, payments reflecting
an allocation of overhead and other office expenses related to
providing Services; (ii) to make, or cause to be made, payments,
or to provide for the reimbursement of expenses of, persons who
provide support services in connection with the distribution of
Shares including, but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding the
Fund, and providing any other Service; and (iii) to make, or
cause to be made, payments to compensate selected dealers or
other authorized persons for providing any Services.
Administrative Services may include, but are not limited to,
establishing and maintaining accounts and records on behalf of
Trust shareholders; processing purchase, redemption and exchange
transactions in Shares; and other similar services not otherwise
required to be provided by the Trust's transfer agent or any
administrator.
(b) Payments under this Plan are not tied exclusively
to the expenses for shareholder servicing, administration and
distribution expenses actually incurred by the Distributor or any
Service Provider, and the payments may exceed expenses actually
incurred by the Distributor and/or a Service Provider.
Furthermore, any portion of any fee paid to the Distributor or to
any of its affiliates by a Fund or any of their past profits or
other revenue may be used in their sole discretion to provide
services to shareholders of the Trust or to foster the
distribution of Shares.
SECTION 3. ADDITIONAL PAYMENTS.
CDC Investment Management Corporation, the Trust's
investment adviser (the "Investment Adviser"), or its affiliate
may pay certain broker-dealers, financial institutions and other
industry professionals ("Service Organizations") for providing
administration, subaccounting, transfer agency and/or other
services with respect to holders of Investor Shares and certain
recordkeeping organizations a fee (the "Service Fee"). A portion
of the Service Fee may be borne by the Funds. The Service Fee
payable to any one Service Organization is determined based upon
a number of factors, including the nature and quality of service
provided, the operations processing requirements of the
relationship and the standardized fee schedule of the Service
Organization or recordkeeper. Payments by the Funds under this
Plan shall not be made to a Service Organization with respect to
services for which the Service Organization is otherwise
compensated by the Distributor, the Investment Adviser or an
affiliate of either.
Payments may be made to Service Organizations by the
Distributor, the Investment Adviser or an affiliate of either
from any such entity's own resources, which may include a fee it
received from the Funds.
<PAGE>
SECTION 4. APPROVAL OF PLAN.
Neither this Plan nor any related agreements will take
effect until approved by a majority of (a) the outstanding voting
Shares, (b) the full Board of Trustees of the Trust and (c) those
Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of this
Plan or in any agreements related to it (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan and the related agreements.
SECTION 5. CONTINUANCE OF PLAN.
This Plan will continue in effect with respect to the
Shares from year to year so long as its continuance is
specifically approved annually by vote of the Trust's Board of
Trustees in the manner described in Section 4(b) and 4(c) above.
The Trust's Board of Trustees will evaluate the appropriateness
of this Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including the types
and extent of Shareholder Services, Selling Services and
Administrative Services provided by the Distributor and/or
Service Providers and amounts Trustees and/or Service Providers
receive under this Plan.
SECTION 6. TERMINATION.
This Plan may be terminated at any time with respect to
the Shares by vote of a majority of the Independent Trustees or
by a vote of a majority of the outstanding voting Shares.
SECTION 7. AMENDMENTS.
This Plan may not be amended to increase materially the
amount of the fees described in Section 1 above with respect to
the Shares without approval of at least a majority of the
outstanding voting securities. In addition, all material
amendments to this Plan must be approved in the manner described
in Section 4(b) and 4(c) above.
SECTION 8. SELECTION OF CERTAIN TRUSTEES.
While this Plan is in effect with respect to the Trust,
the selection and nomination of the Trust's Trustees who are not
interested persons of the Trust will be committed to the
discretion of the Trustees then in office who are not interested
persons of the Trust.
SECTION 9. WRITTEN REPORTS.
In each year during which this Plan remains in effect
with respect to the Funds, any person authorized to direct the
disposition of monies paid or payable by the Funds pursuant to
the Plan or any related agreement will prepare and furnish to the
<PAGE>
Trust's Board of Trustees, and the Board will review, at least
quarterly, written reports, complying with the requirements of
the Rule, which set out the amounts expended under this Plan and
the purposes for which those expenditures were made.
SECTION 10. PRESERVATION OF MATERIALS.
The Trust will preserve copies of this Plan, any
agreement relating to this Plan and any report made pursuant to
Section 8 above, for a period of not less than six years (the
first two years in an easily accessible place) from the date of
this Plan, the agreement or the report.
SECTION 11. MEANING OF CERTAIN TERMS.
As used in this Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to
have the same meanings that those terms have under the 1940 Act
and the rules and regulations under the 1940 Act, subject to any
exemption that may be granted to the Trust under the 1940 Act by
the Securities and Exchange Commission.
SECTION 12. DATE OF EFFECTIVENESS.
This Plan will become effective as of the date the Fund
first commences its investment operations.
IN WITNESS WHEREOF, the Fund has executed this Plan as
of the _____ day of _______, 1999.
CDC MPT+ FUNDS
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
CDC MPT+ FUNDS
SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENT
Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
Dear Sirs:
CDC MPT+ Funds (the "Trust") confirms its agreement with Funds
Distributor Inc. (the "Distributor"), a corporation organized under the laws of
the Commonwealth of Massachusetts, implementing the terms of the Shareholder
Servicing and Distribution Plan (the "Plan"), adopted by the Trust with respect
to U.S. Core Equity Fund, Aggressive Equity Fund and Global Independence Fund
and any other investment fund offered by the Trust in the future that adopts the
Plan (individually a "Covered Fund") and collectively the "Covered Funds"), each
a series of the Trust, pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"). This Agreement is intended to
describe the shareholder servicing and/or distribution services to be provided
by the Distributor. Those services will be provided as set out below, as
follows:
Section 1. AMOUNT OF PAYMENTS.
(a) The Trust will pay the Distributor a fee in connection with
distribution related services provided with respect to the Investor Shares of a
Covered Fund (the "Distribution Fee") at the annual rate of .25% of the value of
the average daily net assets of the Covered Fund attributable to the Investor
Shares.
(b) The Distribution Fee to be paid with respect to the Covered
Funds under this Agreement will be calculated daily and paid monthly by the
Trust with respect to the Covered Fund's Investor Shares at the annual rates
indicated above.
Section 2. SERVICES PROVIDED UNDER THE AGREEMENT.
The Distribution Fee payable with respect to the Investor Shares of a
Covered Fund are intended to compensate the Distributor, or enable the
Distributor to compensate Service Providers including any Distributor of Shares
of the Covered Fund, for providing services that are primarily intended to
result in, or that are primarily attributable to, the sale of shares of the
covered Fund ("Selling Services"). "Selling Services" include, but are not
limited to: the printing and distribution to prospective investors in the
Covered Fund of prospectuses and statements of additional information that are
used in connection with sales of Investor Shares of the Covered Fund; the
preparation, including printing, and distribution of sales literature and media
advertisements relating to the Investor Shares of the Covered
<PAGE>
Fund; the preparation, including printing, and distribution of sales literature
and media advertisements relating to the Investor Shares; and distributing the
Investor Shares of the Covered Fund. In providing compensation for Selling
Services in accordance with the Plan, the Distributor is expressly authorized
(i) to make, or cause to be made, payments reflecting an allocation of overhead
and other office expenses related to the distribution of the Investor Shares of
a Covered Fund; (ii) to make, or cause to be made, payments, or to provide for
the reimbursement of expenses of, persons who provide support services in
connection with the distribution of the Investor Shares of the Covered Fund; and
(iii) to make, or cause to be made, payments to broker-dealers who have sold
Investor Shares of the Covered Fund.
Section 3. APPROVAL BY TRUSTEES.
This Agreement will not take effect with respect to any Class of a
Covered Fund until approved by a majority vote of (a) the full Board of Trustees
of the Trust and (b) those Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or in this Agreement (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Agreement.
Section 4. CONTINUANCE OF AGREEMENT.
This Agreement will continue in effect with respect to a Covered Fund
from year to year so long as its continuance is specifically approved annually
by vote of the Trust's Board of Trustees in the manner described in Section 3
above.
Section 5. TERMINATION
This Agreement may be terminated with respect to any Covered Fund at any time,
without the payment of any penalty, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities of the
Investor Class on not more than 60 days' written notice to the Distributor.
This Agreement will terminate automatically in the event of its assignment.
<PAGE>
Section 6. SELECTION OF CERTAIN TRUSTEES.
While this Agreement is in effect with respect to any Covered Fund,
the selection and nomination of the Trust's Trustees who are not interested
persons of the Trust will be committed to the discretion of the Trustees then in
office who are not interested persons of the Trust.
Section 7. WRITTEN REPORTS.
The Distributor agrees that, in each year during which this Agreement
remains in effect with respect to a Covered Fund, the Distributor will prepare
and furnish to the Trust's Board of Trustees, and the Board will review, at
least quarterly, written reports, complying with the requirements of the Rule,
that set out the amounts expended under this Agreement and the purposes for
which those expenditures were made.
Section 8. PRESERVATION OF MATERIALS.
The Trust will preserve copies of this Agreement and any report made
pursuant to Section 7 above, for a period of not less than six years (the first
two years in an easily accessible place) from the date of this Agreement.
Section 9. MEANING OF CERTAIN TERMS.
As used in this agreement the terms "interested person" and "majority
of the outstanding voting securities" will be deemed to have the same meaning
that those terms have under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Trust under the
1940 Act by the Securities and Exchange Commission.
SECTION 10. FILING OF DECLARATION OF TRUST.
The Trust represents that a copy of its Declaration of Trust, dated as
of October 8, 1998, as amended from time to time (the "Declaration of Trust"),
is on file with the Secretary of State of Delaware.
Section 11. LIMITATION OF LIABILITY.
The obligations of the Trust under this Agreement will not be binding
upon any of the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are binding
only upon the assets and property of the Trust, as provided in the Declaration
of Trust. The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust, and signed by an authorized officer of the Trust,
acting as such, and neither the authorization by the Trustees nor the execution
and delivery by the officer will be deemed to have been made by any of them
<PAGE>
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust.
No Covered Fund will be liable for any claims against any other Covered Fund.
Section 12. EFFECTIVE DATE.
This Agreement has been executed by the Trust with respect to the
Covered Funds as of ____ __, 1999 and will become effective with respect to the
Investor Class of each Covered Fund as of the date on which interests in the
Investor Class are first offered to or held by the public.
If the terms and conditions described above are in accordance with
your understanding, kindly indicate your acceptance of this Agreement by signing
and returning to us the enclosed copy of this Agreement.
Very truly yours,
CDC MPT+ FUNDS
By:
-------------------------------
Name:
Title:
Accepted:
FUNDS DISTRIBUTOR INC.
By:
----------------------------------
Name:
Title:
<PAGE>
CDC MPT+ FUNDS
RULE 18f-3 PLAN
Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the Board of an investment company
desiring to offer multiple classes pursuant to the Rule adopt a plan setting
forth the separate arrangement and expense allocation of each class (a "Class"),
and any related conversion features or exchange privileges. The differences in
distribution arrangements and expenses among these classes of shares, and the
exchange features of each class, are set forth below in this Plan, which is
subject to change, to the extent permitted by law and by the governing documents
of CDC MPT+ Funds that adopts this Plan (the "Trust"), by action of the
governing Board of the Trust.
The governing Board, including a majority of the non-interested Board
members, of the Trust, or series thereof, which desires to offer multiple
classes has determined that the following Plan is in the best interests of each
class individually and the Trust as a whole:
1. CLASS DESIGNATION. Shares of the Trust or series of the Trust shall be
divided into Investor Shares and Institutional Shares.
2. DIFFERENCES IN DISTRIBUTION ARRANGEMENTS.
INVESTOR SHARES. Investor Shares are sold to the general public and are
subject to an annual distribution fee in accordance with a Shareholder Servicing
and Distribution Plan adopted pursuant to Rule 12b-1 under the 1940 Act, under
which the Trust pays 0.25% per annum for services under that Plan. Specified
minimum initial and subsequent purchase amounts are applicable to the Investor
Shares. Investor Shares are available through certain organizations that may or
may not charge their customers administrative charges or other direct fees in
connection with investing in Investor Shares. With respect to Investor Shares,
the Trust may bear the fees of certain financial institutions, broker-dealers
and recordkeeping organizations based on the value of accounts maintained by
such organizations in Investor Shares of the Trust.
INSTITUTIONAL SHARES. Institutional Shares are available for purchase by
financial institutions, retirement plans, broker-dealers, depository
institutions and other financial intermediaries (collectively, "Institutions").
Payments may be made by the distributor of the Trust's Shares (the
"Distributor") or an affiliate thereof from time to time to Institutions for
providing distribution, administrative, accounting and/or other services with
respect to Institutional Shares.
<PAGE>
GENERAL. CDC Investment Management Corporation, the Trust's investment
adviser (the "Investment Adviser") or an affiliate of either may pay certain
Trust transfer agent fees and expenses related to accounts of customers of
organizations that have entered into agreements with the Distributor, or the
Trust. An organization may use a portion of the fees paid pursuant to the Plan
to compensate the Trust's custodian or transfer agent for costs related to
accounts of customers of the organization that hold Investor Shares or
Institutional Shares.
Payments may be made to organizations, the customers or clients of which
invest in Investor Shares or Institutional Shares, by the Distributor, the
Investment Adviser or an affiliate of either from such entity's own resources,
which may include a fee it receives from the Trust.
3. EXPENSE ALLOCATION. The following expenses shall be allocated, to the
extent practicable, on a Class-by-Class basis: (a) fees under the Shareholder
Servicing and Distribution Plan or Distribution Plan, as applicable; and (b)
expenses incurred in connection with shareholders' meetings as a result of
issues relating to a specific Class.
The distribution, administrative and shareholder servicing fees and other
expenses listed above which are attributable to a particular Class are charged
directly to the net assets of the particular Class and, thus, are borne on a pro
rata basis by the outstanding shares of that Class; PROVIDED, HOWEVER, that
money market funds and other funds making daily distributions of their net
investment income may allocate these items to each share regardless of class or
on the basis of relative net assets (settled shares), applied in each case
consistently.
4. CONVERSION FEATURES. No Class shall be subject to any automatic
conversion feature.
5. EXCHANGE PRIVILEGES. Shares of a Class shall be exchangeable only for
(a) shares of the same Class of other investment companies or series thereof
advised by the Investment Adviser that are part of the same group of investment
companies and (b) shares of certain other investment companies specified from
time to time.
6. ADDITIONAL INFORMATION. This Plan is qualified by and subject to the
terms of the then current prospectus for the applicable Class; PROVIDED,
HOWEVER, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the Trust's multiple class structure.
Dated: January 7, 1999
