<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1999
Registration No. 33-
Registration No. 811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. ---
Post-Effective Amendment No. ---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. ---
---
(Check appropriate box or boxes)
DLJdirect MUTUAL FUNDS
(Exact name of registrant as specified in charter)
277 Park Avenue
New York, New York 10172
(Address of Principal Executive Offices)
(800) 825-5723
(Registrant's Telephone Number, Including Area Code)
Brian A. Kammerer
One Pershing Plaza, 10th Floor
Jersey City, NJ 07399
(Name and Address of Agent for Service)
Copy to:
Philip H. Harris, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Approximate date of proposed public offering:
As soon as practicable after the effective date of this
Registration Statement.
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Pursuant to the provisions of Rule 24f-2(a) under the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of securities
under the Securities Act of 1933. The Registrant will file a Rule 24f-2 Notice
within six months after the close of its current fiscal year.
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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 the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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PART A
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Item 1. Front and Back Cover Pages.................................... Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks
and Performance............................................... The Funds' Risk/Return Summary
Item 3. Risk/Return Summary: Fee Table............................... Summary of Fund Expenses
Item 4. Investment Objectives, Principal Investment
Strategies and Related Risks.................................. The Funds' Investment Objectives
and Policies
Item 5. Management's Discussion of Fund Performance................... Not Applicable
Item 6. Management, Organization, and Capital Structure............... Fund Management
Item 7. Shareholder Information....................................... Purchases, Redemption and Share-
holder Services, Other Shareholder
Information, Taxes
Item 8. Distribution Arrangements..................................... Dividend and Distribution Informa-
tion
Item 9. Financial Highlights Information.............................. Not applicable
PART B
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Item 10. Cover Page and Table of Contents.............................. Cover Page
Item 11. Fund History.................................................. Fund History
Item 12. Description of the Fund and Its Investments and Risks......... Investment Policies and Restric-
tions
Item 13. Management of the Fund ....................................... Management
Item 14. Control Persons and Principal Holders of Securities........... Shares of Beneficial Interest
Item 15. Investment Advisory and Other Services........................ Management, Expenses of the
Funds
Item 16. Brokerage Allocation and Other Practices...................... Expenses of the Funds, Portfolio
Transactions
Item 17. Capital Stock and Other Securities............................ General Information, Purchases,
Redemptions, Exchanges and Sys-
tematic Withdrawal Plan
Item 18. Purchase, Redemption and Pricing of Shares.................... Purchases, Redemptions, Ex-
changes and Systematic With-
drawal Plan, Net Asset Value
Item 19. Taxation of the Fund.......................................... Dividends, Distributions and Taxes
Item 20. Underwriters.................................................. Expenses of the Funds
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
N-1A ITEM NO. Location
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Item 21. Calculation of Performance Data............................... Not applicable
Item 22. Financial Statements.......................................... Not Applicable
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
3
<PAGE>
PROSPECTUS NOVEMBER 1, 1999
DLJdirect
Mutual Funds
DLJdirect Growth Fund DLJdirect Technology Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A
DEPOSIT OF ANY BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
[LOGO]
DLJ direct
DLJdirect Inc.
Member NASD and SIPC
A Donaldson, Lufkin & Jenrette Company
<PAGE>
DLJdirect Mutual Funds
Prospectus
November 1, 1999
DLJdirect Growth Fund
DLJdirect Technology Fund
This prospectus provides information about the Funds. Each Fund has a separate
investment objective and portfolio of investments. The Securities and Exchange
Commission has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense. An investment in any of the Funds is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
TABLE OF CONTENTS
The DLJdirect Funds' Risk Return Summary
Summary of DLJdirect Fund Expenses
Annual Fund Operating Expenses
Purchases, Redemptions and Shareholder Services
The DLJdirect Funds' Investment Objectives and Policies
Additional Information on Investment Policies and Risks
Fund Management
Distribution Charges
Dividend and Distribution Information
Taxes
For More Information
<PAGE>
This part of the prospectus summarizes each Fund's investment objective,
principal investment strategies and principal risks. More information about the
DLJdirect Funds is contained in "The DLJdirect Funds' Investment Objectives and
Policies" and "Additional Information on Investment Policies and Risks." Please
read the entire prospectus carefully before investing and save it for future
reference.
THE DLJdirect FUNDS' RISK/RETURN SUMMARY
THE DLJdirect GROWTH FUND
The DLJdirect GROWTH FUND's investment objective is long-term growth of capital.
The Fund seeks to achieve this objective by investing in equity securities of a
limited number of large, carefully selected companies that are likely to achieve
superior growth. The Fund intends to hold securities of approximately 50-60
companies, which may fluctuate depending on the Adviser's view of market
conditions. The Fund seeks to achieve superior performance as compared to the US
domestic growth fund peer universe. Growth companies are typically characterized
by higher price-to-earnings and price-to-book ratios, lower dividend yields,
higher betas, and higher historical and predicted earnings.
Like any investment, an investment in the Growth Fund is subject to risk, and
you could lose money. While DLJ Investment Management Corp. ("DLJIM"or the
"Adviser"), believes that the investments it selects will experience long-term
appreciation, their value could decline. The Fund is subject to risks that
affect equity securities markets in general, such as general economic conditions
and adverse changes (generally increases) in interest rates. Because the Fund
normally invests in a smaller number of securities than many other equity funds,
an investment in this Fund has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value. These and other factors could adversely affect your
investment.
The DLJdirect TECHNOLOGY FUND's investment objective is growth of capital. The
Fund seeks to achieve this objective by investing in a broad number of
industries that comprise the U.S. domestic technology sector. The Fund seeks to
create a blend of stocks like those in the Hambrecht and Quist Technology and
Internet Indices. The Hambrecht and Quist Technology Index is a
capitalization-weighted index of 250 companies that represent the computer
hardware, computer software, communications, semiconductor and services sectors.
The Hambrecht and Quist Internet Index is a capitalization-weighted index
comprised of 60 companies representing the commerce technologies and services,
communication technologies and services, content services, internet software,
and security sectors.
Like any investment, an investment in the DLJdirect Technology Fund is subject
to risk, and you could lose money. While the Fund seeks investments that will
appreciate in value, the Adviser could select securities that will decline in
value and provide no income. Technology stocks, especially those of smaller,
less-seasoned companies tend to be more volatile than the overall stock market.
The Fund is also subject to risks that affect equity securities markets in
general, such as general economic conditions and adverse changes (generally
increases) in interest rates. These and other factors could adversely affect
your investment. In addition, the Technology Fund is a non-diversified fund.
This means that this Fund may invest a relatively high percentage of its assets
in a limited number of industries and/or issuers. Its investment return is more
likely to be impacted by changes in the market value and returns of any one
issuer.
The DLJdirect Funds are new Funds and therefore do not have any performance
history.
SUMMARY OF DLJdirect FUND EXPENSES
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the DLJdirect Funds.
<TABLE>
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Shareholder fees:
(These fees are paid directly from your investment.)
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Maximum sales charge (load) imposed on purchases NONE
(as a percentage of offering price)
Maximum sales charge (load) imposed on NONE
reinvested dividends (as a percentage of offering price)
Maximum deferred sales charge (as a percentage of NONE
original purchase price or redemption proceeds, as applicable)
Redemption Fees [to come]
Exchange Fees NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
These examples help you compare the cost of investing in the Funds with the cost
of investing in other mutual funds. They assume that you invest $10,000 in a
Fund for the periods indicated and then sell all of your shares at the end of
those periods. The examples also assume that your investment has a 5% return
each year and that the Fund's operating expenses would remain the same. The
Adviser has made a written undertaking, to limit the Total Annual Fund Operating
Expenses of each Fund through October 31, 2000. Accordingly, the After 1 Year
Example and the first year in the After 3 Years Examples reflect the waived
fees. Prior to the date of this prospectus, the Funds have not commenced
operations and therefore the percentages referenced below are estimates.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<S> <C> <C> <C>
Annual Fund Operating Expenses Examples
Expenses that are deducted from Fund assets)
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DLJdirect Growth Fund After 1 Year $121
Management Fee .75% After 3 Years $422
Distribution (12b-1) and Service Fees(a) .25%
Other Expenses (b) .40%
Total Annual Fund Operating Expenses(b) 1.40%
Waived Fees (b,c) (.21%)
Total Expenses less Waived Fees 1.19%
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DLJdirect Technology Fund After 1 Year $142
Management Fee .88% After 3 Years $470
Distribution (12b-1) and Service Fees(a) .25%
Other Expenses (b) .40%
Total Annual Fund Operating Expenses (b) 1.53%
Waived Fees (b,c) (.14%)
Total Expenses less Waived Fees 1.39%
</TABLE>
(a) The maximum allowable amount payable for distributing shares is .50 of 1%
of the average daily net assets of each Fund. The Board of Trustees has
currently limited the amount payable to .25 of 1% of the average daily net
assets of each Fund.
(b) Prior to the date of this prospectus, the Funds have not commenced
operations. Accordingly, these percentages are estimates.
(c) The Adviser has undertaken, in writing, to limit Total Expenses of the
Growth Fund and Technology Fund to 1.19% and 1.39% per year, respectively.
This arrangement will remain in place at least until October 31, 2000 and
may be extended thereafter at the discretion of the Adviser.
PURCHASES, REDEMPTIONS AND SHAREHOLDER SERVICES
<PAGE>
Purchases. By first establishing a DLJdirect Investment Account ("DLJdirect
Account") clients of DLJdirect, Inc. ("DLJdirect") are provided with three
separate ways to purchase and or redeem shares of the DLJdirect Mutual Funds.
1. Our website: www.DLJdirect.com;
2. Our toll-free touch tone telephone line: Trade Talk tm at
1.888.999.7236; or
3. Our toll free investor trading line: at 1.800.825.5873
When you place your trade online, you can enter the Fund's symbol or
the first few letters of the Fund's name. Prior to placing an order you
may need to have enough money in your DLJdirect Account or the purchase
request may not be accepted. Investment in the Funds are offered on a
continuous basis at the net asset value per share of each Fund without
the imposition of any sales charges. See calculation of Net Asset Value
on this page. In addition, shares of the Funds purchased through a
DLJdirect Account are available under our No-Transaction-Fee program.
However, shares of the Funds redeemed or exchanged within 6 months of
the purchase date or deposit will incur a transaction fee.
Share certificates will not be issued for full or fractional shares of
the Funds. DLJdirect reserves the right to reject any initial or
subsequent investment in its sole discretion.
Further information is available by contacting our shareholder
services representatives at 1-800-TALK-723 or via email at
[email protected].
Important note: Never place orders via electronic mail! They will not
be accepted.
Redemptions. The value of shares redeemed may be more or less than the cost of
such shares to the shareholder. This depends on the value of the Fund's
portfolio securities at the time of such redemption or repurchase.
Shareholders that have Fund balances of less than $250 may be requested to
increase their holdings to at least $250 within 60 days. If you fail to do so,
DLJdirect reserves the right to liquidate the Fund Account and send the proceeds
to you. IRAs and other qualified retirement accounts are not subject to
mandatory redemption. DLJdirect will not redeem involuntarily any Fund with an
aggregate balance of less than $250 based solely on the market movement of the
Fund's shares.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after shares are tendered in
proper form for redemption, except for any period when the New York Stock
Exchange is closed or restricted. Generally, redemptions will be made in cash or
by check.
Exchanges. You may exchange holdings in one DLJdirect Mutual Fund for holdings
in another DLJdirect Mutual Fund. (The exchange privilege for our Funds is
available only in states in which shares of the Funds may be legally sold.)
Exchanges are made on the basis of each Fund's relative NAV per share next
computed after receipt of an order for the exchange.
The Funds impose no separate charge for exchanges. However, investors may be
charged a transaction fee on exchanges made through DLJdirect.
The exchange privilege is intended to provide you with a convenient way to
switch your investments when your objectives or perceived market conditions
suggest a change. DLJdirect reserves the right to reject any exchange request or
otherwise modify, restrict or terminate the exchange privilege at any time upon
60 days notice. The exchange privilege is not intended to enable shareholders to
play short-term swings in the stock market by engaging in frequent transactions
in and out of the Funds. Shareholders who in the opinion of the Adviser engage
in such frequent transactions may be prohibited or restricted from placing
future exchange orders. You should be aware that for federal income tax purposes
an exchange is treated as a sale and a purchase of shares which may result in
recognition of a gain or loss.
<PAGE>
Timing of Redemptions and Exchanges. If a redemption or transfer order in a
DLJdirect Account is received on a Fund Business Day prior to the close of the
New York Stock Exchange (generally 4:00p.m.), the proceeds will be transferred
as soon as possible. Shares within a DLJdirect Account will be priced that Fund
Business Day. If the redemption or transfer order is received after the close of
the New York Stock Exchange, the shares of the Fund will be priced on the next
Fund Business Day. The proceeds will be transferred as soon as possible after
such pricing in accordance with industry settlement procedures.
The DLJdirect Funds do not permit market-timing. Do not invest in these Funds if
you are a market-timer. DLJdirect reserves the right to impose short-term
redemption fees to discourage market-timing in the Funds.
[side bar]
Net Asset Value - Net asset value per share (or "NAV") is determined
separately for each Fund by taking the total assets of a Fund and subtracting
its total liabilities and then dividing the difference by the total number of
shares outstanding. The NAV is determined at the close of the New York Stock
Exchange each day that the New York Stock Exchange is open for trading. The
price at which a purchase or redemption is effected is based on the next
calculation of NAV after the order is placed. Shares of the Funds are valued at
their current market value determined on the basis of market quotations or, if
such quotations were not readily available, such other method as the Trustees of
the Funds believe in good faith would accurately reflect their fair value.
[side bar]
The investment objectives and policies of each Fund are set forth below. There
can be, of course, no assurance that either of the Funds will achieve its
investment objective. The Funds' investment objectives are fundamental policies
<PAGE>
that cannot be changed without the approval of the shareholders of the
applicable Fund. The Board of Trustees of a Fund may change non-fundamental
policies without shareholder approval.
THE DLJdirect FUNDS' INVESTMENT OBJECTIVES AND POLICIES
DLJdirect GROWTH FUND
Goal: The investment objective of the Growth Fund is long-term growth of
capital. Investments are made based on their potential for superior growth.
Strategy: The Fund seeks to achieve this objective by investing in equity
securities of a limited number of large, carefully selected companies that are
likely to achieve superior growth. Unlike most equity funds, the Fund focuses on
a relatively small number of intensely researched companies. The Fund seeks to
achieve superior performance as compared to the US domestic growth fund peer
universe. Growth companies are typically characterized by higher
price-to-earnings and price-to-book ratios, lower dividend yields, higher betas
and higher historical and predicted earnings. This is viewed as a type of
fundamental analysis.
The Adviser applies extensive research that has been conducted primarily by
research analysts employed by Donaldson Lufkin & Jenrette Securities Corporation
("DLJSC"), on the growth prospects of stocks that are considered for the Fund's
portfolio. Unlike many equity funds, the Growth Fund seeks to limit the number
of Fund holdings to companies that offer the highest potential for capital
appreciation. The Fund intends to hold securities of approximately 50-60
companies, which may fluctuate depending on the Adviser's view of market
conditions. The growth companies tend to be concentrated in the technology,
health care, consumer, financial, telecommunications and commercial services
sectors. By emphasizing DLJSC research in the portfolio stock selection, this
Fund will try to deliver superior performance as compared to the US domestic
growth fund peer universe. Other factors considered in the selection of
securities include the economic and political outlook, the value of a particular
security relative to another security, trends in the determinants of corporate
profits, and management capability and practices. (See "Risks for the Funds" on
page .)
Investments: Under normal circumstances, the Growth Fund invests at least 85% of
its total assets in equity securities in U.S. companies that the Adviser
believes have above-average long-term capital appreciation potential. The
Adviser expects that the average market capitalization of companies in the
portfolio to be in the range of companies that are included in the Standard
&Poors's 500 Index. The Fund may invest in both listed and unlisted securities
and may also:
invest up to 10% of the value of its total assets in non-U.S. securities;
invest no more than 15% of its net assets in restricted securities or other
instruments with no ready market;
invest up to 5% of its total assets in warrants;
attempt to minimize the effect of a market decline on the value of its
securities, subject to market conditions, by writing covered call options
on securities or stock indices (See "Additional Information on Investment
Policies and Risks."); and
invest in investment-grade fixed income securities, including bonds,
debentures, notes and money market instruments such as commercial paper and
bankers acceptances and other financial instruments.
[side bar for the Funds]
Risks. Like any investment, an investment in the Growth Fund or Technology Fund
is subject to risk and you could lose money. While the Funds seek investments
that will appreciate in value , the value of the securities could decline and
provide no income. The Funds are subject to market risks that affect equity
securities markets in general, such as general economic conditions and adverse
changes in interest rates (generally increases). If the value of equity markets
in general declines, you can expect the value of your investment in the Funds to
decline, possibly to a greater extent than the decline in equity markets
generally. The Funds are also subject to investment risk, which is the
possibility that the returns from a specific type of stock will perform worse
than the overall stock market or other market sectors. Other general risks
include the following:
<PAGE>
The Growth Fund will limit the number of companies in its portfolio. Changes in
the value of one security may have a greater effect on the Fund's net asset
value than other U.S. domestic growth funds with a more diversified portfolio.
The Technology Fund invests in technology companies. Certain factors or market
conditions that effect technology companies could have an impact on the Fund's
net asset value. Stocks of small, less seasoned companies, tend to be more
volatile than the overall market. In addition, the Technology Fund is a
non-diversified fund. This means that this Fund may invest a relatively high
percentage of its assets in a limited number of industries and/or issuers. Its
investment return is more likely to be impacted by changes in the market value
and returns of any one issuer.
In addition, each Fund may from time to time take temporary defensive positions
that are inconsistent with a Fund's investment strategies in attempting to
respond to adverse market conditions. If a Fund takes a temporary defensive
position, the Fund may not achieve its investment objective.
[end side bar]
DLJdirect TECHNOLOGY FUND
Goal: The DLJdirect TECHNOLOGY FUND'S investment objective is growth of capital.
Strategy: The Technology Fund seeks to achieve this objective by investing in a
broad number of industries that comprise the U.S. domestic technology sector.
The Fund seeks to create a blend of stocks like those in the Hambrecht and Quist
Technology and Internet Indices. The Hambrecht and Quist Technology Index is a
capitalization-weighted index of 250 companies that represent the computer
hardware, computer software, communications, semiconductor and services sectors.
The Hambrecht and Quist Internet Index is a capitalization-weighted index
comprised of 60 companies representing the commerce technologies and services,
communication technologies and services, content services, internet software,
and security sectors. The Technology Fund may, however, invest a relatively high
percentage of its assets in only a few industries and/or a limited number of
issues and therefore is considered a non-diversified investment company.
Investments: The Technology Fund invests in common stock, preferred stock and
securities convertible into common stock. The Fund will normally invest 80% of
its assets in securities of companies that are expected to benefit from
technological advances and improvements. The technology sector includes
companies that use technology extensively in the development of new or improved
products or processes. The types of companies include computer hardware,
computer software, communications, semi-conductor and services sectors. The Fund
may invest in listed and unlisted securities, well-known and established
companies and in new and unseasoned companies.
To minimize the effect of a market decline in the value of its securities, the
Fund may, depending on market conditions, write covered call options on
securities or stock indices. The Fund may invest up to 10% of its assets in
non-U.S. securities and up to 15% of its assets in restricted securities or
other instruments with no ready market. The Fund may also invest in
investment-grade fixed income securities, including bonds, debentures, notes and
money market instruments such as commercial paper and bankers-acceptances and
other financial instruments. For additional information on the use, risks and
costs of the above referenced policies and practices, see "Additional
Information on Investment Policies and Risks."
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISKS
The following general investment policies and risks supplement those set forth
above for each Fund.
<PAGE>
Equity Securities. "Equity securities" include common stock, preferred stock
(including convertible preferred stock), bonds convertible into common or
preferred stock, rights and warrants, equity interests in trusts and depositary
receipts for equity securities.
Convertible Securities. A "convertible security" is a bond or preferred stock
which may be converted at a stated price within a specified period of time into
a certain quantity of the common or preferred stock of the same or a different
issuer. Convertible securities have characteristics of both bonds and equity
securities. Like a bond, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in market value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the underlying stock. The price of a
convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines.
Warrants. A "warrant" gives the holder thereof the right to buy equity
securities at a specific price during a specified period of time. Warrants tend
to be more volatile than the underlying security, and if at a warrant's
expiration date the security is trading at a price below the price set in the
warrant, the warrant will expire worthless. Conversely, if at the expiration
date the underlying security is trading at a price higher than the price set in
the warrant, the holder of the warrant can acquire the stock at a price below
its market value.
Investment-Grade Debt Securities. Each Fund may invest in debt securities of
investment-grade quality. "Investment-grade debt securities" are debt securities
rated in one of the four highest rating categories by a nationally recognized
statistical rating organization. Investment-grade debt securities may also
include debt securities believed by the Adviser (on the basis of criteria
believed by the Adviser to be comparable to that applied by such rating
agencies) to be of comparable quality to debt securities so rated by the rating
agencies.
Debt securities rated Baa or higher by Moody's or BBB or higher by S&P are
investment-grade securities. Securities rated BBB are regarded by S&P as having
an adequate capacity to pay interest and repay principal; while such securities
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely, in the opinion of S&P, to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Securities rated Baa by Moody's are considered to be medium-grade obligations.
These securities are neither highly protected nor poorly secured. The rating
organization determines that interest payments and principal security appear to
be adequate for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time. For a more
complete description of Moody's and S&P's ratings, see the Appendix to the
Statement of Additional Information of the Funds.
The investment-grade limitations referenced for each Fund are applicable at the
time of initial investment and a Fund may determine to retain securities of
issuers which have had their credit characteristics downgraded.
Equity-Linked Debt Securities. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that are linked
to the performance of a specified index of equity securities. The interest or
principal payments may be significantly greater or less than payment obligations
for other types of debt securities. Adverse changes in equity securities indices
and other adverse changes in the securities markets may reduce payments made
under, and/or the principal of, equity-linked debt securities held by a Fund. As
with any debt securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. A Fund's ability to
dispose of equity-linked debt securities will depend on the availability of
liquid markets for such securities. Investment in equity-linked debt securities
may be considered to be speculative.
Repurchase Agreements. The Funds may enter into " repurchase agreements" with
member banks of the Federal Reserve System or "primary dealers" (as designated
by the Federal Reserve Bank of New York) in such securities. Repurchase
agreements permit a Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
Adviser requires continual maintenance of collateral with the Fund's custodian
in an amount equal to, or in excess of, the market value of the securities that
are the subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, a Fund might suffer a loss to the
<PAGE>
extent that the proceeds from the sale of the collateral are less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings,
the Fund might be delayed in selling the collateral.
Non-U.S. Securities. Each Fund may invest in "non-U.S. securities." There are
additional risks involved in investing in non-U.S. securities. These risks
include those resulting from fluctuations in currency exchange rates,
revaluation of currencies, and the possible imposition of currency exchange
blockages. In addition, there are risks associated with future adverse political
and economic developments and a limited availability of public information
concerning issuers. Non-U.S. issuers typically are subject to different
accounting, auditing and financial reporting standards. Securities of many
non-U.S. companies may be less liquid and their prices more volatile than those
of domestic companies. There is the possibility of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal of
funds or other assets of a non-U.S. issuer, including the withholding of
dividends.
Non-U.S. securities may be subject to taxes imposed by foreign governments that
would reduce the net yield on such securities. Investment in non-U.S. securities
may result in higher expenses due to the cost of converting foreign currency
into U.S. dollars, the payment of fixed brokerage commissions on foreign
exchanges (which generally are higher than commissions on U.S. exchanges) and
the expense of maintaining securities with non-U.S. custodians.
Investments in non-U.S. securities include securities issued by European
issuers. On January 1, 1999, the countries participating in the European
Monetary Union ("EMU") implemented a new currency unit, the Euro, which is
reshaping financial markets, banking systems and monetary policies in Europe and
other parts of the world. Although it is not possible to predict the eventual
impact of the Euro implementation plan on the Funds, the transition to the Euro
may change the economic environment and behavior of investors, particularly in
European markets. Certain European investments may be subject to additional
risks as a result of this conversion. These risks include adverse tax and
accounting consequences, as well as difficulty in processing transactions. The
Funds are aware of such potential problems and are coordinating ways to prevent
or alleviate their adverse impact on the Funds.
Depositary Receipts. American Depositary Receipts ("ADRs") are receipts issued
by a U.S. bank or trust company for the shares of a non-U.S. based corporation
held in the vault of a U.S. bank and entitling the shareholder to all dividends
and capital gains. ADRs may not necessarily be denominated in U.S. dollars,
rather they may be denominated in the currency of the underlying issuers'
country. Issuers of the stock of unsponsored depositary receipts are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the depositary receipts. For purposes of determining the country of issuance,
investments in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets. Some examples of illiquid
securities are the following:
1. direct placements or other securities that are subject to legal or
contractual restrictions on resale or for which there is no readily
available market
2. over-the-counter options
3. repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alternatively, a Fund may not
be able to readily sell the securities. The Adviser will monitor the liquidity
of a Fund's investments in illiquid securities. Generally, less public
information is available about the issuers of these securities than about
companies whose securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act of 1933 requiring an
issuer to register the sale of securities with a governmental agency or imposing
legal restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of non-publicly traded foreign securities. Rule 144A
securities will not be treated as "illiquid" for purposes of this limit on
investments.
Investment Companies. The Funds may invest a limited amount of their assets in
shares of other investment companies which have similar objectives to the Funds'
permitted investments. Investments in other mutual funds
<PAGE>
may involve the payment of substantial premiums above the value of such
investment companies' portfolio securities. In addition, such investments are
subject to limitations under the Investment Company Act of 1940 ("1940 Act") and
market availability.
Options. A call option is a contract that gives the holder the right to buy from
the seller the security underlying the call option at a pre-determined price
while a put option is a contract that gives the buyer the right to require the
seller to purchase the security underlying the put option at a pre-determined
price.
The Funds may write covered call options on individual securities or stock
indices. For the Funds, this practice will only be used to minimize the effect
of a market decline in the value of securities in their respective portfolios.
We cannot guarantee that, should a Fund seek to enter into such transactions, it
could do so at all or on terms that are acceptable. The Funds may purchase and
sell put and call options on securities, currencies and financial indices that
are traded on U.S. or non-U.S. securities exchanges or in the over-the-counter
market. (Options traded in the over-the-counter market are considered illiquid
investments.)
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund may purchase options on futures contracts written or purchased by a Fund
that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 30% of its total assets.
Year 2000 Readiness Disclosure. Many computer systems used today cannot tell the
year 2000 from the year 1900 because of the way dates are encoded. This could be
a problem when the year 2000 arrives and could affect securities trades,
interest and dividend payments, pricing and accounting services. Although the
Funds can't guarantee that this won't be a problem, the Funds' service providers
have been working on adapting their computer systems. They expect that their
systems, and the systems of their service providers, will be ready for the new
millennium.
In addition, issuers of securities may also encounter Year 2000 problems. If
these problems are significant and are not corrected, the securities markets in
general could decline and the issuers that have Year 2000 problems could see the
prices for their securities decline. If a Fund owns securities of an issuer with
a Year 2000 problem or securities markets in general decline, the NAV of the
Fund would likely decline and you could lose money.
FUND MANAGEMENT
DLJ Investment Management Corp., a Delaware corporation with principal offices
at 277 Park Avenue, New York, New York 10172 ("DLJIM"), serves as the investment
adviser for the Funds. DLJIM is a subsidiary of Donaldson, Lufkin & Jenrette
Securities Corporation, which is a member of the New York Stock Exchange and a
wholly-owned
<PAGE>
subsidiary of Donaldson, Lufkin & Jenrette, Inc. ("DLJ") a major international
supplier of financial services. DLJ is an independently operated, indirect
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP ("AXA"), a member of a large French insurance group. AXA is
indirectly controlled by a group of four French mutual insurance companies.
The following individual is responsible for management of the DLJdirect Funds.
Hugh M. Neuburger, Ph.D., is the primary portfolio manager of the Growth Fund
and Technology Fund. He has also served as the primary manager of the DLJ
Winthrop Growth Fund and co-portfolio manager of the DLJ Winthrop Growth and
Income Fund and the DLJ Winthrop Small Company Value Fund since August 1995. Mr.
Neuburger is Managing Director and Director of Quantitative Analysis of the
Adviser and has been an employee of an affiliate of DLJIM since March 1995.
Prior to March 1995, Mr. Neuburger was the president of Hugh M. Neuburger, Inc.,
a consulting firm providing domestic and global tactical asset allocation advice
and other consulting services to large corporate and state pension plans. From
1986 through 1991, Mr. Neuburger was Managing Director of Matrix Capital
Management, an investment management firm. Prior to 1986, Mr. Neuburger managed
asset allocation portfolios for Prudential Insurance Company of America.
DISTRIBUTION CHARGES
Each Fund has adopted 12b-1 Plans pursuant to the rules of the 1940 Act. These
plans allow each Fund to collect distribution and service fees for the sale and
servicingof each Fund's shares. Since these fees are paid out of each Fund's
assets on an on-going basis, over time these fees will increase the cost of your
investment. These fees may cost you more than paying other types of sales
charges.
[side bar]
Distribution and Service Fees - are used to compensate the Distributor for
expenses incurred to promote the sale of shares and the servicing of accounts of
each Fund. The expenses incurred by the Distributor under the 12b-1 Plans
include the preparation, printing and distribution of prospectuses, sales
brochures and other promotional materials sent to prospective shareholders. They
also include purchasing radio, television, newspaper and other advertising and
compensating the Distributor's employees or employees of the Distributor's
affiliates for their distribution assistance. Distribution fees also allow the
Distributor to compensate broker-dealers or other persons for providing
distribution assistance, as well as financial intermediaries for providing
administrative and accounting services for their account holders.
[end side bar]
DIVIDEND AND DISTRIBUTION INFORMATION
Dividends, if available, or capital gains earned in any of the Funds are
normally distributed to shareholders in accordance with the federal income tax
requirements. For purposes of this calculation, net investment income consists
of all accrued interest income on Fund assets less the Fund's expenses
applicable to that dividend period.
For your convenience, dividends and capital gains are automatically reinvested
in your Fund. If you ask us to pay the distributions in cash, your DLJdirect
Account will be credited instead of purchasing more shares of your Fund.
TAXES
As with any investment, you should consider how your investment in the Funds
would be taxed. If your account is not a tax-deferred retirement account, you
should be aware of the following tax consequences. For federal income tax
purposes, a Fund's income and short-term capital gain distributions are taxed as
ordinary income. Long-term capital gain distributions are taxed as capital
gains. Your distributions may also be subject to state and local income taxes.
The distributions are taxable when they are paid, whether you receive them in
cash or participate in the
<PAGE>
dividend reinvestment program. It is anticipated that each January, DLJdirect
will mail you a form indicating the federal tax status of dividends and capital
gains distributions earned from your securities, including the Funds, held
within your DLJdirect Account. For individuals, long-term capital gains are
generally subject to a maximum tax rate of 20%. If you hold shares in a
tax-deferred retirement account, your distributions will be taxed when you
receive a distribution from your tax-deferred account.
When you redeem your shares, the tax treatment of any gains or losses may be
affected by the length of time for which you hold your shares.
As a shareholder, you must provide DLJdirect with a correct taxpayer
identification number (generally your Social Security number) and certify that
you are not subject to backup withholding. If you fail to do so, the IRS can
require DLJdirect to withhold 31% of your taxable distributions and redemptions.
Federal law also requires DLJdirect to withhold 30% or the applicable tax treaty
rate from dividends paid to certain non-resident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
Please see the Statement of Additional Information for your Fund for more
information on the tax consequences of your investment. You should also consult
your own tax adviser for further information.
BACK COVER
FOR MORE INFORMATION
General Information and Other Available Information
The Funds will send out a semi-annual report and an annual report to
shareholders of the DLJdirect Funds. These reports include a list of the Fund's
investments and financial statements. The annual report will contain a statement
from the Fund's Adviser discussing market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
The Funds have a Statement of Additional Information that contains additional
information on all aspects of the Funds and are incorporated by reference into
this Prospectus. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is available for review at the SEC's
Public Reference Room in Washington, DC (1-800-SEC-0330) or on the SEC's web
site at http://www.sec.gov. You can also obtain copies of Fund documents filed
with the SEC by writing:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
Payment of a duplicating fee may be required. .
<PAGE>
Shareholders may obtain any of these documents free of charge and may request
other information about the Funds by calling DLJdirect at 800-TALK-723 or go to
www.DLJdirect.com. DLJdirect, Inc. is located at One Pershing Plaza, Jersey
City, NJ 07399.
DLJ direct FUNDS
SEC file numbers: 811-
DLJdirect is a trademark of DLJ Long Term Investment Corporation
<PAGE>
DLJDIRECT FUNDS
277 PARK AVENUE,
NEW YORK, NEW YORK 10172
TOLL FREE (800) 825-5723
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
This Statement of Additional Information relates to the DLJdirect
Growth Fund and the DLJdirect Technology Fund. Each Fund is a series of the
DLJdirect Mutual Funds (the "Funds"). This Statement of Additional Information
is not a prospectus and should be read in conjunction with the Funds' current
Prospectus dated November 1, 1999, as supplemented from time to time, which is
incorporated herein by reference. A copy of the Prospectus may be obtained by
contacting the Funds at the address or telephone number listed above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND HISTORY.......................................................................................................
INVESTMENT POLICIES AND RESTRICTIONS...............................................................................
MANAGEMENT.........................................................................................................
Adviser.........................................................................................................
EXPENSES OF THE FUNDS..............................................................................................
General.........................................................................................................
Distribution Plan...............................................................................................
PURCHASES, REDEMPTIONS, AND EXCHANGES
Purchases.......................................................................................................
Redemptions.....................................................................................................
Exchanges.......................................................................................................
NET ASSET VALUE....................................................................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES
PORTFOLIO TRANSACTIONS.............................................................................................
PORTFOLIO TURNOVER.................................................................................................
INVESTMENT PERFORMANCE INFORMATION.................................................................................
SHARES OF BENEFICIAL INTEREST......................................................................................
GENERAL INFORMATION................................................................................................
Organization and Capitalization.................................................................................
Counsel and Independent Auditors................................................................................
Additional Information..........................................................................................
Financial Statements............................................................................................
APPENDIX...........................................................................................................
</TABLE>
<PAGE>
FUND HISTORY
The DLJdirect Mutual Funds were organized on [ ] as a
business trust under the laws of the state of Delaware. Its shares are currently
divided into two series, the DLJdirect Growth Fund (the "Growth Fund") and the
DLJdirect Technology Fund (the "Technology Fund")(collectively referred to as
the "Funds"). The Funds commenced operations on November 1, 1999. The Growth
Fund operates as a diversified open-end management investment company. The
Technology Fund operates as a non-diversified open-end management investment
company. The Funds have an unlimited number of authorized shares of beneficial
interest, par value $.001 per share, which may, without shareholder approval,
be divided into an unlimited number of series and an unlimited number of
classes.
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions supplement and
should be read in conjunction with the information set forth under the heading
"The DLJdirect Funds' Investment Objectives and Policies" in the Funds'
Prospectus. Except as noted in the Prospectus, each Fund's investment policies
are not fundamental and may be changed by the Trustees of the Funds without
shareholder approval. Shareholders will be notified prior to a significant
change in such policies. Each Fund's fundamental investment restrictions may not
be changed without shareholder approval as defined in "Fundamental Investment
Restrictions" in this Statement of Additional Information.
It is the policy of the Growth Fund to seek long-term growth of capital
by investing primarily in a limited number of large, carefully selected
companies that are likely to achieve superior growth. It is the policy of the
Technology Fund to seek growth of capital by investing in a broad number of
industries that comprise the U.S. domestic technology sector. In addition, each
Fund may invest in any of the securities described below.
Warrants. The Growth Fund and the Technology Fund each may invest up to
5% of their respective total assets in warrants. Warrants may be considered more
speculative than certain other types of investments due to the following:
(1) Holders are not entitled to dividends or voting rights
with respect to the underlying securities;
(2) Warrants do not represent any rights to the assets of the
issuing company;
(3) A warrant's value does not necessarily change in
proportion to the value of the underlying securities; and
(4) A warrant ceases to have value if it is not exercised
prior to the expiration date.
Non-U.S. Securities. The Growth Fund and the Technology Fund may invest
up to 10% of the value of their respective total assets in non-U.S. securities.
Investment in non-U.S. securities involves certain risks not ordinarily
associated with investments in
<PAGE>
securities of domestic issuers. These risks include fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could adversely affect
investments in those countries.
There may be less publicly available information about a non-U.S.
company than about a U.S. company. Non-U.S. companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those to which U.S. companies are subject.
Non-U.S. securities markets, while growing in volume, generally have
substantially less trading volume than securities of comparable U.S. companies.
Transaction costs of investing in non-U.S. securities markets generally are
higher than in the U.S. There is generally less government supervision and
regulation of exchanges, brokers and issuers than there is in the U.S. The Funds
may have greater difficulty taking appropriate legal action in non-U.S. courts.
Non-U.S. markets also have different clearance and settlement procedures which
in some markets have at times failed to keep pace with the volume of
transactions, thereby creating substantial delays and settlement failures that
could adversely affect a Fund's performance. Dividend and interest income from
non-U.S. securities will generally be subject to withholding taxes by the
country in which the issuer is located and may not be recoverable by the Funds
or investors.
Options. The Growth Fund and Technology Fund may purchase and sell call
and put options for the purpose of hedging against a decline in the value of
their respective portfolio securities.
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase the securities or currency
subject to the option at a specified price (the exercise price or strike price).
The writer, or seller, of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities or a specified amount of cash to
the purchaser upon receipt of the exercise price. When a Fund writes a call
option, that Fund gives up the potential for gain on the underlying securities
or currency in excess of the exercise price of the option during the period that
the option is open.
A put option gives the purchaser, in return for a premium, the right,
for a specified period of time, to sell securities or currency subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price. A Fund that sells a put option might, therefore, be obligated to
purchase the underlying securities or currency for more than their current
market price.
<PAGE>
If a Fund desires to sell a particular security from its portfolio on
which it has written an option, the Fund will seek to effect a closing purchase
transaction prior to or concurrently with the sale of the security. A closing
purchase transaction is a transaction in which an investor who is obligated as a
writer of an option terminates his obligation by purchasing an option of the
same series as the option previously written. (Such a purchase does not result
in the ownership of an option). A Fund may enter into a closing purchase
transaction to realize a profit on a previously written option or to enable the
Fund to write another option on the underlying security with either a different
exercise price or expiration date or both. A Fund realizes a profit or loss from
a closing purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from the writing of the option.
A Fund will write only fully "covered" options. An option is fully
covered if at all times during the option period, the Fund writing the option
owns either (i) the underlying securities, or securities convertible into or
carrying rights to acquire the optioned securities at no additional cost, or
(ii) an offsetting call option on the same securities at the same or a lower
price.
A Fund may not write a call option if, as a result thereof, the
aggregate of such Fund's portfolio securities subject to outstanding call
options (valued at the lower of the option price or market value of such
securities) would exceed 10% of its total assets. The Funds may also purchase
and sell financial futures contracts and options thereon for hedging and risk
management purposes and to enhance gains as permitted by the Commodity Futures
Trading Commission (the "CFTC").
A Fund may also purchase and sell securities index options. Securities
index options are similar to options on specific securities. However, because
options on securities indices do not involve the delivery of an underlying
security, the option represents the holder's right to obtain from the writer in
cash a fixed multiple of the amount by which the exercise price exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying securities index on the exercise date. When a Fund writes an option
on a securities index, it will establish a segregated account with its custodian
in which it will deposit cash or high quality short-term obligations or a
combination of both with a value equal to or greater than the market value of
the option and will maintain the account while the option is open.
Each Fund's successful use of options and financial futures depends on
the ability of the Adviser to predict the direction of the market and is subject
to various additional risks. The investment techniques and skills required to
use options and futures successfully are different from those required to select
international securities for investment. The ability of a Fund to close out an
option or futures position depends on a liquid secondary market. There is no
assurance that liquid secondary markets will exist for any particular option or
futures contract at any particular time. The inability to close options and
futures positions also could have an adverse impact on each Fund's ability to
effectively hedge its portfolio. There is also the risk of loss by a Fund of
margin deposits
<PAGE>
or collateral in the event of bankruptcy of a broker with whom the Fund has an
open position in an option, a futures contract or related option.
To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the CFTC, each Fund is limited to an
investment not in excess of 5% of its total assets, except that each Fund may
purchase and sell such instruments, without limitation, for bona fide hedging
purposes.
Repurchase Agreements. The Funds may enter into "repurchase agreements"
with member banks of the Federal Reserve System, "primary dealers" (as
designated by the Federal Reserve Bank of New York) in such securities or with
any domestic broker/dealer which is recognized as a reporting government
securities dealer. Repurchase agreements permit a Fund to keep all of its assets
at work while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. The Funds require continual maintenance of collateral with
the Custodian in an amount equal to, or in excess of, the market value of the
securities which are the subject of a repurchase agreement. In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral.
Reverse Repurchase Agreements. The Funds may also enter into reverse
repurchase agreements. Under a reverse repurchase agreement a Fund would sell
securities and agree to repurchase them at a mutually agreed upon date and
price. At the time a Fund enters into a reverse repurchase agreement, it would
establish and maintain with an approved custodian a segregated account
containing liquid high-grade securities having a value not less than the
repurchase price. Reverse repurchase agreements involve the risk that the market
value of the securities subject to such agreement could decline below the
repurchase price to be paid by a Fund for such securities. In the event the
buyer of securities under a reverse repurchase agreement filed for bankruptcy or
became insolvent, such buyer or receiver would receive an extension of time to
determine whether to enforce a Fund's obligations to repurchase the securities
and an Fund's use of the proceeds of the reverse repurchase could effectively be
restricted pending such decision. Reverse repurchase agreements create leverage,
a speculative factor, but are not considered senior securities by the Funds or
the Securities and Exchange Commission ("SEC") to the extent liquid high-grade
debt securities are segregated in an amount at least equal to the amount of the
liability.
Illiquid Investments. The Growth Fund and the Technology Fund may
invest up to 15% of its assets in illiquid investments. Under the supervision of
the Trustees, the Adviser determines the liquidity of a Fund's investments. The
absence of a trading market can make it difficult to ascertain a market value
for illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it
<PAGE>
may be difficult or impossible for a Fund to sell them promptly at an acceptable
price. The staff of the SEC currently takes the position that OTC options
purchased by an Fund, and portfolio securities "covering" the amount of that
Fund's obligation pursuant to an OTC option sold by the Fund (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
such Fund's limitations on investments in illiquid securities.
Borrowing. Each Fund may borrow up to one-third of the value of its
total assets from banks to increase its holdings of portfolio securities or for
other purposes. Under the Investment Company Act of 1940, as amended (the "1940
Act"), each Fund is required to maintain continuous asset coverage of 300% with
respect to such borrowings. Leveraging by means of borrowing may exaggerate the
effect of any increase or decrease in the value of portfolio securities on an
Fund's net asset value, and money borrowed will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds. The Adviser does not currently intend
to engage in borrowing transactions.
Securities Lending. The Funds may seek to receive or increase income by
lending their respective portfolio securities. Under present regulatory
policies, such loans may be made to member firms of the New York Stock Exchange
and are required to be secured continuously by collateral held by the Custodian
consisting of cash, cash equivalents or U.S. Government Securities maintained in
an amount at least equal to the market value of the securities loaned.
Accordingly, the Funds will continuously secure the lending of portfolio
securities by collateral held by the Custodian consisting of cash, cash
equivalents or U.S. Government Securities maintained in an amount at least equal
to the market value of the securities loaned. The Funds have the right to call
such a loan and obtain the securities loaned at any time on five days notice.
Cash collateral may be invested in fixed income securities rated at least A or
better by S&P or Moody's. As is the case with any extension of credit, loans of
portfolio securities involve special risks in the event that the borrower should
be unable to repay the loan, including delays or inability to recover the loaned
securities or foreclose against the collateral. The aggregate value of
securities loaned by a Fund may not exceed 33 1/3% of the value of the Fund's
total assets.
When Issued, Delayed Delivery Securities and Forward Commitments. The
Funds may, to the extent consistent with their other investment policies and
restrictions, enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time
of the commitment, with payment and delivery taking place in the future,
generally a month or more after the date of the commitment. While a Fund will
only enter into a forward
<PAGE>
commitment with the intention of actually acquiring the security, such Fund may
sell the security before the settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to a Fund prior to the
settlement date. Each Fund will segregate with its Custodian cash or liquid
high-grade securities in an aggregate amount at least equal to the amount of its
respective outstanding forward commitments.
Short Selling. In these transactions, a Fund sells a security it does
not own in anticipation of a decline in the market value of the security. To
complete the transaction, a Fund must borrow the security to make a delivery to
the buyer. A Fund is obligated to replace the security borrowed by purchasing it
subsequently at the market price at the time of replacement. The price at such
time may be more or less than the price at which the security was sold by the
Fund, which would result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Funds' net assets. The Funds may not make a short sale which
results in the Funds having sold short in the aggregate more than 10% of the
outstanding securities of any class of an issuer.
The Funds also may make short sales "against the box" in which the Fund
enters into a short sale of a security it owns.
Until the Funds closes out their short position or replace the borrowed
security, they will: (a) maintain a segregated account, containing permissible
liquid assets, at such a level that the amount deposited in the account plus the
amount deposited with the broker as collateral always equals the current value
of the security sold short; or (b) otherwise cover their short position.
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following fundamental investment restrictions may not be changed
with respect to a Fund without the approval of a majority of the shareholders of
that Fund, which means the affirmative vote of the holders of (a) 67% or more of
the shares of that Fund represented at a meeting at which more than 50% of the
outstanding shares of the Fund are represented or (b) more than 50% of the
outstanding shares of that Fund, whichever is less. Except as set forth in the
Prospectus, all other investment policies or practices are considered by each
Fund not to be fundamental and accordingly may be changed without shareholder
approval. If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
The following investment restrictions are applicable to each of the
Funds. Briefly, these restrictions provide that a Fund may not:
(1) issue senior securities (including borrowing money,
including on margin if margin securities are owned and enter into
reverse repurchase agreements) in excess of 33 1/3% of its total assets
(including the amount of senior securities issued but excluding any
liabilities and indebtedness not constituting senior securities) except
that the Fund may borrow up to an additional 5% of its total assets for
temporary purposes; or pledge its assets other than to secure such
issuances or in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies. A Fund's obligations under swaps are not treated as senior
securities; or
(2) make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed income
securities consistent with the Fund's investment objectives and
policies or the acquisition of securities subject to repurchase
agreements;
(3) underwrite the securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities
a Fund may be deemed to be an underwriter;
(4) purchase real estate or interests therein;
(5) purchase or sell commodities or commodities contracts
except for purposes, and only to the extent, permitted by applicable
law without the Fund becoming subject to registration with the CFTC as
a commodity pool;
(6) make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless, giving effect
to such sale, the market value of all securities sold short does not
exceed 25% of the value of the Fund's total assets and the Fund's
aggregate short sales of a particular class of securities do not exceed
25% of the then outstanding securities of that class; or
<PAGE>
(7) invest in oil, gas or other mineral leases.
The following investment restrictions are applicable only to
the Growth Fund and may not be changed with respect to the Growth Fund
without the approval of the shareholders of the Growth Fund (as
described above):
(1) purchase the securities of any one issuer, other than the
United States Government, or any of its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of its
total assets would be invested in such issuer or the Fund would own
more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of the value of the Fund's total assets may be
invested without regard to such 5% and 10% limitations; or
(2) except as otherwise stated in the Prospectus of this
Statement of Additional Information, invest 25% or more of the value of
its total assets in any one industry, provided that, for purposes of
this policy, consumer finance companies, industrial finance companies
and gas, electric, water and telephone utility companies are each
considered to be separate industries.
MANAGEMENT
The Trustees and principal officers of the Funds, their ages and their
primary occupations during the past five years are set forth below. Unless
otherwise specified, the address of each such person is 277 Park Avenue, New
York, New York 10172. Those Trustees whose names are preceded by an asterisk are
"interested persons" of the Funds as defined by the 1940 Act.
*G. Moffett Cochran, 49, Chairman of the Board of Trustees and
President of the DLJdirect Funds, is President and Chief Executive Officer of
the Adviser with which he has been associated with affiliates of the Adviser
since prior to 1994. Prior to his association with the Funds and the Adviser,
Mr. Cochran was a Senior Vice President with Bessemer Trust Companies.
Robert E. Fischer, 69, Trustee of the DLJdirect Funds, has been Member
at the law firm Wolf, Block, Schorr and Solis-Cohen LLP (or its predecessor
firm) since prior to 1994.
*Martin Jaffe, 52, Trustee, Vice President, Secretary and Treasurer of
the DLJdirect Funds, is a Managing Director and Chief Operating Officer of the
Adviser, with which he has been associated with affiliates of the Adviser since
prior to 1994.
Wilmot H. Kidd, III, 57, Trustee of the DLJdirect Funds, has been
President of Central Securities Corporation since prior to 1994.
<PAGE>
John W. Waller, III, 48, Trustee of the DLJdirect Funds, has been
Chairman of Waller Capital Corporation, an investment banking firm since prior
to 1994.
Brian A. Kammerer, 42, Vice President of the DLJdirect Funds has been
associated with affiliates of the Adviser since prior to 1994.
The following table sets forth certain information regarding compensation of the
Funds' Trustees and officers. Except as disclosed below, no executive officer or
person affiliated with the Funds received compensation from the Funds.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From Trust and
Aggregate Accrued Estimated Fund Complex Expected
Compensation As Part of Trust Annual Benefits to be Paid to
Name and Position From Trust(1) Expenses Upon Retirement Trustees
<S> <C> <C> <C> <C>
G. Moffett Cochran, Trustee $ 0 None None $0(13)
Robert E. Fischer, Trustee $5,000 None None $5,000(8)
Martin Jaffe, Trustee $ 0 None None $0(8)
Wilmot H. Kidd, III, Trustee $5,000 None None $5,000(8)
John W. Waller, III, Trustee $5,000 None None $5,000(8)
</TABLE>
- -----------
(1) The DLJdirect Funds anticipate paying each independent Trustee approximately
$5,000 in each calendar year.
(2) The parenthetical number represents the number of portfolios (including the
DLJdirect Funds) for which such person acts as Trustee that are considered
part of the same fund complex as the Funds.
-------------------
The Trustees of the DLJdirect Funds who are officers or employees of
the Adviser or any of its affiliates receive no remuneration from the DLJdirect
Funds. Each of the Trustees who are not affiliated with the Adviser will be paid
a $1,000 fee for each board meeting attended. Messrs. Cochran and Jaffe are
members of the Executive Committee. Messrs. Fisher, Kidd and Waller are members
of the Audit Committee and are paid a $500 fee for each Audit Committee meeting
attended.
<PAGE>
ADVISER
The Adviser, a Delaware corporation with principal offices at 277 Park
Avenue, New York, New York 10172, has been retained under an Investment Advisory
Agreement as the Funds' investment adviser (see "Fund Management" in the
Prospectus). The Adviser was established in 1996 to serve a select group of
individuals and institutional investors.
The Adviser is (since 1996) a wholly-owned subsidiary of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ Securities" or the
"Distributor"), the distributor of the Fund's shares, which is a wholly-owned
subsidiary of Donaldson, Lufkin & Jenrette, Inc., which is in turn an
independently operated, indirect subsidiary of The Equitable Companies
Incorporated ("ECI"), a holding company controlled by AXA-UAP ("AXA"), a French
insurance and financial services holding company. The Adviser along with its
affiliates are an integral part of the DLJ Securities family, and as one of the
oldest money management firms in the country, they maintain a tradition of
personalized service and performance. The address of DLJ Securities, Inc. is 277
Park Avenue, New York, New York 10172. The address of ECI is 787 Seventh Avenue,
New York, New York 10019.
As of August 1, 1999, AXA owns 59.6% of the outstanding shares of the
common stock of ECI. AXA is the holding company for an international group of
insurance and related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically, with
activities principally in Western Europe, North America and the Asia/Pacific
region and to a lesser extent, in Africa and South America. AXA is the second
largest insurance group in the world based on worldwide revenue in 1997 and the
largest French Insurance group based on worldwide gross premiums in 1997. AXA is
the largest insurance group in the world based on assets under management at
December 31, 1997. In addition to insurance and asset management. AXA is engaged
in investment banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States, as well as in
Europe and the Asia/Pacific region. Based on information provided by AXA, as of
August 1, 1999, 20.8% of the issued ordinary shares (representing 32.7% of the
voting power) of AXA were directly or indirectly owned by Finaxa, a French
holding company ("Finaxa"). Such percentage of interest includes the interest of
les Ateliers de Construction du Nord de la France-ANF ("ANF"), a 95.4% owned
subsidiary of Finaxa, which owned 0.4% of the issued ordinary shares
(representing 0.4% of the voting power) of AXA. As of August 1, 1999, 61.7% of
the issued ordinary shares (representing 72.3% of the voting power) of Finaxa
were owned by four French mutual insurance companies -- (the "Mutuelles AXA")
and 22.7% of the issued ordinary shares (representing 13.7% of the voting power)
of Finaxa were owned by Paribas, a French bank. Including the ordinary shares
owned by Finaxa and its subsidiary on August 1, 1999, the Mutuelles AXA directly
and indirectly owned 23.9% of the issued ordinary shares of AXA (representing
37.6% of the voting power). Acting as a group, the Mutuelles AXA will continue
to control AXA and Finaxa.
<PAGE>
The Investment Advisory Agreement was approved by the Board of Trustees
of the Funds on July 15, 1999 and by the then shareholder on September , 1999
and became effective on the same date. The Investment Advisory Agreement
continues in force for and initial twenty four month period and then in
successive twelve month periods provided that such continuation is specifically
approved by a majority vote of the Trustees who neither are interested persons
of the Funds nor have any direct or indirect financial interest in the
Investment Advisory Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
Under its Advisory Agreement with the Funds, the Advisor will provide
investment advisory services, order placement facilities and pay all
compensation of Trustees of the Funds who are affiliated persons of the Advisor.
The Funds will pay the Advisor at the following annual percentage rates of the
average daily net assets of each Fund: Growth Fund, .750 of 1% of the first
$500,000,000, .625% of 1% of the balance; and the Technology Fund, .875 of 1% of
the first $500,000,000, .750 of 1% of the next $500,000,000. and .625 of 1% of
the balance.
Pursuant to the terms of the Investment Advisory Agreement, the Adviser
may retain, at its own expense, a subadviser to assist in the performance of its
services to the Funds.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 adopted by the SEC under the 1940 Act, the Funds
have adopted a Distribution Agreement (the "Distribution Agreement") and a Rule
12b-1 Plan for shares of each Fund (the "12b-1 Plans") to permit such Fund
directly or indirectly to compensate the Distributor for activities with the
distribution of shares.
Pursuant to the Distribution Agreement and the 12b-1 Plans, the
Treasurer of the Funds reports the amounts expended under the Distribution
Agreement and the purposes for which such expenditures were made to the Trustees
of the Funds on a quarterly basis. Also, the 12b-1 Plans provide that the
selection and nomination of disinterested Trustees (as defined in the 1940 Act)
are committed to the discretion of the disinterested Trustees then in office.
The Distribution Agreement and 12b-1 Plans may be continued annually if approved
by a majority vote of the Trustees, including a majority of the Trustees who
neither are interested persons of the Funds nor have any direct or indirect
financial interest in the Distribution Agreement, the 12b-1 Plans or in any
other agreements related to the 12b-1 Plans, cast in person at a meeting called
for the purpose of voting on such approval. The Distribution Agreement and 12b-1
Plans were initially approved by the Funds' Trustees including a majority of the
disinterested Trustees, on July 15, 1999 and by the then shareholders on
September , 1999. All material amendments to the 12b-1 Plans must be approved by
a vote of the Trustees, including a majority of the Trustees who neither are
interested persons of the Funds nor have any direct or indirect financial
interest in the 12b-1 Plans or any related agreement, cast in person at a
meeting called for the purpose of voting on such approval. In addition to such
Trustee approval, the 12b-1 Plans may not be amended in order to increase
materially the costs which the Funds may bear pursuant to the 12b-1 Plans
without the approval of a majority of the outstanding
<PAGE>
shares of such Funds. Each Fund's 12b-1 Plan or Plans may be terminated without
penalty at any time by a majority vote of the disinterested Trustees, by a
majority vote of the outstanding shares of an Fund or by the Adviser. Any
agreement related to the 12b-1 Plans may be terminated at any time, without
payment of any penalty, by a majority vote of the independent Trustees or by
majority vote of the outstanding shares of an Fund on not more than 60 days
notice to any other party to the agreement, and will terminate automatically in
the event of assignment.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, each Fund pays a distribution services fee each month to the
Distributor, with respect to the shares of each Fund at an annual rate of up to
.25 of 1% of the aggregate average daily net assets attributable to shares of
each Fund.
The Funds' 12b-1 Plans permit payments to be made in subsequent years
for expenses incurred in prior years if the Funds' Trustees specifically
authorize such payment.
Under the Agreements, the Adviser may make payments to the Distributor
from the Adviser's own resources, which may include the management fees paid by
the funds. In addition to the concession and maintenance fee paid to dealers or
agents, the Distributor will from time to time pay additional compensation to
dealers or agents in connection with the sale of shares. Such additional amounts
may be utilized, in whole or in part, in some cases together with other revenues
of such dealers or agents, to provide additional compensation to registered
representatives of such dealers or agents who sell shares of the Fund. On some
occasions, such compensation will be conditioned on the sale of a specified
minimum dollar amount of the shares of the Funds during a specific period of
time. Such incentives may take the form of payment for meals, entertainment, or
attendance at educational seminars and associated expenses such as travel and
lodging. Such dealer or agent may elect to receive cash incentives of equivalent
amounts in lieu of such payments.
PURCHASES, REDEMPTIONS, AND EXCHANGES
The following information supplements that set forth in the Funds' Prospectus
under the heading "Purchases, Redemptions and Shareholder Services."
PURCHASES
Shares of the Funds are offered at the net asset value per share next
determined following receipt of a purchase order in proper form by the
DLJdirect, Inc. ("DLJdirect"). The Funds calculate net asset value per share as
of the close of the regular session of the New York Stock Exchange, (the "NYSE")
which is generally 4:00 p.m. New York City time on each day that trading is
conducted on the NYSE.
All shares purchased are confirmed to each shareholder and are credited
to such shareholder's account at net asset value. Share certificates will not be
issued for full or fractional shares of the Funds. This eliminates the
requirement of share certificates being
<PAGE>
presented upon redemption and relieves the shareholder of the responsibility and
inconvenience of preventing the share certificates from becoming lost or stolen.
Shareholders maintaining accounts through brokerage firms and other
institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are earlier
than the transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or her institution.
(For example, a brokerage firm may accept purchase orders from its customers up
to 2:15 p.m. for issuance at the 4:00 p.m. transaction time and price.) A
brokerage firm acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on it generally in
connection with transactions in securities for a customer, including the
obligation to act promptly and accurately.
REDEMPTIONS
Shares of the Funds may be redeemed at a redemption price equal to the
net asset value per share, as next computed as of the regular trading session of
the NYSE following the receipt in proper form by the Funds of the shares
tendered for redemption.
Payment of the redemption price may be made either in cash or in
portfolio securities (selected in the discretion of the Trustees and taken at
their value used in determining the redemption price), or partly in cash and
partly in portfolio securities. However, payments will be made wholly in cash
unless the Trustees believe that economic conditions exist which would make such
a practice detrimental to the best interest of the Funds. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after shares are tendered in
proper form for redemption, except for any period during which the NYSE is
closed (other than customary weekend and holiday closings) or during which
trading on the exchange is deemed to be restricted under rules of the SEC, or
for any period during which an emergency (as determined by the SEC) exists as a
result of which disposal by DLJ of its portfolio securities is not reasonably
practicable, or as a result of which it is not reasonably practicable for DLJ to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of shareholders. Generally, redemptions will
be made by payment in cash or by check.
<PAGE>
EXCHANGES
The Shares of a DLJdirect Fund can be exchanged for shares of the other
DLJdirect Fund. Shareholders may exchange shares by telephone or through the
shareholders' investment dealer of record.
The exchange privilege is available only in those jurisdictions where
shares of such Fund may be legally sold. In addition, the exchange privilege is
available only when payment for the shares to be redeemed has been made and the
shares exchanged are held by the Transfer Agent.
The minimum initial exchange into another Fund is $250.
The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short-term swings in the stock
market by engaging in frequent transactions in and out of all the Funds.
Shareholders who engage in such frequent transactions may be prohibited from or
restricted in placing future exchange orders.
Exchanges of shares are subject to the other requirements of the Fund
into which exchanges are made. Annual fund operating expenses for such fund may
be higher. See "Fund Expenses" and "Additional Shareholder Services - Exchange
Privilege" in the Prospectus for a description of these expense differences.
[Redemption information as it applies to exchanges - to come.]
NET ASSET VALUE
Shares of each Fund will be priced at the net asset value per share as
computed each Fund Business Day in accordance with the Funds' Agreement and
Declaration of Trust and By-Laws. For this purpose, a Fund Business Day is any
day on which the NYSE is open for business, typically, Monday through Friday
exclusive of New Year's Day, Martin Luther King Jr. Day, President's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
Good Friday.
The net asset value of the shares of each Fund is determined as of the
close of the regular session on the NYSE, which is generally at 4:00 p.m., New
York City time, on each day that trading is conducted on the NYSE. The net asset
value per share is calculated by taking the sum of the value of each Fund's
investments and any cash or other assets, subtracting liabilities, and dividing
by the total number of shares outstanding. All expenses, including the fees
payable to the Adviser, are accrued daily.
<PAGE>
For purposes of the computation of net asset value, each of the Funds
values securities held in its respective portfolios as follows: readily
marketable portfolio securities listed on an exchange are valued, except as
indicated below, at the last sale price at the close of the exchange on the
business day as of which such value is being determined. If there has been no
sale on such day, the securities are valued at the mean of the closing bid and
asked prices on such day. If no bid or asked prices are quoted on such day, then
the security is valued by such method as the Trustees of the Funds shall
determine in good faith to reflect its fair value.
Readily marketable securities, including certain options, not listed on
an exchange but admitted to trading on the National Association of Securities
Dealers Automatic Quotations, Inc. ("NASDAQ") National Market System (the
"System") are valued in like manner. Portfolio securities traded on more than
one exchange are valued at the last sale price on the business day as of which
such value is being determined at the close of the exchange representing the
principal market for such securities.
Readily marketable securities, including certain options traded only in
the over-the-counter market and listed securities whose primary market is
believed by the Adviser to be over-the-counter (excluding those admitted to
trading on the List) are valued at the mean of the current bid and asked prices
as reported by such sources as the Trustees of the Funds deem appropriate to
reflect their fair market value. However, fixed-income securities (except
short-term securities) may be valued on the basis of prices provided by a
pricing service when such prices are believed by the Adviser to reflect the fair
market value of such securities. The prices provided by a pricing service are
determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities and any developments
related to specific securities. The money market securities in which each Fund
invests are traded primarily in the over-the-counter market and are valued at
the mean between most recent bid and asked prices as obtained from dealers that
make markets in such securities, except for securities having 60 days or less
remaining until maturity which are stated at amortized cost. Portfolio
securities underlying listed call options will be valued at their market price
and reflected in net assets accordingly. Premiums received on call options
written by a Fund will be included in the liability section of the Statement of
Assets and Liabilities as a deferred credit and subsequently adjusted
(marked-to-market) to the current market value of the option written.
Investments for which market quotations are not readily available are valued at
fair value as determined in good faith by the Trustees of the Funds.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend to distribute to shareholders of the Funds on an
annual basis, substantially all of such respective periods' investment company
taxable income, if any, for each respective Fund. Such distributions generally
will be taxable to shareholders as ordinary income for federal income tax
purposes. Since each Fund is treated as a single entity for Federal income tax
purposes, the performance of one Fund will have no effect on the income tax
liability of shareholders of another Fund.
Upon a redemption or other disposition of shares of a Fund, a
shareholder will generally recognize gain or loss in an amount equal to the
difference between the amount realized and the shareholder's tax basis in such
shares. Generally, such gain or loss will be capital gain or loss, if the shares
are held as capital assets and will be long-term capital gain or loss if the
shareholder's holding period for such shares exceeds one year.
Capital gains, if any, realized by each of the Funds during their
fiscal year will be distributed to the respective shareholders shortly after the
end of such fiscal year. Distributions of the Funds' net capital gain, when
designated as such, will be taxable to shareholders as long-term capital gain,
regardless of how long the shareholders have held their shares.
Each income dividend and capital gains distribution, if any, declared
by the Funds on the outstanding shares of any Fund will, at the election of each
shareholder, be paid in cash or reinvested in additional full and fractional
shares of that Fund at the net asset value as of the close of business on the
payment date. Such distributions, to the extent they would otherwise be taxable,
will be taxable to shareholders regardless of whether paid in cash or reinvested
in additional shares. An election to receive dividends and distributions in cash
or shares is made at the time of the initial investment and may be changed by
notice received by the Funds from a shareholder at least 30 days prior to the
record date for a particular dividend or distribution on shares of each Fund.
There is no charge in connection with the reinvestment of dividends and capital
gains distributions.
For Federal income tax purposes, dividends that are declared by an Fund
in October, November or December of any year and payable to shareholders of
record on a specified date in such a month and actually paid in January of the
following year will be treated as if they were paid on December 31 of the year
in which they were declared. Therefore, such dividends will generally be taxable
to a shareholder in the year declared rather than the year paid.
Shareholders will be advised annually as to the Federal tax status of
dividends and capital gains distributions made by each Fund for the preceding
year.
There is no fixed dividend rate and there can be no assurance that a
Fund will pay any dividends or realize any gains. The amount of any dividend or
distribution paid by each Fund depends upon the realization by the Fund of
income and capital gains from that Fund's investments. All dividends and
distributions will be made to shareholders of a Fund solely from assets of that
Fund.
<PAGE>
Payment (either in cash or in portfolio securities) received by a
shareholder upon redemption of his shares, or an exchange of shares in one Fund
for shares in another fund, assuming the shares constitute capital assets in his
hands, will result in long-term or short-term capital gains (or losses)
depending upon the shareholder's holding period and basis in respect of shares
redeemed. Any loss realized by a shareholder on the sale of Fund shares held for
six months or less will be treated for Federal income tax purposes as a
long-term capital loss to the extent of any distributions of long-term capital
gains received by the shareholder with respect to such shares. Note that any
loss realized on the sale of shares will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before the
disposition of such shares. In such case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss.
Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), so that it will not be liable for Federal income taxes to the extent
that its net taxable income and net capital gains are distributed to
shareholders. Accordingly, each Fund must, among other things, (a) derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or other foreign currencies, or other income
(including but not limited to gains from futures and forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the Fund's assets is represented by cash,
cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect of any one issuer, to
an amount not greater than 5% of the value of the Fund's assets and 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 of any one issuer (other than
U.S. Government securities or the securities of other RICs) or of two or more
issuers which the Fund controls and which are engaged in the same or related
trades or businesses. Foreign currency gains that are not 'directly related' to
the Fund's principal business of investing in stock or securities may be
excluded by Treasury Regulations from income that counts toward the 90% of gross
income requirement described above. The Treasury Department has not yet issued
any such regulations.
A dividend or capital gains distribution with respect to shares of any
Fund held by a tax-deferred or qualified retirement plan, such as an IRA, Keogh
Plan or corporate pension or profit sharing plan, will not be taxable to the
plan. Distributions from such plans will be taxable to individual participants
under applicable tax rules without regard to the character of the income earned
by the qualified plan.
As a regulated investment company, each Fund will not be subject to
Federal income tax on income and gains distributed to shareholders if it
distributes at least 90% of its investment company taxable income to
shareholders each year but will be subject to tax on its income and gains to the
extent that it does not distribute to its shareholders an amount equal to such
income and gains. In addition, each Fund will be subject to a
<PAGE>
nondeductible 4% excise tax on the excess, if any, of certain required
distribution amounts over the amounts actually distributed by that Fund. To the
extent practicable, each Fund intends to make such distributions as may be
necessary to avoid this excise tax.
Some of the investment practices of each Fund are subject to special
provisions that, among other things, may defer the use of certain losses of such
Funds and affect the holding period of the securities held by the Funds and,
particularly in the case of transactions in or with respect to foreign
currencies, and in the case of certain hedges or appreciated securities, the
character of the gains or losses realized. These provisions may also require the
Fund to mark-to-market some of the positions in their respective portfolios
(i.e., treat them as if they were closed out), which may cause such Funds to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the distribution requirements for qualification as
a regulated investment company and for avoiding income and excise taxes. Each
Fund will monitor its transactions and may make certain tax elections in order
to mitigate the effect of these rules and prevent disqualification of the Fund
as a regulated investment company.
Each Fund is required to withhold and remit to the U.S. Treasury 31% of
the dividends, capital gain distributions or the proceeds of any redemptions or
exchanges of shares with respect to any shareholder who fails to furnish the
Funds with a correct taxpayer identification number, who under-reports dividend
or interest income or who fails to certify to the Funds that he or she is not
subject to such withholding. An individual's tax identification number is his or
her social security number.
The foregoing is only a brief summary of some of the material U.S.
federal income tax considerations generally relating to an investment in the
Funds. It is based upon the Code, applicable Treasury regulations and
administrative rulings and pronouncements of the Internal Revenue Service, all
as in effect on the date hereof and which are subject to change, possibly with
retroactive effect. This summary is directed to investors who are U.S. persons
(as determined for U.S. federal income tax purposes) and does not purport to
discuss all of the income tax consequences applicable to the Funds or to all
categories of investors, some of whom may be subject to special rules (including
dealers in securities, insurance companies, non-U.S. persons and tax-exempt
entities). Investors are urged to consult their tax advisers regarding the
specific U.S. federal income tax consequences of an investment in the Funds, as
well as the effects of state, local and foreign tax laws and any proposed tax
law changes.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the
Funds, the Adviser is responsible for the investment decisions and the placing
of the orders for portfolio transactions for the Funds. Portfolio transactions
for the Funds are normally effected by brokers.
The Funds have no obligation to enter into transactions in portfolio
securities with any broker, dealer, issuer, underwriter or other entity. In
placing orders, it is the policy of
<PAGE>
the Funds to obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one broker or dealer,
the Adviser may, in its discretion, purchase and sell securities through brokers
and dealers who provide research, statistical and other information to the
Adviser. Such services may be used by the Adviser for all of their investment
advisory accounts, and accordingly, not all such services may be used by the
Adviser in connection with the Funds. If a Fund determines in good faith that
the amount of transaction costs charged by a broker or dealer is reasonable in
relation to the value of the brokerage and research and statistical services
provided by the executing broker or dealer, the Fund may utilize such broker or
dealer although the transaction costs of another broker or dealer are lower. The
supplemental information received from a broker or dealer is in addition to the
services required to be performed by the Adviser under the Investment Advisory
Agreement, and the expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information.
Neither the Funds, nor the Adviser on behalf of the Funds have entered
into agreements or understandings with any broker or dealer regarding the
placement of securities transactions. Because of research or information to the
Adviser for use in rendering investment advice to the Funds, such information
may be supplied at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the Funds. While it
is impossible to place an actual dollar value on such investment information,
its receipt by the Adviser probably does not reduce the overall expenses of the
Adviser to any material extent.
The investment information provided to the Adviser is of the types
described in Section 28(e)(3) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research and statistical services furnished by brokers through
which the Funds effect securities transactions are used by the Adviser in
carrying out their investment management responsibilities with respect to all
their client accounts but not all such services may be utilized by the Adviser
in connection with the Funds.
The Funds may deal in some instances in equity securities which are not
listed on an exchange but are traded in the over-the-counter market. Where
transactions are executed in the over-the-counter market, the Funds seek to deal
with the primary market-makers, but when necessary in order to obtain the best
price and execution, it utilizes the services of others. In all cases, the Funds
will attempt to negotiate best execution.
The Funds may from time to time place orders for the purchase or sale
of securities (including listed call options) with DLJ Securities, the Funds'
Distributor or other affiliates in accordance with the provisions of Section
11(a) of the Securities Exchange Act of 1934 referred to below. With respect to
orders placed with DLJ Securities for execution on a national securities
exchange, commissions received must conform to Section 17(e)(2)(A) of the 1940
Act and Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the Funds), or any affiliated person of such person,
to receive a brokerage commission from such registered
<PAGE>
investment company provided that such commission is reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, DLJ
Securities and its affiliates are restricted as to the nature and extent of the
brokerage services they may perform for the Funds. The SEC has adopted rules
under Section 11(a) which permit an investment adviser to a registered
investment company, or the adviser's affiliates, to receive compensation for
effecting, on a national securities exchange, transactions in portfolio
securities of such investment company, including causing such transactions to be
transmitted, executed, cleared and settled and arranging for unaffiliated
brokers to execute such transactions.
To the extent permitted by such rule, DLJ Securities and its affiliates
may receive compensation relating to transactions in portfolio securities of the
Funds provided that each Fund enters into a written agreement, as required by
such rules, with that firm authorizing it to retain compensation for such
services. The Trustees of the Funds have granted authorization conforming to the
requirements of Section 11(a) to the Adviser to effect transactions in portfolio
securities of the Funds through their affiliates, DLJ Securities and Autranet,
Inc.
PORTFOLIO TURNOVER
Each Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of such securities
owned during the year, excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less. Each
Fund does not anticipate a portfolio turnover rate in excess of 100%. A higher
rate involves greater transaction costs to a Fund and may result in the
realization of net capital gains, which would be taxable to shareholders when
distributed.
INVESTMENT PERFORMANCE INFORMATION
Each Fund may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. "Total return"
represents the change in value of $1,000 invested at the maximum public offering
price for a period assuming reinvestment of all dividends and distributions.
Quotations of average annual total return will reflect only the
performance of an investment in any Fund during the particular time period
shown. Each Fund's total return and current yield may vary from time to time
depending on market conditions, the compositions of its portfolio and operating
expenses. These factors and possible differences in the methods used in
calculating yield should be considered when comparing each Fund's current yield
to yields published for other investment companies and other investment
vehicles. Average annual total return and yield should also be
<PAGE>
considered relative to change in the value of each Fund's shares and the risks
associated with each Fund's investment objectives, policies and risk
considerations. At any time in the future, average annual total returns and
yield may be higher or lower than past total returns and yields and there can be
no assurance that any historical return or yield will continue.
From time to time evaluations of performance are made by independent
sources that may be used in advertisements concerning each Fund. These sources
include Lipper, Inc., Weisenberger Investment Company Service, Barron's,
Business Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune,
Money, Personal Investor, Sylvia Porter's Personal Finance, Bank Rate Monitor,
Morningstar and The Wall Street Journal.
In connection with communicating its yield or average annual total
return to current or prospective shareholders, each Fund may also compare these
figures to the performance of other mutual funds tracked by mutual fund rating
services or to other unmanaged indexes which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
Quotations of each Fund's average annual total return will represent
the average annual compounded rate of return of a hypothetical investment in
each Fund over periods of 1, 5, and 10 years (or up to the life of each Fund),
and are calculated pursuant to the following formula:
P(1+T)'pp'n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). All
average annual total return figures will reflect the deduction of Fund expenses
(net of certain expenses reimbursed by the Adviser) on an annual basis, and will
assume that all dividends and distributions are reinvested and will deduct the
maximum sales charge, if any is imposed. The Funds may also quote total return
that eliminates any applicable initial sales charge or contingent deferred sales
charge.
GENERAL INFORMATION
ORGANIZATION AND CAPITALIZATION
The Trust was formed on June , 1999, as a 'business trust' under the
laws of the State of Delaware.
The Agreement and Declaration of Trust provides that no Trustee,
officer, employee or agent of the Funds is liable to the Funds or to a
shareholder, nor is any
<PAGE>
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Funds, except as such liability may arise from his or
its own bad faith, willful misfeasance, gross negligence or reckless disregard
of his or her duties. It also provides that all third parties shall look solely
to the property of a Fund or the property of such appropriate Fund for
satisfaction of claims arising in connection with the affairs of a Fund. With
the exceptions stated, the Agreement and Declaration of Trust permits the
Trustees to provide for the indemnification of Trustees, officers, employees or
agents of the Funds against all liability in connection with the affairs of the
Funds.
All shares of the Funds when duly issued will be fully paid and
non-assessable. The Trustees are authorized to re-classify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the desire to
establish one or more additional Funds with different investment objectives,
policies, risk considerations or restrictions, may create additional series or
classes of shares. Any issuance of shares of such additional series would be
governed by the 1940 Act and the laws of the State of Delaware.
COUNSEL AND INDEPENDENT AUDITORS
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, serves as legal counsel for the Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been appointed as independent auditors for the Funds.
CUSTODIAN AND TRANSFER AGENT
Citibank, N.A., 111 Wall Street, New York, New York 10043 serves as
custodian to the Funds.
First Data Investor Services Group, Inc., 211 S. Gulph Road, King of
Prussia, PA 19406-3101 serves as Transfer Agent for the Funds.
ADDITIONAL INFORMATION
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the Funds with the
SEC under the Securities Act of 1933. Copies of the Registration Statement may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the offices of the SEC in Washington, D.C.
<PAGE>
<TABLE>
PART C
Other Information
Item 23 EXHIBITS
<S> <C> <C>
(a) Form of Agreement and Declaration of Trust
(b) Form of Bylaws
(c) Not Applicable
(d) Form of Investment Advisory Agreement
(e) Form of Distribution Agreement
(f) Not Applicable
(g) Form of Custody Services Agreement
(h) Form of Services Agreement
(i) Legal Opinion*
(j) Consent of Independent Auditors*
(k) Omitted Financial Statements*
(l) Form of Subscription Agreement with initial shareholders
(m) (1) Rule 12b-1 Plan for the DLJdirect Growth Fund
(2) Rule 12b-1 Plan for the DLJdirect Technology Fund
(n) Rule 18f-3 Plan
Item 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable
Item 25 INDEMNIFICATION
</TABLE>
Registrant's Agreement and Declaration of Trust provides that
the Trust (for the appropriate Fund) shall indemnify each person who is or has
been a trustee or officer of the Trust (including persons who serve, or have
served, at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants and counsel fees, incurred in
connection with the defense or disposition of any action, suit or proceeding,
whether civil or criminal, before any court or administrative or legislative
body, in which such person may be or may have been threatened, while in office
or thereafter, by reason of being or having been such a person,
- --------
* To be filed by Amendment to this Registration Statement.
II-1
<PAGE>
except with respect to any matter as to which it has been determined that such
person (i) did not act in good faith in the reasonable belief that such person's
action was in the best interests of the Trust or (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
The Investment Advisory Agreement between Registrant and DLJ
Investment Management Corp. (the "Advisor") provides that Advisor will not be
liable thereunder for any mistake of judgment or in any event whatsoever except
for lack of good faith and that nothing therein shall be deemed to protect
Advisor against any liability to Registrant or its security holders to which it
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties thereunder, or by reason of reckless
disregard of its duties and obligations thereunder.
The Distribution Agreement between the Registrant and
Donaldson, Lufkin & Jenrette Securities Corporation provides that Registrant
will indemnify, defend and hold Donaldson, Lufkin & Jenrette Securities
Corporation, and any other person who controls it within the meaning of Section
15 of the Investment Company Act of 1940, free and harmless from and against any
and all claims, demands, liabilities and expenses which Donaldson, Lufkin &
Jenrette Securities Corporation or any controlling person may incur arising out
of or based upon any alleged untrue statement of a material fact contained in
Registrant's Registration Statement, Prospectus or Statement of Additional
Information or arising out of, or based upon any alleged omission to state a
material fact required to be stated in any one of the foregoing or necessary to
make the statements in any one of the foregoing not misleading.
The foregoing summaries are qualified by the entire text of
Registrant's Agreement and Declaration of Trust, the Investment Advisory
Agreement between Registrant and the Advisor and the Distribution Agreement
between Registration and Donaldson, Lufkin & Jenrette Securities Corporation.
The Registrant's Investment Advisory Agreement, the Agreement and Declaration of
Trust and the Distribution Agreement are being filed as exhibits to this
Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification may be against
public policy as expressed in the Securities Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnifica tion by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Equitable Life Assurance Society of the United States (the
parent of Advisor's parent) carries for itself and its subsidiaries Directors
and Officers Liability Insurance. Coverage under this policy has been extended
to directors and officers of the investment companies managed by the Advisor.
Under this policy, outside trustees would be covered up to the limits specified
for any claim against them for acts committed in their capacities as members of
the Board.
II-2
<PAGE>
Item 26 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
The description of the Advisor under the caption "Management"
in the Prospectus and in the Statement of Additional Information constituting
Parts A and B, respectively, of this Registration Statement as well as the
Advisor's respective current Forms ADV are incorporated by reference herein.
Item 27 PRINCIPAL UNDERWRITERS
(a) Donaldson, Lufkin & Jenrette Securities Corporation, the
Registrant's Distributor (Underwriter) also acts as
Distributor for the following investment companies:
DLJ Winthrop Focus Funds: DLJ Winthrop Aggressive Growth Fund,
DLJ Winthrop Fixed Income Fund, DLJ Winthrop Growth and Income
Fund, DLJ Winthrop Municipal Trust Fund and DLJ Winthrop
Growth Fund.
DLJ Winthrop Opportunity Funds: DLJ Winthrop Developing
Markets Fund, DLJ Winthrop International Equity Fund, DLJ
Winthrop High Income Fund, DLJ Winthrop Municipal Money
Fund and DLJ Winthrop U.S. Government Money Fund.
(b) For information required with respect to the directors and
officers of the Funds' Distributor, reference is made to the
Form BD filed by the Distributor under the Securities Exchange
Act of 1934.
(c) Not Applicable
Item 28 LOCATION OF ACCOUNTS AND RECORDS
The majority of accounts, books and other documents required
to be maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder are maintained at the offices of the DLJdirect Mutual Funds at
277 Park Avenue, New York, New York 10172 (see "Management" in the Prospectus).
Additional records are maintained at the offices of Citibank, N.A., the
Registrant's Custodian, 111 Wall Street, New York, New York 10043.
Item 29 MANAGEMENT SERVICES
Not applicable
Item 30 UNDERTAKINGS
Not applicable
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York and the State of New York on the
10th day of August, 1999.
DLJdirect Mutual Funds
By: /s/ G. Moffett Cochran
-----------------------------
Name: G. Moffett Cochran
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose name
appears below constitutes and appoints G. Moffett Cochran his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and sent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed and original, but which taken
together shall constitute one instrument.
Pursuant to the requirements of the Securities Act of 1933,
the Registration Statement has been signed below by the following persons in the
capacities and on the date included:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Martin Jaffe Trustee and Vice President, August 10, 1999
- --------------------------------- Secretary and Treasurer
Martin Jaffe
/s/ Robert E. Fischer Trustee August 10, 1999
- ---------------------------------
Robert E. Fischer
/s/ Wilmot H. Kidd III Trustee August 10, 1999
- ---------------------------------
Wilmot H. Kidd III
/s/ John W. Waller III Trustee August 10, 1999
- ---------------------------------
John W. Waller III
</TABLE>
II-4
<PAGE>
SCHEDULE OF EXHIBITS TO FORM N-1A
Exhibits
(a) Form of Agreement and Declaration of Trust
(b) Form of Bylaws
(d) Form of Investment Advisory Agreement
(e) Form of Distribution Agreement
(g) Form of Custody Services Agreement
(h) Form of Services Agreement
(l) Form of Subscription Agreement with initial shareholders
(m) (1) Rule 12b-1 Plan for the DLJdirect Growth Fund
(2) Rule 12b-1 Plan for the DLJdirect Technology Fund
(n) Rule 18f-3 Plan
3
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as.................................. 'SS'
Characters normally expressed as superscript shall be preceded by......... 'pp'
<PAGE>
THE DLJdirect MUTUAL FUNDS
---------------------------------------------------------------
AGREEMENT
AND DECLARATION OF TRUST
----------------------------------------------------------------
JULY 15, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Trust
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Name..............................................................................2
Section 1.2 Definitions.......................................................................2
Section 1.3 Purpose and Powers of Trust.......................................................4
ARTICLE II
Trustees
Section 2.1 Number and Qualification..........................................................4
Section 2.2 Term and Election.................................................................4
Section 2.3 Resignation and Removal...........................................................5
Section 2.4 Vacancies.........................................................................5
Section 2.5 Meetings..........................................................................6
Section 2.6 Officers..........................................................................7
ARTICLE III
Powers and Duties of Trustees
Section 3.1 General...........................................................................7
Section 3.2 Investments.......................................................................8
Section 3.3 Legal Title.......................................................................8
Section 3.4 Issuance and Repurchase of Shares.................................................8
Section 3.5 Borrow Money or Utilize Leverage..................................................9
Section 3.6 Delegation; Committees. .........................................................9
Section 3.7 Collection and Payment. .........................................................9
Section 3.8 Expenses.........................................................................10
Section 3.9 By-Laws..........................................................................10
Section 3.10 Miscellaneous Powers.............................................................10
Section 3.11 Distribution Agreements..........................................................11
Section 3.12 Further Powers...................................................................12
Section 3.13 Parties to Contract..............................................................12
</TABLE>
i
<PAGE>
ARTICLE IV
Limitations of Liability
and Indemnification
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.1 No Personal Liability of Shareholders, Trustees, etc.............................13
Section 4.2 Mandatory Indemnification........................................................13
Section 4.3 No Duty of Investigation; Notice in Trust Instruments, etc.......................15
Section 4.4 Reliance on Experts, etc.........................................................15
Section 4.4 Indemnification of Shareholders..................................................16
ARTICLE V
Shares of Beneficial Interest
Section 5.1 Beneficial Interest..............................................................16
Section 5.2 Series Designation. ............................................................16
Section 5.3 Class Designation. .............................................................17
Section 5.4 Description of Shares............................................................17
Section 5.5 Rights of Shareholders. ........................................................19
Section 5.6 Trust Only.......................................................................19
Section 5.7 Issuance of Shares...............................................................20
Section 5.8 Register of Shares. ............................................................21
Section 5.9 Transfer of Shares...............................................................21
Section 5.10 Notices..........................................................................22
Section 5.11 Net Asset Value..................................................................22
Section 5.12 Distributions to Shareholders....................................................22
ARTICLE VI
Shareholders
Section 6.1 Meetings of Shareholders.........................................................23
Section 6.2 Voting...........................................................................23
Section 6.3 Notice of Meeting, Shareholder Proposals and Record Date.........................23
Section 6.4 Quorum and Required Vote.........................................................24
Section 6.5 Proxies, etc.....................................................................25
Section 6.6 Reports..........................................................................25
Section 6.7 Inspection of Records............................................................26
Section 6.8 Shareholder Action by Written Consent............................................26
</TABLE>
ii
<PAGE>
ARTICLE VII
Redemption
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.1 Redemptions......................................................................26
Section 7.2 Disclosure of Holding............................................................27
Section 7.3 Redemptions of Small Accounts....................................................27
ARTICLE VIII
Duration: Termination of Trust;
Amendment; Mergers, Etc.
Section 8.1 Duration.........................................................................27
Section 8.2 Termination......................................................................27
Section 8.3 Amendment Procedure..............................................................27
Section 8.4 Merger, Consolidation and Sale of Assets.........................................29
Section 8.5 Incorporation ...................................................................30
ARTICLE IX
Miscellaneous
Section 9.1 Filing...........................................................................31
Section 9.2 Resident Agent...................................................................31
Section 9.3 Governing Law....................................................................31
Section 9.4 Counterparts.....................................................................31
Section 9.5 Reliance by Third Parties........................................................32
Section 9.6 Provisions in Conflict with Law or Regulation....................................32
</TABLE>
iii
<PAGE>
THE DLJdirect MUTUAL FUNDS
(the "Trust")
AGREEMENT
AND
DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made as of the 15th day of
July, 1999, by the Trustees hereunder, and by the holders of shares of
beneficial interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business as
set forth more particularly hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number
of its shares of beneficial interest in separate series and classes of each such
series, each separate series to be a sub-trust hereunder, all in accordance with
the provisions hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as Trustees of a Delaware business trust registered as
an investment company under the Investment Company Act of 1940 in accordance
with the provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by
this Declaration and the Certificate of Trust filed with the Secretary of State
of the State of Delaware on July ___, 1999 shall constitute a business trust
under the Delaware Business Trust Statute and that this Declaration shall
constitute the governing instrument of such business trust.
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities, and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the benefit of the holders
from time to time of shares of beneficial interest in this Trust or sub-trusts
created hereunder as hereinafter set forth.
<PAGE>
ARTICLE I
The Trust
Section 1.1 Name. This Trust shall be known as the "DLJdirect
Mutual Funds" and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
Section 1.2 Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"By-Laws" shall mean the By-Laws of the Trust as amended from
time to time by the Trustees.
"Class" shall mean a portion of Shares of a Series of the
Trust established in accordance with Section 5.3 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
"Commission" shall mean the Securities and Exchange
Commission.
"Declaration" shall mean this Agreement and Declaration of
Trust, as amended or amended and restated from time to time, including by way of
any classifying or reclassifying Shares of any Series or any Class of any such
Series or determining any designations, powers, preferences, voting, conversion
and other rights, limitations, qualifications and terms and conditions thereof.
"Delaware Business Trust Statute" shall mean the provisions of
the Delaware Business Trust Act, 12 Del. C. 'SS'3801, et. seq., as such Act may
be amended from time to time.
"Fundamental Policies" shall mean the investment policies and
restrictions set forth from time to time in any Prospectus of the Trust or any
Series that are expressly designated therein as fundamental policies of such
Series.
"Interested Person" shall have the meaning ascribed thereto in
the 1940 Act.
2
<PAGE>
"Majority Shareholder Vote" shall mean a vote of a "majority
of the outstanding voting securities" (as such term is defined in the 1940 Act)
of the Trust, any Series of the Trust or any Class thereof, as applicable.
The "1940 Act" refers to the Investment Company Act of 1940
and the rules and regulations promulgated thereunder and applicable exemptions
there from and interpretations thereof, all as amended from time to time.
The "1933 Act" refers to the Securities Act of 1933, and the
rules and regulations promulgated thereunder and applicable exemptions
therefrom, as amended from time to time.
"Person" shall mean and include natural persons, corporations,
partnerships, trusts, limited liability companies, associations, joint ventures
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"Prospectus" shall mean the current Prospectus of the Trust or
of any Series thereof or of any Class of any such Series, as applicable.
"Series" shall mean the separate sub-trusts that may be
established and designated as series pursuant to Section 5.2 hereof or any one
of such sub-trusts, as applicable.
"Shareholders" shall mean as of any particular time the
holders of record of outstanding Shares of the Trust, any Series of the Trust or
any Class of any Series, as applicable, at such time.
"Shares" shall mean the transferable units of beneficial
interest into which the beneficial interest in the Trust or in a Series of the
Trust shall be divided from time to time and includes fractions of Shares as
well as whole Shares, which Shares may be divided into Series and Classes. All
references to Shares shall be deemed to be Shares of any or all Series or
Classes as the context may require.
"Trust" shall mean the trust established by this Declaration,
as amended from time to time, inclusive of each such amendment and every
sub-trust established as a Series hereunder.
3
<PAGE>
"Trustees" shall mean the signatory to this Declaration, so
long as such signatory shall continue in office in accordance with the terms
hereof, and all other persons who at the time in question have been duly elected
or appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office.
"Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees in such
capacity.
Section 1.3 Purpose and Powers of Trust. The Trust is
established for the purpose of engaging in any activity not prohibited by
Delaware law and shall have the power to engage in any such activity and in any
activity incidental or related to any such activity.
ARTICLE II
Trustees
Section 2.1 Number and Qualification. Prior to any offering of
Shares, there may be a sole Trustee and thereafter the number of Trustees shall
be such number, not less than three or more than seven, as shall be set forth in
a written instrument signed or adopted by a majority of the Trustees then in
office. No reduction in the number of Trustees shall have the effect of removing
any Trustee from office prior to the expiration of such Trustee's term. An
individual nominated as a Trustee shall be at least 21 years of age and not
older than such age as may be set forth in a written instrument signed or
adopted by not less than a majority of the Trustees then in office and shall not
be under legal disability. Trustees need not own Shares and may succeed
themselves in office.
Section 2.2 Term and Election. Except for the Trustees
appointed to fill vacancies pursuant to Section 2.4 hereof, each Trustee shall
be elected to serve until death, resignation, removal, reelection by written
ballot at the annual meeting, if one is held, or at any special meeting. Subject
to Section 2.4 hereof, each Trustee named herein or elected or appointed
pursuant to the terms hereof shall hold office until such Trustee's successor
has been elected at such meetings and has qualified to serve as Trustee.
Election of Trustees at a meeting shall be by the affirmative vote of the
holders of a plurality of the Shares present in person or by proxy.
Each individ-
4
<PAGE>
ual elected or appointed as a Trustee of the Trust shall, unless otherwise
provided by such election or appointment, by such election or appointment also
thereby be elected or appointed, as the case may be, as a Trustee of each Series
of the Trust then in existence.
Section 2.3 Resignation and Removal. Any Trustee may resign
its trust (without need for prior or subsequent accounting) by an instrument in
writing signed and delivered or mailed to the Chairman, if any, the President or
the Secretary and such resignation shall be effective upon such delivery, or at
a later date according to the terms of the instrument. Any Trustee may be
removed (provided the aggregate number of Trustees after such removal shall not
be less than the number required by Section 2.1 hereof) for cause at any time by
written instrument, signed by two-thirds of the remaining Trustees, specifying
the date when such removal shall become effective. Any Trustee may be removed
(provided the aggregate number of Trustees after such removal shall not be less
than the minimum number required by Section 2.1 hereof) without cause at any
time by a written instrument, signed or adopted by two-thirds of the remaining
Trustees or by vote of Shares having not less than two-thirds of the aggregate
number of Shares entitled to vote in the election of such Trustee, specifying
the date when such removal shall become effective. Upon the resignation or
removal of a Trustee, or such persons otherwise ceasing to be a Trustee, such
persons shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, such Trustee's legal representative shall
execute and deliver on such Trustee's behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence.
Section 2.4 Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office, or removal, of a Trustee. Whenever a vacancy in the Board of
Trustees shall occur, the remaining Trustees may fill such vacancy by appointing
an individual having the qualifications described in this Article by action
taken at a meeting or by a written instrument signed or adopted by a majority of
the Trustees then in office or by election by the Shareholders, or may leave
such vacancy unfilled or may reduce the number of Trustees (provided the
aggregate number of Trustees after such reduction shall not be less than the
minimum number required by Section 2.1 hereof). Any vacancy created by an
increase in Trustees may be filled by the appointment of an individual having
the qualifications described in this Article made by action taken at
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a meeting or by a written instrument signed by a majority of the Trustees then
in office or by election by the Shareholders. No vacancy shall operate to annul
this Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided herein, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this
Declaration.
Section 2.5 Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees. Regular meetings of the Trustees may be held
without call or notice at a time and place fixed by the By-Laws or by the
Trustees. Notice of any other meeting shall be mailed not less than 48 hours
before the meeting or otherwise actually delivered orally or in writing not less
than 24 hours before the meeting, but may be waived in writing by any Trustee
either before or after such meeting. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting has not been lawfully called or
convened. The Trustees may act with or without a meeting. A quorum for all
meetings of the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration of Trust, any action of the Trustees may be taken
at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees
or such other proportion as shall be specified herein or by the 1940 Act for
action at a meeting at which all Trustees then in office are present.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority of the members or
such other proportion as shall be specified herein for action at a meeting at
which all committee members are present.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to vote
to the extent not prohibited by the 1940 Act.
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All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone,
internet connection or similar communications equipment by means of which all
persons participating in the meeting can hear or otherwise communicate with each
other; participation in a meeting pursuant to any such communications system
shall constitute presence in person at such meeting except as otherwise provided
by the 1940 Act.
Section 2.6 Officers. The Trustees shall elect a President, a
Secretary and a Treasurer and may elect a Chairman who shall serve at the
pleasure of the Trustees or until their successors are elected. The Trustees may
elect or appoint or may authorize the Chairman, if any, or President to appoint
such other officers or agents with such other titles and powers as the Trustees
may deem to be advisable. A Chairman shall, and the President, Secretary and
Treasurer may, but need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
Section 3.1 General. The Trustees shall owe to the Trust and
its Shareholders the same fiduciary duties as owed by directors of corporations
to such corporations and their stockholders under the general corporation law of
the State of Delaware except as otherwise specified by the 1940 Act. The
Trustees shall have exclusive and absolute control over the Trust Property and
over the business of the Trust or any Series thereof to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees shall have power to engage in any activity not
prohibited by Delaware law. The enumeration of any specific power herein shall
not be construed as limiting the aforesaid power. The Trustees may perform such
acts as in their sole discretion are proper for conducting the business of the
Trust. The powers of the Trustees may be exercised without order of or resort to
any court. No Trustee shall be obligated to give any bond or other security for
the performance of any of its duties or powers hereunder.
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Section 3.2 Investments. The Trustees shall have power to:
(a) manage, conduct, operate and carry on the
business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to securities of any type whatsoever,
whether equity or non-equity, of any issuer, evidences of indebtedness of any
person and any other rights, interests, instruments or property of any sort and
to exercise any and all rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers and privileges in respect of any of said investments. The
Trustees shall not be limited by any law limiting the investments which may be
made by fiduciaries.
Section 3.3 Legal Title. Legal title to all the Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or any Series
thereof, or in the name of any other Person as nominee, custodian or pledgee, on
such terms as the Trustees may determine, provided that the interest of the
Trust or any Series thereof therein is appropriately protected.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon due election and qualification. Upon the ceasing of any person to
be a Trustee for any reason, such person shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.4 Issuance and Repurchase of Shares. Subject to the
provisions of this Declaration and applicable law, the Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares
in fractional denomina-
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tions, shall have the power to establish from time to time in accordance with
the provisions of Section 5.2 and 5.3 hereof Series and Classes representing
interests in the Trust or a Series thereof and, subject to the more detailed
provisions set forth in Article VII, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the applicable Series of the Trust whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of the
State of Delaware governing business corporations.
Section 3.5 Borrow Money or Utilize Leverage. The Trustees
shall have the power to borrow money or otherwise obtain credit or utilize
leverage in connection with the activities of the Trust to the maximum extent
permitted by law, regulation or order and the Fundamental Policies of any Series
and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Trust or any Series thereof, including the lending of
portfolio securities, and to endorse, guarantee, or undertake the performance of
any obligation, contract or engagement of any other person, firm, association or
corporation; provided, however, that the assets of any particular Series shall
not be used as security for any credit extended solely to one or more other
Series.
Section 3.6 Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive authority over the management
of the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient, to at
least the same extent as such delegation is permitted to directors of a Delaware
business corporation and is permitted by the 1940 Act, as well as any further
delegations the Trustees may determine to be desirable, expedient or necessary
in order to effect the purpose hereof. The Trustees may designate one or more
committees, including an executive committee, which shall have all or such
lesser portion of the authority of the entire Board of Trustees as the Trustees
shall determine from time to time except to the extent action by the entire
Board of Trustees or particular Trustees is required by the 1940 Act.
Section 3.7 Collection and Payment. The Trustees shall have
power to collect all property due to the Trust or any Series of the Trust or any
Class thereof; to pay all claims, including taxes, against the Trust Property,
the Trust or any Series of the Trust or any Class thereof, the Trustees or any
officer, employee or agent of the Trust; to prosecute, defend, compromise or
abandon any claims relating to the
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Trust Property, the Trust or any Series of the Trust or any Class thereof, or
the Trustees or any officer, employee or agent of the Trust; to foreclose any
security interest securing any obligations, by virtue of which any property is
owed to the Trust or any Series of the Trust or any Class thereof; and to enter
into releases, agreements and other instruments. Except to the extent required
for a Delaware business corporation, the Shareholders shall have no power to
vote as to whether or not a court action, legal proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the Shareholders.
Section 3.8 Expenses. The Trustees shall have power to incur
and pay out of the assets or income of the Trust or any Series of the Trust or
any Class thereof, any expenses which in the opinion of the Trustees are
necessary or appropri ate to carry out any of the purposes of this Declaration,
and the business of the Trust or any Series of the Trust or any Class thereof,
and to pay reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees and
Trustees. The Trustees may pay themselves such compensation for special
services, including legal, underwriting, syndicating and brokerage services, as
they in good faith may deem reasonable and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series or Class thereof, to pay directly, in
advance or arrears, for charges of distribution, of the custodian or transfer,
shareholder servicing or similar agent of such Series or Class, a pro rata
amount as defined from time to time by the Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends or distributions
owed such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 3.9 By-Laws. The Trustees may adopt and from time to
time amend or repeal By-Laws for the conduct of the business of the Trust. Such
ByLaws shall be binding on the Trust and the Shareholders unless inconsistent
with the provisions of this Declaration. The Shareholders shall not have
authority to adopt or amend By-Laws.
Section 3.10 Miscellaneous Powers. The Trustees shall have the
power to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust or any Series
thereof,
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including investment advisors, administrators, custodians, transfer agents,
share holder services providers, distributors, accountants, counsel, brokers,
dealers and others; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisors, distributors, selected dealers or independent
contractors of the Trust or any Series thereof against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or similar
purposes; (f) to the extent permitted by applicable law, indemnify any Person
with whom the Trust or any Series thereof has dealings, including without
limitation any investment advisor, administrator, manager, transfer agent,
custodian, distributor or selected dealer, or any other person as the Trustees
may see fit to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method in which its accounts shall be kept; and
(i) adopt a seal for the Trust but the absence of such seal shall not impair the
validity of any instrument executed on behalf of the Trust.
Section 3.11 Distribution Arrangements. Subject to compliance
with the 1940 Act, and intending to grant the maximum flexibility and
discretion, the Trustees may adopt and amend or repeal from time to time and
implement one or more plans of distribution pursuant to Rules 18f-3 and 12b-1 of
the 1940 Act on any successor or related rules for the Trust or for any Series
of the Trust or any Class thereof, each of which plans may provide to the
maximum extent then permitted by applicable law for the payment of specified
marketing, distribution, shareholder relations and all other permitted expenses
of the Trust or the respective Series or Class and its agents and the agents of
such agents as to both amounts and, manner of payment, timing, allocation of
expenses and methods of changing such fees and expenses, including direct and
indirect charges. The Trustees may in their discretion from time to time enter
into one or more contracts, providing for the sale of the Shares of the Trust or
any Series of the Trust or any Class thereof, whereby the Trust may either agree
to sell such Shares to the other party to the contract or appoint such other
party its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article or the By-Laws; and such
contract
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may also provide for the repurchase or sale of Shares of the Trust or any Series
of the Trust or any Class thereof by such other party as principal or as agent
of the Trust or the respective Series and may provide that such other party may
enter into selected dealer agreements with registered securities dealers and
brokers and servicing and similar agreements with persons who are not registered
securities dealers to further the purposes of the distribution or repurchase of
the Shares of the Trust or any Series of the Trust or any Class thereof and any
plan or plans of distribution adopted by the Trustees.
Section 3.12 Further Powers. The Trustees shall have the power
to conduct the business of the Trust or any Series of the Trust or any Class
thereof and carry on its operations in any and all of its branches and maintain
offices both within and without the State of Delaware, in any and all states of
the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust or
any Series of the Trust or any Class thereof although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust or any Series of the Trust or any Class thereof made by the Trustees in
good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
Section 3.13 Parties to Contract. Any contract of the
character described in this Article may be entered into with any Person,
although one or more of the Trustees, officers or employees of the Trust may be
an officer, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relation ship, nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust or any Series of the Trust or any Class thereof under or
by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article or
the By-Laws. The same Person may be the other party to contracts entered into
pursuant to this Article, and any individual may be financially interested or
otherwise affili ated with Persons who are parties to any or all of the
contracts mentioned in this Article.
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ARTICLE IV
Limitations of Liability
and Indemnification
Section 4.1 No Personal Liability of Shareholders, Trustees,
etc. No Shareholder of the Trust shall be subject in such capacity to any
personal liability whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. Shareholders shall have the same
limitation of personal liability as is extended to stockholders of a private
corporation for profit incorporated under the general corporation law of the
State of Delaware. No Trustee, officer, employee or agent of the Trust or any
Series of the Trust shall be subject in such capacity to any personal liability
whatsoever to any Person, other than the Trust or the respective Series or the
Shareholders, in connection with Trust Property or the affairs of the Trust or
the respective Series, save only liability to the Trust or its Shareholders
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard for the duty to such Person; and, subject to the foregoing exception,
all such Persons shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee or officer, as such, of the Trust, is made a party to any
suit or proceeding to enforce any such liability, subject to the foregoing
exception, such shareholder shall not, on account thereof, be held to any
personal liability.
Section 4.2 Mandatory Indemnification.
(a) The Trust shall indemnify the Trustees and
officers of the Trust (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and reasonable counsel fees reasonably
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which such person may be or may have
been involved as a party or otherwise (other than, except as authorized by the
Trustees, as the plaintiff or complainant) or with which such person may be or
may have been threatened, while acting in any capacity set forth above in this
Section 4.2 by reason of its having acted in any such capacity, except with
respect to any matter as to which such person shall not have acted in good faith
in the reasonable belief that its action was in the best interest of the Trust
or the respective Series of the Trust or Class thereof and furthermore, in the
case of
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any criminal proceeding, as to which such person shall have had reasonable cause
to believe that the conduct was unlawful, provided, however, that no indemnitee
shall be indemnified hereunder against any liability to any person or any
expense of such indemnitee arising by reason of (i) willful misfeasance, (ii)
bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties
involved in the conduct of its position. Notwithstanding the foregoing, with
respect to any action, suit or other proceeding voluntarily prosecuted by any
indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such indemnitee was
authorized by a majority of the Trustees.
(b) Notwithstanding the foregoing, no indemnification
shall be made hereunder unless there has been a determination (1) by a final
decision on the merits by a court or other body of competent jurisdiction before
whom the issue of entitlement to indemnification hereunder was brought that such
indemnitee is entitled to indemnification hereunder or, (2) in the absence of
such a decision, by (i) a majority vote of a quorum of those Trustees who are
neither Interested Persons of the Trust nor parties to the proceeding
("Disinterested Non-Party Trustees"), that the indemnitee is entitled to
indemnification hereunder, or (ii) if such quorum is not obtainable or even if
obtainable, if such majority so directs, independent legal counsel in a written
opinion conclude that the indemnitee should be entitled to indemnification
hereunder. All determinations to make advance payments in connection with the
expense of defending any proceeding shall be authorized and made in accordance
with the immediately succeeding paragraph (c) below.
(c) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation by the indemnitee of the indemnitee's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Trust unless it is subsequently determined that
such indemnitee is entitled to such indemnification and if a majority of the
Trustees determine that the applicable standards of conduct necessary for
indemnification appear to have been met. In addition, at least one of the
following conditions must be met: (1) the indemnitee shall provide adequate
security for its undertaking, (2) the Trust shall be insured against losses
arising by reason of any lawful advances, or (3) a majority of a quorum of the
Disinterested Non-Party Trustees, or if a majority vote of such quorum so
direct, independent legal counsel in a written opinion, shall conclude, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
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that there is substantial reason to believe that the indemnitee ultimately will
be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these
provi sions shall not exclude any other right to which such indemnitee may be
lawfully entitled.
(e) Notwithstanding the foregoing, subject to any
limitations provided by the 1940 Act and this Declaration, the Trust shall have
the power and authority to indemnify Persons providing services to the Trust to
the full extent provided by law as if the Trust were a corporation organized
under the Delaware General Corporation Law provided that such indemnification
has been approved by a majority of the Trustees.
Section 4.3 No Duty of Investigation; Notice in Trust
Instruments, etc. No purchaser, lender, transfer agent or other person dealing
with the Trustees or with any officer, employee or agent of the Trust or any
Series of the Trust or Class thereof shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, undertaking,
instrument, certificate, Share, other security of the Trust or any Series of the
Trust or any Class thereof, and every other act or thing whatsoever executed in
connection with the Trust or any Series of the Trust or Class thereof shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable or is required by the 1940 Act.
Section 4.4 Reliance on Experts, etc. Each Trustee and officer
or employee of the Trust or any Series of the Trust shall, in the performance of
its duties, be fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith upon the books
of account or other records of the Trust or any Series of the Trust or Class
thereof, upon an opinion of counsel, or upon reports made to the Trust or any
Series thereof by any of the Trust's officers or employees or by any advisor,
administrator, manager, distributor, selected
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dealer, accountant, appraiser or other expert or consultant selected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or other person may also be a Trustee.
Section 4.5 Indemnification of Shareholders. If any
Shareholder or former Shareholder of any Series shall be held personally liable
solely by reason of his being or having been a Shareholder and not because of
his acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of any entity, its general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified to the maximum extent permitted by law against all
loss and expense arising from such liability. The Trust, on behalf of the
affected Series, shall, upon request by such Shareholder, assume the defense of
any claim made against such Shareholder for any act or obligation of the Series
and satisfy any judgment thereon from the assets of the Series.
ARTICLE V
Shares of Beneficial Interest
Section 5.1 Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into an unlimited number of shares of
beneficial interest, par value $.001 per share. All Shares issued in accordance
with the terms hereof, including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and nonassessable when the consideration determined by the Trustees (if any)
therefor shall have been received by the Trust.
Section 5.2 Series Designation. The Trustees, in their
discretion from time to time, may authorize the division of Shares into two or
more Series, each Series relating to a separate portfolio of investments and
each of which Series shall be a separate and distinct subtrust of the Trust.
Each Series so established hereunder shall be deemed to be a separate trust
under the provisions of Delaware law. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate such
separate and distinct Series and to fix and determine the relative rights and
preferences as between the different Series. The establishment and designation
of any Series shall be effective upon the execution by a majority of the
Trustees of an instrument setting forth the establishment and designation of
such Series. Such instrument shall also set forth any rights and preferences of
such Series which are in addition to the rights and preferences of Shares set
forth in this Declara-
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tion. At any time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish or alter that Series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
Section 5.3 Class Designation. The Trustees, in their
discretion from time to time, may authorize the division of Shares of the Trust
or any Series into two or more Classes of Shares all the assets of which shall
be commingled with the other Classes of such Series. The Trustees shall have
exclusive power without the require ment of Shareholder approval to establish
and designate such separate and distinct Classes and to fix and determine the
relative rights, terms, conditions and expenses applicable to each Class of
Shares to the maximum extent permitted by the 1940 Act. The establishment and
designation of any Class of Shares shall be effective upon the affirmative vote
of a majority of the Trustees of the Trust, including the Trustees who are not
interested persons of the Trust. At any time that there are no Shares
outstanding of any particular Class previously established and designated, the
Trustees may, by the affirmative vote of a majority of the Trustees, including a
majority of the Trustees who are not interested persons of the Trust, abolish or
alter that Class and the establishment and designation thereof.
Section 5.4 Description of Shares. If the Trustees shall
create sub-trusts and divide the Shares into one or more Series or create
Classes of Shares, the following provisions shall be applicable:
(a) Number of Shares. The number of Shares of each
Series or Class that may be issued shall be unlimited. The Trustees may classify
or reclas sify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or Classes that may be
established and designated from time to time. The Trustees may hold as treasury
Shares (of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series or Class reacquired by the Trust at their discretion from time to
time.
(b) Investment of Property. The power of the Trustees
to invest and reinvest the Trust Property of each Series that may be established
shall be governed by Section 3.2 of this Declaration.
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(c) Allocation of Assets. All consideration received
by the Trust for the issue or sale of Shares of a particular Series or Class,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payment derived from any reinvestment of such proceeds in whatever form the
same may be, together with such Series' or Class' share of any assets of the
Trust not otherwise allocated to any particular Series or Class, shall be held
by the Trustees and Trust for the benefit of the Shareholders of such Series
and, subject to the rights of creditors of such Series only, shall irrevocably
belong to that Series for all purposes, and shall be so recorded upon the books
of account of the Trust. In the event that there are any assets, income, earn-
ings, profits, and proceeds thereof, funds or payments which are not readily
identifi able as belonging to any particular Series, the Trustees shall allocate
them among anyone or more of the Series established and designated from time to
time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable, and anything so allocated to a Series shall belong to such
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes.
(d) Allocation of Expenses. The assets belonging to
each particular Series or attributable to each particular Class shall be charged
with the liabilities of the Trust in respect of that Series or Class and all
expenses, costs, charges and reserves attributable to that Series or Class, and
any general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as belonging to any particular Series or
attributable to any particular Class shall be allocated and charged by the
Trustees to and among any one or more of the Series or Classes established and
designated from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable; provided that any incremental
expenses allocated to one or more Classes of Shares on a basis other than the
relative net asset values of the respective Classes shall be allocated in a
manner consistent with the 1940 Act. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all Series and Classes for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital, and
each such determination and allocation shall be conclusive and binding upon the
Shareholders. Under no circumstances shall the assets allocated or belonging to
a particular Series or attributable to a particular Class be charged with any
liabilities attributable to another Series
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or Class. Any creditor may look only to the assets of the particular Series with
respect to which such person is a creditor for satisfaction of such creditor's
debt.
(e) Dividends. The power of the Trustees to pay
dividends and make distributions with respect to any one or more Series shall be
governed by Section 5.12 of this Trust. Dividends and distributions on Shares of
a particular Series may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from such of the income and
capital gains, accrued or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual and accrued liabilities
belonging to that Series. All dividends and distributions on each Class of a
Series shall be distributed pro rata to the holders of Shares of that Class in
proportion to the number of Shares of that Class held by such holders at the
date and time of record established for the payment of such dividends or
distribu tions, and such dividends and distributions need not be pro rata with
respect to dividends and distributions paid to Shares of any other Class of such
Series. Dividends and distributions shall be paid with respect to Shares of a
given Class only out of lawfully available assets attributable to such Class.
Section 5.5 Rights of Shareholders. The Shares shall be
personal property giving only the rights in this Declaration specifically set
forth. The ownership of the Trust Property of every description and the right
to conduct any business herein before described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, with respect to a particular
Series of Class and they shall have no right to call for any partition or
division of any property, profits, rights or interests of the Trust nor can they
be called upon to share or assume any losses of the Trust or, subject to the
right of the Trustees to charge certain expenses directly to Shareholders, as
provided in the last sentence of Section 3.8, suffer an assessment of any kind
by virtue of their ownership of Shares. The Shares shall not entitle the holder
to preference, preemptive, appraisal, conversion or exchange rights (except as
specified in this Section 5.5 or in Section 8.4 or as specified by the Trustees
in the designation or redesignation of any Series or Class thereof).
Notwithstanding anything to the contrary contained herein:
(i) Any Class of shares denominated as being
convertible automatically, and without any action or choice on the
part of the holder thereof, or shares denominated as being convertible
based on an election of
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the holder thereof, into any other Class of Shares (or fractions
thereof) pursuant to such terms, conditions and restrictions as may be
established by the Board of Trustees and set forth from time to time in
the applicable Prospectus with respect to such Shares shall be
convertible on such terms as are described in such Prospectus.
(ii) The number of Shares into which each such
convertible Share shall convert pursuant to the foregoing paragraph
shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per share of the
convertible Shares for purposes of sales and redemptions thereof on the
date of such conversion (the "Conversion Date") by the net asset value
per share of the Class of Shares being converted into for purposes of
sales and redemptions thereof on the Conversion Date.
(iii) On the Conversion Date, those Shares which
are converted into another Class of Shares shall cease to accrue
dividends and will no longer be deemed outstanding and the rights of
the holders thereof (except the right to receive dividends declared
prior to the Conversion Date but unpaid as of the Conversion Date) will
cease. Certificates representing Shares resulting from conversion may
be issued pursuant to such terms and conditions as may be established
from time to time by the Board of Trustees.
Section 5.6 Trust Only. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bail ment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 5.7 Issuance of Shares. The Trustees, in their
discretion, may from time to time without vote of the Shareholders issue Shares
with respect to any Series that may have been established pursuant to Section
5.2, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may determine, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. The Trustees may
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from time to time divide or combine the Shares of any Series into a greater or
lesser number without thereby changing the proportionate beneficial interest in
such Series of the Trust. Issuances and redemptions of Shares may be made in
whole Shares and/or l/l,000ths of a Share or multiples thereof as the Trustees
may determine in such fractions thereof.
Section 5.8 Register of Shares. A register shall be kept at
the Trust or any transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Separate registers shall be established and maintained
for each Series of the Trust and each Class thereof. Each such register shall be
conclusive as to who are the holders of the Shares of the applicable Series and
Classes thereof and who shall be entitled to receive dividends or distributions
or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor to
have notice given to it as herein provided, until such shareholder has given its
address to a transfer agent or such other officer or agent of the Trustees as
shall keep the register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate fees therefore and rules and regulations as to their use.
Section 5.9 Transfer of Shares. Shares shall be transferable
on the records of the Trust only by the record holder thereof or by its agent
thereto duly authorized in writing, upon delivery to the Trustees or a transfer
agent of the Trust of a duly executed instrument of transfer, together with such
evidence of the genuine ness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the applicable register of the Trust. Until such record is
made, the Shareholder of record shall be deemed to be the holder of such Shares
for all purposes hereof and neither the Trustees nor any transfer agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as the
holder of such Shares upon production of the proper evidence thereof to the
Trustees or a transfer agent of the Trust, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such for all purposes
hereof, and neither the Trustees nor
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any transfer agent or registrar nor any officer or agent of the Trust shall be
affected by any notice of such death, bankruptcy or incompetence, or other
operation of law.
Section 5.10 Notices. Any and all notices to which any
Shareholder hereunder may be entitled and any and all communications to any
Shareholder shall be deemed duly served or given if mailed, postage prepaid,
addressed to any Shareholder of record at its last known address as recorded on
the applicable register of the Trust and may be sent together with any such
notice or other communication to another Shareholder at the same address.
Section 5.11 Net Asset Value. The value of the assets of the
Trust or any Series and Classes thereof, the amount of liabilities of the Trust
or any Series and Classes thereof and the net asset value of each outstanding
Share of the Trust and the Series and Classes shall be determined at such time
or times and on such days as the Trustees may determine in accordance with
the 1940 Act. The method of determina tion of net asset value shall be
determined by the Trustees. The power and duty to value the assets and
liabilities of the Trust and make net asset value determinations and
calculations may be delegated by the Trustees.
Section 5.12 Distributions to Shareholders.
(a) The Trustees shall from time to time distribute
among the Shares such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets held by the Trustees as they may deem proper or as
may otherwise be determined in the instrument setting forth the terms of such
Shares such Class or Series of Shares, which need not be ratable with respect to
distributions in respect of Shares of any other Class or Series thereof of the
Trust. Such distributions may be made in cash or property (including without
limitation any type of obligations of the Trust or any assets thereof) or any
combination thereof.
(b) Distributions may be made to the Shareholders of
record entitled to such distribution at the time such distribution is declared
or at such later date as shall be determined by the Trust prior to the date of
payment.
(c) The Trustees may always retain from any source
such amount as they may deem necessary to pay the debts or expenses of the Trust
or to meet obligations of the Trust, or as they otherwise may deem desirable to
use in the conduct of its affairs or to retain for future requirements or
extensions of the business of the Trust.
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ARTICLE VI
Shareholders
Section 6.1 Meetings of Shareholders. The Trust may, but shall
not be required to, hold annual meetings of the holders of any Class or Series
of Shares. An annual or special meeting of Shareholders may be called at any
time only by the Trustees; provided, however, that if October 31 of any year
shall have passed and the Trustees shall not have called an annual meeting of
Shareholders for such year, the Trustees shall call a meeting for the purpose of
voting on the removal of one or more Trustees or the termination of any
investment advisory agreement, upon written request of holders of Shares of the
Trust or a Series having in the aggregate not less than a majority of the votes
of the outstanding Shares of the Trust entitled to vote on the matter or matters
in question, such request specifying the purpose or purposes for which such
meeting is to be called. Any meeting of Shareholders shall be held within or
without the State of Delaware on such day and at such time as the Trustees shall
designate.
Section 6.2 Voting. Shareholders shall have no power to vote
on any matter except matters on which a vote of Shares is required by applicable
law, this Declaration or resolution of the Trustees. Any matter required to be
submitted for approval of any of the Shares and affecting one or more Series or
Classes shall require approval by the required vote of Shares of the affected
Series or Class voting together as a single Series or Class and, if such matter
affects one or more Series or Class thereof differently from one or more other
Series or Class, approval by the required vote of Shares of such other Series or
Class voting as a separate Series or Class shall be required in order to be
approved with respect to such other Series or Class; provided, however, that
except to the extent required by the 1940 Act, there shall be no separate class
votes on the election or removal of Trustees or the selection of auditors for
the Trust. Shareholders of a particular Series shall not be entitled to vote on
any matter that affects the rights or interests of only one or more other
Series. There shall be no cumulative voting in the election or removal of
Trustees.
Section 6.3 Notice of Meeting, Shareholder Proposals and
Record Date. Notice of all meetings of Shareholders, stating the time, place and
purposes of the meeting, shall be given by the Trustees by mail to each
Shareholder of record entitled to vote thereat at its registered address, mailed
at least 10 days before the
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meeting or otherwise in compliance with applicable law. Except with respect to
an annual meeting, at which any business required by the 1940 Act may be
conducted, only the business stated in the notice of the meeting shall be
considered at such meeting. Subject to the provisions of applicable law, any
Shareholder wishing to include a proposal to be considered at an annual meeting
must submit such proposal to the Trust at least 30 days in advance of such
meeting. Any adjourned meeting may be held as adjourned one or more times
without further notice not later than 130 days after the record date. For the
purposes of determining the Shareholders who are entitled to notice of and to
vote at any meeting the Trustees may, without closing the transfer books, fix a
date not more than 100 days prior to the date of such meeting of Shareholders as
a record date for the determination of the Persons to be treated as Shareholders
of record for such purposes.
Section 6.4 Quorum and Required Vote.
(a) The holders of a majority of the outstanding Shares of the
Trust on the record date present in person or by proxy shall constitute a quorum
at any meeting of the Shareholders for purposes of conducting business on which
a vote of all Shareholders of the Trust is being taken. The holders of a
majority of the outstanding Shares of one or more Series or one or more Classes
on the record date present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders for purposes of conducting business on which a
vote of Shareholders of such Series or Series or Class or Classes is being
taken. Shares underlying a proxy as to which a broker or other intermediary
states its absence of authority to vote with respect to one or more matters
shall be treated as present for purposes of establishing a quorum for taking
action on any such matter only to the extent so determined by the Trustees at or
prior to the meeting of Shareholders at which such matter is to be considered.
(b) Subject to any provision of applicable law, this
Declara tion or a resolution of the Trustees specifying or requiring a greater
or lesser vote requirement for the transaction of any matter of business at any
meeting of Share holders, (i) the affirmative vote of a plurality of the Shares
entitled to vote for the election of any Trustee or Trustees shall be the act of
such Shareholders with respect to the election of such Trustee or Trustees, (ii)
the affirmative vote of a majority of the Shares present in person or
represented by proxy and entitled to vote on any other
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matter shall be the act of the Shareholders with respect to such matter, and
(iii) where a separate vote of any Series is required on any matter, the
affirmative vote of a majority of the Shares of such Series present in person or
represented by proxy and entitled to vote on such matter shall be the act of the
Shareholders of such Series with respect to such matter.
Section 6.5 Proxies, etc. At any meeting of Shareholders, any
holder of Shares entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more of the
officers or employees of the Trust. Only Shareholders of record shall be
entitled to vote. Each full Share shall be entitled to one vote and each
fractional Share shall be entitled to a vote equal to its fraction of a full
Share. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be given by or on behalf of a Shareholder of record on the record
date for a meeting shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. If
the holder of any such Share is a minor or a person of unsound mind, and subject
to guardianship or to the legal control of any other person as regards the
charge or management of such Share, such person may vote by its guardian or such
other person appointed or having such control, and such vote may be given in
person or by proxy. The Trustees shall have the authority to make and modify
from time to time regulations regarding the validity of proxies. In addition to
signed proxies, such regulations may authorize facsimile, telephonic, internet
and other methods of appointing a proxy that are subject to such supervision by
or under the direction of the Trustees as the Trustees shall determine.
Section 6.6 Reports. The Trustees shall cause to be prepared
and sent to Shareholders at least annually and more frequently to the extent and
in the form required by law, regulation or any exchange on which Shares are
listed a report of operations containing financial statements of the Trust
prepared in conformity with generally accepted accounting principles and
applicable law. It is contemplated that separate reports may be prepared for the
various Series. Copies of such reports shall be mailed to all Shareholders of
record of the applicable Series within the time
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required by the 1940 Act, and in any event within a reasonable period preceding
the meeting of Shareholders.
Section 6.7 Inspection of Records. The records of the Trust
shall be open to inspection by Persons who have been holders of record of at
least $25,000 in net asset value or liquidation preference of Shares for a
continuous period of not less than six months to the same extent and for the
same purposes as is permitted under the Delaware General Business Corporation
Law to shareholders of a Delaware business corporation.
Section 6.8 Shareholder Action by Written Consent. Any action
which may be taken by Shareholders by vote may be taken without a meeting if
the number of shares necessary to approve the act at an in-person meeting and
entitled to vote thereon consent to the action in writing and the written
consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE VII
Redemption
Section 7.1 Redemptions. All outstanding Shares of any Series
of the Trust may be redeemed at the option of the holders thereof, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application by any Shareholder or pursuant to authorization from
any Shareholder of a particular Series or Class, redeem or repurchase from such
Shareholder outstanding Shares of such Series or Class for an amount per share
determined by the application of a formula adopted for such purpose by the
Trustees with respect to such Series (which formula shall be consistent with the
1940 Act); provided that (a) such amount per share shall not exceed any
limitations imposed under applicable law and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for
effecting such redemption, at such rates as the Trustees may establish, as and
to the extent permitted under the 1940 Act, and may, at any time and from time
to time, pursuant to such Act, suspend such right of redemption. The procedures
for effecting redemption shall be as set forth in the Prospectus with respect to
the applicable Series or Class from time to time. The proceeds of the redemption
of Shares shall be paid in cash or property (tangible of intangible) or any
combination thereof in the sole discretion of the Trust's investment advisor.
The proceeds of the redemption of Shares subject to a contingent deferred sales
charge (including
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fractional shares) shall be reduced by the amount of any applicable contingent
deferred sales charge payable on such redemption with respect to the respective
Class of such Shares as set forth in the applicable Prospectus (to the extent
consistent with the 1940 Act) or such other charges, fees or expenses as may be
applicable thereto.
Section 7.2 Disclosure of Holding. The holders of Shares or
other securities of the Trust shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
or other securities of the Trust as the Trustees deem necessary to comply with
the provisions of the Code or any other applicable laws.
Section 7.3 Redemptions of Small Accounts. The Trustees shall
have the power to redeem shares of any Series at a redemption price determined
in accordance with Section 7.1 above, (a) if at any time the total investment in
such account does not have a value of at least such minimum amount as may be
specified in the Prospectus for such Series from time to time, (b) as provided
by Section 3.8, or (c) to the extent a Shareholder or other person beneficially
owns Shares equal to or in excess of a percentage of Shares of the Trust or any
Series or Class determined from time to time by the Trustees and specified in
the applicable Prospectus. In the event the Trustees determine to exercise their
power to redeem Shares provided in subsection (a) of this Section 7.3, the
Shareholder shall be notified that the value of its account is less than the
applicable minimum amount and shall be allowed 30 days to make an appropriate
investment before redemption is processed.
ARTICLE VIII
Duration: Termination of Trust;
Amendment; Mergers, Etc.
Section 8.1 Duration. Subject to termination in accordance
with the provisions of Section 8.2 hereof, the Trust created hereby shall have
perpetual existence.
Section 8.2 Termination.
(a) The Trust or any Series may be dissolved by the
affirma tive vote of a majority of the Trustees, and without any vote of the
Shareholders
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thereof, except as may be required by the 1940 Act. Upon the dissolution of the
Trust or any Series:
(1) The Trust or such Series shall carry
on no business except for the purpose of winding up its affairs.
(2) The Trustees shall proceed to wind
up the affairs of the Trust or such Series and all of the powers of the
Trustees under this Declaration shall continue until the affairs of the
Trust or such Series shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or such Series, collect
its assets, sell, convey, assign, exchange, merger where the Trust is
not the survivor, transfer or otherwise dispose of all or any part of
the remaining Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in part in
cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
merger in which the Trust is not the survivor, transfer or other
disposition of all or substantially all the Trust Property of the
Trust or any Series shall require approval of the principal terms of
the transaction and the nature and amount of the consideration with the
same vote as required for dissolution pursuant to paragraph (a) above.
(3) After paying or adequately providing
for the payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary for their
protection, the Trustees may distribute the remaining Trust Property of
the Trust or any Series, in cash or in kind or partly each, among the
Shareholders of such Series according to their respective rights.
(b) After the winding up and termination of the Trust
or any Series and distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and lodge among the records of the Trust
an instrument in writing setting forth the fact of such termination and shall
execute and file a certificate of cancellation with the Secretary of State of
the State of Delaware. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further
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liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
Upon termination of any Series, the Trustees shall thereunder
be discharged from all further liabilities and duties with respect to such
Series, and the rights and interests of all Shareholders of such Series shall
thereupon cease.
Section 8.3 Amendment Procedure.
(a) Subject to Section 8.3(b), this Declaration may
be amended in any respect by the affirmative vote of two-thirds of the Trustees
and without any vote of the Shareholders of the Trust or any Series or Class
except as may be required by the 1940 Act.
(b) Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders. Expenses of the Trust charged
directly to Shareholders pursuant to Section 3.8 hereof or fees or sales
charges payable upon or in connection with redemptions of Shares pursuant to
Section 7.1 hereof shall not constitute "assessments" for purposes of this
Section 8.3(b).
(c) An amendment duly adopted by the requisite vote
of the Board of Trustees and, if required, Shareholders as aforesaid, shall
become effective at the time of such adoption or at such other time as may be
designated by the Board of Trustees or Shareholders, as the case may be. A
certification signed by a majority of the Trustees setting forth an amendment
and reciting that it was duly adopted by the Trustees and, if required,
Shareholders as aforesaid, or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust or at such other time
designated by the Board.
Notwithstanding any other provision hereof, until such time as
Shares are issued and outstanding, this Declaration may be terminated or amended
in any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
Section 8.4 Merger, Consolidation and Sale of Assets. The
Trust or any Series or Classes thereof may merge or consolidate with any other
corporation,
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association, trust or other organization or any Series, Class, sub-trust or
other designated portion thereof or may sell, lease or exchange all or
substantially all of the Trust Property or the property of any Series or Class
including its good will or may acquire all or substantially all of the property
of any other corporation, association, trust or other organization or any
Series, Class, sub-trust or other designated portion thereof, upon such terms
and conditions and for such consideration when and as authorized by two-thirds
of the Trustees and without any vote by the Shareholders of the Trust or any
Series or Class except as may be required by the 1940 Act, and any such merger,
consolidation, sale, lease, exchange or purchase shall be determined for all
purposes to have been accomplished under and pursuant to the statutes of the
State of Delaware.
Section 8.5 Incorporation. Upon approval by Shareholders, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust,
partnership, association or other organization to take over all of the Trust
Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, limited liability company, association
or organization in exchange for the shares or securities thereof, or otherwise,
and to lend money to, subscribe for the shares or securities of, and enter into
any contracts with any such corporation, trust, limited liability company,
partnership, association or organization, or any corporation, partnership,
trust, limited liability company, association or organization in which the Trust
holds or is about to acquire shares or any other interests. The Trustees may
also cause a merger or consolidation between the Trust or any successor thereto
and any such corporation, trust, limited liability company, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, limited liability
companies, partnerships, associations or other organizations and selling,
conveying or transferring a portion of the Trust Property to such organizations
or entities.
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ARTICLE IX
Miscellaneous
Section 9.1 Filing. This Declaration and any amendment
(including any supplement) hereto shall be filed in such places as may be
required or as the Trustees deem appropriate. Each amendment shall be
accompanied by a certificate signed and acknowledged by a Trustee stating that
such action was duly taken in a manner provided herein, and shall, upon
insertion in the Trust's minute book, be conclusive evidence of all amendments
contained therein. A restated Declaration, containing the original Declaration
and all amendments theretofore made, may be executed from time to time by a
majority of the Trustees and shall, upon insertion in the Trust's minute book,
be conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 9.2 Resident Agent. The Trust shall maintain a
resident agent in the State of Delaware, which agent shall initially be The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The
Trustees may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the State.
Section 9.3 Governing Law. This Declaration is executed and
delivered in the State of Delaware and with reference to the laws thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to, governed by and construed in accordance with the
laws of said State and reference shall be specifically made to the business
corporation law of the State of Delaware as to the construction of matters not
specifically covered herein or as to which an ambiguity exists, although such
law shall not be viewed as limiting the powers otherwise granted to the Trustees
hereunder and any ambiguity shall be viewed in favor of such powers.
Section 9.4 Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
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Section 9.5 Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust, or of any
recording office in which this Declaration may be recorded, appears to be a
Trustee hereunder, certifying to the existence of any fact or facts which in any
manner relate to the affairs of the Trust shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trust.
Section 9.6 Provisions in Conflict with Law or Regulation.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Code or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration to the extent of such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
32
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
By: __________________________________________
Name:
Title:
33
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BY-LAWS
OF
DLJdirect MUTUAL FUNDS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
<S> <C>
Shareholder Meetings.......................................................................1
1.1 Chairman............................................................1
1.2 Proxies; Voting.....................................................1
1.3 Fixing Record Dates.................................................1
1.4 Inspectors of Election..............................................1
1.5 Records at Shareholder Meetings.....................................2
ARTICLE II
Trustees...................................................................................2
2.1 Annual and Regular Meetings.........................................2
2.2 Chairman; Records...................................................3
ARTICLE III
Officers...................................................................................3
3.1 Officers of the Trust...............................................3
3.2 Election and Tenure.................................................3
3.3 Removal of Officers.................................................3
3.4 Bonds and Surety....................................................4
3.5 Chairman, President, and other Officers.............................4
3.6 Secretary...........................................................4
3.7 Treasurer...........................................................5
3.8 Other Officers and Duties...........................................5
ARTICLE IV
Miscellaneous..............................................................................6
4.1 Signatures..........................................................6
4.2 Seal................................................................6
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE V
Stock Transfers............................................................................6
5.1 Transfer of Share...................................................6
5.2 Registered Shareholders.............................................6
ARTICLE VI
Amendment of By-Laws.......................................................................7
6.1 Amendment and Repeal of By-Laws.....................................7
</TABLE>
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DLJdirect MUTUAL FUNDS
BY-LAWS
These By-Laws are made and adopted pursuant to Section 3.9 of
the Declaration of Trust establishing DLJdirect Mutual Funds dated as of July ,
1999 as from time to time amended (hereinafter called the "Declaration"). All
words and terms capitalized in these By-Laws shall have the meaning or meanings
set forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
1.2 Chairman. The Chairman, if any, shall act as chairman at
all meetings of the Shareholders; in the Chairman's absence, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the meeting,
who may be one of themselves.
1.2 Proxies; Voting. Shareholders may vote either in person or
by duly executed proxy and each full share or fraction thereof represented at
the meeting shall have one vote (or such fraction, as the case may be), all as
provided in Article VI of the Declaration.
1.3 Fixing Record Dates. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any meeting,
including any adjournment thereof, or who are entitled to participate in any
dividends, or for any other proper purpose, the Trustees may from time to time,
without closing the trans fer books, fix a record date in the manner provided in
Section 6.3 of the Declaration. If the Trustees do not prior to any meeting of
Shareholders so fix a record date or close the transfer books, then the date of
mailing notice of the meeting or the date upon which the dividend resolution is
adopted, as the case may be, shall be the record date.
1.4 Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or
<PAGE>
Shareholder proxy shall, appoint Inspectors of Election of the meeting. The
number of Inspectors shall be either one or three. If appointed at the meeting
on the request of one or more Shareholders or proxies, a majority of Shares
present shall determine whether one or three Inspectors are to be appointed, but
failure to allow such determination by the Shareholders shall not affect the
validity of the appointment of Inspectors of Election. In case any person
appointed as Inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment made by the Trustees in advance of the convening of
the meeting or at the meeting by the person acting as chairman. The Inspectors
of Election shall determine the number of Shares outstanding, the Shares
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Shareholders. If there are three
Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On request
of the Chairman, if any, of the meeting, or of any Shareholder or Shareholder
proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
1.5 Records at Shareholder Meetings. At each meeting of the
Shareholders, there shall be made available for inspection at a convenient time
and place during normal business hours, if requested by Shareholders, the
minutes of the last previous Annual or Special Meeting of Shareholders of the
Trust and a list of the Shareholders of the Trust, as of the record date of the
meeting or the date of closing of transfer books, as the case may be. Such list
of Shareholders shall contain the name and the address of each Shareholder in
alphabetical order and the number of Shares owned by such Shareholder.
Shareholders shall have such other rights and procedures of inspection of the
books and records of the Trust as are granted to shareholders of a Delaware
business corporation.
ARTICLE II
Trustees
2.1 Annual and Regular Meetings. Meetings of the Trustees
shall be held from time to time upon the call of the Chairman, if any, the
President, the Secre-
2
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tary or any two Trustees. Regular meetings of the Trustees may be held without
call or notice and shall generally be held quarterly on dates established by the
Trustees. Notice of any other meeting shall be mailed not less than 48 hours
before the meeting or otherwise actually delivered orally or in writing not less
than 24 hours before the meeting, but may be waived in writing by any Trustee
either before or after such meeting. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting and no notice need be given of action proposed to be
taken by unanimous written consent.
2.2 Chairman; Records. The Chairman, if any, shall be elected
by the Trustees from one of their number to serve at the pleasure of the
Trustees. Such Chairman, if any, shall act as chairman at all meetings of the
Trustees; in absence of a chairman, the Trustees present shall elect one of
their number to act as temporary chairman. The results of all actions taken at a
meeting of the Trustees, or by unani mous written consent of the Trustees, shall
be recorded by the person appointed by the Board of Trustees as the meeting
secretary.
ARTICLE III
Officers
3.1 Officers of the Trust. The officers of the Trust shall
consist of a President, a Secretary, a Treasurer and such other officers or
assistant officers as may be elected or authorized by the Trustees. Any two or
more of the offices may be held by the same Person, except that the same person
may not be both President and Secretary. The Chairman, if any, shall be a
Trustee, but no other officer of the Trust need be a Trustee.
3.2 Election and Tenure. At the initial organization meeting,
the Trustees shall elect the President, Secretary, Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. Such officers shall serve at the pleasure of the
Trustees or until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers at any
time.
3
<PAGE>
3.3 Removal of Officers. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of
action which any officer may have as a result of removal in breach of a contract
of employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the Chairman, if any, President, or
Secretary, and such resignation shall take effect immediately upon receipt by
the Chairman, if any, President, or Secretary, or at a later date according to
the terms of such notice in writing.
3.4 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of such officer's duties in
such amount and with such sureties as the Trustees may determine.
3.5 Chairman, President, and other Officers. The Chairman, if
any, shall, if present, preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to such person by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the Chairman, if
any, the President shall be the chief executive officer of the Trust and,
subject to the control of the Trustees and any agreements entered into by the
Trust with others, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. Each officer shall have power in the name and on behalf of the
Trust for the benefit of the Trust or any of its Series to execute any and all
loans, documents, contracts, agreements, deeds, mortgages, registration
statements, applications, requests, filings and other instruments in writing,
and to employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, each officer shall have full authority and power, on
behalf of all of the Trustees, to attend and to act and to vote, on behalf of
the Trust at any meetings of business organizations in which the Trust holds an
interest, or to confer such powers upon any other persons, by executing any
proxies duly authorizing such persons. The President shall have such further
authorities and duties as the Trustees shall from time to time determine. In the
absence or disability of the President, the Vice-Presidents in order of their
rank as fixed by the Trustees or, if more than one and not ranked, the
Vice-President designated by the Trustees, shall perform all of the duties of
the President, and when so acting shall have all the powers of and be subject to
all of the restrictions upon the President.
4
<PAGE>
3.6 Secretary. The Secretary shall maintain the minutes of all meetings of, and
record all votes of, Shareholders, Trustees and the Executive Committee, if
any. The Secretary shall be custodian of the seal of the Trust, if any, and the
Secretary (and any other person so authorized by the Trustees) shall affix the
seal, or if permitted, facsimile thereof, to any instrument executed by the
Trust which would be sealed by a Delaware business corporation executing the
same or a similar instrument and shall attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf of the
Trust. The Secretary shall also perform any other duties commonly incident to
such office in a Delaware business corporation, and shall have such other
authorities and duties as the Trustees shall from time to time determine.
3.7 Treasurer. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the President all powers and duties normally incident to the office. The
Treasurer may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order. The Treasurer shall deposit
all funds of the Trust in such depositories as the Trustees shall designate. The
Treasurer shall be responsible for such disbursement of the funds of the Trust
as may be ordered by the Trustees or the President. The Treasurer shall keep
accurate account of the books of the Trust's transactions which shall be the
property of the Trust, and which together with all other property of the Trust
in the Treasurer's possession, shall be subject at all times to the inspection
and control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. The Treasurer shall have such
other duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer agent to maintain bank
accounts and deposit and disburse funds of any Series of the Trust on behalf of
such Series.
3.8 Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be neces sary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of the office. Each officer,
employee and agent of the Trust shall have such other duties and authority as
may be conferred upon such person by the Trustees or delegated to such person by
the President.
5
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ARTICLE IV
Miscellaneous
4.1 Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by its properly authorized officers, agent or
agents, as provided in the Declaration or By-laws or as the Trustees may from
time to time by resolution provide.
4.2 Seal. The Trust is not required to have any seal, and the
adoption or use of a seal shall be purely ornamental and be of no legal effect.
The seal, if any, of the Trust, or any Series of the Trust, if any, may be
affixed to any instrument, and the seal and its attestation may be lithographed,
engraved or otherwise printed on any document with the same force and effect as
if it had been imprinted and affixed manually in the same manner and with the
same force and effect as if done by a Delaware business corporation. The
presence or absence of a seal shall have no effect on the validity,
enforceability or binding nature of any document or instrument that is otherwise
duly authorized, executed and delivered.
ARTICLE V
Stock Transfers
5.1 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 5.9
of the Declaration. The Trust, or its transfer agents, shall be authorized to
refuse any transfer unless and until presentation of such evidence as may be
reasonably required to show that the requested transfer is proper.
5.2 Registered Shareholders. The Trust may deem and treat the
holder of record of any Shares as the absolute owner thereof for all purposes
and shall not be required to take any notice of any right or claim of right of
any other person.
6
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ARTICLE VI
Amendment of By-Laws
6.1 Amendment and Repeal of By-Laws. In accordance with
Section 3.9 of the Declaration, only the Trustees shall have the power to amend
or repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees
with respect to the By-Laws shall be taken by an affirmative vote of a majority
of the Trustees. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration, and any apparent inconsistency shall be construed
in favor of the related provisions in the Declaration.
7
<PAGE>
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated July __, 1999, between
DLJdirect Mutual Funds and its three series, DLJdirect Technology Fund,
DLJdirect S&P 500 Fund and DLJdirect Growth Fund (individually, each a "Fund"
and collectively, the "Trust"), a Delaware business trust, and DLJ Investment
Management Corp. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act
as investment adviser to the Trust with respect to the investment of the Trust's
assets and to supervise and arrange the purchase and sale of securities and
other assets held in the investment portfolio of the Trust in accordance with
the Trust's objectives and policies. The Adviser may delegate any or all of its
responsibilities to one or more sub-advisers or administrators, subject to the
approval of the Board of Trustees of the Trust. Such delegation shall not
relieve the Adviser of its duties and responsibilities hereunder.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Trust
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Trust's assets in accordance with the Trust's
objectives and policies and in connection therewith have complete discretion in
purchasing and selling securities and other assets for the Trust and in voting,
exercising consents and exercising all other rights appertaining to such
securities and other assets on behalf of the Trust, (ii) supervise continuously
the investment program of the Trust and the composition of its investment
portfolio, (iii) arrange, subject to the provisions of Section 3 hereof, for the
purchase and sale of securities and all other assets held in the investment
portfolio of the Trust, (iv) retain, from time to time, in its sole discretion,
one or more sub-adviser(s) (each, a "Sub-Adviser") that shall act as sub-adviser
with
<PAGE>
respect to certain assets designated by the Advisor, in its sole discretion, to
be managed by such Sub-Adviser in accordance with the terms and conditions set
forth herein and to supervise each Sub-Adviser and (v)oversee the administration
of all aspects of the Trust's business and affairs and provide, or arrange for
others whom it believes to be competent to provide, certain services as
specified in Section 9 herein in accordance with the terms and conditions
provided below. Nothing contained herein shall be construed to restrict the
Trust's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of the Trust's shares.
(b) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder, (ii) any other applicable provision of law,
(iii) the provisions of the Declaration of Trust and By-Laws of the Trust, as
such documents are amended from time to time, (iv) the investment objectives,
policies and restrictions applicable to the Trust as set forth in its
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust.
(c) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the Act) of the
Adviser except that the Board of Trustees of the Trust may approve reimbursement
to the Adviser of the pro rata portion of the salaries, bonuses, health
insurance, retirement benefits and all similar employment costs for the time
spent on Trust and Fund operations (other than the provision of investment
advice) of all personnel employed by the Adviser who devote substantial time to
Trust operations. Subject to the foregoing, the Trust shall be responsible for
the payment of all the Trust's other expenses, including (i) payment of the fees
payable to the Adviser under Section 5 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions; (iv) taxes; (v) interest charges on
borrowings; (vi) the cost of liability insurance or fidelity bond coverage for
the Trust officers and employees, and trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing and accounting fees and
expenses; (viii) charges of the Trust's custodian, transfer
2
<PAGE>
agent and dividend disbursing agent; (ix) the Trust's pro rata portion of dues,
fees and charges of any trade association of which the Trust is a member; (x)
the expenses of printing, preparing and mailing proxies and reports, including
the Trust's prospectus and statement of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of the
Trust and its shares under federal or state securities laws; (xii) the fees and
expenses involved in registering and maintaining registration of the Trust's
shares with the Securities and Exchange Commission; (xiii) the expenses of
holding shareholder meetings; (xiv) the compensation, including fees, of any of
the Trust's trustees, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Trust's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Trust's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions and all other distribution
expenses payable by the Trust; and (xvii) litigation and other extraordinary or
non-recurring expenses and other expenses properly payable by the Trust.
(d) The Adviser shall give the Trust the benefit of its
best judgment and effort in rendering services hereunder, but neither the
Adviser nor any of its officers, directors, employees, agents or controlling
persons shall not be liable for any act or omission or for any loss sustained by
the Trust in connection with the matters to which this Agreement relates,
except a loss resulting from 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; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or
any director, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its directors, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided, however that the
Adviser will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations under this Agreement.
3
<PAGE>
3. Portfolio Transactions and Brokerage
(a) The Adviser is authorized, for the purchase and sale of
the Trust's portfolio securities, to employ such securities brokers and dealers
as may, in the judgment of the Adviser, implement the policy of the Trust to
obtain the best net results taking into account such factors as price, including
commission or dealer spread, the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. Consistent with this policy, the
Adviser is authorized to direct the execution of the Trust's portfolio
transactions to dealers and brokers furnishing statistical information or
research deemed by the Adviser to be useful or valuable to the performance of
its investment advisory functions for the Trust in accordance with the
requirements of Section 28(e) of the Securities Exchange Act of 1934, as
amended.
(b) In the course of the Adviser's execution of portfolio
transactions for the Trust, it is agreed that the Adviser shall employ
securities brokers and dealers which, in its judgment, will be able to satisfy
the policy of the Trust to seek the best execution of its portfolio transactions
at reasonable expenses. For purposes of this agreement, "best execution" shall
mean prompt, efficient and reliable execution at the most favorable price
obtainable. Under such conditions as may be specified by the Trust's Board of
Trustees in the interest of its shareholders and to ensure compliance with
applicable law and regulations, the Adviser may (a) place orders for the
purchase or sale of the Trust's portfolio securities with its affiliate, (b) pay
commissions to brokers other than its affiliate which are higher than might be
charged by another qualified broker to obtain brokerage and/or research services
considered by the Adviser to be useful or desirable in the performance of its
duties hereunder and for the investment management of other advisory accounts
over which it or its affiliates exercise investment discretion; and (c) consider
sales by brokers (other than its affiliate distributor) of shares of the Trust
and any other mutual fund for which it or its affiliates act as investment
adviser, as a factor in its selection of brokers and dealers for the Trust's
portfolio transactions.
4. Agency Cross Transactions. From time to time, the Adviser
or brokers or dealers affiliated with it may find themselves in a position to
buy for certain of their brokerage clients securities which the Adviser's
investment advisory clients wish to sell, and to sell for certain of their
brokerage clients securities which advisory clients wish to buy.
4
<PAGE>
Where one of the parties is an advisory client, the Adviser or the affiliated
broker or dealer cannot participate in this type of transaction (known as a
cross transaction) on behalf of an advisory client and retain commissions from
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from one or both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended which permits the Adviser or its affiliates to
participate on behalf of the Account in agency cross transactions if the
advisory client has given written consent in advance. By execution of this
Agreement, each Fund authorizes the Adviser or its affiliates to participate in
agency cross transactions involving the Account. Each Fund may revoke its
consent at any time by written notice to the Adviser.
5. Compensation of the Adviser
(a) With respect to DLJdirect Technology Fund, the Trust
agrees to pay to the Adviser out of the Trust's assets and the Adviser agrees to
accept as full compensation for all services rendered by or through the Adviser
as such, (other than any amounts payable to the Adviser pursuant to paragraph
5(b)) a fee computed and payable monthly in an amount equal to .875% of the
DLJdirect Technology Fund's first $500 million of average daily net assets, with
such amount reduced to (i) .75% of such Fund's next $500 million of average
daily net assets and (ii) .625% of such Fund's average daily net assets over $1
billion, each on an annualized basis. With respect to DLJdirect Growth Fund, the
Trust agrees to pay to the Adviser out of the Trust's assets and the Adviser
agrees to accept as full compensation for all services rendered by or through
the Adviser as such, (other than any amounts payable to the Adviser pursuant to
paragraph 5(b)) a fee computed and payable monthly in an amount equal to the
aggregate of .75% of DLJdirect Growth Fund first $500 million with such amount
reduced to .625% of such Fund's average daily net assets over $500 million on an
annualized basis. With respect to DLJdirect S&P 500 Fund, the Trust agrees to
pay to the Adviser out of the Trust's assets and the Adviser agrees to accept as
full compensation for all services rendered by or through the Adviser as such,
(other than any amounts payable to the Adviser pursuant to paragraph 5(b)) a fee
computed and payable monthly in an amount equal to the aggregate of .25% of
5
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DLJdirect S&P 500 Fund's first $500 million with such amount reduced to .20% of
such Fund's average daily net assets over $500 million on an annualized basis.
For any period less than a month during which this Agreement is in effect, the
fee shall be prorated according to the proportion which such period bears to a
full month of 28, 29, 30 or 31 days, as the case may be.
(b) The Trust will pay the Adviser separately for any
costs and expenses incurred by the Adviser in connection with distribution of
each of the Fund's shares in accordance with the terms (including proration or
nonpayment as a result of allocations of payments) of Plans of Distribution
(collectively, the "Plan") adopted by the Trust pursuant to Rule 12b-1 under the
Act as such Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Adviser hereunder unless and until this
Agreement shall have been approved by Board Approval and Disinterested Board
Approval (as such terms are defined in such Plan). The Trust reserves the right
to modify or terminate such Plan at any time as specified in the Plan and Rule
12b-1, and this subparagraph shall thereupon be modified or terminated to the
same extent without further action of the parties. The persons authorized to
direct the payment of the funds pursuant to this Agreement and the Plan shall
provide to the Trust's Board of Trustees, and the Trustees shall review, at
least quarterly a written report of the amount so paid and the purposes for
which such expenditures were made.
(c) For purposes of this Agreement, the net assets of
the Trust shall be calculated pursuant to the procedures adopted by resolutions
of the Trustees of the Trust for calculating the net asset value of the Trust's
shares.
6. Net Asset Value Calculation Errors
To the extent the Adviser provides inaccurate
information to the transfer agent or any other party that calculates either
Fund's daily net asset value and such information results in an error in the
calculation of such Fund's net asset value, the Adviser shall bear all costs and
expenses in connection with such error.
7. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser
and each of the Adviser's directors, officers, employees, agents (including any
sub-advisers), associates and controlling persons and the partners, directors,
officers, employees and agents thereof (including any individual who
6
<PAGE>
serves at the Adviser's request as director, officer, partner, trustee or the
like of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such Indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard
of the duties involved in the conduct of such Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes referred to herein
as "disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee
appears to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and did not involve
disabling conduct by such Indemnitee and (3) with respect to any action, suit
or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust. Notwithstanding the foregoing the Trust shall
not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the Indemnitee's
7
<PAGE>
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Trust unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide a security for such
Indemnitee's undertaking, (B) the Trust shall be insured against losses arising
by reason of any lawful advances, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final decision on the merits by
a court or other body before whom the proceeding was brought that such
Indemnitee is not liable by reason of disabling conduct or, (2) in the absence
of such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-party Trustees of the Trust, or (ii) if such a quorum is not obtainable or
even, if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized
shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these
provisions shall not exclude any other right to which such Indemnitee may be
lawfully entitled.
8. Duration and Termination
This Agreement shall become effective on the date it is
approved by the shareholders of the Trust and shall continue in effect for a
period of two years and thereafter from year to year, but only so long as such
continuation is specifically approved at least annually in accordance with the
requirements of the Act.
This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Trust sixty days written notice (which notice
may be waived by the Trust) or may be terminated by the Trust at any time
without penalty
8
<PAGE>
upon giving the Adviser sixty days notice (which notice may be waived by the
Adviser), provided that such termination by the Trust shall be directed or
approved by the vote of a majority of the Trustees of the Trust in office at the
time or by the vote of the holders of a "majority" (as defined in the Act) of
the voting securities of the Trust at the time outstanding and entitled to vote
or with respect to paragraph 4(b), by a majority of the Trustees of the Trust
who are not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan. This Agreement shall terminate automatically in the event of its
assignment (as assignment is defined in the Act).
9. Administrative Services
(a) The administrative services to be provided or
arranged for by the Adviser for the trust include the following: (i) maintaining
each Fund's books and records, such as journals, ledger accounts and other
records in accordance with applicable laws and regulations to the extent not
maintained by each Fund's custodian, transfer agent and dividend disbursing
agent, (ii) transmitting purchase and redemption orders for each Fund's shares
to the extent not transmitted by each Fund's distributor or others who purchase
and redeem shares, (iii) initiating all money transfers to each Fund's custodian
and from each Fund's custodian for the payment of each Fund's expenses,
investments, dividends and share redemptions, (iv) reconciling account
information and balances among each Fund's custodian, transfer agent,
distributor, dividend disbursing agent and the Adviser, (v) providing the Funds,
upon request, with such office space and facilities, utilities and office
equipment as are adequate for each Fund's needs, (vi) preparing, but not paying
for, all reports by the Trust, on behalf of each Fund, to their shareholders and
all reports and filings required to maintain the registration and qualification
of each Fund's shares under federal and state law including periodic updating of
the Trust's registration statement and Prospectus (including its Statement of
Additional Information), (vii) supervising the calculation of the net asset
value of each Fund's shares, (viii) preparing notices and agendas for meetings
of each Fund's shareholders and the Trust's Board of Trustees as well as minutes
of such meetings in all matters required by applicable law to be acted upon by
the Board of Trustees and (ix) other services generally performed by
administrators of funds.
(b) In connection with such administrative services
described in paragraph (a) of this Section and in addition to the compensation
described in Section 4 herein,
9
<PAGE>
the Adviser shall be reimbursed by the Trust for all costs and expenses
(including out-of-pocket expenses) and the pro rata portion of the direct and
indirect costs of personnel including, but not limited to, the salaries,
bonuses, health insurance, retirement benefits and all similar employment costs
of such persons for the time spent providing such administrative services.
10. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
11. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly autho rized officers, all as
of the day and the year first above written.
DLJdirect MUTUAL FUNDS, on
behalf of each of its series
DLJdirect Technology Fund
DLJdirect S&P 500 Fund
DLJdirect Growth Fund
By _____________________________________
Name:
Title:
DLJ INVESTMENT MANAGEMENT CORP.
By _____________________________________
Name:
Title
11
<PAGE>
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated July _____, 1999, between
DLJdirect Mutual Funds, a Delaware business trust (the "Trust"), and Donaldson
Lufkin & Jenrette Securities Corporation (the "Distributor"). The Trust is
registered as a series investment company under the Investment Company Act of
1940 (the "1940 Act"), and an indefinite number of shares of beneficial interest
in one or more series, without par value (the "Shares"), have been registered
under the Securities Act of 1933, as amended (the "1933 Act") to be offered for
sale to the public in a continuous public offering in accordance with terms and
conditions set forth in the Prospectus and Statement of Additional Information
(the "Prospectus") of the Trust included in the Trust's Registration Statement
on Form N-1A as such documents may be amended from time to time.
In this connection, the Trust desires that the Distributor act
as its exclusive sales agent and distributor for the sale and distribution of
Shares. The Distributor has advised the Trust that it is willing to act in such
capacities, and it is accordingly agreed between them as follows:
1. The Trust hereby appoints the Distributor as exclusive
sales agent and distributor for the sale and distribution of Shares pursuant to
the aforesaid continuous public offering of Shares, and the Trust further
agrees from and after the commencement of such continuous public offering that
it will not, without the Distributor's consent, sell or agree to sell any
Shares otherwise than through the Distributor, except the Trust may issue Shares
in connection with a merger, consolidation or acquisition of assets on such
basis as may be authorized or permitted under the 1940 Act.
2. The Distributor hereby accepts such appointment and agrees
to use its best efforts to sell such Shares, provided, however, that when
requested by the Trust at any time for any reason the Distributor will suspend
such efforts. The Trust may also withdraw the offering of Shares at any time
when required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is under-
<PAGE>
stood that the Distributor does not undertake to sell all or any specific
portion of the Shares of the Trust. The Trust acknowledges that the Distributor
will enter into sales or servicing agreements with registered securities brokers
and banks and into servicing agreements with financial institutions and other
industry professionals, such as investment advisers, accountants and estate
planning firms. In entering into such agreements, the Distributor shall act only
on its own behalf as principal underwriter and distributor. The Distributor
shall not be responsible for making any distribution plan or service fee
payments pursuant to any plans the Trust may adopt or agreements it may enter
into.
3. The Distributor represents that it is a member in good
standing of the National Association of Dealers, Inc. and agrees that it will
use all reasonable efforts to maintain such status and to abide by the Conduct
Rules, the Constitution and the Bylaws of the National Association of Securities
Dealers, Inc., and all other rules and regulations that are now or may become
applicable to its performance hereunder. The Distributor will undertake and
discharge its obligations hereunder as an independent contractor and it shall
have no authority or power to obligate or bind the Trust by its actions, conduct
or contracts except that it is authorized to accept orders for the purchase or
repurchase of Shares as the Trust's agent and subject to its approval. The Trust
reserves the right to reject any order in whole or in part. The Distributor may
appoint sub-agents or distribute through dealers or otherwise as it may
determine from time to time pursuant to agreements approved by the Trust, but
this Agreement shall not be construed as authorizing any dealer or other person
to accept orders for sale or repurchase of Shares on behalf of the Trust or
otherwise act as the Trust's agent for any purpose. The Distributor shall not
utilize any materials in connection with the sale or offering of Shares except
the then current Prospectus and such other materials as the Trust shall provide
or approve in writing.
4. Shares may be sold by the Distributor only at prices and
terms described in the then current Prospectus relating to the Shares and may
be sold either through persons with whom it has selling agreements in a form
approved by the Trust's Board of Trustees or directly to prospective
purchasers. To facilitate sales,
2
<PAGE>
the Trust will furnish the Distributor with the net asset value of its Shares
promptly after each calculation thereof.
5. The Trust has delivered to the Distributor a copy of its
current Prospectus. It agrees that it will use its best efforts to continue the
effectiveness of its Registration Statement filed under the 1933 Act and the
1940 Act. The Trust further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with such Acts. The Trust will furnish the Distributor at the
Distributor's expense with a reasonable number of copies of the Prospectus and
any amended Prospectus for use in connection with the sale of Shares.
6. At the Distributor's request, the Trust will take such
steps at its own expense as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States of America and
in the District of Columbia in accordance with the laws thereof, and to renew or
extend any such qualification; provided, however, that the Trust shall not be
required to qualify Shares or to maintain the qualification of Shares in any
state, territory dependency or district where it shall deem such qualification
disadvantageous to the Trust. The Distributor will pay all expenses relating to
its broker-dealer qualifications.
7. The Distributor agrees that:
(a) It will furnish to the Trust any pertinent
information required to be inserted with respect to the
Distributor as exclusive sales agent and distributor within
the purview of Federal and state securities laws in any
reports or registrations required to be filed with any
government authority;
(b) It will not make any representations inconsistent
with the information contained in the Registration Statement
or Prospectus filed under the Securities Act of 1933, as in
effect from time to time;
3
<PAGE>
(c) It will not use or distribute or authorize the
use of distribution of any statements other than those
contained in the Trust's then current Prospectus or in such
supplemental literature or advertising as may be authorized in
writing by the Trust; and
(d) Subject to paragraph 9 below, the Distributor
will bear the costs and expenses of printing and distributing
any copies of any prospectuses and annual and interim reports
of the Trust (after such items have been prepared and set in
type) which are used in connection with the offering of Shares
which are incremental to the costs of setting in type such
prospectuses and reports and the costs of printing the copies
of such documents that the Trust prepares for distribution to
its shareholders, and the costs and expenses of preparing,
printing and distributing any other literature used by the
Distributor or furnished by the Distributor for use in
connection with the offering of the Shares and the costs and
expenses incurred by the Distributor in advertising, promoting
and selling Shares of the Trust to the public. Subject to the
approval of the Board of Trustees, such costs may be
reimbursed pursuant to Section 9. The Trust has adopted a
separate plan of distribution (collectively, the "Plan")
pursuant to the provisions of rule 12b-1 of the 1940 Act on
behalf of its shares, respectively, each of which provides for
the payment of administrative and sales related expenses in
connection with the distribution of Trust shares and the
Distributor agrees to take no action inconsistent with said
Plan.
8. The Trust will pay its legal and auditing expenses and the
cost of composition, setting in type, printing and distribution of any
prospectuses of annual or interim reports prepared for distribution to its
shareholders.
9. The Trust will pay the Distributor for costs and expenses
incurred by the Distributor in connection with distribution of Shares by the
Distributor in accordance with the terms of the Plans of Distribution
4
<PAGE>
(the "Plans") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as
such Plans may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder unless and until this
Agreement shall have been approved by Trustee Approval and Disinterested Trustee
Approval (as such terms are defined in such Plans). The Trust reserves the right
to modify or terminate such Plans at any time as specified in the Plans and Rule
12b-1, and this Section 9 shall thereupon be modified or terminated to the same
extent without further action of the parties. In addition, this Section 9 may
be modified or terminated by the Trustees as set forth in Section 13 hereof. The
persons authorized to direct the payment of funds pursuant to this Agreement and
the Plans shall provide to the Trust's Board of Trustees, and the Trustees shall
review, at least quarterly a written report of the amounts so paid and the
purposes for which such expenditures were made. The amounts paid under this
Agreement are in addition to the amount of any contingent deferred sales charge,
if any, paid to the Distributor pursuant to the terms of the Trust's
Registration Statement as in effect from time to time.
10. The Trust agrees to indemnify, defend and hold the
Distributor, its officers, directors, employees and agents and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act (each,
an "indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which such indemnitee may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while the
Distributor was active in such capacity or by reason of the Distributor having
acted in any such capacity or arising out of or based upon any untrue statement
of a material fact contained in the then-current Prospectus relating to the
Shares or arising out of or based upon any alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such claims, demands, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made
5
<PAGE>
in reliance upon and in conformity with information furnished in writing by the
Distributor to the Trust expressly for use in any such Prospectus; provided,
however, that (1) no indemnitee shall be indemnified hereunder against any
liability to the Trust or the shareholders of the Trust or any expense of such
indemnitee with respect to any matter as to which such indemnitee shall have
been adjudicated not to have acted in good faith in the reasonable belief that
its action was in the best interest of the Trust or arising by reason of such
indemnitee's willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement ("disabling conduct"), or (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, no
indemnification shall be provided unless there has been a determination that
such settlement or compromise is in the best interests of the Trust and that
such indemnitee appears to have acted in good faith in the reasonable belief
that its action was in the best interest of the Trust and did not involve
disabling conduct by such indemnitee. Notwithstanding the foregoing the Trust
shall not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Trust cannot lawfully waive.
The Distributor agrees to indemnify, defend and hold the
Trust, its Trustees, officers, employees and agents and any person who controls
the Trust within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense 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 the Distributor of the Trust expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such
information not misleading or arising by reason of disabling conduct by such
indemnitee or any person selling Shares pursuant to an agreement with the
Distributor.
The Trust shall make advance payments in connection with the
expenses of defending any action with
6
<PAGE>
respect to which indemnification might be sought hereunder if the Trust
receives a written affirmation of the indemnitee's good faith belief that the
standard of conduct necessary for indemnification has been met and a written
undertaking to reimburse the Trust unless it is subsequently determined that he
is entitled to such indemnification and if the Trustees of the Trust determining
that the facts then known to them would not pre clude indemnification. In
addition, at least one of the following conditions must be met: (A) the
indemnitee shall provide a security for his undertaking, (B) the Trust shall be
insured against losses arising by reason of any lawful advances, or (C) a
majority of a quorum of Trustees of the Trust who are neither "interested
persons" of the Trust (as defined in Section 2(a)(19) of the Act) nor parties to
the proceeding ("Disinterested Non-Party Trustees") or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the indemnitee ultimately will be found entitled to
indemnification.
All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct or, (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-party Trustees of the Trust,
or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
11. This Agreement shall become effective with respect to any
class and any series of the Trust on the date set forth above when approved by
the Board of Trustees and shall remain in effect for up to two years from its
effective date (one year in the case of Section 9) and thereafter from year to
year provided such continuance is specifically approved at least annually prior
to each anniversary of such date by (a) Trustee Approval or by vote at a meeting
of shareholders of such series of the lesser of (i) 67 percent of the Shares
present or represented by proxy and (ii) 50 percent of the outstanding Shares
and (b) by Disinterested Trustee Approval.
7
<PAGE>
12. This Agreement may be terminated (a) by the Distributor at
any time without penalty by giving sixty (60) days' written notice to the Trust
which notice may be waived by the Trust; or (b) by the Trust at any time without
penalty upon sixty (60) days' written notice to the Distributor (which notice
may be waived by the Distributor); provided, however, that any such termination
by the Trust shall be directed or approved in the same manner as required for
continuance of this Agreement by Section 11(a) (or, in the case of termination
of Section 9, by Section 11(b)).
13. This Agreement may not be amended or changed except in
writing signed by each of the parties hereto and approved in the same manner as
provided for continuance of this Agreement in Section 11(a) (or, in the case of
amendment of Section 9, by Section 11(b)). Any such amendment or change shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by either party
and shall automatically terminate upon assignment (as such term is defined in
the 1940 Act and the rules thereunder).
14. This Agreement shall be construed in accordance with the
laws of the State of New York applicable to agreements to be performed entirely
therein and in accordance with applicable provisions of the 1940 Act.
15. If any provision of this Agreement shall be held or made
invalid or unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected or impaired thereby.
16. Notice is hereby given that this Agreement is entered into
on the Trust's behalf by an officer of the Trust in such officer's capacity as
an officer and not individually. It is understood and expressly stipulated that
none of the Trustees, officers or shareholders of the Trust are personally
liable hereunder. Neither the Trustees, officers or shareholders assume any
personal liability for obligations entered into on behalf of the Trust. All
persons dealing with the Trust shall look solely to the property of the Trust
for the enforcement of any claims against the Trust.
8
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by the Trust's authorized officers as of July __, 1999.
DLJdirect Mutual Funds
for each of its series
DLJdirect Technology Fund
DLJdirect S&P 500 Fund
DLJdirect Growth Fund
By:_________________________________
Name:
Title:
Donaldson Lufkin & Jenrette
Securities Corporation
By:_________________________________
Name:
Title:
9
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GLOBAL CUSTODIAL SERVICES
AGREEMENT
DLJ DIRECT MUTUAL FUNDS
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS...................................................................................................i
2. APPOINTMENT OF CUSTODIAN....................................................................................iii
3. PROPERTY ACCEPTED...........................................................................................iii
4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS................................................................iii
5. INSTRUCTIONS.................................................................................................iv
6. PERFORMANCE BY THE CUSTODIAN..................................................................................v
7. POOLING, REGISTRATION AND OTHER ACTION.......................................................................vi
8. CUSTODY CASH ACCOUNT PAYMENTS...............................................................................vii
9. ASSURED INCOME PAYMENT SERVICE.............................................................................viii
10. WITHDRAWAL AND DELIVERY...................................................................................viii
11. ACCESS AND RECORDS........................................................................................viii
12. USE OF AGENTS...............................................................................................ix
13. CITICORP ORGANIZATION INVOLVEMENT...........................................................................ix
14. SCOPE OF RESPONSIBILITY......................................................................................x
15. LITIGATION; INDEMNITY.......................................................................................xi
16. LIEN.......................................................................................................xii
17. FEES AND EXPENSES.........................................................................................xiii
18. TAX STATUS/WITHHOLDING TAXES..............................................................................xiii
19. TERMINATION...............................................................................................xiii
20. ASSIGNMENT.................................................................................................xiv
21. JOINT AND SEVERAL LIABILITY................................................................................xiv
22. DISCLOSURE.................................................................................................xiv
23. NOTICES.....................................................................................................xv
24. GOVERNING LAW AND JURISDICTION..............................................................................xv
25. MISCELLANEOUS...............................................................................................xv
</TABLE>
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THIS GLOBAL CUSTODIAL SERVICES AGREEMENT is made on the ________ day of _______
1999, by and between DLJ DIRECT MUTUAL FUNDS, a Delaware Business Trust
organized under the laws of __________, acting on its own behalf and/or as agent
on behalf of its customers, (the "Client"), having its principal place of
business at 277 Park Avenue, New York, New York and CITIBANK, N.A., acting as a
custodian hereunder through its office located at 111 Wall Street, New York,
New York 10005 (the "Custodian").
1. DEFINITIONS
"AGREEMENT" means this Global Custodial Services Agreement, as amended
from time to time, and any other terms and conditions agreed upon by the Client
and the Custodian in writing from time to time in connection with this
Agreement.
"ASSURED INCOME PAYMENT SERVICE" means the Custodian's services in
which interest, dividends or other such periodic income, to which the Client is
entitled, on Securities specified by the Custodian from time to time at its
absolute discretion, are credited to the Custody Cash Account in respect of such
Securities.
"ASSURED INCOME PAYMENT STANDARDS" means the terms and conditions
governing the Assured Income Payment Service, as such terms and conditions are
amended and/or supplemented from time to time by, and at the absolute discretion
of, the Custodian.
"ASSURED PAYMENT" means, in relation to those Securities specified by
the Custodian under the Assured Income Payment Service, an amount equal to the
interest, dividends or periodic income that is due to the Client in respect of
such Securities less any taxes, duties, levies, charges or any other withholding
payments payable in respect of such interest, dividends or periodic income.
"ASSURED PAYMENT DATE" means, in relation to the payment of any
interest, dividend or periodic income of any particular Securities specified by
the Custodian under the Assured Income Payment Service, the date on which such
interest, dividend or periodic income is normally payable in respect of such
Securities or such other date as may be notified by the Custodian to the Client
from time to time.
"AUTHORIZED PERSON" means (i) any person who has been authorized by the
Client, by notice in writing to the Custodian, to act on its behalf in the
performance of any act, discretion or duty under this Agreement, or (ii) any
other person holding a duly executed power of attorney from the Client which is
in a form acceptable to the Custodian (including, for avoidance of doubt, any
officer or employee of such agent or person).
"BRANCH" means any branch or office of Citibank, N.A.
"CITICORP ORGANIZATION" means Citicorp and any company of which
Citicorp is, now or hereafter, directly or indirectly a shareholder or owner.
For the purposes of this Agreement, each Branch shall be deemed to be a separate
member of the Citicorp Organization.
"CLEARANCE SYSTEM" means The Federal Reserve Bank of New York, The
Depository Trust Company, Participants Trust Company, Cedel Bank, S.A., the
Euroclear System operated by Morgan Guaranty Trust Company of New York, the
CREST system operated by CREST CO. Limited, the Central Money Markets Office,
the Central Gilts Office and such other clearing agency, settlement system or
depository as may from time to time be used in connection with transactions
relating to Securities, and any nominee, clearing agency, or depository for any
of the foregoing.
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"CUSTODY ACCOUNT" means the custody account or accounts in the name of
the Client and/or such other name as the Client may reasonably designate, for
the deposit of any Property (other than cash) from time to time received by the
Custodian for the account of the Client.
"CUSTODY CASH ACCOUNT" means the cash account or accounts, which, at
the discretion of the Client, may be either a subaccount(s) of the Custody
Account or a demand deposit account(s), in the name of the Client and/or such
other name as the Client may reasonably designate, for the deposit of cash in
any currency received by the Custodian from time to time for the account of the
Client, whether by way of deposit or arising out of or in connection with any
Property in the Custody Account.
"FEE AGREEMENT" means the agreement between the Custodian and the
Client setting forth the fees, costs and expenses to be paid by the Client to
the Custodian in connection with the custodial services provided pursuant to
this Agreement, as such fee agreement may be amended at the Custodian's
reasonable discretion from time to time by prior written notice to the Client.
"INSTRUCTIONS" means any and all instructions received by the Custodian
from, or reasonably believed by the Custodian in good faith to be from, any
Authorized Person, including any instructions communicated through any manual or
electronic medium or system agreed between the Client and the Custodian and on
such terms and conditions as the Custodian may specify from time to time.
"PERSON" means any person, firm, company, corporation, government,
state or agency of a state, or any association or partnership (whether or not
having separate legal personality) of two or more of the foregoing.
"PROPERTY" means, as the context requires, all or any part of any
Securities, cash, or any other property from time to time held for the Client
under the terms of this Agreement.
"RULES" means any rules and regulations (whether of a local regulatory
authority, stock exchange or other entity) in any jurisdiction with which the
Custodian may from time to time be required to comply in the provision of its
services hereunder.
"SECURITIES" means bonds, debentures, notes, stocks, shares, securities
or other financial assets acceptable to the Custodian and all moneys, rights or
property which may at any time accrue or be offered (whether by way of bonus,
redemption, preference, option or otherwise) in respect of any of the foregoing
and any certificates, receipts, warrants or other instruments (whether in
registered or unregistered form) representing rights to receive, purchase or
subscribe for any of the foregoing or evidencing or representing any other
rights or interests therein (including, without limitation, any of the foregoing
not constituted, evidenced or represented by a certificate or other document but
by an entry in the books or other permanent records of the issuer, a trustee or
other fiduciary thereof, a Clearance System or other person).
"SERVICE STANDARDS" means any written service standards governing the
day to day operations of the custodial services which may be provided to the
Client or modified by the Custodian by notice to the Client from time to time.
"SUBCUSTODIAN" means a subcustodian (other than a Clearance System)
appointed by the Custodian for the safe-keeping, administration, clearance and
settlement of Securities.
"TAXES" means all taxes, levies, imposts, charges, assessments,
deductions, withholdings and related liabilities, including additions to tax,
penalties and interest imposed on or in respect of the Property, the
transactions effected under this Agreement or the Client; PROVIDED THAT Taxes
does not include income or franchise taxes imposed on or measured by the net
income of the Custodian or its agents.
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2. APPOINTMENT OF CUSTODIAN
(A) The Client hereby appoints the Custodian to act as its custodian in
accordance with the terms hereof and authorizes the Custodian to establish on
its books, on the terms of this Agreement, the Custody Account, to be designated
to show that the Securities belong to the Client and are segregated from the
Custodian's assets and the Client Cash Account.
(B) Subject to the express terms of this Agreement, the Client understands and
agrees that the obligations and duties hereunder of the Custodian shall be
performed only by the Custodian or its agents, and shall not be deemed
obligations or duties of any other member of the Citicorp Organization. The
Client agrees that the Custodian may register or record legal title to any
Securities in the name of a nominee company or a Subcustodian in the Citicorp
Organization and may appoint a member of the Citicorp Organization to be a
Subcustodian.
(C) The Client agrees to take any such action which may be necessary and to
execute further documents and provide such materials and information as may be
reasonably requested by the Custodian to enable the Custodian to perform the
duties and obligations under this Agreement, including participation in any
relevant Clearance System, and will notify the Custodian as soon as it becomes
aware of any inaccuracy in such materials or information.
(D) All custody services by the Custodian hereunder shall be provided in
accordance with the Service Standards, a copy of which the Custodian may supply
to the Client from time to time. In the event of any conflict between any term
of this Global Custodial Services Agreement and any term of the Service
Standards, the Global Custodial Services Agreement shall prevail with respect to
such term.
(E) The Client agrees to comply with any relevant security procedures relating
to the provision of custody services under this Agreement which may be specified
by the Custodian or imposed on the Client by any relevant Clearance System.
3. PROPERTY ACCEPTED
(A) Subject to Section 3(C) below, the Custodian agrees to accept for custody in
the Custody Account any Securities which are capable of deposit under the terms
of this Agreement.
(B) Subject to Section 3(C) below, the Custodian agrees to accept for deposit in
the Client Cash Account, cash in any currency (which shall, if necessary, be
credited by the Custodian to different accounts in the currencies concerned),
such cash to be owed to the Client by the Custodian as banker.
(C) The Custodian may in its reasonable discretion refuse to accept (in whole or
in part) any proposed deposit in either the Custody Account or the Custody Cash
Account if the Custodian reasonably believes that the acceptance of such deposit
would violate any law, rule, regulation, practice or policy to which the
Custodian is subject.
4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
(A) The Client hereby represents, warrants and undertakes to the Custodian that:
(i) it is duly organized and validly existing under the laws of
the jurisdiction of its organization;
(ii) during the term of this Agreement it (and any person on whose
behalf it may act as agent or otherwise in a representative
capacity) has and will continue to have, or will take all
action necessary to obtain, full capacity and authority to
enter into this Agreement and to carry out the transactions
contemplated herein, and has taken and will continue to take
all action (including, without limitation, the obtaining of
all necessary governmental consents in any applicable
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jurisdiction) to authorize the execution, delivery and
performance of obligations of the Client, and the validity and
enforceability of such obligations and the rights of the
Custodian, under this Agreement;
(iii) it will not assert any interest in Property held by the
Custodian in any Clearance System in any way which could
present a transfer of title to a unit of such Property by the
Custodian (or by any other person) where such transfer is
required by the Clearance System;
(iv) this Agreement is legal, valid and binding on the Client;
(v) on or prior to the execution of this Agreement, the Client has
provided to the Custodian certified true copies of evidence of
the due authorization for the execution, delivery and
performance of this Agreement;
(vi) except as provided in Clause 16 of this Agreement, all
Property deposited with the Custodian shall, at all times, be
free from all charges, mortgages, pledges or other such
encumbrances; and
(vii) the Client shall, at all times, be entitled or otherwise duly
authorized to deal with, and dispose of, all or any part of
the Property, whether through a relevant Clearance System or
otherwise.
The Client agrees to inform the Custodian promptly if any statement set forth in
this Section 4(A) ceases to be true and correct as of any date after the date
hereof.
(B) The Custodian hereby represents, warrants and undertakes to the Client that:
(i) it is duly organized and validly existing under the laws of
the jurisdiction of its organization;
(ii) during the term of this Agreement it has and will continue to
have, or will take all action necessary to obtain, full
capacity and authority to enter into this Agreement and to
carry out the transactions contemplated herein, and has taken
and will continue to take all action (including, without
limitation, the obtaining of all necessary governmental
consents in any applicable jurisdiction) to authorize the
execution, delivery and performance of this Agreement; and
(iii) this Agreement is legal, valid and binding on the Custodian.
The Custodian agrees to inform the Client promptly if any statement set
forth in this Section 4(B) ceases to be true and correct as of any date
after the date hereof.
5. INSTRUCTIONS
(A) The Custodian may, in its absolute discretion and without liability on its
part, rely and act upon (and the Client shall be bound by) any Instructions.
Instructions shall continue in full force and effect until canceled or
superseded; PROVIDED THAT any Instruction canceling or superseding a prior
Instruction must be received by the Custodian at a time and in a manner that
accords the Custodian a reasonable opportunity to act upon such Instruction. The
Custodian shall be entitled to rely upon the continued authority of any
Authorized Person to give Instructions until the Custodian receives notice from
the Client to the contrary.
(B) Instructions shall be governed by and carried out subject to the prevailing
laws, rules, operating procedures and market practice of any relevant stock
exchange, Clearance System or market where or through which they are to be
executed or carried out, and shall be acted upon only during banking hours
(including applicable cut-off times) and on banking days when the applicable
financial markets are open for business.
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(C) Instructions delivered to the Custodian by telephone or facsimile shall be
promptly confirmed in writing, by tested telex, SWIFT, letter, the Custodian's
proprietary electronic banking system or as provided in the Service Standards,
such confirmation shall, where relevant, be made by an Authorized Person.
However, the Custodian may, in its absolute discretion, in good faith, rely and
act upon telephone or facsimile Instructions before the written confirmation is
received.
(D) The Custodian has offered the Client security procedures for the
transmission of Instructions to the Custodian (and the Client acknowledges that
it has received the same and agrees that the security procedures mutually agreed
to by the Client and the Custodian are commercially reasonable). As long as the
Custodian acts in compliance with such security procedures and this Section 5,
it shall have no further duty to verify the identity or authority of the person
giving or confirming, or the genuineness or contents of, any Instruction.
(E) The Custodian is authorized to in good faith rely upon any Instructions
received by any means, provided that the Custodian and the Client have agreed
upon the means of transmission and the method of identification for such
Instructions.
(F) Instructions are to be given in the English language. The Custodian may in
its reasonable discretion and without any liability on its part, act upon what
it reasonably believes in good faith such Instructions to be; notwithstanding
any other provision hereof, the Custodian shall have the right, in its
reasonable discretion to refuse to execute any such Instruction, in which event
the Custodian shall notify the Client of such refusal without undue delay.
(G) The Client agrees to be bound by any Instructions, whether or not
authorized, given to the Custodian in the Client's name and accepted by the
Custodian in accordance with the provisions of this Section 5.
6. PERFORMANCE BY THE CUSTODIAN
(A) CUSTODIAL DUTIES NOT REQUIRING FURTHER INSTRUCTIONS. In the absence of
contrary Instructions, the Custodian is authorized by the Client to, and where
applicable, the Custodian shall, carry out the following actions in relation to
the Property:
(i) except as otherwise provided in this Agreement, separately
identify the Property on its records as being held for the
account of the Client and segregate all Property held on
behalf of the Client by the Custodian from the assets of the
Custodian;
(ii) sign any affidavits, certificates of ownership or other
certificates relating to the Property which may be required by
any tax or regulatory authority or under the laws of any
relevant jurisdiction, whether governmental or otherwise, and
whether relating to ownership, or income, capital gains or
other tax, duty or levy (and the Client further agrees to
ratify and to confirm or to do, or to procure the doing of,
such things as may be necessary or appropriate to complete or
evidence the Custodian's actions under this Section 6(A)(ii)
or otherwise under the terms of this Agreement);
(iii) collect and receive, for the account of the Client, all
income, payments and distributions in respect of the Property,
and credit the same to the Custody Cash Account;
(iv) take any action which is necessary and proper in connection
with the receipt of income, payments and distributions as are
referred to in Section 6(A)(iii) above, including, without
limitation, the presentation of coupons and other interest
items;
(v) collect, receive and hold for the account of the Client any
capital arising out of or in connection with the Property
whether as a result of it being called or redeemed or
otherwise becoming
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payable and credit the same to the Custody Cash Account;
(vi) take any action which is necessary and proper in connection
with the receipt of any capital as is referred to in Section
6(A)(v) above, including, without limitation, the presentation
for payment of any Property which becomes payable as a result
of its being called or redeemed or otherwise becoming payable
and the endorsement for collection of checks, drafts and other
negotiable instruments;
(vii) take any action which is necessary and proper to enable the
Custodian to provide services to the Client within, and to
observe and perform its obligations in respect of, any
relevant Clearance System;
(viii) receive and hold for the account of the Client all Securities
received by the Custodian as a result of a stock dividend,
share sub-division or reorganization, capitalization of
reserves or otherwise;
(ix) exchange interim or temporary receipts for definitive
certificates, and old or overstamped certificates for new
certificates and hold such definitive and/or new certificates
in the Custody Account;
(x) make cash disbursements for any necessary and proper expenses
incurred in handling the Property and for similar items in
connection with the Custodian's duties under this Agreement in
accordance with the Fee Agreement, and debit the same to the
Client Cash Account or any other account of the Client with
the Custodian; and
(xi) deliver to the Client transaction advices and/or regular
statements of account showing the Property held at such
intervals as may be agreed between the parties hereto but
subject always to applicable Rules.
(B) CUSTODIAL DUTIES REQUIRING INSTRUCTIONS. The Custodian is authorized by the
Client to, and where applicable, the Custodian shall, carry out the following
actions in relation to the Property only upon receipt of and in accordance with
specific Instructions:
(i) make payment for and receive Property, or deliver or dispose
of Property;
(ii) (subject to Section 7(D)) deal with subscription, rights,
bonus or scrip issues, conversions, options, warrants and
other similar interests or any other discretionary right in
connection with the Property; and
(iii) subject to the agreement of the Custodian, to carry out any
action other than those mentioned in Section 6(A) above.
7. POOLING, REGISTRATION AND OTHER ACTION
(A) Subject to applicable laws, rules and regulations, any Property may be
pooled with other property of the Custodian's customers, like with like, and the
Client is beneficially entitled to such portion of the property that has been
pooled as shall correspond to the Property deposited with the Custodian by the
Client (as increased or diminished by subsequent sales or purchases from time to
time);
(B) The Client understands and agrees that, except as may be specified in the
Service Standards, Property shall be registered as the Custodian may direct
either in the name of the Custodian, Subcustodian or Clearance System, or
nominee of any of them, in the jurisdiction where the Property is required to be
registered or otherwise held. Where
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feasible, the Custodian will arrange on written request by the Client for the
registration of Property with the issuer or its agent in the name of the Client
or its nominee. The Client understands and agrees, however, that the Custodian
shall have discretion to determine whether such direct registration is feasible.
(C) The Custodian shall, to the extent reasonably possible, notify, make
available or deliver to the Client, in a timely manner, all official notices,
circulars, reports and announcements that are received by the Custodian in such
capacity concerning the Securities held on the Client's behalf that require
discretionary action.
(D) The Custodian shall provide proxy services to the Client only where there is
a separate agreement in relation to proxy services between the Custodian and the
Client.
(E) Upon receipt of each transaction advice and/or statement of account, the
Client shall examine the same and notify the Custodian within thirty (30) days
of the date of any such advice or statement of any discrepancy between
Instructions given and the situation shown in the transaction advice and/or
statement, and/or of any other errors therein. In the event that the Client does
not inform the Custodian in writing of any exceptions or objections within
thirty (30) days after the date of such transaction advice and/or statement, the
Client shall be deemed to have approved such transaction advice and/or
statement.
8. CUSTODY CASH ACCOUNT PAYMENTS
(A) Except as otherwise provided herein, the Custodian shall make, or cause its
agents to make, payments of cash credited to the Custody Cash Account:
(i) in connection with the purchase of Property (other than cash)
for the account of the Client in accordance with Instructions;
(ii) in payment for the account of the Client of (A) all Taxes,
claims, liabilities, fees, costs and expenses incurred by the
Custodian or its agents under or in connection with the terms
of this Agreement, and (B) all amounts owed to the Custodian
pursuant to the Fee Agreement;
(iii) for payments to be made in connection with the conversion,
exchange or surrender of Property held in the Custody Account;
(iv) pursuant to assured payment obligations incurred in the
capacity of settlement bank on behalf of the Client within a
relevant Clearance System;
(v) for other purposes as may be specified by the Client in its
Instructions; or
(vi) upon the termination of this Agreement on the terms hereof;
PROVIDED THAT, unless otherwise agreed, the payments referred to above shall not
exceed the funds available in the Custody Cash Account at any time. The Client
shall promptly reimburse the Custodian for any advance of cash or any such
taxes, charges, expenses, assessments, claims or liabilities upon request for
payment. Notwithstanding the foregoing, nothing in this Agreement shall obligate
the Custodian to extend credit, grant financial accommodation or otherwise
advance moneys to the Client or assume financial risk on behalf of the Client
for the purpose of meeting any such payments or otherwise carrying out any
Instructions.
(B) Unless otherwise provided herein, the proceeds from the sale or exchange of
Property will be credited to the Custody Cash Account on the date the proceeds
are actually received by the Custodian.
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9. ASSURED INCOME PAYMENT SERVICE
(A) The Custodian may, at its absolute discretion, offer the Client an Assured
Income Payment Service in respect of specific Securities, as may be notified by
the Custodian to the Client from time to time. In relation to any such
Securities, the Custodian may, at its absolute discretion, cause the Custody
Cash Account to be credited with an Assured Payment on the Assured Payment Date
relevant thereto; PROVIDED THAT the Custodian shall be entitled to reverse any
credit (in whole or in part) made in respect of that Assured Payment if the
Custodian fails to receive the full amount corresponding to such Assured Payment
within a reasonable time, as determined by the Custodian in its absolute
discretion, after the relevant Assured Payment Date, for any reason whatsoever
other than as a result of the negligence or willful default of the Custodian.
The Assured Income Payment Service shall be provided by the Custodian
in accordance with the Assured Income Payment Standards.
(B) Where the Custodian acts as a settlement bank in any relevant Clearance
System:
(i) upon the Custodian incurring any assured payment obligation,
the Client shall reimburse the Custodian for such amount, and
the Custodian may debit the Client Cash Account with such
amount;
(ii) the Custodian may without notice set, revise or disable debit
caps in respect of the maximum aggregate amount of assured
payment obligations it will incur on behalf of the Client; and
(iii) if another settlement bank in such Clearance System defaults
on an assured payment obligation owed to the Custodian wholly
or partially, the Custodian has no liability to make good the
loss and will, where appropriate, attribute the loss pro rata
between all Clients on whose behalf such payment should have
been received by the Custodian.
10. WITHDRAWAL AND DELIVERY
Subject to the terms of this Agreement, the Client may at any time
demand withdrawal of all or any part of the Property in the Custody Account
and/or the Custody Cash Account. Delivery of any Property will be made without
undue delay at the expense of the Client at such location as the parties hereto
may agree; PROVIDED THAT if the Custodian has effected any transaction on behalf
of the Client the settlement of which is likely to occur after a withdrawal
pursuant to this Section 10, then the Custodian shall be entitled in its
absolute discretion to close out or complete such transaction and to retain
sufficient funds from the Property for that purpose.
11. ACCESS AND RECORDS
(A) ACCESS TO THE CUSTODIAN'S RECORDS. Except as otherwise provided in this
Agreement, during the Custodian's regular business hours and upon receipt of
reasonable notice from the Client, any officer or employee of the Client, any
independent public accountant(s) selected by the Client and any person
designated by any regulatory authority having jurisdiction over the Client shall
be entitled to examine on the Custodian's premises Property held by the
Custodian and the Custodian's records regarding Property deposited with entities
authorized to hold Property in accordance with Section 12 hereof, but only upon
the Client's furnishing the Custodian with Instructions to that effect; PROVIDED
THAT such examination shall be consistent with the Custodian's obligations of
confidentiality to other parties. The Custodian's reasonable costs and expenses
in facilitating such examinations, including but not limited to the cost to the
Custodian of providing personnel in connection with examinations, shall be borne
by the Client.
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(B) ACCESS TO THIRD PARTY RECORDS. The Custodian shall also, subject to
restrictions under applicable laws and regulations, seek to obtain from any
entity with which the Custodian maintains the physical possession or book-entry
record of any of the Property in the Custody Account or the Custody Cash Account
such records as may be required by the Client or its agents.
12. USE OF AGENTS
(A) The Custodian is authorized subject to any relevant Rules, to appoint agents
(each an "agent", which term includes, without limitation, service providers and
Subcustodians, but not Clearance Systems, and which agents may be a member or
members of the Citicorp Organization) and to participate in Clearance Systems,
whether in its own name or that of the Client, and whether by participation as a
member, sponsor or settlement bank within the Clearance System, to perform any
of the duties of the Custodian under this Agreement. The Custodian may delegate
to any such agent or Clearance System any of its functions under this Agreement,
including, without limitation, the collection of any payment or payments,
whether of an income or a capital nature, due on the Property. Notwithstanding
anything else in this Agreement, each Clearance System that is a U.S. depository
shall be an entity eligible under Rule 17f-4 promulgated under the Investment
Company Act of 1940 and notice shall be given to the Client of the use of any
non-U.S. depository.
(B) In the selection and use of such agents and participation in such Clearance
Systems, the Custodian shall comply with any relevant Rules, and shall be
responsible only for the negligence in the selection of such agents and
Clearance Systems but shall otherwise have no responsibility for the performance
by such agents or Clearance System of any of the duties delegated to them under
this Agreement; notwithstanding the foregoing, the Custodian shall be
responsible for the negligence, fraud or willful default of any Subcustodian
that is a Branch or subsidiary of Citibank, N.A., and shall have the same level
of responsibility to the Client for any nominee company controlled by the
Custodian or by any of the Custodian's affiliated companies as the Custodian has
for itself.
(C) Subject to any relevant Rules and regulations, the Property may be deposited
with any Subcustodian deemed appropriate by the Custodian or in any Clearance
System deemed appropriate by the Custodian or a Subcustodian, as the case may
be. Property held in any Clearance System shall be subject to the rules or
operating procedures of such Clearance System, including rules regarding
supervision or termination of membership of such Clearance System, and such
further information provided by the Custodian to the Client, or acknowledgments
or agreements which may be required from the Client, for the purposes of this
Section 12(C) in connection with use of a Clearance System from time to time.
The Custodian will direct each Subcustodian and Clearance System to separately
identify on its books Securities held by it pursuant to this Agreement as being
held for the account of the Custodian's customers. The Custodian will direct
each Subcustodian and Clearance System to segregate any such Securities held by
such entity from the assets of the Custodian and such entity.
The Client is hereby advised that, where the Custodian arranges for any Property
to be held overseas, there may be different settlement, legal and regulatory
requirements in overseas jurisdictions from those applying in the United States,
together with different practices for the separate identification of the
Client's Property.
13. CITICORP ORGANIZATION INVOLVEMENT
(A) To the extent permitted by applicable law, the Client hereby authorizes the
Custodian without the need for the Custodian to obtain the Client's prior
consent:
(i) when acting on Instructions to purchase and/or sell Property
(other than cash) from, to or through itself or any other
member of the Citicorp Organization and from and/or to any
other customer of the Custodian or any other member of the
Citicorp Organization; and
(ii) to obtain and keep, without being liable to account to the
Client, any commission payable by any
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third party or any other member of the Citicorp Organization
in connection with dealings arising out of or in connection
with the Custody Account and/or the Custody Cash Account.
(B) The Client agrees and understands that if in accordance with Instructions,
an investment is made in any property, held, issued or managed by any member of
the Citicorp Organization, then such member of the Citicorp Organization may
retain a profit arising therefrom (in addition to the charges, commissions and
fees payable by the Client under this Agreement) without being liable to account
to the Client for such profit.
(C) The Client agrees and understands that (i) the Custodian and other members
of the Citicorp Organization may have banking or other business relationships
with issuers of Securities held in the Custody Account or Securities purchased
and sold for the Custody Account, and (ii) the Custodian shall not have any
obligations to the Client as a result of such relationships.
14. SCOPE OF RESPONSIBILITY
(A) Subject to the terms hereof, the Custodian shall use all reasonable care in
the performance of its duties under this Agreement and will exercise the due
care of a professional custodian for hire with respect to the Property in its
possession or control. The Custodian shall not be responsible for any loss or
damage suffered by the Client as a result of the Custodian performing such
duties unless the same results from an act of fraud, negligence or willful
default on the part of the Custodian and as provided in Section 12(B) hereof; in
which event the liability of the Custodian in connection with any Property shall
not exceed the market value of the Property, to which such loss or damage
relates, at the time of such fraud, negligence or willful default plus interest
at the rate applicable to the base currency of the Custody Cash Account accruing
from the date of such fraud, negligence or willful default until the date of
discharge. Notwithstanding the foregoing, in no event shall the Custodian be
liable to the Client for indirect, special or consequential damages, even if
advised of the possibility of such damages.
(B) The Custodian is not obliged to maintain any insurance on the Property held
under the terms of this Agreement.
(C) In the event that any law, regulation, decree, order, government act,
custom, procedure or practice to which the Custodian, or any Subcustodian or
Clearance System is subject, or to which the Property is subject, prevents or
limits the performance of the duties and obligations of the Custodian, or any
Subcustodian or Clearance System, then until such time as the Custodian,
Subcustodian or Clearance System is again able to perform such duties and
obligations hereunder, such duties and obligations of the Custodian,
Subcustodian or Clearance System shall be suspended.
(D) Neither the Custodian nor any member of the Citicorp Organization shall be
responsible for any loss or damage, or failure to comply or delay in complying
with any duty or obligation, under or pursuant to this Agreement arising as a
direct or indirect result of any reason, cause or contingency beyond its
reasonable control, including (without limitation) natural disasters,
nationalization, currency restrictions, act of war, act of terrorism, act of
God, postal or other strikes or industrial actions, or the failure, suspension
or disruption of any relevant stock exchange, Clearance System or market.
(E) Subject to Section 14(A) above, the Custodian shall not be liable for any
loss resulting from, or caused by, the collection of any Property and/or any
funds or other property paid or distributed in respect of the Property.
(F) The Custodian does not warrant or guarantee the authenticity or validity of
any Security or other Property received by the Custodian, or any other entity
authorized to hold Property under this Agreement. If the Custodian becomes aware
of any defect in title or forgery of any Property, the Custodian shall promptly
notify the Client.
(G) The Client shall be responsible for all filings, tax returns and reports on
any transactions undertaken
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pursuant to this Agreement, or in respect of the Property or collections
relating to the Property as may be requested by any relevant authority, whether
governmental or otherwise, and for the payment of all unpaid calls, Taxes
(including without limitation any value added tax), imposts, levies or duties
due on or with respect to any principal, interest or other collections, or any
other liability or payment arising out of or in connection with the Property,
and in so far as the Custodian is under any obligation (whether of a
governmental nature or otherwise) to pay the same on behalf of the Client it may
do so out of any Property held by the Custodian pursuant to the terms of this
Agreement.
(H) The Custodian is not acting under this Agreement as an investment manager,
nor as an investment, legal or tax adviser to the Client and the Custodian's
duty is solely to act as a custodian in accordance with the terms of this
Agreement.
(I) Nothing herein shall obligate the Custodian to perform any obligation or to
allow, take or omit taking any action which will breach any relevant Rules, or
any law, rule, regulation or practice of any relevant government, stock
exchange, Clearance System, self-regulatory organization or market.
(J) The Custodian may at any time suspend or terminate its participation and
holding of assets in a Clearance System, and will give reasonable notice to the
Client of any such action. In such case, or in the event of suspension as
contemplated in Section 14(C) above, the Custodian may arrange for the relevant
Securities to be held in certificated form.
(K) The Custodian shall not be responsible for the acts or omissions, default or
insolvency of any broker, counterparty, issuer of Securities or, except as
provided in Section 12(B), Subcustodian, agent or Clearance System.
(L) The Custodian shall not be responsible for the accuracy, content or
translation of any notice, circular, report, announcement or other material
forwarded to the Client.
(M) The Custodian shall only have such duties and responsibilities as are
specifically set forth or referred to in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
15. LITIGATION; INDEMNITY
(A) The Custodian or any of its agents, as the case may be, may (but without
being under any duty or obligation to) institute or defend legal proceedings, or
take any other action arising out of or in connection with the Property and the
Client shall indemnify the Custodian or agent against any costs and expenses,
including without limitation any reasonable attorneys' fees and disbursements,
arising from such proceedings or other action and make available to the
Custodian such security in respect of such costs and expenses as the Custodian
or agent in its absolute discretion deems necessary or appropriate.
(B) In the event the Custodian does not institute or defend legal proceedings,
or take any other action arising out of or in connection with the Property, the
Custodian hereby agrees that the Client shall, to the extent of any loss of the
Client's interest in the Property and to the extent permitted by applicable law
and not prohibited by contract, be subrogated to all of the rights of recovery
of the Custodian therefor against any third party person or entity; PROVIDED
THAT nothing herein shall be interpreted as granting the Client any rights to
bring any direct action under any insurance policy issued in favor of the
Custodian or as limiting the Custodian's right to bring any action against any
such third party for any damages suffered by the Custodian. Notwithstanding any
other provision hereof, in no event shall the Custodian be obliged to bring suit
in its own name or be obliged to allow suit to be brought in its name. Subject
to the terms of this Section 15(B) and to the extent permitted by law, the
Custodian shall execute and deliver any and all such instruments and documents
which the Client may reasonably request and take such other actions as
reasonably necessary or appropriate to assist the Client in the exercise of such
rights of recovery and to enable the Client to recover against any and all such
third party persons or entities. The Client shall
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reimburse the Custodian for any reasonable out-of-pocket costs incurred in
connection with the actions contemplated by this Section 15(B).
(C) The Client agrees to indemnify the Custodian and to defend and hold the
Custodian harmless against all losses, liabilities, claims, expenses and Taxes,
including any reasonable legal fees and disbursements, (each referred to as a
"LOSS") arising directly or indirectly:
(i) from the fact that the Property is registered in the name of
or held by the Custodian or any nominee or agent of the
Custodian or any Clearance System;
(ii) without limiting the generality of Section 15(C)(i), from any
act which the Custodian or any nominee or agent performs or
permits (including the provision of any overdraft or other
financial accommodation which arises on the books of the
Custodian, whether on an advised or unadvised basis) in
relation to the Property pursuant to this Agreement or any
Instructions;
(iii) from the Custodian or any such nominee, agent or Clearance
System carrying out any Instructions pursuant to the terms of
this Agreement, including, without limitation, Instructions
transmitted orally, by telephone, telex, facsimile
transmission or any other means agreed by the Client and the
Custodian from time to time or otherwise;
(iv) from any reclaim or refund of Taxes effected by the Custodian
or any agent for the Client; and
(v) from the Custodian's reliance or action on any information
provided by the Client in connection with this Agreement;
PROVIDED THAT the Custodian shall not be indemnified against or held harmless
from any liability arising out of the Custodian's negligence, fraud or willful
default.
(D) The disclosure by the Client to the Custodian that the Client has entered
into this Agreement as the agent or representative of another person shall not
prevent the Custodian from being entitled to treat the Client as incurring all
obligations as principal under this Agreement.
(E) The Custodian shall give notice of any Loss in respect of which the Client
is obliged to provide indemnification pursuant to this Agreement. Such notice
shall describe the Loss in reasonable detail, and shall indicate the amount
(estimated, if necessary, and to the extent feasible) of the Loss that has been
or may be suffered by Custodian.
16. LIEN AND SET-OFF
(A) In addition to any remedies available to the Custodian under applicable law,
the Custodian shall have, and the Client hereby grants, a continuing general
lien on all Property (other than cash) to secure payment of fees and expenses
for services rendered under this Agreement. If the Custodian advances cash or
securities to the Client for any purpose 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 its
duties hereunder, except such as may arise from its or its nominee's negligent
action, neglect failure to act or willful misconduct, any Property at any time
held for the Custody Account shall be security therefor and the Client hereby
grants a security interest therein to the Custodian. The Client shall promptly
reimburse the Custodian for any such advance of cash or securities or any such
taxes, charges, expenses, assessments, claims or liabilities upon the request
for payment, but should the Client fail to so reimburse the Custodian, the
Custodian shall be entitled to dispose of such Property to the extent necessary
to obtain reimbursement. The Custodian shall be entitled to debit any Account,
in connection with any such advance and any interest on such advance as the
Custodian deems reasonable.
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17. FEES AND EXPENSES
Without prejudice to any of its liabilities and obligations under this
Agreement, the Client agrees to pay to the Custodian from time to time such fees
and commissions for its services pursuant to this Agreement as determined in
accordance with the terms of the Fee Agreement, together with any applicable
taxes or levies, including, without limitation, all those items referred to in
Section 8(ii) hereof. If the Client fails to pay amounts after notice, the
Custodian is further authorized to debit (as well after as before the date of
any termination pursuant to Section 19 hereof) any account of the Client with
the Custodian, including, without limitation, the Custody Cash Account, for any
amount owing to the Custodian from time to time under this Agreement.
18. TAX STATUS/WITHHOLDING TAXES
(A) The Client will provide the Custodian with information as to its tax status
as reasonably requested by the Custodian from time to time.
(B) The Client may be required from time to time to file such proof of taxpayer
status or residence, to execute such certificates and to make such
representations and warranties, or to provide any other information or documents
in respect of the Property, as the Custodian or any of its agents may deem
necessary or proper to fulfill the obligations of the Custodian or its agents
under applicable law. The Client shall provide the Custodian or its agents, as
appropriate, in a timely manner, with copies, or originals if necessary and
appropriate, of any such proofs of residence, taxpayer status or identity,
beneficial ownership of Property and any other information or documents which
the Custodian or its agents may reasonably request.
(C) If any Taxes shall become payable with respect to any payment due to the
Client, such Taxes may be withheld from such payment in accordance with
applicable law. The Custodian and any agents may withhold any interest, any
dividends or other distributions or securities receivable in respect of
Securities, proceeds from the sale or distribution of Securities ("PAYMENTS"),
or may sell for the account of the Client any part thereof or all of the
Securities, and may apply such Payment and/or cash from the Custody Cash Account
in satisfaction of such Taxes, the Client remaining liable for any deficiency.
If any Taxes shall become payable with respect to any payment made to the Client
by the Custodian or its agents in a prior year, the Custodian or its agents may
withhold Payments in satisfaction of such prior year's Taxes.
(D) In the event the Client requests that the Custodian provide tax relief
services and the Custodian agrees to provide such services, the Custodian or any
of its agents, shall apply for appropriate tax relief (either by way of reduced
tax rates at the time of an income payment or retrospective tax reclaims in
certain markets as agreed from time to time); PROVIDED THAT the Client provides
to the Custodian such documentation and information as is necessary to secure
such tax relief. In no event shall the Custodian or any of its agents be
responsible for the difference between the statutory rate of withholding and the
treaty rate of withholding if the Custodian or any of its agents are unable to
secure tax relief.
19. TERMINATION
(A) Either of the parties hereto may terminate this Agreement by giving not less
than 60 days' prior written notice to the other party; PROVIDED THAT within 60
days of such notice, the Client shall provide the Custodian with Instructions
specifying the person to whom the Custodian shall deliver the Property in the
Custody Account and Custody Cash Accounts; PROVIDED FURTHER THAT if the
Custodian has effected any transaction on behalf of the Client the settlement of
which is likely to extend beyond the expiration of such notice, then the
Custodian shall be entitled in its absolute discretion to close out or complete
such transaction and to retain sufficient funds from the Property for that
purpose. If within 60 days following termination, the Client fails to give the
Custodian Instructions specifying the person to whom the Custodian shall deliver
the Property in the Custody
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Account and Custody Cash Account, the Custodian shall deliver the Property to
the Client at its address set out above.
(B) The rights and obligations contained in Sections 15, 16, 17 and 18 of this
Agreement shall survive the termination of this Agreement.
20. ASSIGNMENT
This Agreement shall bind and enure for the benefit of the parties
hereto and their respective successors and permitted assigns, and the Client
shall not assign, transfer or charge all or any rights or benefits hereunder
without the written consent of the Custodian. The Custodian may not assign,
transfer or charge all or any of its rights or benefits hereunder without the
written consent of the Client; PROVIDED HOWEVER that this Agreement may be
assigned by the Custodian to another member of the Citicorp Organization with
prior written notice to the Client, and such assignee shall, without the
execution or filing of any consents or other documents, succeed to and be
substituted for the Custodian with like effect as though such assignee had been
originally named as the Custodian hereunder. Any purported assignment, transfer
or charge made in contravention of this Section shall be null and void and of no
effect whatsoever.
21. JOINT AND SEVERAL LIABILITY
Where the Client comprises two or more persons, all obligations and
liabilities under this Agreement shall be deemed to be joint and several, and
any notice served on any one of such persons shall be deemed to have been served
on such other person or persons, as the case may be.
22. DISCLOSURE
(A) The Client agrees and understands that the Custodian or its agents may
disclose information regarding the Custody Account and/or the Custody Cash
Account if required to do so (i) to establish under the laws of any relevant
jurisdiction the nominee (or similar) status of the Custodian or its agents with
respect to Property in the Custody Account and/or Custody Cash Account for the
purpose of performing or discharging its duties and obligations under this
Agreement, (ii) to enable auditors to perform auditing services, (iii) to make
the required tax certifications in the relevant jurisdictions, (iv) by any
applicable law, statute or regulation or court order or similar process in any
relevant jurisdiction, (v) by order of an authority having power over the
Custodian or its agents within the jurisdiction of such authority, whether of a
governmental nature or otherwise, or (vi) where required by the operating rules
of any relevant Clearance System.
(B) The Client hereby authorizes (i) the collection, storage and processing of
any information relating to the Client by the Custodian and the Branches,
subsidiaries, affiliates and agents of, or Clearance Systems used by, Citibank,
N.A.; and (ii) the transfer of any information relating to the Client to and
between the Branches, subsidiaries, affiliates and agents of, or Clearance
Systems used by, Citibank, N.A. and third parties selected by any of them,
wherever situated, for confidential use in connection with the provision of
services to the Client, and further acknowledges that any such Branch,
subsidiary, affiliate, agent, third party or Clearance System shall be entitled
to transfer any such information as required by any law, court, legal process or
as requested by any authority in accordance with which it is required to act, as
it shall reasonably determine.
(C) The Client agrees that the terms of this Agreement shall be kept strictly
confidential and no printed materials or other matter in any language (including
without limitation, prospectuses, statements of additional information, notices
to shareholders, annual reports and promotional materials) which mention
Citicorp, Citibank, N.A. or the Custodian's name, or the rights, powers or
duties of the Custodian, shall be issued by the Client or on the Client's behalf
unless Citibank, N.A. and/or the Custodian (as applicable) shall first have
given its specific written consent thereto; PROVIDED THAT no prior consent shall
be required if the only reference to the
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Custodian's name is in identifying the Custodian as one of the Client's
custodians.
(D) The Client agrees that the Custodian or its agents may, upon reasonable
request, review the Client's premises, and security controls and procedures,
where necessary for the performance of the Custodian's obligations regarding any
relevant Clearance System.
23. NOTICES
All notices and communications to be given by one party to the other
under this Agreement shall be in writing in the English language and (except for
notices, reports and information from the Custodian, and Instructions given by
electronic means) shall be made either by telex or facsimile, other electronic
means agreed to by the parties or by letter addressed to the party concerned at
the addresses set out above (or at such other addresses as may be notified in
writing by either party to the other from time to time). Any such notice or
communication hereunder shall be effective upon actual receipt.
24. GOVERNING LAW AND JURISDICTION
(A) This Agreement shall be governed by and construed in accordance with the
internal laws (and not the laws of conflict) of the state of New York. The
Client agrees for the benefit of the Custodian and, without prejudice to the
right of the Custodian to take any proceedings in relation hereto before any
other court of competent jurisdiction, that the courts of the State of New York
shall have jurisdiction to hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of or in connection with this
Agreement and, for such purposes, irrevocably submits to the non-exclusive
jurisdiction of such courts.
(B) Each party hereto waives any objection it may have at any time to the laying
of venue of any actions or proceedings brought in a court of the State of New
York, waives any claim that such actions or proceedings have been brought in an
inconvenient forum and further waives the right to object that such court does
not have jurisdiction over such party.
(C) The Client irrevocably waives, to the fullest extent permitted by applicable
law, with respect to itself and its revenues and assets (irrespective of their
use or intended use), all immunity on the grounds of sovereignty or similar
grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific performance or for recovery of property, (iv)
attachment of its assets (whether before or after judgment), and (v) execution
or enforcement of any judgment to which it or its revenues or assets might
otherwise be entitled in any actions or proceedings in such courts, and
irrevocably agrees, to the fullest extent permitted by applicable law, that it
will not claim such immunity in any such actions or proceedings.
(D) The Client hereby understands and agrees that the opening of, the holding of
all or any part of the Property in, and the delivery of any Securities and other
Property to or from, the Custody Account and Custody Cash Account and the
performance of any activities contemplated in this Agreement by the Custodian,
including acting on any Instructions, are subject to the relevant local laws,
regulations, decrees, orders, government acts, customs, procedures and practices
(i) to which the Custodian, or any Subcustodian or Clearance System, is subject
and (ii) as exist in the country in which the Property is held.
25. MISCELLANEOUS
(A) This Agreement shall not be amended except by a written agreement and any
purported amendment made in contravention of this Section shall be null and void
and of no effect whatsoever.
(B) This Agreement shall constitute the entire agreement between the Client and
the Custodian and, unless otherwise expressly agreed in writing, shall supersede
all prior agreements relating to global custodial services,
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written or oral, between the parties hereto.
(C) The parties hereto agree that (i) the rights, powers, privileges and
remedies stated in this Agreement are cumulative and not exclusive of any
rights, powers, privileges and remedies provided by law, unless specifically
waived, and (ii) any failure or delay in exercising any right power, privilege
or remedy will not be deemed to constitute a waiver thereof and a single or
partial exercise of any right, power, privilege or remedy will not preclude any
subsequent or further exercise of that or any other right, power, privilege or
remedy.
(D) In the event that any provision of this Agreement, or the application
thereof to any person or circumstances, shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the remaining
provisions of this Agreement, and the application of such provisions to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall be unaffected thereby and such provisions shall be valid
and enforced to the fullest extent permitted by law in such jurisdiction.
(E) Titles to Sections of this Agreement are included for convenience of
reference only and shall be disregarded in construing the language contained in
this Agreement.
(F) This Agreement may be executed in several counterparts, each of which shall
be an original, but all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized.
<TABLE>
<S> <C>
CITIBANK, N.A., NEW YORK OFFICE DLJ DIRECT MUTUAL FUNDS
BY: ________________________________ BY: ________________________________
NAME: ________________________________ NAME: ________________________________
TITLE: ________________________________ TITLE: ________________________________
</TABLE>
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SERVICES AGREEMENT
THIS AGREEMENT, dated as of this day of , 1999 between DLJdirect
Mutual Funds (the "Fund"), a Delaware business trust having its principal place
of business at 277 Park Avenue, New York, New York 10172 and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("Investor Services Group"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its fund accounting agent, transfer agent, dividend
disbursing agent, custody administrator and agent in connection with certain
other activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of
the governing body of the Fund, as the case may be.
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange
Commission.
(f) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(g) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(h) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(j) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(k) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(l) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
custody administrator, fund accounting agent and
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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shareholder servicing agent for the Fund and Investor Services Group hereby
accepts such appointments and agrees to perform the duties hereinafter set
forth.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. Investor Services Group
shall provide the Fund on a regular basis with the total number of
Shares of each Portfolio 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.
(c) Investor Services Group shall be responsible for the
following: performing the customary services of a fund accounting agent
for the Fund, as more fully described in the written schedule of Duties
of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and subject to the supervision and direction of
the Board of Directors of the Fund.
(d) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its agent for the limited
purpose of (i) accepting invoices charged to the Fund for custody
services performed by the Custodian on the Fund's behalf, (ii)
remitting payment to the Custodian for such services, and (iii) as more
fully described in the written schedule of Duties of Investor Services
Group annexed hereto as Schedule B and incorporated herein.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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dividend by the Board of Directors, or the legality of the issuance of
any Shares in payment of any dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
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 Investor Services Group 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 the
reporting of such transactions to the Fund as provided above.
3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure
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Written Instructions as to the handling of such request. Investor Services Group
reserves the right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable for the failure
to comply with such request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule C and incorporated herein.
6.2 In addition to those fees and other charges set forth in Section
6.1 above, the Fund on behalf of each of the Portfolios agrees to pay, and will
be billed separately for, out-of-pocket expenses incurred by Investor Services
Group in the performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule D and incorporated
herein. Schedule D may be modified by written agreement between the parties.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by Investor Services Group in the performance of
its obligations hereunder.
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6.3 The Fund on behalf of each of the Portfolios hereby authorizes
Investor Services Group to collect its fees, other charges and related
out-of-pocket expenses by debiting the Fund's or Portfolio's custody account for
invoices which are rendered for the services performed for the applicable
function. Invoices for the services performed will be sent to the Fund after
such debiting with an indication that payment has been made.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees and charges that Investor
Services Group charges the Fund under this Agreement reflect the allocation of
risk between the parties, including the disclaimer of warranties in Section 9.3
and the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services Group charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Investor Services Group System.
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8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
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(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement; and
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
grossly negligent act or omission to act or bad faith by Investor
Services Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to any prior transfer agent for the Fund, excluding FPS
Services, Inc., in the performance of Investor Services Group's duties
and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
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(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has
not prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event for
which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and
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exclusive remedy for claims or other actions or proceedings to which the Fund's
indemnification obligations pursuant to this Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own gross negligence, bad faith or willful misconduct
or that of its employees.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that occurred more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) year ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
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13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor service provider will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Should the Fund desire to move any of the services outlined in
this Agreement to a successor service provider prior to the expiration of the
Initial Term or any renewal Term, or without the required notice period,
Investor Services Group shall make a good faith effort to facilitate the
conversion on such prior date, however, there can be no guarantee that Investor
Services Group will be able to facilitate a conversion of services on such prior
date. Should services be converted to a successor service provider, or if the
Fund is liquidated or its assets merged or purchased or the like with another
entity, prior to the end of the required notice period, payment of fees to
Investor Services Group shall be accelerated to a date prior to the conversion
or termination of services and calculated at the asset levels on the date notice
of termination was given to Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent, fund
accounting agent, and custody administrator under the terms hereof, the Fund
shall so notify Investor Services Group in writing, and if Investor Services
Group agrees in writing to provide such services, Exhibit 1 shall be amended to
include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or
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disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and
Investor Services Group may, however, disclose Confidential Information to their
respective parent corporation, their respective affiliates, their subsidiaries
and affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement. The Fund and Investor Services Group may
also disclose the Confidential Information to independent contractors, auditors,
and professional advisors, provided they first agree in writing to be bound by
the confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault
of such party; or
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(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted
including, but not limited to, giving the other party as much advance
notice of the possibility of such disclosure as practical so the other
party may attempt to stop such disclosure or obtain a protective order
concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the non-performing
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to recommence performance
or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Arbitration.
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18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
DLJdirect Mutual Funds
277 Park Avenue
New York, New York 10172
Attention: President
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in
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the City of Boston, and Investor Services Group and the Fund hereby submit
themselves to the exclusive jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
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25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
DLJdirect MUTUAL FUNDS
By:
___________________________________________
Title:
________________________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
___________________________________________
Title:
________________________________________
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SCHEDULE A
LISTING OF PORTFOLIOS
Below are listed the portfolios/series to which services under this Agreement
are to be performed.
DLJdirect MUTUAL FUNDS
1. DLJdirect S&P 500 FUND
2. DLJdirect TECHNOLOGY FUND
3. DLJdirect GROWTH FUND
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SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
(a) Shareholder Information. Investor Services Group shall maintain a
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification and which shall indicate whether
such Shares are held in certificates or uncertificated form.
(b) Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
(c) Share Certificates.
At the expense of the Fund, the Fund shall supply Investor
Services Group with an adequate supply of blank share certificates
to meet Investor Services Group requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or removal of
any officer of the Fund whose signature appears on such
certificates, Investor Services Group or its agent may continue to
countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
Investor Services Group shall issue replacement Share certificates
in lieu of certificates which have been lost, stolen or destroyed,
upon receipt by Investor Services Group of properly executed
affidavits and lost certificate bonds, in form satisfactory to
Investor Services Group, with the Fund and Investor Services Group
as obligees under the bond.
Investor Services Group shall also maintain a record of each
certificate issued, the number of Shares represented thereby and
the Shareholder of record. With respect to Shares held in open
accounts or uncertificated form (i.e., no certificate being issued
with respect thereto) Investor Services Group shall maintain
comparable records of the Shareholders thereof, including their
names, addresses and taxpayer identification. Investor Services
Group shall further maintain a stop transfer record on lost and/or
replaced certificates.
(d) Mailing Communications to Shareholders; Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 19 -
<PAGE>
connection with meetings of Shareholders, Investor Services Group will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted prior to
meetings, act as inspector of election at meetings and certify Shares voted at
meetings.
(e) Sales of Shares.
Investor Services Group shall not be required to issue any Shares of
the Fund where it has received a Written Instruction from the Fund or
official notice from any appropriate authority that the sale of the
Shares of the Fund has been suspended or discontinued. The existence of
such Written Instructions or such official notice shall be conclusive
evidence of the right of Investor Services Group to rely on such
Written Instructions or official notice.
In the event that any check or other order for the payment of money is
returned unpaid for any reason, Investor Services Group will endeavor
to: (i) give prompt notice of such return to the Fund or its designee;
(ii) place a stop transfer order against all Shares issued as a result
of such check or order; and (iii) take such actions as Investor
Services Group may from time to time deem appropriate.
(f) Transfer and Repurchase.
Investor Services Group shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures
set forth in the Fund's Prospectus.
Investor Services Group will transfer or repurchase Shares upon receipt
of Oral or Written Instructions or otherwise pursuant to the Prospectus
and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as Investor Services Group
reasonably may deem necessary.
Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. Investor Services Group also
reserves the right to refuse to transfer or repurchase Shares until it
is satisfied that the requested transfer or repurchase is legally
authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or repurchases which Investor Services Group,
in its good judgement, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to
such transfer or repurchase.
When Shares are redeemed, Investor Services Group shall, upon receipt
of the instructions and documents in proper form, deliver to the
Custodian and the Fund or its designee a notification setting forth the
number of Shares to be repurchased. Such repurchased shares shall be
reflected on appropriate accounts maintained by Investor
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 20 -
<PAGE>
Services Group reflecting outstanding Shares of the Fund and Shares
attributed to individual accounts.
Investor Services Group shall upon receipt of the monies provided to it
by the Custodian for the repurchase of Shares, pay such monies as are
received from the Custodian, all in accordance with the procedures
described in the written instruction received by Investor Services
Group from the Fund.
Investor Services Group shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by Investor Services Group
or its agent of notification of the suspension of the determination of
the net asset value of the Fund.
(g) Dividends.
Upon the declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund with respect to
Shares of the Fund, the Fund shall furnish or cause to be furnished to
Investor Services Group Written Instructions setting forth the date of
the declaration of such dividend or distribution, the ex-dividend date,
the date of payment thereof, the record date as of which Shareholders
entitled to payment shall be determined, the amount payable per Share
to the Shareholders of record as of that date, the total amount payable
on the payment date and whether such dividend or distribution is to be
paid in Shares at net asset value.
On or before the payment date specified in such resolution of the Board
of Directors, the Fund will provide Investor Services Group with
sufficient cash to make payment to the Shareholders of record as of
such payment date.
If Investor Services Group does not receive sufficient cash from the
Fund to make total dividend and/or distribution payments to all
Shareholders of the Fund as of the record date, Investor Services Group
will, upon notifying the Fund, withhold payment to all Shareholders of
record as of the record date until sufficient cash is provided to
Investor Services Group.
(h) Retirement Plans. In connection with the individual retirement
account, simplified employee pension plan, rollover individual retirement plan,
educational IRA and ROTH individual retirement account (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code")
offered by the Fund for which contributions of the Funds' shareholders (the
"Participants") in the IRA's are invested in shares of the Fund, Investor
Services Group shall provide the following administrative services in addition
to those services described herein:
Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess
contributions, etc.);
Record method of distribution requested and/or made;
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
Receive and process designation of the beneficiary forms;
Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets
in the account and records pertaining thereto as requested;
Prepare any annual reports or returns required to be prepared
and/or filed by a custodian of an IRA, including, but not limited
to, an annual fair market value report, Forms 1099R and 5498 and
file with the IRS and provide to Participant/Beneficiary; and
Perform applicable federal withholding and send
Participants/Beneficiaries an annual TEFRA notice regarding
required federal tax withholding.
(i) Cash Management Services.
(a) Investor Services Group shall establish demand deposit accounts
(DDA's) with a cash management provider to facilitate the receipt of purchase
payments and the processing of other Shareholder-related transactions. Investor
Services Group shall retain any excess balance credits earned with respect to
the amounts in such DDA's ("Balance Credits") after such Balance Credits are
first used to offset any banking service fees charged in connection with banking
services provided on behalf of the Fund. Balance Credits will be calculated and
applied toward the Fund's banking service charges regardless of the withdrawal
of DDA balances described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal Agency
obligations, money market mutual funds, repurchase agreements, money market
preferred securities (rated A or better), commercial paper (rated A1 or P1),
corporate notes/bonds (rated A or better) and/or Eurodollar time deposits
(issued by banks rated A or better). Investor Services Group bears the risk of
loss on any such investment and shall retain any earnings generated thereby.
Other similarly rated investment vehicles may be used, provided however,
Investor Services Group shall first notify the Fund of any such change.
(c) Investor Services Group may facilitate the payment of distributions
from the Fund which are made by check ("Distributions") through the "IPS
Official Check" program. "IPS Official Check" is a product and service provided
by Investor Services Group's affiliate, Integrated Payment Systems ("IPS"). IPS
is licensed and regulated as an "issuer of payment instruments". In the event
the IPS Official Check program is utilized, funds used to cover such
Distributions shall be forwarded to and held by IPS. IPS may invest such funds
while awaiting presentment of items for payment. In return the services provided
by IPS, IPS imposes a per item charge which is identified in the Schedule of
Out-of-Pocket Expenses attached hereto and shall retain, and share with Investor
Services Group, the benefit of the revenue generated from its investment
practices.
(j) Lost Shareholders. Investor Services Group shall perform such
services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the "Lost Shareholder
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 22 -
<PAGE>
Rules"), including, but not limited to those set forth below. Investor Services
Group may, in its sole discretion, use the services of a third party to perform
the some or all such services.
documentation of electronic search policies and procedures;
execution of required searches;
creation and mailing of confirmation letters;
taking receipt of returned verification forms;
providing confirmed address corrections in batch via electronic
media;
tracking results and maintaining data sufficient to comply with
the Lost Shareholder Rules; and
preparation and submission of data required under the Lost
Shareholder Rules.
II. FUND ACCOUNTING SERVICES
Daily, Weekly, and Monthly Reporting
Portfolio and General Ledger Accounting
Daily Valuation of all Portfolio Securities
Daily Valuation and NAV Calculation
Review research of price tolerance/fluctuation report to market
movements and events
Research of items appearing on the price exception report
Security trade processing
Daily cash and monthly position reconciliation with the custodian bank
Daily updating of price and distribution rate information to the
Transfer Agent/Insurance Agent, client.
Daily support and report delivery to Portfolio Management
Daily calculation of distribution rates
Provide daily investable cash balances
Monitor and research aged receivables
Monitor aged income items and reclaims
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
Update NASDAQ reporting, if applicable
Daily maintenance of each Portfolio's general ledger including expense
accruals
Calculation of 30-day SEC yields and total returns, if applicable
Preparation of month-end reconciliation package
III. CUSTODY ADMINISTRATION
Performing custody administration services as follows:
Assign a custody administrator to accept, control and process the
Fund's daily portfolio transactions through direct computer link with
the Custodian
Match and review DTC eligible ID's and trade information with the
Fund's instructions for accuracy and coordinating with the Custodian
and the Fund's accounting agent for recording and affirmation
processing with the depository
Systematically settle all depository eligible issues
Assist the Fund in placing cash management trades through the
Custodian, such as commercial paper, CD's and repurchase agreements
Provide the Fund with daily custodian statements reflecting all prior
day cash activity on behalf of each Portfolio by 8:30 a.m. Eastern
time. Complete description of any posting, inclusive of Sedol/CUSIP
numbers, interest/dividend payment date, capital stock details, expense
authorizations, beginning/ending cash balances, etc., will be provided
by the Custodian's reports or systems.
Provide monthly activity statements combining both cash changes and
security trades, and a full portfolio listing.
Communicate to the Fund on any corporate actions, capital changes and
interest rate changes supported by appropriate supplemental reports
received from the Custodian. Follow-up will be made with the Custodian
to ensure all necessary actions and/or paperwork is complete.
Coordinate and resolve unsettled dividends, interest, paydowns and
capital changes. Assist in resolution of failed transactions and any
settlement problems.
Provide broker interface ensuring trade settlement with failed trade
follow-up.
Provide the Fund's auditor with trade documentation to help expedite
the Fund's audit.
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
Investor Services Group shall be entitled to retain any excess balance
credits or fee reductions or other concessions or benefits earned or
generated by or associated with the Fund's custodial accounts or made
available by the institution at which such accounts are maintained
after such benefits are first applied towards banking service fees
charged to the Fund by such institution.
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 25 -
<PAGE>
SCHEDULE C
TRANSFER AGENCY AND SHAREHOLDER SERVICES
I. TRANSFER AGENT AND SHAREHOLDER SERVICES: (1/12th payable monthly)
$24,000 per fund per year. Assumes one omnibus account per fund and
that all activity is via Fund/SERV Networking Level 3, and First Data
Investor Services Group does no tax reporting and handles a limited
number of shareholder calls and no broker calls.
II. IRA'S, 403(b) PLANS, DEFINED CONTRIBUTION/BENEFIT PLANS:
Annual Maintenance Fee - $12.00 per account per year
(Normally charged to participants)
III. FUND/SERV PROCESSING (If Applicable)
$1,000 One time set-up charge - new fund
$50.00 Per month/per fund monthly maintenance fee
IV. NETWORKING PROCESSING (If Applicable)
$1,000 One time set-up charge - new fund
$75.00 Per month/per fund monthly maintenance fee
FUND ACCOUNTING AND PORTFOLIO VALUATION FEES
I. ANNUAL FEE SCHEDULE Per Domestic Index Portfolio: U.S. Dollar
Denominated Securities only (1/12th payable monthly)
<TABLE>
<S> <C> <C>
$25,000 Minimum to $ 20 Million of Average Net Assets
.0003 On Next $ 30 Million of Average Net Assets
.0002 On Next $ 50 Million of Average Net Assets
.0001 Over $100 Million of Average Net Assets
</TABLE>
A base multi-class fee of $7,500 per year per each additional class
would be assessed on multiple class portfolios. This fee is not
included in the minimums discussed above.
ANNUAL FEE SCHEDULE Per Domestic non-Indexed Portfolio: U.S. Dollar
Denominated Securities only (1/12th payable monthly)
$25,000 minimum per domestic fund, plus
.000190 On First $1 Billion of combined funds Average Net Assets
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
.0001 Over $1 Billion of combined funds Average Net Assets
A base multi-class fee of $7,500 per year per each additional class
would be assessed on multiple class portfolios. This fee is not
included in the minimums discussed above.
II. PRICING SERVICES QUOTATION FEE
Specific costs will be identified based upon options selected by
the client and will be billed monthly.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
MULLER DATA INTERACTIVE J.J. KENNY
SECURITY TYPES CORP.* DATA CORP.* CO., INC.*
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
-------------------------------------------------------------------------------------------------------
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
-------------------------------------------------------------------------------------------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
-------------------------------------------------------------------------------------------------------
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
-------------------------------------------------------------------------------------------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
-------------------------------------------------------------------------------------------------------
Convertible Bonds .50 .50 1.00 (a)
-------------------------------------------------------------------------------------------------------
High Yield Bonds .50 .50 1.00 (a)
-------------------------------------------------------------------------------------------------------
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
-------------------------------------------------------------------------------------------------------
U.S. Equities .15 .15 n/a
-------------------------------------------------------------------------------------------------------
U.S. Options .15 .15 n/a
-------------------------------------------------------------------------------------------------------
Domestic Dividends & Capital Changes
(per Issue per Month) n/a 3.50 n/a
-------------------------------------------------------------------------------------------------------
Foreign Securities .50 .50 n/a
-------------------------------------------------------------------------------------------------------
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
-------------------------------------------------------------------------------------------------------
Set-up Fees n/a n/a (d) .25 (c)
-------------------------------------------------------------------------------------------------------
All Added Items n/a n/a .25 (c)
-------------------------------------------------------------------------------------------------------
</TABLE>
* Based on current Vendor costs, subject to change. Costs are
quoted based on individual security CUSIP/identifiers and are
per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
(d) Interactive Data also charges monthly transmission costs
and disk storage charges.
A) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day
B) DOW JONES MARKETS (FORMERLY TELERATE SYSTEMS, INC.)* (if
applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the client and will be billed monthly.
C) REUTERS, INC.*
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the client and will be billed monthly.
D) MUNICIPAL MARKET DATA* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
the client and will be billed monthly.
III. SEC YIELD CALCULATION: (if applicable)
Provide up to 12 reports per year to reflect the yield calculations
for non-money market Funds required by the SEC, $1,000 per year per
Fund. For multiple class Funds, $1,000 per year per class. Daily SEC
yield reporting is available at $3,000 per year per Fund (US dollar
denominated securities only).
CUSTODY ADMINISTRATION FEES
I. DOMESTIC SECURITIES AND ADRS PER PORTFOLIO: (1/12th payable monthly)
U.S. Dollar Denominated Securities only
<TABLE>
<S> <C> <C>
.000168 On First $ 75 Million of Average Net Assets
.000120 On the Next $ 75 Million of Average Net Assets
.000100 Over $150 Million of Average Net Assets
</TABLE>
70% of the foregoing asset based fees will apply, subject to a
minimum monthly fee of $500 per portfolio.
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 28 -
<PAGE>
II. CUSTODY DOMESTIC SECURITIES TRANSACTIONS CHARGE: (billed monthly)
<TABLE>
<S> <C>
Book Entry DTC, Federal Book Entry, PTC $14.00
Physical/Options/RIC's $24.00
Mortgage Backed Securities -- Principal paydown per pool $11.00
</TABLE>
A transaction includes buys, sells, maturities or free security
movements.
III. WHEN ISSUED, SECURITIES LENDING, INDEX FUTURES, ETC.:
Should any investment vehicle require a separate segregated custody
account, a fee of $250 per account per month will apply.
IV. CUSTODY MISCELLANEOUS FEES
Administrative fees incurred in certain local markets will be passed
onto the customer with a detailed description of the fees. Fees
include income collection, corporate action handling, overdraft
charges, funds transfer, special local taxes, stamp duties,
registration fees, messenger and courier services and other
out-of-pocket expenses.
ADDITIONAL SERVICES
To the extent the Funds commence using investment techniques such as Security
Lending, Swaps, Leveraging, Short Sales, Derivatives, Precious Metals, or
foreign currency futures and options, additional fees will apply. Activities of
a non-recurring nature such as shareholder in-kinds, fund consolidations,
mergers or reorganizations will be subject to negotiation. Any
additional/enhanced services, programming requests, or reports will be quoted
upon request.
LOST SHAREHOLDER SEARCH/REPORTING: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long as
the Trust retains Keane Tracers, Inc. ("KTI") to provide the Trust with KTI's
"In-Depth Research Program" services.
MISCELLANEOUS CHARGES.
The Fund shall be charged for the following products and services as applicable:
Ad hoc reports
Ad hoc SQL time
COLD Storage
Digital Recording
Banking Services, including incoming and outgoing wire charges
Microfiche/microfilm production
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
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<PAGE>
Magnetic media tapes and freight
Manual Pricing
Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
FEE ADJUSTMENTS.
After the one year anniversary of the effective date of this Agreement,
Investor Services Group may adjust the fees described in the above sections once
per calendar year, upon thirty (30) days prior written notice in an amount not
to exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) -
(1982-84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date absent a prior
such adjustment).
PROGRAMMING COSTS.
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
<TABLE>
<S> <C> <C>
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
</TABLE>
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
- --------------------------------------------------------------------------------
Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 30 -
<PAGE>
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
Postage - direct pass through to the Fund
Telephone and telecommunication costs, including all lease, maintenance
and line costs
Proxy solicitations, mailings and tabulations
Shipping, Certified and Overnight mail and insurance
Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
Duplicating services
Distribution and Redemption Check Issuance - $.07 per item
Courier services
Overtime, as approved by the Fund
Temporary staff, as approved by the Fund
Travel and entertainment, as approved by the Fund
Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
Third party audit reviews (SAS 70)
Insurance
Pricing services (or services used to determine Fund NAV)
Vendor set-up charges for Blue Sky and other services
Blue Sky filing or registration fees
EDGAR filing fees
Vendor pricing comparison
Such other expenses as are agreed to by Investor Services Group and the
Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
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Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 31 -
<PAGE>
SCHEDULE E
FUND DOCUMENTS
1. Certified copy of the Declaration of Trust of the Fund, as amended
2. Certified copy of the By-laws of the Fund, as amended
3. Copy of the resolution of the Board of Trustees authorizing the execution
and delivery of this agreement
4. Specimens of the certificates for Shares of the Fund, if applicable, in the
form approved by the Board of Trustees of the Fund, with a certificate of
the Secretary of the Fund as to such approval
5. All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by the Fund
6. All notices issued by the Fund with respect to the Shares including the
giving of notice of any special or annual meetings of shareholders
7. Listing of all jurisdictions in which each portfolio is lawfully available
for sale and all information relative to the monitoring of sales and
registrations of Fund shares in such jurisdictions
8. Each Fund's most recent post-effective amendment to its Registration
Statement
9. Each Fund's most recent Prospectus and Statement of Additional Information
and all amendments and supplements thereto
- --------------------------------------------------------------------------------
Agreement between DLJdirect Mutual Funds and First Data Investor Services Group
- 32 -
<PAGE>
DLJ Investment Management Corp.
277 Park Avenue
24th Floor
New York, New York 10172
July __, 1999
DLJdirect Mutual Funds
277 Park Avenue
24th Floor
New York, New York 10172
Ladies and Gentlemen:
DLJ Investment Management Corp. (the "Adviser") hereby offers
and agrees to purchase with respect to DLJdirect Technology Fund -- 5000 shares
of common stock, and with respect to DLJdirect Growth Fund -- 5000 shares of
common stock (the "Shares") at a price of $10.00 per share for an aggregate
purchase price of $100,000. The Adviser acknowledges that the Shares are being
purchased for the Adviser's own account and for investment purposes only and
will be sold only pursuant to a registration statement declared effective under
the Securities Act of 1933, as amended, or an exemption therefrom.
Sincerely,
DLJ INVESTMENT MANAGEMENT
CORP.
By: _____________________
Name:
Title:
DLJdirect Mutual Funds hereby accepts the Adviser's offer to
purchase the Shares at a price of $10.00 per Share for an aggregate purchase
price of $100,000.
DLJdirect MUTUAL FUNDS
By: _________________________
Name:
Title:
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DLJdirect GROWTH FUND
The DLJdirect Growth Fund (the "Fund") intends to engage in business as a
separate series of DLJdirect Mutual Funds (the "Trust"), which is an open-end
management investment trust registered as such under the Investment Company
Act of 1940 (the "Act"). The Trust intends to employ Donaldson, Lufkin &
Jenrette Securities Corporation and/or others as the principal underwriter and
distributor (the "Distributor") of shares of the Fund pursuant to a written
distribution agreement and desires to adopt a plan of distribution pursuant to
Rule 12b-1 under the Act to assist in the distribution of shares of the Fund.
The Board of Trustees (the "Board") of the Trust having determined that a
plan of distribution containing the terms set forth herein is reasonably likely
to benefit the Fund and its shareholders, the Trust hereby adopts a plan of
distribution for the Fund's shares (the "Plan") pursuant to Rule 12b-1 under the
Act on the following terms and conditions:
1. The Trust is hereby authorized to pay to the Distributer as compensation
for its services, distribution payments (the "Payments") in connection with the
distribution of shares of the Fund an aggregate amount not to exceed 0.25% per
year of the average daily net assets of shares of the Fund which can be raised
up to 0.50% per year of the average daily net assets by a majority vote of the
Board if, in their opinion, the raise is in the best interest of the Fund and
its shareholders. Such Payments as shall be approved by the Board shall be
accrued daily and paid monthly in arrears or shall be accrued and paid at such
other intervals as the Board shall determine.
2. Payments may be made by the Trust under this Plan for the purpose of
financing or assisting in the financing of any activity which is primarily
intended to result in the sale of shares of the Fund which concept is intended
to be interpreted as broadly as applicable law permits. The scope of the
foregoing shall be interpreted
<PAGE>
by the Board from time to time, including the selection of those activities for
which payment can be made whose decision shall be conclusive. Without in any way
limiting the discretion of the Board, the following activities are hereby
declared to be primarily intended to result in the sale of shares of the Fund:
advertising the Fund either alone or together with other funds; compensating
underwriters, dealers, brokers, banks and other selling entities and sales and
marketing personnel of any of them for sales of shares of the Fund, whether in a
lump sum or on a continuous, periodic, contingent, deferred or other basis;
compensating underwriters, dealers, brokers, banks and other servicing entities
and servicing personnel (including the Fund's investment adviser and its
personnel) of any of them for providing services to shareholders of the Fund
relating to their investment in the Fund, including assistance in connection
with inquiries relating to shareholder accounts; the production and
dissemination of prospectuses (including statements of additional information)
of the Fund and the preparation, production and dissemination of sales,
marketing and shareholder servicing materials; third party consultancy or
similar expenses relating to any activity for which Payment is authorized by the
Board; and the financing of any activity for which Payment is authorized
by the Board.
3. If the Board so authorizes by Board Approval (as defined below) and
Disinterested Trustee Approval (as defined below), the Trust may make Payments
under and within the limitations of this Plan in a subsequent year with respect
to activities which occurred in a prior year and for which Payments were not
previously made.
4. The Trust is hereby authorized and directed to enter into appropriate
written agreements with the Distributor and each other person to whom the Trust
intends to make any Payment, and the Distributor is hereby authorized and
directed to enter into appropriate written agreements with each person to whom
the Distributor intends to make any payments in the nature of a Payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom Payment is to be made does not have the
purpose set forth in Section 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the Act.
2
<PAGE>
5. Each agreement required to be in writing by Section 4 must contain the
provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the trustees
("Disinterested Trustee Approval") who are not "interested persons" of the Trust
and have no direct or indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a meeting called for the
purposes of voting on such agreement.
6. The officers, investment adviser or Distributor of the Fund, as
appropriate, shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
7. To the extent any activity is covered by Section 2 and is also an
activity which the Trust may pay for on behalf of the Fund without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the Act (such as the printing of prospectuses for existing Fund shareholders),
this Plan shall not be construed to prevent or restrict the Trust from paying
such amounts outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the limitation
set forth in Section 1.
8. This Plan shall not take effect until it has been approved by a vote of
at least a majority of the outstanding voting securities of the Fund. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Trustee Approval and may not be amended to increase the maximum
level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the outstanding voting securities
of the Fund. This Plan may continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval.
9. While the Plan is in effect, the selection and nomination of the
Trustees who are not "interested persons" of the Trust will be committed to the
discretion of such disinterested Trustees.
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<PAGE>
10. This Plan may be terminated at any time by a vote of the Trustees who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of the Plan or any agreement hereunder, cast in
person at a meeting called for the purposes of voting on such termination, or by
a vote of at least a majority of the outstanding voting securities of the Fund.
11. For purposes of this Plan the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the outstanding voting securities" of the Fund shall mean the
vote, at the annual or a special meeting of the security holders of the Fund
duly called the lesser of (a) 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (b) more than 50%
of the outstanding voting securities of the Fund.
4
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DLJdirect TECHNOLOGY FUND
The DLJdirect Technology Fund (the "Fund") intends to engage in business as
a separate series of DLJdirect Mutual Funds (the "Trust"), which is an open-end
management investment trust registered as such under the Investment Company
Act of 1940 (the "Act"). The Trust intends to employ Donaldson, Lufkin &
Jenrette Securities Corporation and/or others as the principal underwriter and
distributor (the "Distributor") of shares of the Fund pursuant to a written
distribution agreement and desires to adopt a plan of distribution pursuant to
Rule 12b-1 under the Act to assist in the distribution of shares of the Fund.
The Board of Trustees (the "Board") of the Trust having determined that a
plan of distribution containing the terms set forth herein is reasonably likely
to benefit the Fund and its shareholders, the Trust hereby adopts a plan of
distribution for the Fund's shares (the "Plan") pursuant to Rule 12b-1 under the
Act on the following terms and conditions:
1. The Trust is hereby authorized to pay to the Distributer as compensation
for its services, distribution payments (the "Payments") in connection with the
distribution of shares of the Fund an aggregate amount not to exceed 0.25% per
year of the average daily net assets of shares of the Fund which can be raised
up to 0.50% per year of the average daily net assets by a majority vote of the
Board if, in their opinion, the raise is in the best interest of the Fund and
its shareholders. Such Payments as shall be approved by the Board shall be
accrued daily and paid monthly in arrears or shall be accrued and paid at such
other intervals as the Board shall determine.
2. Payments may be made by the Trust under this Plan for the purpose of
financing or assisting in the financing of any activity which is primarily
intended to result in the sale of shares of the Fund which concept is intended
to be interpreted as broadly as applicable law permits. The scope of the
foregoing shall be interpreted
<PAGE>
by the Board from time to time, including the selection of those activities for
which payment can be made whose decision shall be conclusive. Without in any way
limiting the discretion of the Board, the following activities are hereby
declared to be primarily intended to result in the sale of shares of the Fund:
advertising the Fund either alone or together with other funds; compensating
underwriters, dealers, brokers, banks and other selling entities and sales and
marketing personnel of any of them for sales of shares of the Fund, whether in a
lump sum or on a continuous, periodic, contingent, deferred or other basis;
compensating underwriters, dealers, brokers, banks and other servicing entities
and servicing personnel (including the Fund's investment adviser and its
personnel) of any of them for providing services to shareholders of the Fund
relating to their investment in the Fund, including assistance in connection
with inquiries relating to shareholder accounts; the production and
dissemination of prospectuses (including statements of additional information)
of the Fund and the preparation, production and dissemination of sales,
marketing and shareholder servicing materials; third party consultancy or
similar expenses relating to any activity for which Payment is authorized by
the Board; and the financing of any activity for which Payment is authorized by
the Board.
3. If the Board so authorizes by Board Approval (as defined below) and
Disinterested Trustee Approval (as defined below), the Trust may make Payments
under and within the limitations of this Plan in a subsequent year with respect
to activities which occurred in a prior year and for which Payments were not
previously made.
4. The Trust is hereby authorized and directed to enter into appropriate
written agreements with the Distributor and each other person to whom the Trust
intends to make any Payment, and the Distributor is hereby authorized and
directed to enter into appropriate written agreements with each person to whom
the Distributor intends to make any payments in the nature of a Payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom Payment is to be made does not have the
purpose set forth in Section 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the Act.
2
<PAGE>
5. Each agreement required to be in writing by Section 4 must contain the
provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the trustees
("Disinterested Trustee Approval") who are not "interested persons" of the Trust
and have no direct or indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a meeting called for the
purposes of voting on such agreement.
6. The officers, investment adviser or Distributor of the Fund, as
appropriate, shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
7. To the extent any activity is covered by Section 2 and is also an
activity which the Trust may pay for on behalf of the Fund without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the Act (such as the printing of prospectuses for existing Fund shareholders),
this Plan shall not be construed to prevent or restrict the Trust from paying
such amounts outside of this Plan and without limitation hereby and without such
payments being included in calculation of Payments subject to the limitation
set forth in Section 1.
8. This Plan shall not take effect until it has been approved by a vote of
at least a majority of the outstanding voting securities of the Fund. This Plan
may not be amended in any material respect without Board Approval and
Disinterested Trustee Approval and may not be amended to increase the maximum
level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the outstanding voting securities
of the Fund. This Plan may continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Trustee Approval.
9. While the Plan is in effect, the selection and nomination of the
Trustees who are not "interested persons" of the Trust will be committed to the
discretion of such disinterested Trustees.
3
<PAGE>
10. This Plan may be terminated at any time by a vote of the Trustees who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of the Plan or any agreement hereunder, cast in
person at a meeting called for the purposes of voting on such termination, or by
a vote of at least a majority of the outstanding voting securities of the Fund.
11. For purposes of this Plan the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the outstanding voting securities" of the Fund shall mean the
vote, at the annual or a special meeting of the security holders of the Fund
duly called the lesser of (a) 67% or more of the voting securities present at
such meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (b) more than 50%
of the outstanding voting securities of the Fund.
4
<PAGE>
RULE 18f-3 PLAN
OF
DLJdirect MUTUAL FUNDS
1. This plan is the written plan (the "Plan") contemplated by Rule 18f-3 under
the Investment Company Act of 1940, as amended (the "1940 Act"), in connection
with the issuance and distribution of multiple classes of shares representing
interests in the same portfolio of securities of each of DLJdirect Technology
Fund ("Technology Fund") and DLJdirect S&P 500 Fund ("S&P 500 Fund") and
DLJdirect Growth Fund ("Growth Fund", and together with the Technology Fund and
S&P 500 Fund and any other future series of DLJdirect Mutual Funds, the
"DLJdirect Funds").
2. DLJdirect Funds may issue multiple classes of shares, subject to such
front-end sales loads, contingent deferred sales loads, redemption fees, and
waivers therefrom, each up to the maximum limit and to the maximum extent
permitted by the rules and regulations of the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc., as such rules and
regulations may be amended from time to time, as may be described in DLJdirect
Funds' Registration Statement from time to time as such changes may be approved
by the Board of Trustees.
3. Each class shall have a different arrangement for shareholder services or the
distribution of shares or both, and shall pay the expenses of that arrangement.
Each class may pay a different share of expenses related to the management of
DLJdirect Funds' assets, if these expenses are actually incurred in a different
amount by that class, or if the class receives services of a different kind or
to a different degree than other classes.
4. Each class may pay a different advisory fee to the extent that any difference
in amount paid is the result of the application of the same performance fee
provisions in the advisory contract of DLJdirect Funds to the different
investment performance of each class.
<PAGE>
5. Each class shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement.
6. Each class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class.
7. Each class shall have in all other respects the same rights and obligations
as each other class.
8. Expenses may be waived or reimbursed by DLJdirect Funds' adviser,
underwriter, or any other provider of services to DLJdirect Funds.
9. Income, realized and unrealized capital gains and losses, and expenses of
DLJdirect Funds not allocated to a particular class, except as set forth above,
shall be allocated to each class on the basis of the net asset value of that
class in relation to the net asset value of DLJdirect Funds.
10. Each DLJdirect Fund may be offered with an exchange privilege providing that
securities of the class may be exchanged for certain securities of another
DLJdirect Fund or a fund advised by DLJdirect Funds' investment advisers or
whose securities are distributed by DLJdirect Funds's distributor or otherwise.
11. Each DLJdirect Fund may be offered with a conversion feature providing that
shares of one class (the "Purchase Class") will be exchanged automatically for
shares of another class (the "Target Class") after a specified period of time,
provided that such conversion will be effected on the basis of the relative net
asset values of the two classes without the imposition of any sales load, fee or
other charge and that the expenses, including payments authorized under a Rule
12b-1 plan for the Target Class are not higher than the expenses, including
payments authorized under a Rule 12b-1 plan, for the Purchase Class; and, if the
amount of expenses, including payments authorized under a Rule 12b-1 plan, for
the Target Class are increased materially without approval of the shareholders
of the Purchase Class, DLJdirect Funds
2
<PAGE>
will establish a new Target Class for the Purchase Class on the same terms as
applied to the Target Class before that increase.
12. Each DLJdirect Fund may offer a conversion feature providing that shares of
a class in which an investor is no longer eligible to participate may be
converted to shares of a class in which such investor is eligible to participate
provided that such investor is given notice of the proposed conversion either at
the time of purchase or subsequently and the conversion is effected on the basis
of the relative net asset values of the two classes without the imposition of a
sales load, fee or other charge.
13. Each DLJdirect Fund currently intends to offer one class of shares, but
reserves the right to issue additional classes. Each Fund's shares are not
subject to a front-end sales load. Each Fund's shares are subject to a Rule
12b-1 fee of .25% of average daily net assets. DLJdirect Technology Fund's and
DLJdirect Growth Fund's shares are subject to a Management fee of .75% of each
of DLJdirect Technology Fund's and DLJdirect Growth Fund's first $500 million
with such amount reduced to .625% of such Fund's average daily net assets over
$500 million on an annualized basis. DLJdirect S&P 500 Fund's shares are subject
to a Management fee of .25% of DLJdirect S&P 500 Fund's first $500 million with
such amount reduced to .20% of such Fund's average daily net assets over $500
million on an annualized basis.
14. This Plan is hereby approved by a majority of the Trustees of DLJdirect
Funds, including a majority of the Trustees who are not interested persons of
each DLJdirect Fund (collectively, the "Trustees"). The Trustees have found that
this Plan, including the expense allocation, is in the best interests of
DLJdirect Funds. The Trustees have made this determination after requesting and
evaluating such information as may be reasonably necessary to evaluate this
Plan.
