<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997, (TO BE
EFFECTIVE ON APRIL 15, 1997)
SECURITIES ACT FILE NO. 33-36697
INVESTMENT COMPANY ACT FILE NO. 811-6166
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 9 [x]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 11 [x]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
THE FAHNESTOCK FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------
<TABLE>
<CAPTION>
<S> <C>
110 WALL STREET
NEW YORK, NEW YORK 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 668-8000
------------------------
ALBERT G. LOWENTHAL
FAHNESTOCK & CO., INC.
110 WALL STREET
NEW YORK, NEW YORK 10005
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPIES TO:
FAITH COLISH, A PROFESSIONAL CORPORATION
63 WALL STREET
NEW YORK, NEW YORK 10005
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):
[x] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BEING OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PER UNIT* OFFERING PRICE** FEE
<S> <C> <C> <C> <C>
Shares of Beneficial Interest, $.01 par value.................. 292,500 $13.65 $ 3,992,625 None
</TABLE>
* Estimated solely for the purposes of determining the amount of the
registration fee based on the net asset value per share of such securities on
April 10, 1997.
** Calculated pursuant to Rule 24e-2(a) under the Investment Company Act of
1940. During the fiscal year ended December 31, 1996, 292,500 shares were
redeemed. Of this total, none was used for reduction made by the issuer with
respect to Rule 24f-2 for such fiscal year. All of such total is being used
for 'reduction' in this amendment. None of such shares was previously so used
in filings pursuant to Rule 24e-2(a) with respect to the current fiscal year
ending December 31, 1997.
---------------------------
DECLARATION PURSUANT TO RULE 24f-2
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF EACH SERIES OF
ITS SHARES OF BENEFICIAL INTEREST, $.01 PAR VALUE PER SHARE, UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (a)(1) OF RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE RULE 24f-2 NOTICE FOR REGISTRANT'S FISCAL
PERIOD ENDING DECEMBER 31, 1996 WAS FILED ON APRIL 1, 1997.
________________________________________________________________________________
<PAGE>
<PAGE>
HUDSON CAPITAL APPRECIATION FUND
FORM N-1A
CROSS REFERENCE SHEET
(REFERENCES TO PROSPECTUS HEADINGS APPLY TO BOTH PROSPECTUSES)
<TABLE>
<CAPTION>
PART A
ITEM NO. PROSPECTUS HEADING
- -------- ---------------------------------------------------------
<C> <S> <C>
1. Cover Page................................... Cover Page
2. Synopsis..................................... Expense Information
3. Condensed Financial Information.............. Expense Information and Financial Highlights
4. General Description of Registrant............ Cover Page; Organization of the Fund; Investment
Objectives and Policies; and Additional Information
5. Management of the Fund....................... Management of the Fund; and Investment Objectives and
Policies
6. Capital Stock and Other Securities........... Distributions to Shareholders and Taxation; and
Additional Information
7. Purchase of Securities Being Offered......... Cover Page; Management of the Fund; Net Asset Value; How
to Buy Shares; and Dividends, Distributions and Taxes
8. Redemption or Repurchase..................... How to Redeem Shares
9. Pending Legal Proceedings.................... Not applicable
<CAPTION>
PART B. HEADING IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
- -------- ---------------------------------------------------------
<C> <S> <C>
10. Cover Page................................... Cover Page
11. Table of Contents............................ Contents
12. General Information and History.............. Organization of the Fund; Management of the Fund
13. Investment Objectives and Policies........... Investment Objectives and Policies
14. Management of the Fund....................... Management
15. Control Persons and Principal Holders of
Securities................................. See in the Prospectus 'Additional Information'
16. Investment Advisory and Other Services....... Management; Purchases and Redemptions; See in the
Prospectus 'Management of the Fund'
17. Brokerage Allocation and Other Practices..... Investment Objectives and Policies
18. Capital Stock and Other Securities........... See in the Prospectus 'Management of the Fund'
19. Purchase, Redemption and Pricing of
Securities Being Offered................... Purchases and Redemptions
20. Tax Status................................... Taxes
21. Underwriters................................. Purchases and Redemptions; See in the Prospectus
'Purchase of Shares'
22. Calculation of Performance Data.............. Calculation of Performance
23. Financial Statements......................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
HUDSON CAPITAL CLASS A SHARES
APPRECIATION FUND CLASS B SHARES
(A Series of The Fahnestock Funds) 110 Wall Street
New York, New York 10005
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
April 15, 1997
Hudson Capital Appreciation Fund (the 'Fund') is the first (and, to date, the
only) series of The Fahnestock Funds, a Massachusetts business trust (the
'Trust'). The Trust is an open-end diversified management investment company
commonly known as a mutual fund. The Fund seeks long term growth through capital
appreciation by investing primarily in equity securities. Current income is a
secondary consideration.
The Fund issues three classes of shares, of which two, Class A and Class B, are
offered by this Prospectus. (See 'How to Buy Shares.'):
<TABLE>
<S> <C>
-- Class A shares are sold with an initial maximum sales charge of 4.50%.
-- Class B shares are sold without an initial sales charge but are subject to a contingent deferred sales
charge ('CDSC') depending on the length of time between purchase and redemption.
-- Class A and Class B shares pay different ongoing fees under their respective distribution plans. See
'Management of the Fund -- How the Fund's Class A and Class B Shares are Distributed.'
</TABLE>
The third class of shares, Class N shares, are offered by a different
prospectus. (See 'Other Matters -- Description of the Fund's Shares.')
This Prospectus sets forth information about the Fund that an investor in Class
A or Class B shares ought to know before investing. It should be read and
retained for future reference.
A Statement of Additional Information dated April 15, 1997 has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this Prospectus. A copy can be obtained free of charge upon request by writing
or telephoning: Fahnestock & Co. Inc., 110 Wall Street, New York, NY 10005,
1-800-221-5588.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Information.............................................................................................. 3
Financial Highlights............................................................................................. 5
Organization of the Fund......................................................................................... 6
Investment Objective, Policies and Risk Considerations........................................................... 6
Management of the Fund........................................................................................... 9
Distributions to Shareholders and Taxation....................................................................... 13
Computation of Net Asset Value................................................................................... 14
How to Buy Shares................................................................................................ 15
How to Redeem Shares............................................................................................. 18
Additional Services and Programs................................................................................. 20
Performance Information.......................................................................................... 20
Other Matters.................................................................................................... 20
</TABLE>
- --------------------------------------------------------------------------------
-2-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
The following information reflects the costs and expenses an investor may expect
to incur, either directly or indirectly, as a holder of Class A or Class B
shares of the Fund, based upon the maximum sales charge that may be incurred at
the time of purchase or redemption, as applicable, and the Fund's projected
annual operating expenses.
SHAREHOLDER TRANSACTION EXPENSE
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) 4.50%(1) 0%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) 0% 0%
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) 0%(1) 5.00%(2)
Redemption Fees (as a percentage of amount redeemed, if applicable) 0% 0%
</TABLE>
------------------------------------------------------------
(1) The sales charge set forth in the above table is the maximum charge imposed
on purchases of Class A shares; investors may pay actual charges less than
4.50%, depending upon the amount invested. Class A purchases of $1 million
or more are not subject to an initial sales charge; however, a contingent
deferred sales charge of 1% may be imposed on redemptions within 18 months
following such a purchase. See 'How to Buy Shares.'
(2) This charge is the maximum applicable to redemptions of Class B shares;
investors may pay actual charges that are lower, as described under 'How to
Buy Shares.'
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C> <C>
Management Fee(3) 1.00% 1.00%
12b-1 Fees .50%(4) 1.00%
Other Expenses (After fee waiver/expense reimbursement(5) 0.50% 0.50%(6)
------- -------
Total Fund Operating Expenses (After fee waiver/expense reimbursement) 2.00% 2.50%
</TABLE>
------------------------------------------------------------
(3) The Investment Management Agreement, as amended effective February 23, 1993,
provides for a management fee at a reduced rate of 0.75% per annum with
respect to assets of the Fund in excess of $25,000,000. To date the Fund's
net assets have not exceeded $25,000,000.
(4) The Class A 12b-1 fee is payable with respect to assets of the Fund,
attributable to Class A shares, which have been continuously included in its
portfolio for four years or less as of the Fund's most recent fiscal
year-end, and is based on the average daily net asset value of those assets
during such period; no 12b-1 fee will be paid with respect to assets of the
Fund that are attributable to Class A
- --------------------------------------------------------------------------------
-3-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
shares and which have been continuously included in its portfolio for more than
four years as of the Fund's most recent fiscal year-end, calculated on a
first-in, first-out basis. (See 'How the Fund's Class A Shares and Class B
Shares are Distributed.')
(5) 'Other Expenses' in the above table include fees for shareholder services,
custodial fees, legal and accounting fees, printing costs and registration
fees and give effect to expense reimbursements that are expected to remain
in effect during the current fiscal year ending December 31, 1997.
(6) Other expenses with respect to Class B shares are estimated at the
applicable maximum; the Fund has no history of operation with respect to
Class B shares. For a more detailed description of 'Other Expenses,' see
'Management of the Fund -- The Fund's Expenses.'
The purpose of the above table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly. The management fees referred to above and nature of services
provided are more fully explained in this prospectus under the section
'Management of the Fund' and in the Statement of Additional Information under
the caption 'Investment Advisory and Other Services.'
Fahnestock & Co., Inc., the Fund's distributor, has concluded that the
combination of sales charges imposed on purchases or redemptions and the
asset-based charges pursuant to Rule 12b-1 are within the guidelines established
by the National Association of Securities Dealers, Inc. ('NASD'). However
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by NASD rules.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in Class A or Class B shares of the Fund. These
amounts assume reinvestment of all dividends and distributions, payment of the
maximum initial or contingent deferred sales charge and payment by the Fund of
operating expenses at the levels set forth in the table above, and are also
based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
You would pay the following expenses for
the period of years indicated on a $1,000
investment, assuming 5% annual return and
redemption at the end of each time
period. $64 $75 $ 105 $ 108 $ 148 $ 143 $ 267 $ 284
------- ------- ------- ------- ------- ------- ------- -------
You would pay the following expenses on
the same investment, assuming no
redemption at the end of each time
period. $64 $25 $ 105 $ 78 $ 148 $ 133 $ 267 $ 284
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN;
MOREOVER, THE ACTUAL RATE OF ANNUAL RETURN WILL VARY AND MAY BE GREATER OR
LESSER THAN THE ASSUMED RATE OF 5%.
- --------------------------------------------------------------------------------
-4-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following table has been audited by the Fund's independent auditors, whose
reports thereon were unqualified. This information should be read in conjunction
with the financial statements and related notes which appear in the Fund's
annual report to shareholders and which are incorporated by reference into the
Statement of Additional Information. The information below was audited by Ernst
& Young LLP for the period from March 5, 1991 to December 31, 1991 and for the
year ended December 31, 1992 and Coopers & Lybrand L.L.P. for the years ended
December 31, 1993, 1994, 1995, and 1996.
<TABLE>
<CAPTION>
MARCH 5, 1991
CLASS A SHARES (COMMENCEMENT
------------------------------------------------------------------------ OF OPERATIONS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36 $ 10.00
Income from investment
operations:
Net investment income/(loss)
(net)........................ (0.10) (0.03) (0.06) (0.13) (0.05) 0.01
Net realized and unrealized
gains (losses) on
investments.................. 4.72 2.09 (1.48) 2.25 1.02 1.74
------------ ------------ ------------ ------------ ------------ --------------
Total income/(loss) from
investment operations.... 4.62 2.06 (1.54) 2.12 0.97 1.75
Less dividends paid to
shareholders:
Dividends paid from net
realized gains on
investments.................. (3.02) (1.62) (1.23) (0.33) (0.40) (0.39)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of
period....................... $ 12.99 $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36
------------ ------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ ------------ --------------
Total return....................... 40.68% 18.94% (11.22)% 17.77% 8.54% 17.50%
Ratios/Supplemented
Data:
Net assets, end of period
(000)........................ $ 15,671 $ 12,097 $ 15,874 $ 19,227 $ 16,993 $ 11,987
Ratio of expenses to average
net assets................... 2.50%`D' 2.50%`D' 2.49%`D' 2.49%`D' 2.50%`D' 2.48%*`D'
Ratio of net investment income
(loss) to average net
assets....................... (1.13)%`D' (0.16)%`D' (0.46)%`D' (1.00)%`D' (0.48)%`D' 0.11%*`D'
Average Commission rate paid... $ 0.0597`D'`D' -- -- -- -- --
Portfolio turnover rate........ 85.37% 197.71% 194.55% 154.18% 256.84% 250.85%
</TABLE>
- ------------
* Annualized
`D' The ratios of expenses and investment income/(loss) (net) to average net
assets are net of expenses voluntarily reimbursed by the Adviser,
Administrator and Distributor in the amount of 1.00%, .92%, .27%, .25%,
1.10% and .56%, respectively.
`D'`D' For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
or sales of equity securities.
Class B shares were not offered during the periods shown.
Further information about the Fund's performance is contained in the Fund's
annual report, dated December 31, 1996, which can be obtained free of charge.
- --------------------------------------------------------------------------------
-5-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUND
The Fund is the initial (and, to date, only) series of shares of beneficial
interest (hereinafter referred to simply as 'shares') of The Fahnestock Funds
(the 'Trust') which is a diversified open-end management investment company
created as a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts on August 29, 1990 by Fahnestock, the Fund's Administrator and
principal distributor.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The Fund seeks long term growth through capital appreciation by investing
primarily in equity securities. Current income is a secondary consideration. The
Fund may not always achieve its objective, but it expects to follow the
investment strategy described in the following paragraphs.
The Fund seeks to achieve its objective by investing primarily in common stocks
and securities convertible into common stock. When, in the judgment of Hudson
Capital Advisors, Inc. (the 'Adviser'), a defensive investment posture is
appropriate because of market conditions or there are temporarily no investment
opportunities in common stocks or securities convertible into common stocks
which are appropriate for the Fund, the Fund may invest up to 100% of its assets
in short-term debt securities as a temporary alternative to equity securities.
Such investments may be in United States Government securities, certificates of
deposit of major banks, commercial paper rated in the top two ratings of a
nationally recognized statistical rating organization or in a money market fund,
including a money market fund which the Adviser may manage in the future. Since
the return on a money market fund may be less than would be available through a
direct investment in the securities comprising its portfolio and will involve
payment of duplicative management and other fees, such purchases will be made
only in accordance with guidelines established by the Board of Trustees designed
to ensure that purchases of shares of a money market fund will be undertaken
only when it is in the best interest of the Fund and complies with limitations
established by the Investment Company Act of 1940, as amended (the '1940 Act').
In establishing these guidelines, the Trustees will consider whether the Adviser
should be paid a management fee by the Fund with respect to the assets invested
in such money market fund. Investing in such short-term debt securities as a
defensive or temporary investment approach does not constitute a change in the
Fund's investment objective and will be subject to any guidelines which the
Trustees may establish.
In choosing investments for the portfolio, the Adviser uses the following
primary criteria for selection of securities:
1. Earnings growth. The Adviser attempts to identify companies with strong
fundamentals, a history of profitable operations, and the likelihood of
continued earnings growth. Within this group, the Adviser seeks to invest in
companies showing earnings growth which the Adviser anticipates will be higher
than investors generally expect. Higher earnings could be generated internally
by, for example, a new product, a new service, or a new management with a
dynamic program for growth. Higher earnings could also result from events
external to the company, such as a lowering of the costs of materials important
to its operations or an exceptional increase in demand for its products. Since
factors such as the foregoing sometimes have greater impact on the share prices
of smaller companies, the Adviser will frequently place greater emphasis on
- --------------------------------------------------------------------------------
-6-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
the ownership of such companies. Historically, companies enjoying growth have
been particularly attractive in a cycle of general market increases, because, in
the view of the Adviser, higher than average earnings often tend to result in
higher than average price-earning ratios during such periods with the likely
result of greater appreciation in prices of the shares of such companies.
In addition to the foregoing considerations, the Adviser will attempt to
identify companies whose stock prices do not adequately reflect underlying
values and growth potential. There can be many reasons why a stock's price is
depressed, such as investor perception about the company's industry or sector
that is not relevant to the particular company, temporary impairment of the
company's financial condition, or short-term earnings disappointments which the
company is taking appropriate steps to address. In each case, the Adviser will
focus on the company's 'staying power,' the strength of its balance sheet, and
the long-term fundamentals of its industry. Again, this selection process often
leads to small-capitalization companies. Because the marketplace generally
devotes less research and attention to small companies, the Adviser believes
that it is more likely to find underlying values that are not yet recognized.
However, the Fund generally will also hold mid-size and larger-capitalization
companies to balance the somewhat-greater price volatility that may be
experienced by companies with smaller capitalization.
2. Corporate events. In addition to the criteria described above, the Adviser
will endeavor to identify companies that are likely to experience changes not
only in material costs, products, markets, management style, or investors'
perception of their value but also in the structure of the company itself, such
as the acquisition of another company, the likelihood that the company itself
will be acquired, the sale or discontinuance of divisions that have failed to
contribute sufficiently (or at all) to earnings, a company's tender offer for
its own stock, a spin-off of part of the company through a distribution of
shares to its shareholders that permits the market to appraise each segment of
the company separately, a sale of assets followed by a distribution of a part or
all of the proceeds to shareholders, or even dissolution of the company followed
by a distribution of assets or proceeds of sale to the shareholders.
Ideally, the Adviser will endeavor to identify companies where all of these
types of change may occur, since such instances may offer more than one
opportunity to realize appreciation.
Foreign Securities
In seeking to achieve its objective, the Fund may, to a minor degree, and in no
event with respect to more than 10% of its assets at the time of purchase,
invest in foreign securities. Foreign securities usually are denominated in
foreign currencies, which means their value will be affected by changes in the
strength of foreign currencies relative to the U.S. dollar, as well as the other
factors that affect security prices. Foreign companies are not subject to
accounting standards or governmental supervision comparable to United States
companies and there often is less publicly available information about their
operations. There generally is less governmental regulation of foreign
securities markets, and security trading practices abroad may offer less
protection to investors such as the Fund. Foreign securities can also be
affected by political or financial instability abroad, and may be less liquid or
more volatile than domestic investments. These investments may be in the form of
- --------------------------------------------------------------------------------
-7-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
American Depositary Receipts, which typically are issued by a U.S. bank or trust
company to evidence ownership of underlying securities issued by a foreign
operation. American Depositary Receipts are not necessarily denominated in the
same currency as the underlying securities.
Warrants
A warrant confers upon its holder the right to purchase an amount of securities
at a particular time and price. Because a warrant does not carry with it the
right to dividends or voting rights with respect to the securities which it
entitles a holder to purchase, and because it does not represent any rights in
the assets of the issuer, warrants may be considered more speculative than
certain other types of investments. Also, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Lending of Securities
The Fund may lend its portfolio securities to broker-dealers and other financial
institutions pursuant to agreements requiring that the loans be continuously
collateralized by cash, letters of credit or U.S. Government securities of a
value equal to at least the fair market value of the securities loaned. These
loans will not be made if as a result the aggregate of all outstanding loans
exceeds 30 percent of the value of the Fund's total assets taken at current
value.
Other Investment Policies, Restrictions and Risk Considerations
A fundamental policy of management is to spread the Fund's investments among a
number of industry groups without concentration in any particular industry; the
Fund will not purchase a security if 25% or more of its total assets would be
invested in a particular industry.
In order to limit investment risks, portfolio securities are sold when they
reach a predetermined price objective, or when a change in relative valuation
occurs, or when a deterioration in company or industry fundamentals is
anticipated or occurs. In addition, the percentage of the Fund's assets invested
in cash or temporary investments is increased when investment alternatives, such
as U.S. Government securities and money market instruments, offer better overall
returns than equities. When, in the opinion of the Adviser, current market or
economic conditions warrant, the Fund temporarily may retain cash or invest in
preferred stock, nonconvertible bonds or other fixed-income securities. During
those periods the Fund may tend to emphasize investment in securities of issuers
which the Adviser believes offer the possibility of a corporate event, since
changes of this nature can result in gains even when the overall equity market
is weak. Purchases and sales of securities will be made whenever necessary in
the management's view to achieve the objective of the Fund. It is anticipated
that portfolio turnover will normally not exceed 100% in the future. See page 5
for prior turnover rates. (A 100% rate of portfolio turnover is normally
considered to be high.) A high rate of portfolio turnover will increase the
Fund's brokerage expenses and may increase the amount of taxable short-term
gains realized by the Fund. The Fund does not expect to realize significant
gains from selling securities held less than three months.
The Statement of Additional Information contains more information about the
Fund's investment policies and also identifies the restrictions on the Fund's
investment activities, which provide that the Fund shall not, among other
things:
- --------------------------------------------------------------------------------
-8-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
-- Invest more than 5% of its total assets, taken at market value, in the
securities of any one issuer other than the United States Government, or
purchase more than 10% of the voting securities or of any other class of
securities of any one issuer.
-- Purchase securities of any company with a record of less than three years'
continuous operation if such purchase would cause the Fund's investments in all
such companies taken at cost to exceed 5% of the Fund's total assets taken at
market value.
The investment objective and restrictions referred to above are fundamental and
may not be changed without approval of a majority of the outstanding voting
securities of the Fund. The Statement of Additional Information contains a
complete description of the Fund's restrictions and policies relating to the
investment of its assets and its activities.
MANAGEMENT OF THE FUND
The business of the Fund is managed by its Trustees. The Trustees elect officers
who are responsible for the day-to-day operations of the Fund and who execute
policies formulated by the Trustees.
How the Fund Receives Investment Advice. The Trust has entered into an
Investment Management Agreement with the Adviser with respect to the Fund, under
which the Adviser, subject to the direction of the Trustees, provides the Fund
with a continuous investment program consistent with the Fund's stated
investment objective and policies and is responsible for the management of the
Fund's assets. In addition to providing investment advice to the Fund, the
officers and employees of the Adviser are responsible for the investment and
reinvestment of the Fund's assets, subject to the overall authority of the
Trustees.
Effective October 1, 1995, James Gerson became portfolio manager of the Fund
with primary responsibility for day-to-day management of the portfolio. Mr.
Gerson is a Senior Vice President of Hudson Capital Advisors, Inc., the Fund's
Investment Manager, as well as of Fahnestock & Co., Inc. From April 1993 until
October 1994, he was a Senior Vice President and Managing Director of
Fahnestock's Corporate Finance Department. From October 1994 to September 1995,
he was an Equity Research Analyst with Fahnestock. From 1986 until he joined
Fahnestock & Co., Inc., he was associated with other investment banking firms in
the following capacities: February 1992 to April 1993 -- Senior Vice President
and Managing Director, Corporate Finance, of Reich & Co.; and January 1986 to
February 1992 -- Senior Vice President and Managing Director, Corporate Finance,
of Josephthal & Co. and its successor companies. In these positions he
concentrated on analyzing and structuring corporate financing for public
companies, with particular emphasis on 'small-cap' companies.
Mr. Gerson uses his familiarity with the market for small-cap securities, as
well as larger companies, in seeking to achieve the Fund's investment objective,
policies and risk considerations.
Performance information about the Fund from its inception through December 31,
1996 is contained in the Fund's Annual Report filed with the Securities and
Exchange Commission. A copy of the Annual Report may be obtained free of charge
upon written or phone request from Fahnestock & Co., Inc., 110 Wall Street, New
York, NY 10005, telephone 1-800-221-5588. This performance is not necessarily
indicative of
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results that would have been achieved if Mr. Gerson had been managing the Fund
during the same period.
Pursuant to the Investment Management Agreement, the Fund pays the Adviser an
annual management fee equal to one percent of the Fund's average annual net
assets up to $25 million and 0.75% of annual average net assets in excess of $25
million. The management fee is accrued daily and paid quarterly and is based on
the average of the daily net asset values of the Fund during the preceding
quarter.
The Adviser, a corporation organized in 1986 under the laws of New York, located
at 780 Third Avenue, New York, NY 10017, currently has approximately $30,000,000
in assets under management in its capacity as investment adviser. The Adviser is
a wholly-owned subsidiary of Fahnestock Viner Holdings, Inc., a corporation
organized and existing under the laws of the province of Ontario, Canada, whose
non-voting shares are listed on the New York Stock Exchange and the Toronto
Stock Exchange, and approximately 95% of whose voting securities are held by
officers and directors of Fahnestock Viner Holdings, Inc.
To reduce the potential risk of an adverse effect on the Fund's portfolio,
written policies have been adopted by the Trust, the Fund and the Adviser to
restrict securities trading in personal accounts of the portfolio managers and
other affiliated personnel who normally have access to information on portfolio
transactions. These policies comply in all material respects with the
recommendations of the Investment Company Institute.
How the Fund Receives Administrative Services. The Trust has entered into an
Administration Agreement with Fahnestock pursuant to which Fahnestock provides
certain administrative services to the Fund and its shareholders. Under the
Administration Agreement, Fahnestock provides the Trust and the Fund with office
space, supplies and other facilities required for the business of the Fund.
Fahnestock pays the compensation of all officers and employees of the Trust and
pays the expenses of clerical services related to the administration of the
Trust and the Fund. Fahnestock has entered into a Sub-Administration Agreement
with Federated Services Company (the 'Sub-Administrator'), which has extensive
experience in the mutual fund industry, to perform these services. Pursuant to
the Sub-Administration Agreement, Fahnestock is responsible for any fees and
out-of-pocket expenses due to the Sub-Administrator. The Fund pays no
administrative fee to Fahnestock or the Sub-Administrator.
The Fund's Expenses. The Adviser has voluntarily undertaken to limit expenses
applicable to the Class B shares to 2.5% and to 2.0% with respect to the other
Classes of shares. If the expenses of a Class exceed the applicable limit, the
Adviser has undertaken to reimburse the Fund for any such excess amount, limited
to an amount not greater than the portion of the advisory fee reflecting the
proportion of the Fund's assets attributable to that Class. The Adviser has
undertaken to pay any reimbursements on the same schedule as the Fund is
required to pay the advisory fee, provided that if, at the end of the fiscal
year, Class expenses do not exceed the applicable annual expense limits, the
Fund will reimburse the Adviser for monies paid by the Adviser during the course
of the fiscal year. This is a voluntary undertaking on the part of the Adviser,
which reserves the right to modify or withdraw it with respect to any Class at
any time without notice. The expenses of printing
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prospectuses used in selling Fund shares and other sales literature, as well as
certain other sales-related charges, all of which may be eligible for
reimbursement under the Fund's 12b-1 Plans, are borne by Fahnestock.
All expenses which are not specifically undertaken to be paid by the Adviser or
Fahnestock and which are incurred in the operation of the Fund (including fees
of Trustees of the Trust who are not 'interested persons,' as such term is
defined in the 1940 Act) and the continuous public offering of the shares of the
Fund are borne by the Fund, including the cost of printing and engraving share
certificates, the expenses relating to the determination of the net asset value
of shares of the Fund, the expenses of the continuing registration and
qualification of shares for sale, the cost of prospectuses distributed to
shareholders, the charges for custodians, transfer agents, registrars and other
agents, and auditing and legal expenses.
At present, the only expenses that are allocated specifically to one or more
Classes are expenses under the Distribution Plans. However, the Trustees reserve
the right to allocate certain other expenses ('Class Expenses') to specific
Classes as they deem appropriate. In any case, Class Expenses would be limited
to distribution fees, shareholder servicing fees, transfer agency fees
identified by the Transfer Agent as attributable specifically to holders of
particular Classes of shares; printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectus and proxy
materials to current shareholders; registration fees paid to the Securities and
Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of specific
Classes of shares; legal or accounting fees relating solely to a particular
Class or Classes; and Trustees' fees incurred in connection with issues relating
solely to a particular Class or Classes.
Brokerage Transactions. Securities for the Fund's portfolio will at all times be
bought and sold solely on the basis of investment considerations and
appropriateness to the fulfillment of the Fund's objective. The primary
consideration in placing portfolio security transactions is execution at the
most favorable prices, consistent with best execution. All orders for
transactions in securities on behalf of the Fund are placed with broker-dealers
selected by the Adviser. Fahnestock & Co. Inc., which is also the Distributor of
shares of the Fund, may serve as the Fund's broker in effecting portfolio
transactions on national securities exchanges and retain commissions in
accordance with certain regulations of the Securities and Exchange Commission,
including Rule 17e-1 under the 1940 Act. In addition, the Adviser may select
broker-dealers that provide it with research services and may cause the Fund to
pay these broker-dealers commissions that exceed those that other broker-dealers
may have charged, if it views the commissions as reasonable in relation to the
value of the brokerage and/or research services received consistent with best
execution. Consistent with the foregoing primary consideration, the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of any other series of The Fahnestock Funds as a factor
in the selection of other broker-dealers to execute the Fund's portfolio
transactions. (For further discussion of brokerage allocation, see the Statement
of Additional Information.)
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How the Fund's Class A and Class B Shares are Distributed. The Trust has entered
into a Distribution Agreement with Fahnestock, under which Fahnestock is
obligated to use its best efforts on behalf of the Fund to sell, and accept
orders for the purchase of, shares of the Fund. Fahnestock may, from time to
time, enter into selling agreements with other selected broker-dealers ('Selling
Dealers') who have agreed to sell Class A and/or Class B shares of the Fund.
Fahnestock is a member of the National Association of Securities Dealers, Inc.
and of the New York, American and other principal national securities exchanges.
The Fund is a series of The Fahnestock Funds, which has adopted plans of
distribution ('Plans') pursuant to Rule 12b-1 under the 1940 Act, under which it
may reimburse Fahnestock for the expenses Fahnestock bears in distributing
shares of a particular Class of the Fund or providing for services to
shareholders of that Class. Under the Plan for Class A shares, the Fund may
reimburse Fahnestock for distribution and service expenses at an annual rate not
exceeding 0.50 percent of the average daily net value of the Fund's assets
attributable to Class A shares which have been continuously included in its
portfolio for four years or less. No reimbursement for distribution expenses
will be payable during the Fund's fiscal year with respect to assets of the Fund
which have been continuously included in its portfolio for more than four years,
as measured by the net asset value of Class A shares of the Fund which have been
continuously outstanding for four years or more as of the last day of its
preceding fiscal year. In calculating the number of shares which have been
outstanding for four years or more, the Fund will treat all redemptions in a
particular shareholder's account as having been made from those shares which
have been outstanding for the longest period of time, a method of accounting
commonly referred to as 'first-in, first-out.' With respect to Class B shares,
the Fund may reimburse Fahnestock at the maximum annual rate of 0.25 percent of
the average daily net asset value of the Class for the expenses of providing
personal service to Class B shareholders or the maintenance of Class B
shareholder accounts, or for payments by Fahnestock to others for such
activities, and at the maximum annual rate of .75 percent for expenses incurred
in distributing Class B shares. In both cases there is no limit on the length of
the period such net assets have been invested in the Fund.
Expenses incurred by Fahnestock during a year may exceed the amount available
for reimbursement under a Distribution Plan. Such excess expenses may be carried
forward and sought to be reimbursed in future years. Interest at the prevailing
broker loan rate may be charged to the Fund on any expenses carried forward. At
the date of this Prospectus, no excess expenses are being carried forward under
any Plan.
Expenses incurred in connection with promotional activities will be identified
to the Class involved, although it is anticipated that some promotional
activities may be conducted in respect of all Classes in common, with the result
that expenses incurred in connection with those activities will not be
identifiable to any particular Class. In the latter case, expenses will be
allocated among the Classes on the basis of their relative net assets.
Continuance of each Plan is subject to annual approval by a majority of the
Trustees and a majority of the Trustees who are not 'interested persons' of the
Fund and who have no direct or
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indirect financial interest in the operation of the Plans or any related
agreement ('Rule 12b-1 Trustees'). Each of the Plans requires that quarterly
written reports of amounts spent under such Plan and the purposes of such
expenditures be furnished to and reviewed by the Trustees. No Plan may be
amended to increase materially the amount which may be spent thereunder without
approval by a majority of the outstanding shares of the Class subject to that
Plan. All material amendments of a Plan will require approval by a majority of
the Fund's Trustees and of the Rule 12b-1 Trustees. A Plan may be terminated at
any time by vote of either a majority of the Rule 12b-1 Trustees or a majority
of the outstanding shares of the Class subject to that Plan.
Fahnestock, a New York corporation, is a wholly-owned subsidiary of Fahnestock
Viner Holdings, Inc. and has its principal office at 110 Wall Street, New York,
NY 10005. Albert G. Lowenthal, Chairman of the Board of Trustees of the Trust
and President, a Principal and a Director of the Adviser, is Chairman of the
Board of Directors, Chief Executive Officer and Chief Financial Officer of
Fahnestock. Michael Mendelson, who is President and a Trustee of the Trust, is
Managing Director of Fahnestock Asset Management, a division of Fahnestock.
Richard Wohlman, who is Treasurer of the Trust, is Comptroller of Fahnestock.
Transfer and Dividend Agent. Investors Fiduciary Trust Company, located at 127
West 10th Street, Kansas City, Missouri, 64105 serves as the Fund's Transfer
Agent and, as such, automatically opens and maintains an account for each new
investor in shares of the Fund. Under this arrangement, share certificates are
not delivered to individual shareholders unless a written request is received by
the Transfer Agent from the shareholder and then only to the extent of the
number of whole shares owned or requested. Fractional interests in shares, to
three decimal places, are reflected in the shareholder's account. Shareholders
will receive statements reflecting transactions in their accounts and account
balances. Shareholders should retain their account statements in order to
calculate the taxes on any gains or losses realized from redemption of the
Fund's shares. Fahnestock or the Transfer Agent can provide account transcripts
for past periods but shareholders may be required to pay a fee to receive such
transcripts.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXATION
Distributions. The Fund expects to distribute substantially all of its net
taxable investment income at least annually and substantially all of its net
realized capital gains, if any, annually. Unless a shareholder indicates on the
applicable document at the time of initial investment or subsequently in writing
to the transfer agent that dividends and distributions are to be paid in cash,
dividends and distributions will automatically be reinvested in additional
shares of the same Class at net asset value and will not be subject to an
initial or contingent deferred sales charge.
Each Class will be treated separately in determining the amounts of dividends
and distributions payable to holders of its shares. The Classes may have
different dividend and distribution rates because of their differing expense
levels; however, dividends and distributions paid to each Class of shares will
be declared and paid at the same time and will be determined in the same manner
as those paid to each other Class.
Dividends declared by the Fund and distributed to shareholders of record in
October, November or December of any year will be treated for
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Federal income tax purposes as having been received by shareholders in that
year, so long as the dividends are paid before February 1 of the following year.
Federal Taxes. The Fund has qualified as a 'regulated investment company' under
Subchapter M of the Internal Revenue Code (the 'Code') and intends to continue
to so qualify in the future. As such, and by complying with the applicable
provisions of the Code, the Fund will not be subject to Federal income tax on
taxable income (including realized capital gains) which is distributed to
shareholders.
Distributions from the Fund representing net investment income and any net
short-term capital gains, as computed for Federal income tax purposes, will be
taxable to shareholders as ordinary income whether such distributions are
distributed as cash payments or reinvested in additional shares of the Fund.
Distributions from the Fund representing net long-term capital gains, as
computed for Federal income tax purposes, whether such distributions are
distributed as cash payments or reinvested in additional shares, will be taxable
to the shareholders as long-term capital gains regardless of the length of time
a shareholder has held his shares. Long-term capital gains of individuals are
taxed at a maximum rate of 28% rather than the maximum rate applicable to
ordinary income for individuals (currently 39.6%). Net long term capital gains
of corporations are taxed at the rates applicable to ordinary income. In
general, only dividends from the Fund that reflect its dividend income from
United States corporations may, subject to certain limitations, qualify for the
Federal dividends-received deduction for corporate shareholders.
The Fund may be required to withhold for Federal income tax purposes 31%
('backup withholding') of the taxable distributions and the proceeds of
redemptions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification numbers or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
back-up withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from back-up withholding.
Shortly after the end of each taxable year, shareholders will receive a written
notice designating the amount of the year's distributions and the Federal income
tax treatment by shareholders of amounts distributed by the Fund, including
amounts includable in income as described in the preceding paragraph.
State and Local Taxes. Depending on the residence of the shareholder for tax
purposes, distributions may also be subject to state and local taxes.
Shareholders should consult their own tax advisers as to the Federal, state and
local tax consequences of ownership of shares of the Fund in their particular
circumstances.
COMPUTATION OF NET ASSET VALUE
The Fund's net asset value per share is computed as of the close of business on
the New York Stock Exchange (generally at 4:00 p.m. New York time) on each day
on which the Exchange is open for unrestricted trading.
The net asset value per share is determined by dividing the total current market
value of the assets of the Fund attributable to each Class of shares, less the
liabilities allocable to that Class,
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by the total number of shares of the Class outstanding at the time of
determination. The Trustees have determined to value the Fund's securities
traded on a national securities exchange at the price of the last sale on such
exchange on the date as of which assets are valued. If no sale has occurred on
the date as of which assets are valued, or if the security is traded only in the
over-the-counter market, it will normally be valued at its current bid price.
Debt securities having a remaining maturity of 60 days or less may be valued at
amortized cost, which approximates market value. These instruments may include
government securities, corporate debt securities and money market instruments,
such as bank certificates of deposit and commercial paper. Portfolio securities
for which current quotations are not readily available are valued at fair value
as determined in good faith by the Trustees.
HOW TO BUY SHARES
GENERAL
Investors may buy Class A or Class B shares of the Fund through representatives
of Fahnestock or the Selling Dealers. Investors may be charged a fee if they
purchase Class A or Class B shares through a broker or agent. Initial orders are
reviewed when they are received by Fahnestock or the Selling Dealers and, if
they are accompanied by all appropriate information or are made through an
existing brokerage account, the order is accepted by Fahnestock. The minimum
initial investment in either class is $1,000 and all purchases must be made in
U.S. dollars. Thereafter, additional investments may be made in amounts of $250
or more as the shareholder elects. (These minimums do not apply to retirement
plans. See 'Retirement Plans' below.) Purchases by check written upon a bank
situated outside the United States may be delayed until United States funds are
received and a collection charge may be imposed by the transfer agent to defray
the cost of conversion to U.S. funds.
CLASS A SHARES
The offering price of Class A shares will be the net asset value per share next
determined after acceptance of the purchase order plus a sales load as follows:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE CONCESSION TO
AS A AS A SELLING DEALERS
AMOUNT OF PERCENTAGE OF PERCENTAGE OF AS A
PURCHASE THE THE PERCENTAGE OF THE
(INCLUDING SALES CHARGE) AMOUNT INVESTED OFFERING PRICE OFFERING PRICE*
- -------------------------------------------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $100,000................................ 4.71 4.50 4.00
$100,000 but less than $250,000................... 3.63 3.50 3.00
$250,000 but less than $500,000................... 2.56 2.50 2.00
$500,000 but less than $1 million................. 2.04 2.00 1.50
$1 million or more................................ ** ** **
</TABLE>
(footnotes on next page)
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(footnotes from previous page)
* Fahnestock may, from time to time, at its own expense, provide promotional
incentives to certain Selling Dealers whose representatives have sold or are
expected to sell significant amounts of shares of the Fund. Selling Dealers
to whom 90% or more of the entire sales load is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
Fahnestock retains the entire sales load on any retail sales made by it.
** No initial sales charge is payable on purchases of $1 million or more, but a
contingent deferred sales charge, payable to Fahnestock, of 1.00% is imposed
on redemptions within 18 months. Fahnestock will pay Selling Dealers who
initiate and are responsible for purchases of $1 million or more a commission
as follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million,
plus 0.20% on the next $2 million and 0.08% on the excess over $5 million.
Class A shares acquired in a purchase of $1 million or more will be subject to a
contingent deferred sales charge (a 'CDSC') of 1.00% if redeemed within 18
months of purchase. With the exception of differing applicable holding periods,
the same procedures and conditions, including waivers of the CDSC, will apply to
the CDSC for $1 million purchases of Class A shares as apply to the CDSC for
Class B shares.
The sales charge may be reduced if an investor combines his purchases with those
of certain individuals or entities (Combination Privilege) or already owns
shares (Accumulation Privilege). (See Statement of Additional Information,
'Methods of Obtaining Reduced Sales Charge' or ask your sales representative.)
In addition, the foregoing schedule of reduced sales charges will also be
available to investors who enter into a written Letter of Intent providing for
the purchase, within a 13-month period, of Class A shares of the Fund. Class A
shares previously purchased during a 90-day period prior to the date of receipt
by the Fund of the Letter of Intent and still owned by the shareholder may also
be included in determining the applicable reduction.
Class A shares may be sold without a sales charge to Trustees or officers of the
Fund, and directors or officers of the Adviser, Fahnestock, Selling Dealers, or
Fahnestock Viner Holdings, Inc. or its affiliates, to the bona fide full-time
employees and their relatives, retired employees or sales representatives of any
of the foregoing who have acted as such for not less than 90 days, or members of
the families of bona fide full-time employees or sales representatives of
Fahnestock, or to any trust, pension, profit sharing or other benefit plan for
such persons. Such sales will be made upon written assurance by the purchaser
that the purchase is made for investment purposes and that the shares will not
be resold except through redemption by the issuer. Class A shares may also be
purchased without a sales charge by any state, county, or city, or any
instrumentality, department, authority or agency thereof, which is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered management investment
company (hereinafter 'an eligible governmental authority'). If an investment by
an eligible governmental authority at net asset value is made through a Selling
Dealer or a
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registered representative of Fahnestock, Fahnestock may make a payment, out of
its own resources, to such Selling Dealer or registered representative in an
amount not to exceed 0.25% of the amount invested. Finally, Class A shares may
also be purchased without a sales charge by a broker-dealer, bank or other
financial services institution, as shareholder of record, on behalf of (i)
investment advisers or financial planners trading for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services, and clients of such investment advisers or financial
planners trading for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of the record holder.
Additional information relating to the methods of obtaining reduced sales loads
is contained in the Fund's Statement of Additional Information and may be
obtained from a registered representative of Fahnestock or a Selling Dealer.
Retirement Plans. Investors may use the Fund as a funding medium for various
types of qualified retirement plans, including Individual Retirement Accounts,
Keogh Plans (H.R. 10), Pension and Profit Sharing Plans, Tax Sheltered Annuity
Retirement Plans, and 401(k) Plans. The initial investment minimum for any of
the above will be $1,000. Contributions to such plans are subject to prevailing
amount limits set by the Internal Revenue Code and may be deducted within limits
set by the Code.
Investors may purchase Class A shares at net asset value, without imposition of
a sales charge, to the extent that the investment represents (a) the proceeds
from the redemption made within the preceding 60 days of shares of another
mutual fund not affiliated with Hudson Capital Advisers, Inc., whose shares were
purchased subject to a sales charge, or (b) the net proceeds of the sale within
the preceding 60 days of shares of any closed-end investment company. When
making a purchase at net asset value pursuant to these provisions, the investor
must forward to Fahnestock either the redemption check representing the proceeds
of the mutual fund shares redeemed, or a copy of the confirmation from the other
mutual fund showing the redemption transaction, or a copy of the confirmation
showing the sale of the shares of the closed-end company.
Automatic Investment. The Fund offers an Automatic Investment Plan whereby the
Fund's transfer agent, Investors Fiduciary Trust Company (IFTC), is permitted
through preauthorized checks of $250 or more to charge the regular bank account
of a shareholder on a regular basis to provide systematic additions to the Fund
account of the shareholder. While there is no charge to shareholders for this
service, a charge of $10 will be deducted from a shareholder's Fund account for
checks returned for insufficient funds. A shareholder's Automatic Investment
Plan may be terminated at any time without charge or penalty by the shareholder,
the Fund, IFTC or Fahnestock. Further information regarding the Automatic
Investment Plan may be obtained through any Fahnestock account representative.
Additional Information. Investors should refer to the Statement of Additional
Information for more complete information about how to purchase shares of the
Fund. Investors can also obtain additional information from a representative of
Fahnestock or a Selling Dealer.
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CLASS B SHARES
Because it will normally be preferable to an investor who qualifies for reduced
initial sales charges to purchase Class A shares rather than Class B shares,
Fahnestock will reject any purchase order greater than $250,000 for Class B
shares.
There is no initial sales charge on purchases of Class B shares, but a CDSC may
be charged on any redemption that causes the current value of the shareholder's
Class B share account to fall below the amount of purchase payments made during
a six-year holding period. There is no CDSC on redemptions of (i) shares that
represent appreciation of the original investment or (ii) shares purchased
through reinvestment of dividends and distributions. The amount of the CDSC is
based on the length of time shares are held, according to the following table:
<TABLE>
<CAPTION>
YEARS SHARES ARE HELD CDSC
- ------------------------------------------------- ----
<S> <C>
Less than one.................................... 5%
One but less than two............................ 4%
Two but less than four........................... 3%
Four but less than five.......................... 2%
Five but less than six........................... 1%
Six or more...................................... 0%
</TABLE>
For purposes of calculating the applicable CDSC, it is assumed that redemptions
are made first of Class B shares to which the CDSC does not apply, then of Class
B shares that have been held the longest; this will result in the lowest
applicable charge.
No CDSC will be charged on redemptions of Class B shares that would have
qualified for a waiver of the initial sales charge had they been purchased as
Class A shares. In addition, no CDSC will be charged on (i) Systematic
Withdrawal Plan payments that do not exceed on an annual basis 12% of the value
of the shareholder's investment in Class B shares at the time the shareholder
elects to participate in the Systematic Withdrawal Plan, (ii) redemptions of
shares in connection with certain required post-retirement withdrawals from a
retirement plan or (iii) redemptions following the death or disability of a
shareholder. It is the responsibility of a shareholder redeeming shares
otherwise subject to a CDSC but qualifying for one of the foregoing waivers to
assert this status at the time of the redemption and to provide satisfactory
evidence of such qualification.
HOW TO REDEEM SHARES
Through Fahnestock or a Selling Dealer. Shares of the Fund may be redeemed
through Fahnestock or your Selling Dealer. Redemptions, net of any applicable
CDSC, will be made at the net asset value next determined after receipt of any
such order by Fahnestock or the Selling Dealer. Certificates, if any, in proper
form for redemption or any required stock powers should be presented or sent to
Fahnestock or your Selling Dealer no later than the close of business of the day
on which the redemption order is placed. Investors may be charged a fee if they
redeem Class A or Class B shares through a broker or agent.
Written Request. Any shareholder of record may require the Fund to redeem his
shares by making written application to the transfer agent. Such application
must be signed by the shareholder as his name appears on the records of the Fund
and must be accompanied by any share certificates issued for shares being
redeemed or a stock power if no such certificates were issued. A stock power is
a written instrument executed by a shareholder in order to facilitate the legal
transfer of shares of the Fund. Share certificates must be
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duly endorsed for transfer. Signatures on share certificates and stock powers
must be guaranteed, except that (subject to the restriction in the next
sentence) a signature guarantee will not be required for a redemption of less
than $5,000 where the redemption proceeds are sent to a shareholder of record at
the shareholder's address of record. A redemption request must be accompanied by
a signature guarantee if the shareholder's address of record has changed within
the past 30 days. A signature guarantee is a widely accepted way to protect you
and the transfer agent by verifying the signature on your request. The following
institutions may provide you with an acceptable signature guarantee: a U.S.
bank, trust company, credit union or savings association, a foreign bank that
has a New York correspondent bank (which correspondent bank must be named by the
guarantor), a U.S. registered securities broker or dealer (including a broker or
dealer in municipal securities or U.S. government securities), a U.S. national
securities exchange, a registered securities association or a clearing agency. A
notary public is not an acceptable signature guarantor. Redemptions, net of any
applicable CDSC, will be effected at the net asset value next determined after
receipt by the Transfer Agent of such application and certificates or stock
powers, if any, in proper form for redemption.
General. Payment for shares redeemed will ordinarily be made on the next
business day after the redemption is effected. However, the Fund reserves the
right to pay redemption proceeds within seven days after the order is effected
if, in its judgment, immediate payment would adversely affect the Fund. In
addition, at various times the Trust may be requested to redeem Fund shares for
which it has not yet received good payment. Accordingly, the Trust may delay the
mailing of a redemption draft for up to 10 business days from the payment
date or until such time as it has assured itself that good payment (e.g., cash
in hand) has been collected for the purchase of such shares, whichever occurs
first.
The Trust may suspend the right of redemption of Fund shares and may postpone
payment for redeemed Fund shares when the New York Stock Exchange is closed for
other than weekends or holidays, or if permitted by the rules of the Securities
and Exchange Commission during periods when trading on the Exchange is
restricted or during an emergency which makes it impractical for the Trust to
dispose of the Fund's securities or fairly to determine the value of its net
assets, or during any other period permitted by the Securities and Exchange
Commission for the protection of investors.
Due to the proportionately high cost of maintaining smaller accounts, the Trust
reserves the right to redeem all shares in a Fund account which has a value of
less than $500 as the result of redemptions (except accounts which constitute
the assets of retirement plans and Individual Retirement Accounts) and to mail
the proceeds to the shareholder. Shareholders will be notified before these
redemptions are to be made and will have 30 days to purchase additional shares
to bring their accounts up to the required minimum.
The redemption price of shares of the Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of the redemption, and gain or loss may be recognized for
Federal income tax purposes.
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ADDITIONAL SERVICES AND PROGRAMS
Systematic Withdrawal Plan. This service enables a shareholder with an account
value of $10,000 or more automatically to receive or make periodic payments from
the Fund at no cost. A shareholder may elect to receive or make as many payments
as he wants. Payments may be made monthly, quarterly, semi-annually or annually
in varying amounts, but not less than $100 each. Payments may be made to the
shareholder, another individual, a bank or any other designated entity. This
service is particularly useful in paying regular bills and disbursing funds from
retirements plans in compliance with IRS regulations.
The maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional Class A shares of the Fund would be disadvantageous to a shareholder
because of the sales load payable on such purchases. A Systematic Withdrawal
Plan may be established by completing an application form available from
Fahnestock or your Selling Dealer and requires that all dividends and
distributions be taken in additional shares of the Fund. See the Statement of
Additional Information, 'Additional Services and Programs.'
Reinvestment Privilege. A shareholder who has redeemed Class A shares of the
Fund may, within two years after the date of redemption, reinvest any part of
the redemption proceeds in Class A shares without payment of a sales load. A
shareholder should notify Fahnestock or the Selling Dealer in writing of an
intention to exercise the reinvestment privilege. If the shareholder reinvests
in the Fund within thirty (30) days, any loss realized on the redemption will
not be recognized for Federal income tax purposes as to the number of shares
acquired under the reinvestment privilege except through an adjustment in the
tax basis of the so-acquired shares.
Additional Information. Shareholders should refer to the Statement of Additional
Information for more complete information on the additional services and
programs available to shareholders of the Fund. Additional information is also
available from a registered representative of Fahnestock or a Selling Dealer.
PERFORMANCE INFORMATION
From time to time the Fund may publish its 'total return' for each Class of
shares. Total return figures are based on historical earnings and are not
intended to indicate future performance. The 'total return' of a Class refers to
the average annual compounded rates of return over periods of 1, 5, and 10 years
(which periods will be stated in the publication) that would compare the initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation assumes the reinvestment of all
dividends and distributions, and reflects all recurring fees that are charged to
all shareholder accounts and nonrecurring charges, if any, including, unless
otherwise stated, maximum applicable initial or contingent deferred sales
charges.
If the total return calculation includes the maximum sales charge of 4.50% or
the maximum CDSC of 5.00%, investment or redemption at a lower sales charge
would increase this performance measure correspondingly. See the information
under the caption 'How to Buy Shares' for information on reduced sales charges.
The principal value of an investment will fluctuate so that the value of the
investment, when redeemed, may be more or less than the original investment.
OTHER MATTERS
Description of the Fund's Shares. The Fund is the initial (and, to date, the
only) series of shares of
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<PAGE>
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beneficial interest of The Fahnestock Funds, a Massachusetts business trust
which was created on August 29, 1990 under the laws of the Commonwealth of
Massachusetts and has an unlimited number of authorized shares of beneficial
interest. The Fund currently offers three classes of shares -- A, B and N. The
Classes differ with respect to their sales charges and other expenses, which may
affect their performance. Only shares of Classes A and B are offered by this
prospectus. Investors can obtain information about Class N Shares, which are
also offered to the public, or a Class N prospectus by calling Fahnestock at
1-800-800-9168.
All shares have equal rights as to voting, except as to matters (such as a Plan
of Distribution) that affect only some but not all Classes, or which have
different consequences for different Classes, in which case the matter will be
submitted to a separate vote of each affected Class. All Classes have equal
rights to redemption and liquidation at their respective net asset values,
subject to any applicable CDSC. Dividends may vary as between the classes to the
extent that different expenses are allocated to specific Classes. All shares
issued and outstanding are fully paid and nonassessable by the Fund and the
Trust and are redeemable at net asset value at the option of shareholders,
subject to any applicable CDSC. Shares have no preemptive or conversion rights
and are freely transferable. Certificates for shares will not be issued unless
requested in writing by an investor.
When matters are submitted for shareholder vote, shareholders of each series of
The Fahnestock Funds, including the Fund, will have one vote for each full share
held and proportional, fractional votes for each fractional share held.
Shareholders of all series of The Fahnestock Funds will vote collectively on
certain matters affecting all series, such as the election of Trustees and the
selection of accountants; shareholders of one series are not entitled to vote on
a matter that does not affect that series but that does require a separate vote
of another series, such as a particular series' investment management agreement.
As noted above, different classes will vote separately on matters affecting only
a particular class, or having different effects on different classes. Neither
the Trust nor the Fund intends to hold annual meetings. As a result,
shareholders may not consider each year the election of Trustees or the
appointment of accountants. However, pursuant to the By-Laws of the Trust, the
holders of at least 10 percent of the shares outstanding and entitled to vote
may require a special meeting of shareholders to be held for any purpose,
including removal of a Trustee from office. Shareholders of the Trust may remove
a Trustee by the affirmative vote of a majority of the outstanding voting
shares. In addition, the Board of Trustees will call a special meeting of
shareholders for the purpose of electing Trustees if, at any time, less than a
majority of the Trustees holding office at that time were elected by
shareholders. The Trustees may call special shareholder meetings of one or more
(including all) series or Classes of shares for such purposes as electing or
removing Trustees, changing fundamental policies or adopting new management
agreements.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. The Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts, obligations or affairs of the Trust. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any
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<PAGE>
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shareholder of the Fund held personally liable by reason of being or having been
a shareholder. Liability of a shareholder of the Fund is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Transfer Agent. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, acts as transfer agent for the Fund; in this capacity, it
maintains the record of each transaction of a shareholder with respect to shares
of the Fund. A Shareholder may obtain information about his account by
consulting his sales representative or calling the transfer agent at
1-800-367-0068.
Custody of Portfolio. Portfolio securities of the Fund are held pursuant to a
custodian agreement by Investors Fiduciary Trust Company, as custodian; eligible
securities may be held in the book entry system for U.S. government securities
maintained by the Federal Reserve System or deposited with the Depository Trust
Company.
Registration Statement. This Prospectus omits certain information contained in
the Statement of Additional Information and Part C of the Registration Statement
which the Fund has filed with the Securities and Exchange Commission. The Fund's
Statement of Additional Information is incorporated by reference into this
Prospectus. A copy of the Fund's Statement of Additional Information can be
obtained upon request free of charge by writing or telephoning Fahnestock. You
may obtain a copy of Part C of the Registration Statement from the Securities
and Exchange Commission upon payment of the prescribed fee.
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HUDSON CAPITAL
APPRECIATION FUND
(A Series of The Fahnestock Funds)
110 Wall Street
New York, New York 10005
Telephone (800) 221-5588
INVESTMENT ADVISER
Hudson Capital Advisors, Inc.
805 Third Avenue
New York, New York 10022
PRINCIPAL DISTRIBUTOR
Fahnestock & Co. Inc.
110 Wall Street
New York, New York 10005
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
1100 Main Street, Suite 900
Kansas City, Missouri 64105
LEGAL COUNSEL
Faith Colish, A Professional Corporation
63 Wall Street
New York, New York 10005
[LOGO HUDSON CAPITAL APPRECIATION FUND]
PROSPECTUS CLASS A SHARES
April 15, 1997 CLASS B SHARES
A mutual fund seeking to achieve long-term growth of capital through investment
in equity securities.
[LOGO FAHNESTOCK]
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<PAGE>
<PAGE>
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<TABLE>
<S> <C>
HUDSON CAPITAL CLASS N SHARES
APPRECIATION FUND 110 Wall Street
(A Series of The Fahnestock Funds) New York, New York 10005
</TABLE>
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PROSPECTUS
April 15, 1997
Hudson Capital Appreciation Fund (the 'Fund') is the first (and, to date, the
only) series of The Fahnestock Funds, a Massachusetts business trust (the
'Trust'). The Trust is an open-end diversified management investment company
commonly known as a mutual fund. The Fund seeks long term growth through capital
appreciation by investing primarily in equity securities. Current income is a
secondary consideration.
The Fund issues three classes of shares. Class N shares are offered by this
Prospectus and are sold at net asset value without a sales charge. (See 'How to
Buy Shares.') They are subject to an ongoing distribution and shareholder
services fee. See 'Management of the Fund -- How the Fund's Class N Shares are
Distributed.'
Class A and Class B shares of the Fund are offered by a different prospectus.
(See 'Other Matters -- Description of the Fund's Shares.')
This Prospectus sets forth information about the Fund that an investor in Class
N shares ought to know before investing. It should be read and retained for
future reference.
A Statement of Additional Information dated April 15, 1997 has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this Prospectus. A copy can be obtained free of charge upon request by writing
or telephoning: Fahnestock & Co. Inc., 110 Wall Street, New York, NY 10005,
1-800-221-5588.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE>
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Information.............................................................................................. 3
Financial Highlights............................................................................................. 5
Organization of the Fund......................................................................................... 6
Investment Objective, Policies and Risk Considerations........................................................... 6
Management of the Fund........................................................................................... 9
Distributions to Shareholders and Taxation....................................................................... 13
Computation of Net Asset Value................................................................................... 14
How to Buy Shares................................................................................................ 14
How to Redeem Shares............................................................................................. 16
Additional Services and Programs................................................................................. 18
Performance Information.......................................................................................... 18
Other Matters.................................................................................................... 18
</TABLE>
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<PAGE>
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EXPENSE INFORMATION
The following information reflects the costs and expenses an investor may expect
to incur, either directly or indirectly, as a holder of Class N shares of the
Fund, based upon the Fund's projected annual operating expenses.
SHAREHOLDER TRANSACTION EXPENSE
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 0%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) 0%
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) 0%
Redemption Fees (as a percentage of amount redeemed, if applicable) 0%
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C> <C>
Management Fee(1) 1.00%
12b-1 Fees 0.25%
Other Expenses (After fee waiver/expense reimbursement)(2) 0.75%
------- -------
Total Fund Operating Expenses (After fee waiver/expense reimbursement) 2.00%
</TABLE>
------------------------------------------------------------
(1) The Investment Management Agreement, as amended effective February 23, 1993,
provides for a management fee at a reduced rate of 0.75% per annum with
respect to assets of the Fund in excess of $25,000,000. To date the Fund's
net assets have not exceeded $25,000,000.
(2) Expenses with respect to Class N shares are estimated at the applicable
maximum; the Fund has no history of operation with respect to Class N
shares. 'Other Expenses' in the above table include fees for shareholder
services, custodial fees, legal and accounting fees, printing costs and
registration fees and give effect to expense reimbursements that are
expected to remain in effect during the current fiscal year ending December
31, 1997. For a more detailed description of 'Other Expenses,' see
'Management of the Fund -- The Fund's Expenses.'
The purpose of the above table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly. The management fees referred to above and nature of services
provided are more fully explained in this prospectus under the section
'Management of the Fund' and in the Statement of Additional Information under
the caption 'Investment Advisory and Other Services.'
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Fahnestock & Co., Inc., the Fund's distributor, has concluded that the
asset-based charges pursuant to Rule 12b-1 are within the guidelines established
by the National Association of Securities Dealers, Inc. ('NASD'). However
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by NASD rules.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in Class N shares of the Fund. These amounts assume
reinvestment of all dividends and distributions and payment by the Fund of
operating expenses at the levels set forth in the table above, and are also
based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------------- -----------------
<S> <C> <C>
You would pay the following expenses for the period of years indicated on
a $1,000 investment, assuming 5% annual return and redemption at the end
of each time period. $20 $63
</TABLE>
------------------------------------------------------------
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN;
MOREOVER, THE ACTUAL RATE OF ANNUAL RETURN WILL VARY AND MAY BE GREATER OR
LESSER THAN THE ASSUMED RATE OF 5%.
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FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following table has been audited by the Fund's independent auditors, whose
reports thereon were unqualified. This information should be read in conjunction
with the financial statements and related notes which appear in the Fund's
annual report to shareholders and which are incorporated by reference into the
Statement of Additional Information. The information below was audited by Ernst
& Young LLP for the period from March 5, 1991 to December 31, 1991 and for the
year ended December 31, 1992 and Coopers & Lybrand L.L.P. for the years ended
December 31, 1993, 1994, 1995, and 1996. It pertains only to Class A shares, the
only Class of shares of the Fund outstanding during the periods shown.
<TABLE>
<CAPTION>
MARCH 5, 1991
CLASS A SHARES (COMMENCEMENT
------------------------------------------------------------------------ OF OPERATIONS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36 $ 10.00
Income from investment
operations:
Net investment income/(loss)
(net)........................ (0.10) (0.03) (0.06) (0.13) (0.05) 0.01
Net realized and unrealized
gains (losses) on
investments.................. 4.72 2.09 (1.48) 2.25 1.02 1.74
------------ ------------ ------------ ------------ ------------ --------------
Total income/(loss) from
investment operations.... 4.62 2.06 (1.54) 2.12 0.97 1.75
Less dividends paid to
shareholders:
Dividends paid from net
realized gains on
investments.................. (3.02) (1.62) (1.23) (0.33) (0.40) (0.39)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of
period....................... $ 12.99 $ 11.39 $ 10.95 $ 13.72 $ 11.93 $ 11.36
------------ ------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ ------------ --------------
Total return....................... 40.68% 18.94% (11.22)% 17.77% 8.54% 17.50%
Ratios/Supplemented
Data:
Net assets, end of period
(000)........................ $ 15,671 $ 12,097 $ 15,874 $ 19,227 $ 16,993 $ 11,987
Ratio of expenses to average
net assets................... 2.50%`D' 2.50%`D' 2.49%`D' 2.49%`D' 2.50%`D' 2.48%*`D'
Ratio of net investment income
(loss) to average net
assets....................... (1.13%)`D' (0.16)%`D' (0.46)%`D' (1.00)%`D' (0.48)%`D' 0.11%*`D'
Average commission rate paid... $ 0.0597`D'`D' -- -- -- -- --
Portfolio turnover rate....... . 85.37% 197.71% 194.55% 154.18% 256.84% 250.85%
</TABLE>
- ------------
* Annualized
`D' The ratios of expenses and investment income/(loss) (net) to average net
assets are net of expenses voluntarily reimbursed by the Adviser,
Administrator and Distributor in the amount of 1.00%, .92%, .27%, .25%,
1.10% and .56%, respectively.
`D'`D' For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
or sales of equity seurities.
Further information about the Fund's performance is contained in the Fund's
annual report, dated December 31, 1996, which can be obtained free of charge.
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ORGANIZATION OF THE FUND
The Fund is the initial (and, to date, only) series of shares of beneficial
interest (hereinafter referred to simply as 'shares') of The Fahnestock Funds
(the 'Trust') which is a diversified open-end management investment company
created as a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts on August 29, 1990 by Fahnestock, the Fund's Administrator and
principal distributor.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
The Fund seeks long term growth through capital appreciation by investing
primarily in equity securities. Current income is a secondary consideration. The
Fund may not always achieve its objective, but it expects to follow the
investment strategy described in the following paragraphs.
The Fund seeks to achieve its objective by investing primarily in common stocks
and securities convertible into common stock. When, in the judgment of Hudson
Capital Advisors, Inc. (the 'Adviser'), a defensive investment posture is
appropriate because of market conditions or there are temporarily no investment
opportunities in common stocks or securities convertible into common stocks
which are appropriate for the Fund, the Fund may invest up to 100% of its assets
in short-term debt securities as a temporary alternative to equity securities.
Such investments may be in United States Government securities, certificates of
deposit of major banks, commercial paper rated in the top two ratings of a
nationally recognized statistical rating organization or in a money market fund,
including a money market fund which the Adviser may manage in the future. Since
the return on a money market fund may be less than would be available through a
direct investment in the securities comprising its portfolio and will involve
payment of duplicative management and other fees, such purchases will be made
only in accordance with guidelines established by the Board of Trustees designed
to ensure that purchases of shares of a money market fund will be undertaken
only when it is in the best interest of the Fund and complies with limitations
established by the Investment Company Act of 1940, as amended (the '1940 Act').
In establishing these guidelines, the Trustees will consider whether the Adviser
should be paid a management fee by the Fund with respect to the assets invested
in such money market fund. Investing in such short-term debt securities as a
defensive or temporary investment approach does not constitute a change in the
Fund's investment objective and will be subject to any guidelines which the
Trustees may establish.
In choosing investments for the portfolio, the Adviser uses the following
primary criteria for selection of securities:
1. Earnings growth. The Adviser attempts to identify companies with strong
fundamentals, a history of profitable operations, and the likelihood of
continued earnings growth. Within this group, the Adviser seeks to invest in
companies showing earnings growth which the Adviser anticipates will be higher
than investors generally expect. Higher earnings could be generated internally
by, for example, a new product, a new service, or a new management with a
dynamic program for growth. Higher earnings could also result from events
external to the company, such as a lowering of the costs of materials important
to its operations or an exceptional increase in demand for its products. Since
factors such as the foregoing sometimes have greater impact on the share prices
of smaller companies, the Adviser will frequently place greater emphasis on
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the ownership of such companies. Historically, companies enjoying growth have
been particularly attractive in a cycle of general market increases, because, in
the view of the Adviser, higher than average earnings often tend to result in
higher than average price-earning ratios during such periods with the likely
result of greater appreciation in prices of the shares of such companies.
In addition to the foregoing considerations, the Adviser will attempt to
identify companies whose stock prices do not adequately reflect underlying
values and growth potential. There can be many reasons why a stock's price is
depressed, such as investor perception about the company's industry or sector
that is not relevant to the particular company, temporary impairment of the
company's financial condition, or short-term earnings disappointments which the
company is taking appropriate steps to address. In each case, the Adviser will
focus on the company's 'staying power,' the strength of its balance sheet, and
the long-term fundamentals of its industry. Again, this selection process often
leads to small-capitalization companies. Because the marketplace generally
devotes less research and attention to small companies, the Adviser believes
that it is more likely to find underlying values that are not yet recognized.
However, the Fund generally will also hold mid-size and larger-capitalization
companies to balance the somewhat-greater price volatility that may be
experienced by companies with smaller capitalization.
2. Corporate events. In addition to the criteria described above, the Adviser
will endeavor to identify companies that are likely to experience changes not
only in material costs, products, markets, management style, or investors'
perception of their value but also in the structure of the company itself, such
as the acquisition of another company, the likelihood that the company itself
will be acquired, the sale or discontinuance of divisions that have failed to
contribute sufficiently (or at all) to earnings, a company's tender offer for
its own stock, a spin-off of part of the company through a distribution of
shares to its shareholders that permits the market to appraise each segment of
the company separately, a sale of assets followed by a distribution of a part or
all of the proceeds to shareholders, or even dissolution of the company followed
by a distribution of assets or proceeds of sale to the shareholders.
Ideally, the Adviser will endeavor to identify companies where all of these
types of change may occur, since such instances may offer more than one
opportunity to realize appreciation.
Foreign Securities
In seeking to achieve its objective, the Fund may, to a minor degree, and in no
event with respect to more than 10% of its assets at the time of purchase,
invest in foreign securities. Foreign securities usually are denominated in
foreign currencies, which means their value will be affected by changes in the
strength of foreign currencies relative to the U.S. dollar, as well as the other
factors that affect security prices. Foreign companies are not subject to
accounting standards or governmental supervision comparable to United States
companies and there often is less publicly available information about their
operations. There generally is less governmental regulation of foreign
securities markets, and security trading practices abroad may offer less
protection to investors such as the Fund. Foreign securities can also be
affected by political or financial instability abroad, and may be less liquid or
more volatile than domestic investments. These investments may be in the form of
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American Depositary Receipts, which typically are issued by a U.S. bank or trust
company to evidence ownership of underlying securities issued by a foreign
operation. American Depositary Receipts are not necessarily denominated in the
same currency as the underlying securities.
Warrants
A warrant confers upon its holder the right to purchase an amount of securities
at a particular time and price. Because a warrant does not carry with it the
right to dividends or voting rights with respect to the securities which it
entitles a holder to purchase, and because it does not represent any rights in
the assets of the issuer, warrants may be considered more speculative than
certain other types of investments. Also, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Lending of Securities
The Fund may lend its portfolio securities to broker-dealers and other financial
institutions pursuant to agreements requiring that the loans be continuously
collateralized by cash, letters of credit or U.S. Government securities of a
value equal to at least the fair market value of the securities loaned. These
loans will not be made if as a result the aggregate of all outstanding loans
exceeds 30 percent of the value of the Fund's total assets taken at current
value.
Other Investment Policies, Restrictions and Risk Considerations
A fundamental policy of management is to spread the Fund's investments among a
number of industry groups without concentration in any particular industry; the
Fund will not purchase a security if 25% or more of its total assets would be
invested in a particular industry.
In order to limit investment risks, portfolio securities are sold when they
reach a predetermined price objective, or when a change in relative valuation
occurs, or when a deterioration in company or industry fundamentals is
anticipated or occurs. In addition, the percentage of the Fund's assets invested
in cash or temporary investments is increased when investment alternatives, such
as U.S. Government securities and money market instruments, offer better overall
returns than equities. When, in the opinion of the Adviser, current market or
economic conditions warrant, the Fund temporarily may retain cash or invest in
preferred stock, nonconvertible bonds or other fixed-income securities. During
those periods the Fund may tend to emphasize investment in securities of issuers
which the Adviser believes offer the possibility of a corporate event, since
changes of this nature can result in gains even when the overall equity market
is weak. Purchases and sales of securities will be made whenever necessary in
the management's view to achieve the objective of the Fund. It is anticipated
that portfolio turnover will normally not exceed 100% in the future. See page 5
for prior turnover rates. (A 100% rate of portfolio turnover is normally
considered to be high.) A high rate of portfolio turnover will increase the
Fund's brokerage expenses and may increase the amount of taxable short-term
gains realized by the Fund. The Fund does not expect to realize significant
gains from selling securities held less than three months.
The Statement of Additional Information contains more information about the
Fund's investment policies and also identifies the restrictions on the Fund's
investment activities, which provide that the Fund shall not, among other
things:
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<PAGE>
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-- Invest more than 5% of its total assets, taken at market value, in the
securities of any one issuer other than the United States Government, or
purchase more than 10% of the voting securities or of any other class of
securities of any one issuer.
-- Purchase securities of any company with a record of less than three years'
continuous operation if such purchase would cause the Fund's investments in all
such companies taken at cost to exceed 5% of the Fund's total assets taken at
market value.
The investment objective and restrictions referred to above are fundamental and
may not be changed without approval of a majority of the outstanding voting
securities of the Fund. The Statement of Additional Information contains a
complete description of the Fund's restrictions and policies relating to the
investment of its assets and its activities.
MANAGEMENT OF THE FUND
The business of the Fund is managed by its Trustees. The Trustees elect officers
who are responsible for the day-to-day operations of the Fund and who execute
policies formulated by the Trustees.
How the Fund Receives Investment Advice. The Trust has entered into an
Investment Management Agreement with the Adviser with respect to the Fund, under
which the Adviser, subject to the direction of the Trustees, provides the Fund
with a continuous investment program consistent with the Fund's stated
investment objective and policies and is responsible for the management of the
Fund's assets. In addition to providing investment advice to the Fund, the
officers and employees of the Adviser are responsible for the investment and
reinvestment of the Fund's assets, subject to the overall authority of the
Trustees.
Effective October 1, 1995, James Gerson became portfolio manager of the Fund
with primary responsibility for day-to-day management of the portfolio. Mr.
Gerson is a Senior Vice President of Hudson Capital Advisors, Inc., the Fund's
Investment Manager, as well as of Fahnestock & Co., Inc. From April 1993 until
October 1994, he was a Senior Vice President and Managing Director of
Fahnestock's Corporate Finance Department. From October 1994 to September 1995,
he was an Equity Research Analyst with Fahnestock. From 1986 until he joined
Fahnestock & Co., Inc., he was associated with other investment banking firms in
the following capacities: February 1992 to April 1993 -- Senior Vice President
and Managing Director, Corporate Finance, of Reich & Co.; and January 1986 to
February 1992 -- Senior Vice President and Managing Director, Corporate Finance,
of Josephthal & Co. and its successor companies. In these positions he
concentrated on analyzing and structuring corporate financing for public
companies, with particular emphasis on 'small-cap' companies.
Mr. Gerson uses his familiarity with the market for small-cap securities, as
well as larger companies, in seeking to achieve the Fund's investment objective,
policies and risk considerations.
Performance information about the Fund from its inception through December 31,
1996 is contained in the Fund's Annual Report filed with the Securities and
Exchange Commission. A copy of the Annual Report may be obtained free of charge
upon written or phone request from Fahnestock & Co., Inc., 110 Wall Street, New
York, NY 10005, telephone 1-800-221-5588. This performance is not necessarily
indicative of results that would have been achieved if Mr.
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Gerson had been managing the Fund during the same period.
Pursuant to the Investment Management Agreement, the Fund pays the Adviser an
annual management fee equal to one percent of the Fund's average annual net
assets up to $25 million (which is higher than the management fee paid by most
investment companies) and 0.75% of annual average net assets in excess of $25
million. The management fee is accrued daily and paid quarterly and is based on
the average of the daily net asset values of the Fund during the preceding
quarter.
The Adviser, a corporation organized in 1986 under the laws of New York, located
at 780 Third Avenue, New York, NY 10017, currently has approximately $30,000,000
in assets under management in its capacity as investment adviser. The Adviser is
a wholly-owned subsidiary of Fahnestock Viner Holdings, Inc., a corporation
organized and existing under the laws of the province of Ontario, Canada, whose
non-voting shares are listed on the New York Stock Exchange and the Toronto
Stock Exchange, and approximately 95% of whose voting securities are held by
officers and directors of Fahnestock Viner Holdings, Inc.
To reduce the potential risk of an adverse effect on the Fund's portfolio,
written policies have been adopted by the Trust, the Fund and the Adviser to
restrict securities trading in personal accounts of the portfolio managers and
other affiliated personnel who normally have access to information on portfolio
transactions. These policies comply in all material respects with the
recommendations of the Investment Company Institute.
How the Fund Receives Administrative Services. The Trust has entered into an
Administration Agreement with Fahnestock pursuant to which Fahnestock provides
certain administrative services to the Fund and its shareholders. Under the
Administration Agreement, Fahnestock provides the Trust and the Fund with office
space, supplies and other facilities required for the business of the Fund.
Fahnestock pays the compensation of all officers and employees of the Trust and
pays the expenses of clerical services related to the administration of the
Trust and the Fund. Fahnestock has entered into a Sub-Administration Agreement
with Federated Services Company (the 'Sub-Administrator'), which has extensive
experience in the mutual fund industry, to perform these services. Pursuant to
the Sub-Administration Agreement, Fahnestock is responsible for any fees and
out-of-pocket expenses due to the Sub-Administrator. The Fund pays no
administrative fee to Fahnestock or the Sub-Administrator.
The Fund's Expenses. The Adviser has voluntarily undertaken to limit expenses
applicable to the Class B shares to 2.5% and to 2.0% with respect to the other
Classes of shares, including Class N shares. If the expenses of a Class exceed
the applicable limit, the Adviser has undertaken to reimburse the Fund for any
such excess amount, limited to an amount not greater than the portion of the
advisory fee reflecting the proportion of the Fund's assets attributable to that
Class. The Adviser has undertaken to pay any reimbursements on the same schedule
as the Fund is required to pay the advisory fee, provided that if, at the end of
the fiscal year, class expenses do not exceed the applicable annual expense
limits, the Fund will reimburse the Adviser for monies paid by the Adviser
during the course of the fiscal year. This is a voluntary undertaking on the
part of the Adviser, which reserves the right to modify or withdraw it with
respect to any Class at any time without notice. The expenses of printing
prospectuses used in selling Fund shares and other sales literature, as
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well as certain other sales-related charges, all of which may be eligible for
reimbursement under the Fund's 12b-1 Plan, are borne by Fahnestock.
All expenses which are not specifically undertaken to be paid by the Adviser or
Fahnestock and which are incurred in the operation of the Fund (including fees
of Trustees of the Trust who are not 'interested persons,' as such term is
defined in the 1940 Act) and the continuous public offering of the shares of the
Fund are borne by the Fund, including the cost of printing and engraving share
certificates, the expenses relating to the determination of the net asset value
of shares of the Fund, the expenses of the continuing registration and
qualification of shares for sale, the cost of prospectuses distributed to
shareholders, the charges for custodians, transfer agents, registrars and other
agents, and auditing and legal expenses.
At present, the only expenses that are allocated specifically to one or more
Classes are expenses under the Distribution Plans. However, the Trustees reserve
the right to allocate certain other expenses ('Class Expenses') to specific
Classes as they deem appropriate. In any case, Class Expenses would be limited
to distribution fees, shareholder servicing fees, transfer agency fees
identified by the Transfer Agent as attributable specifically to holders of
particular Classes of shares; printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectus and proxy
materials to current shareholders; registration fees paid to the Securities and
Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of specific
Classes of shares; legal or accounting fees relating solely to a particular
Class or Classes; and Trustees' fees incurred in connection with issues relating
solely to a particular Class or Classes.
Brokerage Transactions. Securities for the Fund's portfolio will at all times be
bought and sold solely on the basis of investment considerations and
appropriateness to the fulfillment of the Fund's objective. The primary
consideration in placing portfolio security transactions is execution at the
most favorable prices, consistent with best execution. All orders for
transactions in securities on behalf of the Fund are placed with broker-dealers
selected by the Adviser. Fahnestock & Co. Inc., which is also the Distributor of
shares of the Fund, may serve as the Fund's broker in effecting portfolio
transactions on national securities exchanges and retain commissions in
accordance with certain regulations of the Securities and Exchange Commission,
including Rule 17e-1 under the 1940 Act. In addition, the Adviser may select
broker-dealers that provide it with research services and may cause the Fund to
pay these broker-dealers commissions that exceed those that other broker-dealers
may have charged, if it views the commissions as reasonable in relation to the
value of the brokerage and/or research services received consistent with best
execution. Consistent with the foregoing primary consideration, the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of any other series of The Fahnestock Funds as a factor
in the selection of other broker-dealers to execute the Fund's portfolio
transactions. (For further discussion of brokerage allocation, see the Statement
of Additional Information.)
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How the Fund's Class N Shares are Distributed. The Trust has entered into a
Distribution Agreement with Fahnestock, under which Fahnestock is obligated to
use its best efforts on behalf of the Fund to sell, and accept orders for the
purchase of, shares of the Fund. Fahnestock may, from time to time, enter into
selling agreements with selected broker-dealers ('Selling Dealers') who have
agreed to sell Class N shares of the Fund. Fahnestock is a member of the
National Association of Securities Dealers, Inc. and of the New York, American
and other principal national securities exchanges.
The Fund is a series of The Fahnestock Funds, which has adopted plans of
distribution ('Plans') pursuant to Rule 12b-1 under the 1940 Act, under which it
may reimburse Fahnestock for the expenses Fahnestock bears in distributing
shares of a particular Class of the Fund or providing for services to
shareholders of that Class. Under the Plan for Class N shares the Fund may pay
Fahnestock a fee at the maximum annual rate of 0.25 percent of the average daily
net asset value of the Class to reimburse Fahnestock for its expenses in
distributing Class N shares or providing personal service to Class N
shareholders or the maintenance of Class N shareholder accounts, or for payments
by Fahnestock to others for such activities.
Expenses incurred by Fahnestock during a year may exceed the amount available
for reimbursement under a Distribution Plan. Such excess expenses may be carried
forward and sought to be reimbursed in future years. Interest at the prevailing
broker loan rate may be charged to the Fund on any expenses carried forward. At
the date of this Prospectus, no excess expenses are being carried forward under
any Plan.
Expenses incurred in connection with activities covered by the Plans will be
identified to the Class involved, although it is anticipated that some
activities may be conducted in respect of all Classes in common, with the result
that expenses incurred in connection with those activities will not be
identifiable to any particular Class. In the latter case, expenses will be
allocated among the Classes on the basis of their relative net assets.
Continuance of each Plan is subject to annual approval by a majority of the
Trustees and a majority of the Trustees who are not 'interested persons' of the
Fund and who have no direct or indirect financial interest in the operation of
the Plans or any related agreement ('Rule 12b-1 Trustees'). Each of the Plans
requires that quarterly written reports of amounts spent under such Plan and the
purposes of such expenditures be furnished to and reviewed by the Trustees. No
Plan may be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding shares of the Class
subject to that Plan. All material amendments of a Plan will require approval by
a majority of the Fund's Trustees and of the Rule 12b-1 Trustees. A Plan may be
terminated at any time by vote of either a majority of the Rule 12b-1 Trustees
or a majority of the outstanding shares of the Class subject to that Plan.
Fahnestock, a New York corporation, is a wholly-owned subsidiary of Fahnestock
Viner Holdings, Inc. and has its principal office at 110 Wall Street, New York,
NY 10005. Albert G. Lowenthal, Chairman of the Board of Trustees of the Trust
and President, a Principal and a Director of the Adviser, is Chairman of the
Board of Directors, Chief Executive Officer and Chief Financial Officer of
Fahnestock. Michael Mendelson, who is President and a Trustee of the Trust, is
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Managing Director of Fahnestock Asset Management, a division of Fahnestock.
Richard Wohlman, who is Treasurer of the Trust, is Comptroller of Fahnestock.
Transfer and Dividend Agent. Investors Fiduciary Trust Company, located at 127
West 10th Street, Kansas City, Missouri, 64105 serves as the Fund's Transfer
Agent and, as such, automatically opens and maintains an account for each new
investor in shares of the Fund. Under this arrangement, share certificates are
not delivered to individual shareholders unless a written request is received by
the Transfer Agent from the shareholder and then only to the extent of the
number of whole shares owned or requested. Fractional interests in shares, to
three decimal places, are reflected in the shareholder's account. Shareholders
will receive statements reflecting transactions in their accounts and account
balances. Shareholders should retain their account statements in order to
calculate the taxes on any gains or losses realized from redemption of the
Fund's shares. Fahnestock or the Transfer Agent can provide account transcripts
for past periods but shareholders may be required to pay a fee to receive such
transcripts.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXATION
Distributions. The Fund expects to distribute substantially all of its net
taxable investment income at least annually and substantially all of its net
realized capital gains, if any, annually. Unless a shareholder indicates on the
applicable document at the time of initial investment or subsequently in writing
to the transfer agent that dividends and distributions are to be paid in cash,
dividends and distributions will automatically be reinvested in additional
shares of the same Class at net asset value and will not be subject to an
initial or contingent deferred sales charge.
Each Class will be treated separately in determining the amounts of dividends
and distributions payable to holders of its shares. The Classes may have
different dividend and distribution rates because of their differing expense
levels; however, dividends and distributions paid to each Class of shares will
be declared and paid at the same time and will be determined in the same manner
as those paid to each other Class.
Dividends declared by the Fund and distributed to shareholders of record in
October, November or December of any year will be treated for Federal income tax
purposes as having been received by shareholders in that year, so long as the
dividends are paid before February 1 of the following year.
Federal Taxes. The Fund has qualified as a 'regulated investment company' under
Subchapter M of the Internal Revenue Code (the 'Code') and intends to continue
to so qualify in the future. As such, and by complying with the applicable
provisions of the Code, the Fund will not be subject to Federal income tax on
taxable income (including realized capital gains) which is distributed to
shareholders.
Distributions from the Fund representing net investment income and any net
short-term capital gains, as computed for Federal income tax purposes, will be
taxable to shareholders as ordinary income whether such distributions are
distributed as cash payments or reinvested in additional shares of the Fund.
Distributions from the Fund representing net long-term capital gains, as
computed for Federal income tax purposes, whether such distributions are
distributed as cash payments or reinvested in additional shares, will be taxable
to the sharehold-
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ers as long-term capital gains regardless of the length of time a shareholder
has held his shares. Long-term capital gains of individuals are taxed at a
maximum rate of 28% rather than the maximum rate applicable to ordinary income
for individuals (currently 39.6%). Net long term capital gains of corporations
are taxed at the rates applicable to ordinary income. In general, only dividends
from the Fund that reflect its dividend income from United States corporations
may, subject to certain limitations, qualify for the Federal dividends-received
deduction for corporate shareholders.
The Fund may be required to withhold for Federal income tax purposes 31%
('backup withholding') of the taxable distributions and the proceeds of
redemptions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification numbers or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
back-up withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from back-up withholding.
Shortly after the end of each taxable year, shareholders will receive a written
notice designating the amount of the year's distributions and the Federal income
tax treatment by shareholders of amounts distributed by the Fund, including
amounts includable in income as described in the preceding paragraph.
State and Local Taxes. Depending on the residence of the shareholder for tax
purposes, distributions may also be subject to state and local taxes.
Shareholders should consult their own tax advisers as to the Federal, state and
local tax consequences of ownership of shares of the Fund in their particular
circumstances.
COMPUTATION OF NET ASSET VALUE
The Fund's net asset value per share is computed as of the close of business on
the New York Stock Exchange (generally at 4:00 p.m. New York time) on each day
on which the Exchange is open for unrestricted trading.
The net asset value per share is determined by dividing the total current market
value of the assets of the Fund attributable to each Class of shares, less the
liabilities allocable to that Class, by the total number of shares of the Class
outstanding at the time of determination. The Trustees have determined to value
the Fund's securities traded on a national securities exchange at the price of
the last sale on such exchange on the date as of which assets are valued. If no
sale has occurred on the date as of which assets are valued, or if the security
is traded only in the over-the-counter market, it will normally be valued at its
current bid price. Debt securities having a remaining maturity of 60 days or
less may be valued at amortized cost, which approximates market value. These
instruments may include government securities, corporate debt securities and
money market instruments, such as bank certificates of deposit and commercial
paper. Portfolio securities for which current quotations are not readily
available are valued at fair value as determined in good faith by the Trustees.
HOW TO BUY SHARES
GENERAL
Investors may buy Class N shares of the Fund through representatives of
Fahnestock or the Selling Dealers. Investors may be charged a fee if they
purchase Class N shares through a broker or agent. Initial orders are reviewed
when they
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are received by Fahnestock or the Selling Dealers and, if they are accompanied
by all appropriate information or are made through an existing brokerage
account, the order is accepted by Fahnestock. The minimum initial investment in
either class is $1,000 and all purchases must be made in U.S. dollars.
Thereafter, additional investments may be made in amounts of $250 or more as the
shareholder elects. (These minimums do not apply to retirement plans. See
'Retirement Plans' below.) Purchases by check written upon a bank situated
outside the United States may be delayed until United States funds are received
and a collection charge may be imposed by the transfer agent to defray the cost
of conversion to U.S. funds.
The offering price of Class N shares will be the net asset value per share next
determined after acceptance of the purchase order.
Retirement Plans. Investors may use the Fund as a funding medium for various
types of qualified retirement plans, including Individual Retirement Accounts,
Keogh Plans (H.R. 10), Pension and Profit Sharing Plans, Tax Sheltered Annuity
Retirement Plans, and 401(k) Plans. The above plans are not subject to minimum
restrictions on initial or subsequent investments. Contributions to such plans
are subject to prevailing amount limits set by the Internal Revenue Code and may
be deducted within limits set by the Code.
Automatic Investment. The Fund offers an Automatic Investment Plan whereby the
Fund's transfer agent, Investors Fiduciary Trust Company (IFTC), is permitted
through preauthorized checks of $250 or more to charge the regular bank account
of a shareholder on a regular basis to provide systematic additions to the Fund
account of the shareholder. While there is no charge to shareholders for this
service, a charge of $10 will be deducted from a shareholder's Fund account for
checks returned for insufficient funds. A shareholder's Automatic Investment
Plan may be terminated at any time without charge or penalty by the shareholder,
the Fund, IFTC or Fahnestock. Further information regarding the Automatic
Investment Plan may be obtained through any Fahnestock account representative.
Additional Information. Investors should refer to the Statement of Additional
Information for more complete information about how to purchase shares of the
Fund. Investors can also obtain additional information from a representative of
Fahnestock or a Selling Dealer.
Purchases Through Processing Organizations. Investors may also be able to
purchase Class N shares through brokers and other financial intermediaries which
make shares of the Fund and other mutual funds available to their customers
without the payment of transaction fees for purchases and redemptions. Other
financial intermediaries (together with the former institutions, 'Processing
Organizations') may impose certain conditions on their clients or customers that
invest in Class N shares, which are in addition to or different from those
described in this Prospectus, and may charge their clients or customers direct
fees. Processing Organizations may modify or waive certain features of the Fund,
such as the initial and subsequent investment minimums, and may impose
transaction or administrative charges or other direct fees which would not be
imposed on purchases directly through Fahnestock. Accordingly, a client or
customer of a Processing Organization should read this Prospectus in light of
the terms of the client's or customer's account with the Processing
Organization. Processing Organizations will be responsible for promptly
transmitting client or
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customer purchase and redemption orders to the Funds in accordance with their
agreements with clients or customers. Processing Organizations that have entered
into agreements with the Fund or Fahnestock may enter confirmed purchase orders
on behalf of clients and customers, with payment to follow not later than the
Fund's pricing of Class N shares on the following business day. If payment is
not received by such time, the Processing Organization could be held liable for
resulting fees or losses.
Pursuant to its distribution plan for Class N shares, the Fund may, through
Fahnestock, pay Processing Organizations with whom it or Fahnestock has entered
into agreeements a service fee, for administration, subaccounting and/or other
shareholder services (for a fuller description of such services, see
'Distribution Agreement and Plans' in the Statement of Additional Information),
generally up to .25% of the average annual value of accounts maintained by such
Processing Organizations. Fahnestock may supplement such service fees from its
own resources. The aggregate service fee payable to any one Processing
Organization will be determined based upon a number of factors, including the
nature and quality of the services provided, the operations processing
requirements of the relationship and the standardized fee schedule of the
Processing Organization. Servicing arrangements between the Fund or Fahnestock
and a Processing Organization may provide for processing of purchases and
redemptions by telephone and wire transfer.
HOW TO REDEEM SHARES
Through Fahnestock or a Selling Dealer. Shares of the Fund may be redeemed
through Fahnestock or your Selling Dealer. Redemptions of Class N shares will be
made at the net asset value next determined after receipt of any such order by
Fahnestock or the Selling Dealer. Certificates, if any, in proper form for
redemption or any required stock powers should be presented or sent to
Fahnestock or your Selling Dealer no later than the close of business of the day
on which the redemption order is placed. Investors may be charged a fee if they
redeem Class N shares through a broker or agent.
Written Request. Any shareholder of record may require the Fund to redeem his
shares by making written application to the transfer agent. Such application
must be signed by the shareholder as his name appears on the records of the Fund
and must be accompanied by any share certificates issued for shares being
redeemed or a stock power if no such certificates were issued. A stock power is
a written instrument executed by a shareholder in order to facilitate the legal
transfer of shares of the Fund. Share certificates must be duly endorsed for
transfer. Signatures on share certificates and stock powers must be guaranteed,
except that (subject to the restriction in the next sentence) a signature
guarantee will not be required for a redemption of less than $5,000 where the
redemption proceeds are sent to a shareholder of record at the shareholder's
address of record. A redemption request must be accompanied by a signature
guarantee if the shareholder's address of record has changed within the past 30
days. A signature guarantee is a widely accepted way to protect you and the
transfer agent by verifying the signature on your request. The following
institutions may provide you with an acceptable signature guarantee: a U.S.
bank, trust company, credit union or savings association, a foreign bank that
has a New York correspondent bank (which correspondent bank must be named by the
guarantor), a U.S. regis-
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tered securities broker or dealer (including a broker or dealer in municipal
securities or U.S. government securities), a U.S. national securities exchange,
a registered securities association or a clearing agency. A notary public is not
an acceptable signature guarantor. Redemptions will be effected at the net asset
value next determined after receipt by the Transfer Agent of such application
and certificates or stock powers, if any, in proper form for redemption.
Redemption by Telephone. Class N Shares that are not represented by share
certificates may also be redeemed by telephone by calling 1-800-367-0068. To
redeem Class N Shares by telephone, a shareholder must have completed and
returned to the Transfer Agent an account application electing the telephone
redemption privilege. A shareholder should be aware that redemption by telephone
may involve giving up a measure of security that is provided by written
redemptions. Neither the Fund, Fahnestock nor the Transfer Agent will be liable
for following redemption instructions received by telephone that it reasonably
believes to be genuine; reasonable procedures will be employed to confirm the
genuineness of such instructions, including the requesting of specific personal
information from the caller and the provision of written confirmation of
telephone transactions. Telephone calls requesting redemptions may also be
recorded. Proceeds of telephone redemptions will be sent only to the
shareholder's address of record, and telephone redemption is not available to a
shareholder whose address of record has changed within the past 30 days. During
periods of unusual economic or market activity, it may be difficult to effect
redemptions by telephone; if a shareholder is unable to contact the Transfer
Agent by telephone, the redemption request may be effected in writing.
General. Payment for shares redeemed will ordinarily be made on the next
business day after the redemption is effected. However, the Fund reserves the
right to pay redemption proceeds within seven days after the order is effected
if, in its judgment, immediate payment would adversely affect the Fund. In
addition, at various times the Trust may be requested to redeem Fund shares for
which it has not yet received good payment. Accordingly, the Trust may delay the
mailing of a redemption draft for up to 10 business days from the payment
date or until such time as it has assured itself that good payment (e.g., cash
in hand) has been collected for the purchase of such shares, whichever occurs
first.
The Trust may suspend the right of redemption of Fund shares and may postpone
payment for redeemed Fund shares when the New York Stock Exchange is closed for
other than weekends or holidays, or if permitted by the rules of the Securities
and Exchange Commission during periods when trading on the Exchange is
restricted or during an emergency which makes it impractical for the Trust to
dispose of the Fund's securities or fairly to determine the value of its net
assets, or during any other period permitted by the Securities and Exchange
Commission for the protection of investors.
Due to the proportionately high cost of maintaining smaller accounts, the Trust
reserves the right to redeem all shares in a Fund account which has a value of
less than $500 as the result of redemptions (except accounts which constitute
the assets of retirement plans and Individual Retirement Accounts) and to mail
the proceeds to the shareholder. Shareholders will be notified before these
redemptions are to be made and will have 30 days to purchase additional shares
to bring their accounts up to the required minimum.
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The redemption price of shares of the Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of the redemption, and gain or loss may be recognized for
Federal income tax purposes.
ADDITIONAL SERVICES AND PROGRAMS
Systematic Withdrawal Plan. This service enables a shareholder with an account
value of $10,000 or more automatically to receive or make periodic payments from
the Fund at no cost. A shareholder may elect to receive or make as many payments
as he wants. Payments may be made monthly, quarterly, semi-annually or annually
in varying amounts, but not less than $100 each. Payments may be made to the
shareholder, another individual, a bank or any other designated entity. This
service is particularly useful in paying regular bills and disbursing funds from
retirements plans in compliance with IRS regulations.
A Systematic Withdrawal Plan may be established by completing an application
form available from Fahnestock or your Selling Dealer and requires that all
dividends and distributions be taken in additional shares of the Fund. See the
Statement of Additional Information, 'Additional Services and Programs.'
Additional Information. Shareholders should refer to the Statement of Additional
Information for more complete information on the additional services and
programs available to shareholders of the Fund. Additional information is also
available from a registered representative of Fahnestock or a Selling Dealer.
PERFORMANCE INFORMATION
From time to time the Fund may publish its 'total return' for each Class of
shares. Total return figures are based on historical earnings and are not
intended to indicate future performance. The 'total return' of a Class refers to
the average annual compounded rates of return over periods of 1, 5, and 10 years
(which periods will be stated in the publication) that would compare the initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation assumes the reinvestment of all
dividends and distributions, and reflects all recurring fees that are charged to
all shareholder accounts and nonrecurring charges, if any, including, unless
otherwise stated, maximum applicable initial or contingent deferred sales
charges.
The principal value of an investment will fluctuate so that the value of the
investment, when redeemed, may be more or less than the original investment.
OTHER MATTERS
Description of the Fund's Shares. The Fund is the initial (and, to date, the
only) series of shares of beneficial interest of The Fahnestock Funds, a
Massachusetts business trust which was created on August 29, 1990 under the laws
of the Commonwealth of Massachusetts and has an unlimited number of authorized
shares of beneficial interest. The Fund currently offers three classes of
shares -- A, B and N. The Classes differ with respect to their sales charges and
other expenses, which may affect their performance. Only Class N shares are
offered by this prospectus. Investors can obtain information about Class A and
Class B shares, which are also offered to the public, or a prospectus describing
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those classes by calling Fahnestock at 1-800-800-9168.
All shares have equal rights as to voting, except as to matters (such as a Plan
of Distribution) that affect only some but not all Classes, or which have
different consequences for different Classes, in which case the matter will be
submitted to a separate vote of each affected Class. All Classes have equal
rights to redemption and liquidation at their respective net asset values,
subject to any applicable CDSC. Dividends may vary as between the classes to the
extent that different expenses are allocated to specific Classes. All shares
issued and outstanding are fully paid and nonassessable by the Fund and the
Trust and are redeemable at net asset value at the option of shareholders,
subject to any applicable CDSC. Shares have no preemptive or conversion rights
and are freely transferable. Certificates for shares will not be issued unless
requested in writing by an investor.
When matters are submitted for shareholder vote, shareholders of each series of
The Fahnestock Funds, including the Fund, will have one vote for each full share
held and proportional, fractional votes for each fractional share held.
Shareholders of all series of The Fahnestock Funds will vote collectively on
certain matters affecting all series, such as the election of Trustees and the
selection of accountants; shareholders of one series are not entitled to vote on
a matter that does not affect that series but that does require a separate vote
of another series, such as a particular series' investment management agreement.
As noted above, different classes will vote separately on matters affecting only
a particular class, or having different effects on different classes. Neither
the Trust nor the Fund intends to hold annual meetings. As a result,
shareholders may not consider each year the election of Trustees or the
appointment of accountants. However, pursuant to the By-Laws of the Trust, the
holders of at least 10 percent of the shares outstanding and entitled to vote
may require a special meeting of shareholders to be held for any purpose,
including removal of a Trustee from office. Shareholders of the Trust may remove
a Trustee by the affirmative vote of a majority of the outstanding voting
shares. In addition, the Board of Trustees will call a special meeting of
shareholders for the purpose of electing Trustees if, at any time, less than a
majority of the Trustees holding office at that time were elected by
shareholders. The Trustees may call special shareholder meetings of one or more
(including all) series or Classes of shares for such purposes as electing or
removing Trustees, changing fundamental policies or adopting new management
agreements.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. The Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts, obligations or affairs of the Trust. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder of the Fund held personally
liable by reason of being or having been a shareholder. Liability of a
shareholder of the Fund is limited to circumstances in which the Fund itself
would be unable to meet its obligations.
Transfer Agent. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, acts as transfer agent for the Fund; in this capacity, it
maintains the record of each transaction of a shareholder with respect to shares
of the Fund. A Shareholder may obtain information about his account by
consulting his
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sales representative or calling the transfer agent at 1-800-367-0068.
Custody of Portfolio. Portfolio securities of the Fund are held pursuant to a
custodian agreement by Investors Fiduciary Trust Company, as custodian; eligible
securities may be held in the book entry system for U.S. government securities
maintained by the Federal Reserve System or deposited with the Depository Trust
Company.
Registration Statement. This Prospectus omits certain information contained in
the Statement of Additional Information and Part C of the Registration Statement
which the Fund has filed with the Securities and Exchange Commission. The Fund's
Statement of Additional Information is incorporated by reference into this
Prospectus. A copy of the Fund's Statement of Additional Information can be
obtained upon request free of charge by writing or telephoning Fahnestock. You
may obtain a copy of Part C of the Registration Statement from the Securities
and Exchange Commission upon payment of the prescribed fee.
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HUDSON CAPITAL
APPRECIATION FUND
(A Series of The Fahnestock Funds)
110 Wall Street
New York, New York 10005
Telephone (800) 221-5588
INVESTMENT ADVISER
Hudson Capital Advisors, Inc.
805 Third Avenue
New York, New York 10022
PRINCIPAL DISTRIBUTOR
Fahnestock & Co. Inc.
110 Wall Street
New York, New York 10005
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
1100 Main Street, Suite 900
Kansas City, Missouri 64105
LEGAL COUNSEL
Faith Colish, A Professional Corporation
63 Wall Street
New York, New York 10005
[LOGO HUDSON CAPITAL APPRECIATION FUND]
PROSPECTUS CLASS N SHARES
April 15, 1997
A mutual fund seeking to achieve long-term growth of capital through investment
in equity securities.
[LOGO FAHNESTOCK]
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 15, 1997
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<TABLE>
<S> <C>
HUDSON CAPITAL
APPRECIATION FUND 110 Wall Street
(A Series of The Fahnestock Funds) New York, New York 10005
Class A Shares
Class B Shares
Class N Shares
</TABLE>
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This Statement of Additional Information provides information about Hudson
Capital Appreciation Fund (the 'Fund') in addition to the information that is
contained in the Fund's Prospectus dated April 15, 1997. (Unless otherwise
indicated, references in this Statement of Additional Information to the Fund's
Prospectus apply equally to the Prospectus for Class N shares and to the
Prospectus for Class A and Class B shares.) This Statement of Additional
Information is not a prospectus. It should be read in conjunction with the
Fund's Prospectus, a copy of which can be obtained upon request free of charge
by writing or telephoning the Fund's Distributor at the address and telephone
number below.
<TABLE>
<CAPTION>
INVESTMENT ADVISER: DISTRIBUTOR:
- ---------------------------------------------------------- ----------------------------------------------------------
<S> <C>
Hudson Capital Advisors, Inc. Fahnestock & Co., Inc.
780 Third Avenue 110 Wall Street
New York, New York 10017 New York, New York 10005
Telephone: 1-212-644-3200 Telephone: 1-800-221-5588
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
CROSS-REFERENCED TO
STATEMENT OF CAPTIONS IN
ADDITIONAL PROSPECTUS
INFORMATION
------------- CLASS A/B CLASS N
PAGE PAGE PAGE
------------- --------- -------
<S> <C> <C> <C>
Organization of the Fund........................................... 3 6 6
Investment Objective and Policies.................................. 3 6 6
Investment Restrictions............................................ 4 8 8
Management of the Fund............................................. 5 9 9
Investment Advisory and Other Services............................. 7 9 9
Distribution Agreement and Plans................................... 8 12 12
Methods of Obtaining Reduced Sales Charge on Class A Shares........ 10 15 --
Special Redemptions................................................ 11 18 16
Additional Services and Programs................................... 11 20 18
Taxes.............................................................. 12 14 13
Taxation of Fund Investments....................................... 14 14 13
Calculation of Performance......................................... 14 20 18
Portfolio Transactions and Brokerage............................... 14 11 11
Custody of Portfolio............................................... 16 22 20
Independent Auditors and Counsel................................... 16 5 5
Financial Statements............................................... 16 5 5
</TABLE>
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ORGANIZATION OF THE FUND
Hudson Capital Appreciation Fund (the 'Fund') is the first (and, to date, the
only) series of the shares of beneficial interest of The Fahnestock Funds, a
diversified open-end management investment company organized as a Massachusetts
business trust under the laws of the Commonwealth of Massachusetts. The Trust
was created under the laws of Massachusetts on August 29, 1990.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve long-term growth through
capital appreciation by investing primarily in equity securities. Current income
is a secondary consideration.
The types of securities the Fund invests in are more fully described in the
Prospectus. This section contains supplemental information concerning the types
of securities and other instruments in which the Fund may invest, the investment
policies and portfolio strategies that the Fund may utilize and certain risks
associated with those investments, policies and strategies.
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
U.S. Government Securities
Examples of the types of U.S. Government securities that the Fund may hold
include, in addition to those described in the Prospectus, U.S. Treasury Bills,
the obligations of the Federal Housing Administration, Farmers Home
Administration, Small Business Administration, General Services Administration,
Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks and the Maritime Administration.
Lending of Securities
The Fund has the authority to lend securities to brokers, dealers and other
financial organizations. The Fund will not lend securities to the Adviser,
Fahnestock or their affiliates. By lending its securities, the Fund can increase
its income by continuing to receive interest on the loaned securities as well as
by either investing the cash collateral in short term securities or obtaining
yield in the form of interest paid by the borrower when U.S. Government
securities are used as collateral. The Fund will adhere to the following
conditions whenever its securities are loaned: (a) the Fund must receive at
least 100 percent cash collateral or equivalent securities from the borrower;
(b) the borrower must increase this collateral whenever the market value of the
securities including accrued interest rises above the level of the collateral;
(c) the Fund must be able to terminate the loan at any time; (d) the Fund must
receive reasonable interest on the loan, as well as any dividends, interest or
other distributions on the loaned securities and any increase in market value;
(e) the Fund may pay only reasonable custodian fees in connection with the loan;
and (f) voting rights on the loaned securities may pass to the borrower;
provided, however, that if a material event adversely affecting the investment
occurs, the Board of Trustees must terminate the loan and regain the right to
vote the securities.
Purchases and sales of securities will be made whenever necessary in the
management's view to achieve the objectives of the Fund. The Adviser expects
that the Fund, in pursuing its objectives, will experience portfolio turnover of
not in excess of 100% and intends to keep
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turnover to a minimum consistent with such objectives. The Adviser believes that
unsettled market and economic conditions during certain periods may require
greater portfolio turnover in pursuing the Fund's objectives than would
otherwise be the case. The Fund's portfolio turnover rates for the fiscal years
ended December 31, 1995 and 1996 were 197.71% and 85.37%, respectively. The
difference in rates for the two years is primarily due to the differing
investment appproaches and strategies of the Fund's current portfolio manager,
who began managing the Fund's portfolio late in 1995, and his predecessor.
The investment objectives of the Fund as stated above and the following
investment restrictions will not be changed without approval of a majority of
outstanding voting securities of the Fund, which, as used in the Prospectus and
under the Investment Company Act of 1940, as amended, means approval of the
lesser of (1) the holders of 67% or more of the shares of the Fund represented
at a meeting if the holders of more than 50% of outstanding shares are present
in person or by proxy or (2) the holders of more than 50% of the outstanding
shares.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities. The Fund may not:
(1) Purchase securities on margin, or purchase real estate or interests therein,
commodities or commodity contracts (including futures contracts) or make loans
except through the purchase of bonds and other marketable obligations of
corporate enterprises.
(2) Invest more than 5% of its total assets, taken at market value, in the
securities of any one issuer other than the United States Government, or
purchase more than 10% of the voting securities or of any other class of
securities of any one issuer.
(3) Engage in the underwriting of securities of other issuers, except to the
extent that the Fund may be deemed to be an underwriter in selling, as part of
an offering registered under the Securities Act of 1933, as amended, securities
which it has acquired.
(4) Effect a short sale of any security.
(5) Purchase securities of any company with a record of less than three years'
continuous operation if such purchase would cause the Fund's investments in all
such companies, taken at cost, to exceed 5% of the Fund's total assets taken at
market value.
(6) Borrow money, except that the Fund may borrow from banks as a temporary
measure for emergency purposes where such borrowings would not exceed either (i)
33 1/3% of total assets of the Fund taken at market or other fair value less
liabilities other than borrowings, or (ii) 10% of its total assets taken at
cost; or pledge, mortgage, or hypothecate its assets taken at market value to an
extent greater than 15% of the Fund's total assets taken at cost. (The Fund does
not expect to borrow more than 5% of its total net assets at any one time and
will not purchase securities during any period when borrowings exceed 5% of its
total assets.)
(7) Invest for the purpose of exercising control over or management of any
company.
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(8) Invest more than 10% of the Fund's total assets in the securities of other
investment companies. (The Investment Company Act of 1940, as amended, provides
additional limitations on investment in securities of investment companies.)
(9) Invest in oil, gas or other mineral exploration or development programs,
except that the Fund may invest in the securities of companies that invest in or
sponsor those programs.
(10) Purchase or retain securities of any issuer if those officers and trustees
of the Fund or the officers and directors of its investment adviser owning
individually more than one-half of one percent of the securities of such issuer,
together own more than 5% of such issuer, or purchase from or sell to any of its
officers and trustees or investment adviser, its principal distributor of the
officers and directors of its investment adviser or principal distributor,
portfolio securities of the Fund.
(11) Purchase restricted securities which are subject to legal or contractual
delays in or restriction on resale if as a result more than 5% in market value
of the assets of the Fund would be invested in such securities. (The Fund does
not intend to acquire securities which are illiquid at the time of purchase.)
The percentage limitations contained in the restrictions listed above apply at
the time of purchases of securities. If a percentage restriction is adhered to
at the time of an investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
such restriction.
MANAGEMENT OF THE FUND
The business of the Fund is managed by its Trustees. They elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers of the Fund and Trustees of
the Trust are also officers and directors of the Fund's investment adviser,
Hudson Capital Advisors, Inc. ('the Adviser'), or officers and directors of the
Fund's principal distributor, Fahnestock & Co., Inc. ('Fahnestock').
The names and ages of the Trustees and officers of the Fund and their principal
occupations for the past five years follows. An asterisk (*) indicates Trustees
who are 'interested persons' of the Fund (as defined by the 1940 Act). Unless
otherwise indicated, the address of each Trustee and officer is 110 Wall Street,
New York, New York 10005.
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH THE FUND AND PRINCIPAL OCCUPATION
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<S> <C>
Albert G. Lowenthal, 52* Trustee, Chairman of the Board and Chief Executive Officer of the Fund. Mr.
Lowenthal is Chairman of the Board, Chief Executive Officer and Chief Financial
Officer of Fahnestock and its parent, Fahnestock Viner Holdings Inc. He is also
the General Partner of Phase II Financial LTD., a limited partnership, Chairman of
Freedom Investments, Inc., a broker-dealer, and is President, Director and a
Principal of the Adviser.
</TABLE>
(list continued on next page)
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(list continued from previous page)
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH THE FUND AND PRINCIPAL OCCUPATION
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<S> <C>
Michael Mendelson, 55* Trustee and President of the Fund. Mr. Mendelson is Managing Director of
Fahnestock Asset Management, a division of Fahnestock. He was formerly President
and Director of Fahnestock and Senior Vice President, E.F. Hutton & Co. (New York,
NY), a former securities firm.
Keith Gunzenhauser, 63 Trustee. Mr. Gunzenhauser is retired. He was formerly Executive Vice
2649 360th Street President -- Finance and Chief Investment Officer, Central Life Assurance Company
Van Meter, IA 50261 (Des Moines, IA).
Richard E. Landau, 53 Trustee. Mr. Landau is a private investor. He was formerly Managing Director and
4490 Riverwatch Drive Vice Chairman of Angeles Corporation (Los Angeles, CA), a holding company whose
#201 Bonita Bay subsidiaries manage securities, real estate, oil and natural gas investment
Bonita Springs, FL 33923 programs and mutual fund assets, and Chairman of the Board of Quinoco Resources,
Inc. and Quinoco Oil and Gas, Inc. (New York, NY).
James D. McQuaid, 59 Trustee. Mr. McQuaid is a consultant and was formerly the Chief Executive Officer
5 Oak Brook Drive of Metromail Corporation (Chicago, IL), a direct mail company.
Apt. S101
Oakbrook, IL 60521
James D. Gerson, 53 Senior Vice President and Portfolio Manager of the Fund. Mr. Gerson is also Senior
Vice President of Fahnestock and of the Adviser, since October 1, 1995. Previously
he was Equity Research Analyst with Fahnestock (October 1994-September 1995) and
Senior Vice President and Managing Director of Fahnestock's Corporate Finance
Department (April 1993-October 1994). Prior to joining Fahnestock he was with
Reich & Co. (February 1992-April 1993) and Josephthal & Co. (January 1986-February
1992).
Richard Wohlman, 52 Treasurer. Mr. Wohlman is Comptroller and Chief Financial Officer of Fahnestock
and was previously Assistant Comptroller of that firm.
Russell L. Pollack, 43 Secretary. Mr. Pollack has been Benefits Director and Manager-Corporate Tax of
Fahnestock since 1989.
</TABLE>
As of the close of business on April 7, 1997, the trustees and officers of the
Trust beneficially owned as a group 7.86% of the outstanding shares of Hudson
Capital Appreciation Fund. Included in this amount are 6.58% of the Fund's
outstanding shares beneficially owned by Mr. Gerson and his family; otherwise,
neither the Trust nor management of the Trust is aware of any shareholder who
beneficially owned 5% or more of the Fund's shares as of that date.
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Officers and Trustees of the Trust who are also officers or employees of
Fahnestock or the Adviser receive no remuneration from the Trust. Each other
Trustee receives an annual fee of $3,000 in addition to a fee of $750 for each
Board meeting attended, and is reimbursed for travel and out-of-pocket expenses.
For the fiscal year ended December 31, 1996, aggregate Trustee fees paid to
Trustees who are not officers or employees of Fahnestock or the Adviser were as
follows:
Keith Gunzenhauser $6000
Richard E. Landau $6000
James D. McQuaid $6000
The Trust has no bonus, profit sharing, pension or retirement plans.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Fund's Prospectus under the caption 'How the Fund Receives
Investment Advice,' the Fund has entered into an investment management agreement
with the Adviser (the 'Management Agreement'), under which the Adviser provides
the Fund with a continuous investment program, consistent with the Fund's stated
investment objective and policies. The Adviser is responsible for the management
of the Fund's portfolio assets.
No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund's
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical information, and information regarding general economic
factors and trends, from Fahnestock.
Under the terms of the Management Agreement between the Trust and the Adviser
and the Administration Agreement between the Trust and Fahnestock, the Adviser
and Fahnestock provide the Fund with office space, supplies and other facilities
required for the business of the Fund. The Adviser and Fahnestock pay the
compensation of all officers and employees of the Trust and the Fund and pay the
expenses of clerical services relating to the administration of the Trust and
the Fund.
As discussed in the Prospectus and as provided in the Management Agreement, the
Fund pays the Adviser an investment management fee, which is accrued daily and
is paid quarterly, that is approximately equal, on an annual basis, to 1.00% of
the average of the daily net assets of the Fund up to $25 million and 0.75% of
annual average net assets in excess of $25 million.
For the fiscal year ended December 31, 1994, the Fund incurred investment
management fees of $175,266. The Adviser waived $47,465 of the investment
management fee.
For the fiscal year ended December 31, 1995, the Fund incurred investment
management fees of $143,793. The Adviser waived $132,225 of the investment
management fee.
For the fiscal year ended December 31, 1996, the Fund incurred investment
management fees of $133,239. The Adviser waived $133,239 of the investment
management fee.
From time to time the Adviser, in its sole discretion and as it deems
appropriate, may assume certain expenses of the Fund while retaining the ability
to be reimbursed by the Fund for such amounts prior to the end of the fiscal
year. This will have the effect of lowering the Fund's overall expense ratio and
of increasing yield to investors, or the converse, at the time such amounts are
assumed or reimbursed as the case may be. The Adviser will not be reimbursed
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for such amounts if such action would violate the provisions of the Fund's
applicable expense limitations. The Adviser reserves the right to request the
Trustees to authorize in subsequent years recovery of prior expense
reimbursements or waived fees.
Pursuant to the Management Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith, gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Management Agreement.
The Management Agreement provides that it will terminate automatically if
assigned, and that it may be terminated without penalty by either party upon not
more than 60 days' nor less than 30 days' written notice. The Management
Agreement will continue in effect for a period of more than two years from the
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the Investment Company Act.
Under the Management Agreement, the Fund may use the name 'Hudson' or any name
derived from or similar to it only for so long as the Agreement or any
extension, renewal or amendment thereof remains in effect. If the Management
Agreement is no longer in effect with respect to the Fund, the Fund (to the
extent that it lawfully can) will cease to use such a name or any other name
indicating that it is advised by or otherwise connected with the Adviser. In
addition, Fahnestock may grant the nonexclusive right to use the name Fahnestock
or any similar name to any other corporation or entity, including but not
limited to any investment company of which Fahnestock or any subsidiary or
affiliate thereof or any successor to the business of any subsidiary or
affiliate thereof shall be the distributor or the investment adviser.
DISTRIBUTION AGREEMENT AND PLANS
The Board of Trustees has adopted Plans of Distribution (the 'Plans') pursuant
to Rule 12b-1 under the Act and has approved a distribution agreement (the
'Distribution Agreement') under which Fahnestock serves as distributor of shares
of the Fund. Under the Distribution Agreement, Fahnestock is obligated to use
its best efforts to sell shares on behalf of the Fund. Fahnestock accepts orders
for the purchase of shares of the Fund which are continually offered at net
asset value next determined plus any applicable sales charge. Fahnestock is
authorized to receive compensation in the form of a sales charge in connection
with the sale of Class A shares of the Fund and certain redemptions of Class A
and Class B shares. These charges are listed in the Fund's Prospectus for Class
A and Class B shares. Fahnestock may enter into selling agreements with other
selected broker-dealers who agree to sell shares of the Fund.
Expenses incurred by Fahnestock during a year may exceed the amount available
for reimbursement under a Plan. Such excess expenses may be carried forward and
sought to be reimbursed in future years. Interest at the prevailing broker loan
rate may be charged to the Fund on any expenses carried forward. These expenses
and interest will be reflected as current expenses on the Fund's statement of
operations for the year in which these amounts become accounting liabilities,
which is expected to be the year in which they are actually paid. Although the
Board of Trustees may change this policy, payments
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under the Plans currently are applied first to distribution expenses incurred in
the current year and then, up to the maximum amount permitted under the Plans,
to previously incurred but unreimbursed expenses carried forward and interest
thereon. Fahnestock has acknowledged that payments under each Plan are subject
to the approval of the Board of Trustees and that the Fund is not contractually
obligated to make payments in any amount at any time, including those in
reimbursement of Fahnestock, for expenses and interest thereon incurred in a
prior year.
Under their terms, the Plans remain in effect so long as their continuance is
approved at least annually by a vote of the Board of Trustees, including a
majority of the Trustees who have no direct or indirect financial interest in
the operation of the Plans or the Distribution Agreement (the 'Qualified
Trustees'). No Plan may be amended to increase materially the amount to be spent
under the Plan without approval of the affected Class of shareholders, and all
material amendments of a Plan must also be approved by the Qualified Trustees in
the manner described above. A Plan may be terminated at any time, without
penalty, by vote of a majority of the Qualified Trustees or by a vote of a
majority of the outstanding shares of the Class affected. Each Plan requires
that Fahnestock provide the Board of Trustees quarterly written reports of
amounts spent under the Plan and the purposes for which such expenditures were
made.
Each of the Plans provides for reimbursement of distribution expenses incurred
by Fahnestock with respect to the applicable Class of shares, including, but not
limited to, (a) continuing compensation to Fahnestock's account representatives
and others who engage in or support distribution of shares of the Class; (b)
payments to persons who service shareholder accounts of the Class, including,
but not limited to, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Fund's transfer agent; (c) costs relating to the
formation and implementation of marketing and promotional activities, including,
but not limited to, direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (d) costs of printing and
distributing prospectuses, statements of additional information and annual or
semi-annual reports of the Fund to prospective investors in the Class; (e) costs
involved in preparing, printing and distributing sales literature pertaining to
shares of the Class; and (f) costs involved in obtaining whatever information
analyses and reports with respect to marketing and promotional activities that
the Fund may, from time to time, deem advisable. The Class B and Class N Plans
also provide for reimbursement of shareholder service expenses, a separate
category of expenses described as payments to broker-dealers and other persons
and organizations pursuant to arrangements whereby such persons provide various
shareholder services to holders of Class B or Class N shares, as the case may
be, including but not limited to answering inquiries regarding the Fund;
assistance in changing dividend options, account designations and addresses;
performance of subaccounting; establishment and maintenance of shareholder
accounts and records; assistance in processing purchase and redemption
transactions; providing periodic statements showing a Class B or Class N
shareholder's account balance; and the integration of such statements with those
of other transactions and balances in the shareholder's other accounts serviced
by such person. The
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Plan for Class N shares also contains a 'defensive' provision, which provides,
in effect, that if payments out of its own resources by Fahnestock or the Fund's
investment adviser for distribution or shareholder services are deemed to
represent indirect payments by the Fund that are primarily intended to result in
sales of Class N shares, such indirect payments are authorized by the Plan.
In considering the adoption of each Plan, the Board of Trustees considered a
variety of factors and was advised by counsel to the Fund (who is not counsel to
Fahnestock or Hudson). The Board considered the factors suggested in the public
releases issued by the SEC in connection with the proposal and adoption of Rule
12b-1, and concluded, in the exercise of their business judgment and in light of
their fiduciary duties under state law and the Act, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
During the year ended December 31, 1996, only the Plan for Class A shares was in
effect. Under that Plan, the fund reimbursed distribution expenses of $66,620,
of which $38,287, $5,724, and $22,609, respectively, were spent for sales force
trailer commissions, marketing, and on reserve.
METHODS OF OBTAINING REDUCED SALES CHARGES ON CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund are
described in the Fund's Prospectus for the Class A and Class B shares. Methods
of qualifying for reduced sales charges referred to generally in that Prospectus
of the Fund are described in detail below.
Combination Privilege
In calculating the sales charge applicable to purchases made at one time, the
purchases will be combined if made by (a) an individual, his spouse and their
children under the age of 21, purchasing securities for his or their own
account, (b) a trustee or other fiduciary purchasing for a single trust estate
or single fiduciary account and (c) certain groups of four or more individuals
making use of salary deductions or similar group methods of payment whose funds
are combined for the purchase of mutual fund shares. Further information about
combined purchases, including certain restrictions on combined group purchases,
is available from a representative of Fahnestock or Selling Dealer.
Sales to Persons Affiliated With the Fund
Class A shares of the Fund may be sold without a sales charge to officers of the
Fund and Trustees of the Trust, and directors or officers of the Adviser,
Fahnestock, Fahnestock Viner Holdings, Inc. or Selling Dealers or affiliates of
any of them, or to the bona fide, full-time employees and their relatives,
retired employees, or sales representatives of any of the foregoing who have
acted as such for not less than 90 days, or to any trust, pension,
profit-sharing or other benefit plan for such persons. Such sales will be made
only upon the written assurance of the purchaser that the purchase is made for
investment purposes and that the shares will not be resold except through
redemption by the issuer. Such sales are made without a sales load to promote
good will with employees and others with whom the Trust has business
relationships and because the sales effort, if any, involved in making such
sales is negligible. Such sales may be registered solely in the name of the
eligible party or in the names of the eligible party and his immediate family
members.
- --------------------------------------------------------------------------------
-10-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Accumulation Privilege
An investor (including investors combining purchases) who is already a
shareholder may also obtain the benefit of a reduced sales charge by taking into
account not only the money then being invested but also the net asset value of
all the shares of the Fund already held by such person. If the net asset value
of all the shares already held plus the gross investment amount of the current
purchase exceeds a point in the schedule of sales charges at which the charge is
reduced to a lower percentage, the entire current purchase is eligible for the
reduced charge. For example, an investment of $5,000 in shares of the Fund, if
made at a time when the net asset value of funds already held is $100,000, would
result in a sales load of 3.50% of the offering price.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. If a shareholder sells portfolio
securities received in this fashion he would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has, however, elected to
be governed by Rule 18f-1 under the Investment Company Act of 1940, as amended.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net assets at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Systematic Withdrawal Plan
As described briefly in the Fund's Prospectus, the Fund permits the
establishment of a Systematic Withdrawal Plan. Payments under this Plan
represent proceeds arising from the redemption of Fund shares. Since the
redemption price of the shares of the Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of redemption, the distribution of cash pursuant to this
Plan may result in realization of gain or loss for purposes of Federal, state
and local income taxes. The maintenance of a Systematic Withdrawal Plan
concurrently with the purchases of additional shares of the Fund could be
disadvantageous to a shareholder because of the sales charge payable on such
purchases and because redemptions are taxable events. Therefore, a shareholder
will not be permitted to purchase shares of the Fund (except for investments of
$5,000 or more) at the same time as a Systematic Withdrawal Plan is in effect.
The Fund reserves the right to modify or discontinue the Systematic Withdrawal
Plan of any shareholder on 30 days' prior written notice to such shareholder, or
to discontinue the availability of such Plan in the future. The shareholder may
terminate the Plan at any time by giving proper notice to Fahnestock or the
Transfer Agent.
Reinvestment Privilege
A shareholder who has redeemed Class A shares of the Fund may, within two years
after the date of redemption, reinvest any part of the redemption proceeds in
the Fund without payment of a sales load. The Fund may modify or terminate the
reinvestment privilege at any time.
- --------------------------------------------------------------------------------
-11-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes. Any gain or loss realized is recognized for such purposes
even if the reinvestment privilege is exercised. If the shareholder reinvests in
the Fund within thirty (30) days, any loss realized on the redemption will not
be recognized for Federal income tax purposes as to the number of shares
acquired under the reinvestment privilege except through an adjustment in the
tax basis of the so-acquired shares.
Any loss realized by a shareholder on the redemption or other disposition of
Fund shares which have been held by such shareholder for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of any
capital gains distributions received by the shareholder with respect to such
shares.
TAXES
Set forth below is a summary of certain general Federal income tax
considerations which may affect the Fund and its shareholders. As the summary is
not intended as a substitute for individual tax planning, investors are urged to
consult their own tax advisers with specific reference to their particular
Federal, state or local tax situations.
Tax Status of the Fund
The Fund has qualified as a 'regulated investment company' under Subchapter M of
the Internal Revenue Code (the 'Code'). The Fund will be treated as a separate
taxpayer for Federal income tax purposes. Accordingly, the amounts of investment
income and capital gains that are subject to tax will be determined separately
for the Fund and the Fund must separately meet the diversification, income and
distribution requirements for qualification as a 'regulated investment company'
within the meaning of the Internal Revenue Code of 1986.
A qualified Fund will not be liable for Federal income tax on any investment
income or capital gains that it distributes to its shareholders, if at least 90%
of its investment income for the taxable year is so distributed. (Amounts
reinvested automatically in additional shares of a Fund will be treated as
distributed to its shareholders.) In addition, in order to avoid a four percent
excise tax, the Fund must distribute, or be treated as having distributed,
before each January 1, at least 98 percent of its ordinary income earned during
the prior calendar year and 98 percent of the net capital gains earned during
the twelve months ending on the preceding October 31.
The requirements for qualification as a regulated investment company include two
significant rules as to investment results. First, the Fund must earn at least
90 percent of its gross income from dividends, interest, payments with respect
to securities loans, gains from the disposition of equity or debt securities and
income or gains from options on securities (the '90 percent test'). Second, the
Fund must earn less than 30 percent of its gross income from gains on securities
held less than 3 months (the '30 percent test'). The Fund does not expect the
90% test to significantly affect its investment policy. The 30 percent test will
restrict the extent to which the Fund may: (i) sell securities held for less
than three months; (ii) write options that expire in less than three months;
(iii) close options that were written or purchased within the preceding three
months; and (iv) hold certain options during the fourth quarter of its taxable
year.
- --------------------------------------------------------------------------------
-12-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Taxation of Shareholders
Long term capital gains are taxed at a maximum rate of 28% rather than the
maximum rate applicable to ordinary income for individuals (currently 39.6%).
Capital losses are deductible only against capital gains, plus for individuals,
up to $3,000 of ordinary income. If a shareholder who receives a distribution
taxable as long-term capital gain with respect to shares of a Fund redeems or
exchanges the shares before holding them (unhedged) for more than six months,
loss on the redemption or exchange, up to the amount of the distribution, will
be treated as a long-term capital loss.
Dividends of investment income from the Fund may qualify for the Federal
dividends-received deduction for corporate shareholders only to the extent of
the aggregate amount of dividends received by the Fund from U.S. corporations.
The Fund must hold stock for more than 45 days (90 days in the case of certain
preferred stock), without hedging its investment in the stock in certain ways,
for dividends paid on the stock to be eligible dividends.
If the Fund is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends are included in the
Fund's gross income as of the later of (a) the date such stock became ex-
dividend with respect to such dividends (i.e., the date on which a buyer of the
stock would not be entitled to receive the declared, but unpaid, dividends) or
(b) the date the Fund acquired such stock. Accordingly, in order to satisfy its
income distribution requirements, the Fund may be required to pay dividends
based on anticipated earnings, and a shareholder may receive dividends in an
earlier year than would otherwise be the case. If a shareholder (a) incurs a
sales charge in acquiring Fund shares, (b) disposes of those shares within
ninety days and (c) acquires shares in a mutual fund for which the otherwise
applicable sales charge is reduced by reason of reinvestment right (i.e., an
exchange privilege), the original sales charge increases the shareholder's tax
basis in the original shares only to the extent that the otherwise applicable
sales charge for the second acquisition is not reduced. The portion of the
original sales charge that does not increase the shareholder's tax basis in the
original shares would be treated as incurred with respect to the second
acquisition and, as a general rule, would increase the shareholder's tax basis
in the newly acquired shares. Furthermore, the same rule also applies to a
disposition of the newly acquired shares made within ninety days of the second
acquisition. This provision prevents a shareholder from immediately deducting
the sales charge by shifting his investment in a family of mutual funds.
Backup Withholding
In general, if a shareholder who is taxed as an individual cannot certify that
he has given his correct taxpayer identification number to the Fund and that he
is not subject to backup withholding, he will be subject to a 31 percent Federal
backup withholding tax on Fund dividends and distributions and the proceeds of
redemptions or exchanges of Fund shares. (An individual's taxpayer
identification number is his social security number.) The backup withholding tax
is not an additional tax and may be credited against a shareholder's regular
Federal income tax liability.
- --------------------------------------------------------------------------------
-13-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
TAXATION OF FUND INVESTMENTS
Capital Gains
When the Fund sells a security, the resulting gain or loss will generally be
capital gain or loss and will be long-term capital gain or loss if the Fund has
held the security for more than one year. If the Fund acquires a debt security
at a discount, however, the portion of any gain upon its sale or redemption that
reflects the accrued market discount will be taxed as ordinary income, rather
than capital gain.
Foreign Taxes
Because the Fund will invest no more than 10% of its assets in foreign
securities, shareholders will not receive credits against their Federal income
tax due for foreign taxes paid by the Fund, if any.
CALCULATION OF PERFORMANCE
The Fund's total return is computed by finding the average annual compounded
rate of return over the 1, 5 and 10 year periods that would equate the initial
amount invested to the ending redeemable value according to the following
formula:
ERV = P(1xT)'pp'n
where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment made at the
beginning of the 1, 5 and 10 year periods (as fractional portion thereof),
assuming reinvestment of all dividends and distributions.
This calculation assumes that the maximum current applicable sales charge is
imposed upon purchase or redemption, as the case may be and also assumes that
all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.
The performance of the Fund and of each Class of its shares is not fixed or
guaranteed. Performance quotations should not be considered to be
representations of performance of the Fund for any period in the future. The
performance of any Class is a function of many factors including its earnings,
expenses and number of outstanding shares. Fluctuating market conditions;
purchases, sales and maturities of portfolio securities; sales and redemptions
of shares of beneficial interest; and changes in operating expenses are all
examples of items that can increase or decrease the performance of each Class.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser, within the policy
established by its investment committee and subject to review by the officers of
the Fund. In effecting securities transactions, the Adviser generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered together with other relevant factors. The
Adviser will use Fahnestock, of which the Adviser's direct parent, Fahnestock
Viner Holdings, Inc., is the direct sole shareholder, as its principal broker
where, in the judgment of the Adviser, Fahnestock will be able to obtain a price
and execution at least as favorable as other qualified brokers. All transactions
through Fahnestock are made in
- --------------------------------------------------------------------------------
-14-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
accordance with guidelines established by the Board of Trustees. The Fund may
not purchase from Fahnestock securities of underwritten offerings in which
Fahnestock participates as an underwriter. The Fund may, however, purchase
securities from other members of underwriting syndicates of which Fahnestock is
a member, but only in accordance with the policy set forth below and procedures
adopted and reviewed periodically by the Trustees.
During the years ended December 31, 1996, 1995 and 1994, the Fund paid $3,180,
$9,338, and $35,000, respectively, in brokerage commissions to Fahnestock.
During 1996, transactions effected by Fahnestock represented 14% of the Fund's
transactions involving the payment of brokerage commissions.
Orders for purchases and sales of securities are placed in a manner which, in
the opinion of the officers of the Fund, will offer the best price and market
for the execution of each such transaction. Purchases from underwriters of
portfolio securities may include a commission or commission paid by the issuer
and transactions with dealers serving as market makers reflect a 'spread.'
Investments in debt securities are generally traded on a net basis through
dealers acting for their own accounts as principals and not as brokers; no
brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Within the framework of this policy, the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund as a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.
The Adviser will be governed in the selection of brokers and dealers, and the
negotiation of brokerage commission rates and dealer spreads, by the reliability
and quality of the services, including primarily the availability and value of
research information and to a lesser extent statistical assistance furnished to
the Adviser of the Fund, and their value and expected contribution to the
performance of the Fund. It may not be possible to place a dollar value on
information and services to be received from brokers and dealers, since they are
only supplementary to the research efforts of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Adviser or other advisory clients of the Adviser and, conversely,
brokerage commissions and spreads paid by other advisory clients of the Adviser
may result in research information and statistical assistance beneficial to the
Fund. The Fund will make no binding commitment to allocate amounts of portfolio
transactions. While the Adviser will be primarily responsible for the allocation
of the Fund's brokerage business, the policies and practices of the Adviser in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay a broker-dealer which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker-dealer would have charged for effecting that transaction. This
prac-
- --------------------------------------------------------------------------------
-15-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
tice is subject to a good faith determination by the Trustees that such
commission is reasonable in light of the brokerage and research services
provided and to such policies as the Trustees may adopt from time to time.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust and Investors Fiduciary Trust Company, 127 West 10th Street,
Kansas City, Missouri 64105 (the 'Custodian'). Under the custodian agreement,
the Custodian performs custody and portfolio and accounting services for the
Trust and the Fund.
INDEPENDENT AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P., the independent auditor of the Trust, audits and
renders an opinion on the Fund's annual financial statements.
Faith Colish, A Professional Corporation, serves as counsel for the Fund.
FINANCIAL STATEMENTS
The Fahnestock Funds hereby incorporates by reference the financial statements
of Hudson Capital Appreciation Fund, together with the Report of Independent
Accountants thereon, all of which are contained in its Annual Report to
Shareholders for the fiscal year ended December 31, 1996. The Fund will provide
a copy of the Annual Report to each person who requests a copy of this Statement
of Additional Information. The Fund will also furnish a copy of the Annual
Report without charge to any shareholder upon request directed to the Fund at
the address or telephone number given on the cover page of this Statement of
Additional Information.
- --------------------------------------------------------------------------------
-16-
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in Registration Statement:
(i) Financial Highlights included in Part A.
(ii) Incorporated by reference under 'Financial Statements' in Part B:
Statement of Investments and Statement of Assets and Liabilities
as of December 31, 1996; Statement of Operations for the Year
ended December 31, 1996; Statement of Changes in Net Assets for
the years ended December 31, 1995 and 1996; Financial Highlights
for the years ended December 31, 1994, 1995 and 1996; Notes to
Financial Statements; and the Reports of Coopers & Lybrand
L.L.P., Independent Auditors, dated February 13, 1995, February
6, 1996 and February 17, 1997.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 -- Amended and Restated Declaration of Trust of Registrant
2 -- Amended and Restated By-Laws
3 -- Not applicable
4.1 -- Specimen copy of certificate for Class A shares issued by Registrant
4.2 -- Specimen copy of certificate for Class B shares issued by Registrant
4.3 -- Specimen copy of certificate for Class N shares issued by Registrant
5.1 -- Investment Management Agreement effective February 23, 1993****
6 -- Amended and Restated Distribution Agreement
7 -- Not applicable
8 -- Custody Agreement***
9(a) -- Transfer Agency Agreement***
9(b) -- Administration Agreement***
9(c) -- Sub-Administration Agreement
10 -- Opinion and Consent of Gaston & Snow**
11 -- Consent of Coopers & Lybrand L.L.P.
12 -- Not applicable
13 -- Not applicable
14 -- Not applicable
15.1 -- Amended and Restated Plan of Distribution with respect to Class A shares
15.2 -- Plan of Distribution with respect to Class B shares
15.3 -- Plan of Distribution with respect to Class N shares
16 -- Not applicable
17 -- Not applicable
18 -- Rule 18f-3 Plan
</TABLE>
- ------------
** Incorporated by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed on January 22,
1991.
*** Incorporated by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed on April 29,
1992.
**** Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A filed on February 26,
1993.
C-1
<PAGE>
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of April 11, 1997 there were 1,116 record holders of Registrant's Class
A shares of beneficial interest, par value $.01 per share and no holders of any
other class of shares.
ITEM 27. INDEMNIFICATION
Incorporated by reference to Item 27 of Part C of Pre-Effective Amendment
No. 2 to Registrant's Registration Statement filed on January 22, 1991.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER
Hudson Capital Advisors, Inc. ('Hudson'), a wholly-owned subsidiary of
Fahnestock Viner Holdings, Inc., serves as Investment Manager to Registrant.
Hudson acts as investment manager primarily for institutional clients and is one
of the managers of the Managers Fund, a registered management open-end
investment company. Listed below are the names of all of the directors and
officers of Hudson as of April 15, 1997, their positions with the Registrant, if
any, and, under the heading 'Other Business Activities and Principal Business
Addresses,' any business, profession, vocation or employment of a substantial
nature (other than the business of Hudson) in which they have been engaged for
their own account or in the capacity of director, officer, employee, partner or
trustee during the past two fiscal years of Hudson.
<TABLE>
<CAPTION>
NAME AND POSITION POSITION WITH
WITH HUDSON REGISTRANT OTHER BUSINESSES, ETC.
- ------------------------------------ ---------------------- ----------------------------------------------
<S> <C> <C>
Albert G. Lowenthal Trustee, Chairman of Chairman of Board of Directors, Chief
President and Director Board of Trustees, and Executive Officer and Chief Financial Officer
Chief Executive of Fahnestock & Co., Inc., its holding company
Officer parent, Fahnestock Viner Holdings, Inc. and
its affiliated companies.
A. W. Oughtred None Solicitor, Borden & Elliot; Director of
Director Fahnestock & Co., Inc. and its affiliated
companies.
E. K. Roberts None President, Fahnestock Viner Holdings, Inc.;
Director, Treasurer and Secretary Treasurer and Director, Fahnestock & Co., Inc.
and Director of its affiliated companies.
James D. Gerson Senior Vice President Director, Ag Services of America, Inc.,
Senior Vice President and Portfolio Manager American Power Conversion Corporation,
Computer Outsourcing Services, Inc.,
Conceptronic Inc., Energy Research Corp., and
Hilite Industries, Inc.
</TABLE>
C-2
<PAGE>
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Not applicable
(b) The following information is provided with respect to each director and
officer of Fahnestock as of April 15, 1997.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH FAHNESTOCK WITH REGISTRANT
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Albert G. Lowenthal Chairman of the Board of Directors, Trustee, Chairman of the Board of
Chief Executive Officer, and Chief Trustees, and Chief Executive
Financial Officer Officer
Michael Mendelson Managing Director of Fahnestock Trustee
Asset Management, a division of
Fahnestock & Co., Inc.
Richard Wohlman Comptroller Treasurer and Chief Financial
Officer
Russell L. Pollack Benefits Director and Manager, Secretary
Corporate Tax
Robert M. Neuhoff Executive Vice President N/A
James D. Gerson Senior Vice President Senior Vice President and Portfolio
Manager
Elaine Kells Roberts Treasurer and Director N/A
Fahnestock Viner
Holdings, Inc.
P.O. Box 16/Suite 1204
Guardian of Canada Tower
181 University Ave.
Toronto, Ontario M5H 3M7
Angus Winn Oughtred Director N/A
Borden & Elliot
40 King Street West
Toronto, Canada M5H 3Y4
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) Hudson Capital Advisors, Inc.
780 Third Avenue
New York, NY 10017
(2) The Fahnestock Funds
110 Wall Street
New York, New York 10005
(3) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
ITEM 31. MANAGEMENT SERVICES
Not applicable
- ------------
* Except as otherwise indicated, principal business address is 110 Wall Street,
New York, NY 10005.
C-3
<PAGE>
<PAGE>
ITEM 32. UNDERTAKINGS
32(c) A brief discussion of relevant market conditions and the investment
strategies and techniques pursued by the Fund's investment adviser, that
materially affected the performance of the Fund during its fiscal year ended
December 31, 1996, and a line graph comparing the initial account value and
subsequent account values at the end of each fiscal year from inception (1991)
to the present to the Standard & Poor's Composite Index of 500 Stocks (including
income) are contained in the Fund's Annual Report to shareholders for the year
ended December 31, 1996. The Fund undertakes to furnish to each person to whom a
prospectus is delivered a copy of said annual report upon request and without
charge.
C-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 8th day
of April, 1997.
THE FAHNESTOCK FUNDS
By /s/ ALBERT G. LOWENTHAL
...................................
ALBERT G. LOWENTHAL, CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------- ------------------
<C> <S> <C>
/s/ ALBERT G. LOWENTHAL Trustee, Chairman of Board of Trustees (Chief April 8, 1997
......................................... Executive Officer)
ALBERT G. LOWENTHAL,
AS OFFICER AND TRUSTEE
AND NOT INDIVIDUALLY
By /s/ ALBERT G. LOWENTHAL Treasurer (Chief Financial and Accounting April 8, 1997
......................................... Officer)
RICHARD WOHLMAN,
AS OFFICER AND NOT
INDIVIDUALLY, BY
ALBERT G. LOWENTHAL,
ATTORNEY-IN-FACT
By /s/ ALBERT G. LOWENTHAL Trustee and President April 8, 1997
.........................................
MICHAEL MENDELSON,
AS OFFICER AND TRUSTEE
AND NOT INDIVIDUALLY, BY
ALBERT G. LOWENTHAL,
ATTORNEY-IN-FACT
By /s/ ALBERT G. LOWENTHAL Trustee April 8, 1997
.........................................
KEITH GUNZENHAUSER,
AS TRUSTEE ONLY AND
NOT INDIVIDUALLY, BY
ALBERT G. LOWENTHAL,
ATTORNEY-IN-FACT
By /s/ ALBERT G. LOWENTHAL Trustee April 8, 1997
.........................................
RICHARD E. LANDAU
AS TRUSTEE ONLY AND
NOT INDIVIDUALLY, BY
ALBERT G. LOWENTHAL,
ATTORNEY-IN-FACT
By /s/ ALBERT G. LOWENTHAL Trustee April 8, 1997
.........................................
JAMES D. MCQUAID,
AS TRUSTEE ONLY AND
NOT INDIVIDUALLY, BY
ALBERT G. LOWENTHAL,
ATTORNEY-IN-FACT
</TABLE>
C-5
<PAGE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NUMBER
IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERING SYSTEM
- ----------- ------------------------------------------------------------------------------------- ----------------
<C> <S> <C>
1 -- Amended and Restated Declaration of Trust of Registrant...........................
2 -- Amended and Restated By-Laws......................................................
3 -- Not applicable....................................................................
4.1 -- Specimen copy of certificate for Class A shares issued by Registrant..............
4.2 -- Specimen copy of certificate for Class B shares issued by Registrant..............
4.3 -- Specimen copy of certificate for Class N shares issued by Registrant..............
5.1 -- Investment Management Agreement effective February 23, 1993****...................
6 -- Amended and Restated Distribution Agreement.......................................
7 -- Not applicable....................................................................
8 -- Custody Agreement***..............................................................
9(a) -- Transfer Agency Agreement***......................................................
9(b) -- Administration Agreement***.......................................................
9(c) -- Sub-Administration Agreement......................................................
10 -- Opinion and Consent of Gaston & Snow**............................................
11 -- Consent of Coopers & Lybrand L.L.P................................................
12 -- Not applicable....................................................................
13 -- Not applicable....................................................................
14 -- Not applicable....................................................................
15.1 -- Amended and Restated Plan of Distribution with respect to Class A shares..........
15.2 -- Plan of Distribution with respect to Class B shares...............................
15.3 -- Plan of Distribution with respect to Class N shares...............................
16 -- Not applicable....................................................................
17 -- Not applicable....................................................................
18 -- Rule 18f-3 Plan...................................................................
</TABLE>
- ------------
** Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed on January 22, 1991.
*** Incorporated by reference to Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed on April 29, 1992.
**** Incorporated by reference to Post-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A filed on February 26, 1993.
C-6
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ...............................'D'
The section symbol shall be expressed as...............................'SS'
Characters normally expressed as superscript will be preceded by ......'pp'
<PAGE>
<PAGE>
Exhibit 1
AMENDED AND RESTATED DECLARATION OF TRUST
OF
The Fahnestock Funds
WHEREAS, The Fahnestock Funds (the "Trust"), a trust with
transferable shares under the laws of the Commonwealth of Massachusetts was
established on August 29, 1990 pursuant to a Declaration of Trust made as of
that date (the "Present Declaration"); and
WHEREAS, the Trustees (as that term is defined in the Present
Declaration) desire to amend the Present Declaration in accordance with the
provisions of Section 8.3 thereof and to restate the Declaration of Trust of the
Trust, as amended, as contemplated by Section 10.1 thereof;
NOW, THEREFORE, the Present Declaration be and it hereby is
amended and, as amended, restated as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is The
Fahnestock Funds (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the
following terms have the following respective
meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8
hereof, as from time to time amended.
(b) The "1940 Act" means the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time.
(c) The terms "Commission" and "Interested Person", have the
meanings given them in the 1940 Act. Except as otherwise defined by the Trustees
in conjunction with the establishment of any Series or Class of Shares, the term
"vote of a majority of the Shares outstanding and entitled to vote" shall have
the same meaning as the term "vote of a majority of the outstanding voting
securities" given it in the 1940 Act.
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(d) "Custodian" means any person other than the Trust who has
custody of any Trust Property as required by ss.17(f) of the 1940 Act, but does
not include a system for the central handling of securities described in said
'SS'17(f).
(e) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein," and "hereunder" shall be deemed to refer to this Declaration
rather than exclusively to the article or section in which such words appear.
(f) "Distributor" means the party, other than the Trust, to
the contract described in Section 3.1 hereof.
(g) "Fund" or "Funds" individually or collectively means the
separate Series of Shares of the Trust, together with
the assets and liabilities assigned thereto.
(h) "His" shall include the feminine and neuter, as well as
the masculine, genders.
(i) "Investment Adviser" means the party, other than the
Trust, to the contract described in Section 3.2 hereof.
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(k) "Series" individually or collectively means the separate
Series of the Trust as may be established and designated from time to time by
the Trustees pursuant to Section 5.11 hereof.
(l) "Shareholder" means record owner of Outstanding Shares.
(m) "Shares" means the transferable units of interest into
which the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
"Outstanding" Shares means those Shares shown from time to time on the books of
the Trust or its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the Trust and which
are at the time held in the treasury of the Trust.
(n) "Class" of Shares means any class of Shares of the Trust
(or of any Series thereof) established and designated by the Trustees pursuant
to Section 5.11 hereof.
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(o) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(p) "Trust" means the Massachusetts business trust established
by this Declaration of Trust, as amended from time to time.
(q) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or
for the account of the Trust or the Trustees.
(r) The "Trustees" means all persons who may from time to time
be duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in his capacity or their
capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
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 conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
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 although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust 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.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the Trustees may be
exercised without order of or resort to any court.
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Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and
appropriate to the conduct of such operations.
(b) To invest in, hold for investment, or reinvest in,
securities, including common and preferred stocks; warrants; bonds, debentures,
bills, time notes and all other evidences of indebtedness; negotiable or
non-negotiable instruments; government securities, including securities of any
state, municipality or other political subdivision thereof, or any governmental
or quasi-governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, commercial paper, bankers
acceptances and all kinds of repurchase agreements, of any corporation, company,
trust, association, firm or other business organization however established, and
of any country, state, municipality or other political subdivision, or any
government or quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or options to purchase or
sell, to sell or otherwise dispose of, to lend and to pledge any such
securities, to enter into repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell options on securities or indices,
futures contracts and options on futures contracts of all descriptions and to
engage in all types of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership
or interest in all securities and repurchase agreements included in the Trust
Property, including the right to vote thereon and otherwise act with respect
thereto and to do all acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any property, real
or personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; and to endorse, guarantee,
or undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
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(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in which is included
in the Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into one or more plans of distribution and any
related agreements whereby the Trust may finance directly or indirectly any
activity which is primarily intended to result in sale of Shares.
(i) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of
any object or the furtherance of any power hereinbefore set forth, either alone
or in association with others, and to do every other act or thing incidental or
appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 2.3. 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 of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine, provided that the interest of the Trust
therein is deemed 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 the termination of the term of office,
resignation, removal or death of a Trustee he 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.
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Section 2.4. Issuance and Repurchase of Shares. 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, and, subject to the provisions set forth in Articles VI and VII and
Section 5.11 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 2.5. Delegation; Committees. The Trustees shall have
power 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 any Series of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient, to
the same extent as such delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. Subject to Section 5.11
hereof, the Trustees shall have power to collect all property due to the Trust;
to pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.7. Expenses. Subject to Section 5.11 hereof, the
Trustees shall have the power to incur and pay any expenses which in the opinion
of the Trustees are necessary or incidental to carry out any of the purposes of
this Declaration, 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.
Section 2.8. Manner of Acting; By-laws. Except as otherwise
provided herein or in the By-laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum
being present), including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written consents of the
entire number of Trustees then in office. The Trustees may adopt By-laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-laws to the extent such power is not
reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8
and in addition to such provisions or any other provision of this Declaration or
of the By-laws, the Trustees may
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by resolution appoint a committee consisting of less than the whole number of
Trustees then in office, which committee may be empowered to act for and bind
the Trustees and the Trust, as if the acts of such committee were the acts of
all the Trustees then in office, with respect to the institution, prosecution,
dismissal, settlement, review or investigation of any action, suit or proceeding
which shall be pending or threatened to be brought before any court,
administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11
hereof, 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; (b) enter into joint ventures, partnerships
and any other combinations or associations; (c) remove Trustees or fill
vacancies in or add to their number, elect and remove such officers and appoint
and terminate such agents or employees as they consider appropriate, and appoint
from their own number, and terminate, any one or more committees which may
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; (d) purchase, and pay for out of Trust Property or the Property
of the appropriate Series of the Trust, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors selected dealers or independent contractors of the Trust 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; (e) establish pension,
profit-making, share purchase, and other retirement, incentive and benefit plans
for any Trustees, officers, employees and agents of the Trust; (f) to the extent
permitted by law, indemnify any person with whom the Trust or any Series thereof
has dealings, including the Investment Adviser, Distributor, Transfer Agent and
selected dealers, 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 or any Series thereof and the method by 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 2.10. Principal Transactions. Except in transactions
not permitted by the 1940 Act or rules and regulations adopted by the
Commission, the Trustees may, on behalf of the Trust, buy any securities from or
sell any securities to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with the
Investment Advisor,
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Distributor or Transfer Agent or with any Interested Person of such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian upon
customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall
be such number as shall be fixed from time to time by a written instrument
signed by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) or more than fifteen (15).
Section 2.12. Election and Term. Except for the Trustees named
herein or appointed to fill vacancies pursuant to Section 2.14 hereof, the
Trustees shall be elected by the Shareholders owning of record a plurality of
the Shares voting at a meeting of Shareholders on a date fixed by the Trustees.
Except in the event of resignation or removals pursuant to Section 2.13 hereof,
each Trustee shall hold office until such time as less than a majority of the
Trustees holding office have been elected by Shareholders. In such event the
Trustees then in office will call a Shareholders' meeting for the election of
Trustees. Except for the foregoing circumstances, the Trustees shall continue to
hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may resign
his trust (without the need for any prior or subsequent account) by an
instrument in writing signed by him and delivered to the other Trustees and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any of the Trustees may be removed (provided the
aggregate number of Trustees after such removal shall not be less than one) with
cause, by the action of two- thirds of the remaining Trustees or by action of
two-thirds of the outstanding shares of beneficial interest of the Trust at a
meeting duly called pursuant to Section 5.10 hereof by the Shareholders for such
purpose. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he 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, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of his death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to
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the terms of the Declaration. In the case of an existing vacancy, including a
vacancy existing by reason of an increase in the number of Trustees, subject
(but only after the Trust's initial registration statement under the Securities
Act of 1933 shall have become effective) to the provisions of Section 16(a) of
the 1940 Act, the remaining Trustees shall fill such vacancy by the appointment
of such other person as they in their discretion shall see fit, made by a
written instrument signed by a majority of the Trustees then in office. Any such
appointment shall not become effective, however, until the person named in the
written instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.14, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall disregard
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees in office shall be conclusive evidence of the existence of such
vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any
Trustee may, by power of attorney, delegate his power for a period not exceeding
six (6) months at any one time to any other Trustee or Trustees; provided that
in no case shall fewer than two (2) Trustees personally exercise the powers
granted to the Trustees under this Declaration except as herein otherwise
expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
distribution contract or contracts providing for the sale of the Shares to net
the Trust or the applicable Series of the Trust not less than the amount
provided for in Section 7.1 of Article VII hereof, whereby the Trustees may
either agree to sell the Shares to the other party to the contract or appoint
such other party their sole agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
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Section 3.2. Advisory or Management Contract. The Trustees may
in their discretion from time to time enter into an investment advisory contract
or, if the Trustees establish multiple Series, separate investment advisory
contracts with respect to each Series, whereby the other party to such contract
or contracts shall undertake to manage the investment operations of one or more
Series of the Trust and the compositions of the portfolios of the Trust or such
Series, including the purchase, retention and disposition of securities, and
other assets, in accordance with the investment objectives, policies and
restrictions of the Trust or such Series and all upon such terms and conditions
as the Trustees may in their discretion determine, including the grant of
authority to such other party to determine what securities shall be purchased or
sold by the Trust or the applicable Series of the Trust and what portion of its
assets shall be uninvested, which authority shall include the power to make
changes in the investments of the Trust of any Series.
Section 3.3. Affiliations of Trustees or Officers, Etc. The
fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partners,
trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any
organization, with which a contract of the character described
in Sections 3.1 or 3.2 above or for services as Custodian,
Transfer Agent or disbursing agent or for related services may
have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association
or other organization with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made also has any
one or more of such contracts with one or more other
partnerships, corporations, trusts, associations or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered
into pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940
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Act (including any other applicable Act of Congress hereinafter enacted) with
respect to its continuance in effect, its termination and the method of
authorization and approval of such contract or renewal thereof.
ARTICLE IV
LIMITATION OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property, or to the Property of one or
more specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee, or agent, as such, of
the Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to any
personal liability. The trust shall indemnify and hold each Shareholder harmless
from and against all claims and liabilities, to which such Shareholder may
become subject by reason of his being or having been a Shareholder, and shall
reimburse such Shareholder out of the Trust Property for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The indemnification and reimbursement required by the preceding
sentence shall be made only out of assets of the one or more Series whose Shares
were held by said Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any
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way any former or acting Trustee to redress any breach of trust) except for his
own bad faith, willful misfeasance, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust, or by
one or more Series thereof if the claim arises from his or her
conduct with respect to only such Series to the fullest extent
permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, or other, including appeals),
actual or threatened; and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to
a Trustee or officer:
(i) against any liability to the Trust, a Series
thereof or the Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith
in the reasonable belief that this action was in the best
interest of the Trust or a Series thereof;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
paragraph (b)(ii) resulting in a payment by a Trustee or
office, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad
faith, gross
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negligence or reckless disregard of the duties involved
in the conduct of his office:
(A) by the court or other body approving
the settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by
(x) vote of a majority of the Non-interested Trustees
acting on the matter (provided that a majority of the
Non-interested Trustees then in office act on the
matter) or (y) written opinion of independent legal
counsel.
(c) The rights or indemnification herein provided may be
insured against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 4.3 may advance by the Trust or a Series thereof prior to
final disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient, or
the Trustee or Series thereof shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Non-interested Trustees acting
on the matter (provided that a majority of the Non-interested
Trustees act on the matter) or independent legal counsel in a
written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is on
who is not (i) an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested
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Person" by any rule, regulation or order of the Commission), or (ii) involved in
the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 4.5. No Duty or Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, transfer agent or other Person dealing
with the Trustees or any officer, employee or agent of the Trust or a Series
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, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act or
thing whatsoever executed in connection with the Trust shall be conclusively
presumed 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 or a Series thereof. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking made or issued by the Trustees may recite that the
same is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property or the Trust Property of the applicable
Series, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer
or employee of the Trust or a Series thereof shall, in the performance of his
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 a Series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a Series thereof by any of its
officers or employees or by the Investment Adviser, the Distributor, Transfer
Agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
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the Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable shares of beneficial
interest, all of one class, except as provided in Section 5.11 hereof, par value
$.01 per share. The number of shares of beneficial interest authorized hereunder
is unlimited. All Shares issued hereunder including, without limitation, Shares
issued in connection with a dividend in Shares or a split of Shares, shall be
fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the
Trust Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for partition or
division of any property, profits, rights or interests of the Trust no can they
be called upon to share or assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
be personal property giving only the rights specifically set forth in this
Declaration. The Shares shall not entitle the holder to preference, preemptive
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any Series or Class of Shares.
Section 5.3. 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, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their
discretion may, from time to time without vote of the Shareholders, issue
Shares, 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 deem best, and may in such manner acquire other assets
(including the acquisition of assets subject
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to, and in connection with the assumption of, liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in the treasury. The Trustees may from time to time divide or
combine the Shares of the Trust or any Class of Shares thereof or, if the Shares
be divided into Series, of any Series of the Trust or of any Class of Shares of
such Series, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at
the principal office of the Trust or an office of the Transfer Agent 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. Such register
shall be conclusive as to who are the holders of the Shares 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 him as herein or in
the By-laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said 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 rules and regulations as to
their use.
Section 5.6. Transfer of Shares. Shares shall be transferable
on the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon deliver to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matter as may reasonably be required. Upon such delivery the transfer
shall be recorded on the 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 hereunder 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 register of Shares as the holder of
such Shares for all purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar nor any officer or agent of the Trust shall be
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affected by any notice of such death, bankruptcy or incompetence, or other
operation of law.
Section 5.7. Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage pre-paid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury
shall, until resold pursuant to Section 5.4, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power
to vote only (i) for the election of Trustees as provided in Section 2.12; (ii)
with respect to any investment advisory contract entered into pursuant to
Section 3.2; (iii) with respect to termination of the Trust or a Series thereof
as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 8.3; (v) with respect to
any merger, consolidation or sale of assets as provided in Section 8.4; (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 8.5; (vii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or a Series thereof or the Shareholders of either; (viii)
with respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act, and related matters; and (ix) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
by the By-laws or any registration of the Trust as an investment company under
the 1940 Act with the Commission (or any successor agency) or as the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. If separate Series of
Shares are established, Shares shall be voted by individual Series on any matter
submitted to a vote of the Shareholders of the Trust except as provided in
Section 5.11(f) hereof. When the Trustees determine that any matter to be
submitted to a vote of Shareholders affects only the rights or interests of
Shareholders of one or more but not all Series, or of one or more but not all
Classes (including without limitation any distribution plan pursuant to Rule
12b-1 under the 1940 Act applicable to any such Series or Class), then only the
Shareholders of the Series or Classes so affected shall be entitled to vote
thereon. Without limiting the generality of the foregoing, and except as
required by the 1940 Act or other law, the Shareholders of each Class shall have
exclusive voting
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rights with respect to the provisions of any distribution plan adopted by the
Trustees pursuant to Rule 12b-1 under the 1940 Act applicable to such Class.
There shall be no cumulative voting in the election of Trustees. Until shares
are issued, the Trustees may exercise all rights of shareholders and may take
any action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders' votes
and meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of the
Shareholders of the Trust may be called at any time by the President, and shall
be called by the President or the Secretary at the request, in writing or by
resolution, of a majority of the Trustees, or at the written request of the
holder or holders of ten percent (10%) or more of the total number of Shares
then issued and outstanding of such Series of the Trust entitled to vote at such
meeting. Any such request shall state the purpose of the proposed meeting.
Section 5.11. Series and Classes of Shares. The Trustees, in
their discretion, may authorize the division of Shares into two or more Series,
and the different Series shall be established and designated, and the variations
in the relative rights and preferences as between the different Series shall be
fixed and determined, by the Trustees; provided, that all Shares shall be
identical except that there may be variations so fixed and determined between
different Series as to investment objective, purchase price, right of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series shall have
separate voting rights, all of which are subject to the limitations set forth
below. All references to Shares in this Declaration shall be deemed to be Shares
of any or all Series as the context may require.
Without limitation of any other powers accorded to them by
this Declaration or otherwise, the Trustees shall have power, at any time or
from time to time, and without the necessity for any Shareholder approval, to
authorize by vote of a majority of the Trustees two or more separate Classes of
Shares of any Series (or, if separate Series have not been established, of the
Trust), and in such connection to fix and determine the relative rights and
burdens of Shares of the respective Classes of such Series (or of the Trust) as
to sales charges, redemption charges or other fees and charges, allocations of
expenses, conversion rights, and conditions under which Shareholders of the
several Classes shall have separate voting rights or (subject to Section 5.9
hereof) no voting rights. Any such authorization of Classes shall be effective
upon the execution by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a majority of the Trustees) and the deposit among the
records of the Trust of an instrument setting forth such provisions and the
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manner in which the same may be amended. At any time at which no Shares of a
particular Class and no Shares of any other Class which are convertible into
Shares of such Class are outstanding, the Trustees may terminate such Class. Any
such termination shall be effective upon the execution by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
the Trustees) and the deposit among the records of the Trust of an instrument
stating that such Class is terminated. The fact that a Series shall have
initially been established without Classes, or shall have one or more
established and designated Classes, shall not limit the authority of the
Trustees to establish and designate separate Classes or further Classes of that
Series without Shareholder approval, provided that the establishment and
designation of such Classes would not adversely affect the rights of such
Shareholders.
If the Trustees shall divide the Shares of the Trust into two
or more Series or Classes, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of Shares
of each Series or Class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series 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) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, 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 any such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds. or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate them among any
one 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. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes. No holder of Shares of any
Series shall have any
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claim on or right to any assets allocated or belonging to any other Series.
(c) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to an among any one or more of the Series
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. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The assets of
a particular Series of the Trust shall, under no circumstances, be charge with
liabilities attributable to any other Series of the Trust. All persons extending
credit to, or contracting with or having any claim against a particular Series
or Class of the Trust shall look only to the assets of that particular Series
for payment of such credit, contract or claim or the share of that Class in the
assets of the Trust or of the Series of which it is a part, as the case may be.
(d) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 7.2 of this Declaration with respect
to any one or more Series or classes which represents the interests in the
assets of the Trust immediately prior to the establishment of two or more Series
or classes. With respect to any other Series, 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 Shares
of a particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of Shares of that Series held by such
Shareholders at the time of record established for the payment of such dividends
or distribution. Where separate Classes of Shares, either of the Trust or of a
Series, have been established, dividends and distributions on the Shares of such
Classes shall be in such amount as may be declared from time to time by the
Trustees, and such dividends and
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distributions may vary as between such Classes to reflect differing allocations
among such Classes of the liabilities, expenses, costs, charges and reserves of
the Trust or such Series, as the case may be, and any resultant differences
between the net asset value of such several Classes, to such extent and for such
purposes as the Trustees may deem appropriate, but dividends and distributions
on the Shares of a particular Class shall be distributed pro rata to the
Shareholders of that Class in proportion to the number of such Shares held by
such holders at the date and time of record established for the payment of such
dividends and distributions.
(e) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series or of a Class of Shares of a Series, shall be entitled to receive his pro
rata share of distributions of income and capital gains made with respect to
such Series or Class. Upon redemption of his Shares or indemnification for
liabilities incurred by reason of his being or having been a Shareholder of a
Series, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust. Upon liquidation or termination of a Series without
Classes, Shareholders of such Series shall be entitled to receive a pro rata
share of the net assets of such Series. Upon liquidation or termination of a
Series with separate Classes, the net assets of the Series shall be allocated
among the Classes in proportion to the respective aggregate net asset value of
the outstanding Shares of such Classes, and shall be distributed to the
Shareholders of each such Class in proportion to the number of Shares of that
Class held by them and recorded on the books of the Trust. A Shareholder of a
particular Series of the Trust shall not be entitled to participate in a
derivative or class action on behalf of any other Series or the Shareholders of
any other Series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled to
vote shall be voted by individual Series, except for the election of Trustees
and except to the extent the 1940 Act or Rule 18f-2 or any successor rule
thereunder permits Shares to be voted in the aggregate and not by individual
Series or Class. Except as otherwise provided in this Article V, the Trustees
shall have the power to determine the designations, preferences, privileges,
limitations and rights, including voting and dividend rights, of each Class and
Series of Shares.
The establishment and designation of any Series of Shares
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series, or as otherwise provided in such
instrument. Each such
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instrument shall have the status of an amendment to this Declaration.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust
shall be redeemable, at the redemption price determined in the manner set out in
this Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares of the Trust or any Series
thereof at the price determined as hereinafter set forth, upon the appropriately
verified written application of the record holder thereof (or upon such other
form of request as the Trustees may determine) at such office or agency as may
be designated from time to time for that purpose by the Trustees. The Trustees
may from time to time specify additional conditions, not inconsistent with the
1940 Act, regarding the redemption of Shares in the Trust's then effective
prospectus under the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net
asset value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
Section 6.3. Payment. Payment of the redemption price of
Shares of the Trust or any Series thereof shall be made in cash or in property
to the Shareholder at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective prospectus under the Securities Act of 1933, subject to
the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net
Asset Value. If, pursuant to Section 6.9 hereof, the Trustees shall declare a
suspension of the determination of net asset value with respect to Shares of the
Trust or of any Series thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series thereof shall be suspended until the termination of such suspension
is declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and
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withdraw any certificates on deposit. The redemption price of Shares for which
redemption applications have not been revoked shall be the net asset value of
such Shares nest determined as set forth in Section 7.1 after the termination of
such suspension, and payment shall be made within seven (7) days after the date
upon which the application wa made plus the period after such application during
which the determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase
Shares directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trust
shall have the right at any time without prior notice to the Shareholder to
redeem Shares of any Shareholder for their then current net asset value per
Share if at such time the Shareholder owns Shares of any Series having an
aggregate net asset value per Series of less then $1,000 subject to such terms
and conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right, either by publication in the Trust's prospectus, if any, or by such other
means as the Trustees may determine.
Section 6.7. Redemption of Shares in order to Qualify as
Regulated Investment Company; Disclosure of Holding. If the Trustees shall, at
any time and in good faith, be of the opinion that direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power by lot or other means deemed equitable by them (i)
to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in Section 6.1.
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The holder 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 Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares
Pursuant to Net Asset Value Formula. The Trustees may also reduce the number of
outstanding Shares of the Trust or of any Series of the Trust pursuant to the
provisions of Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may
declare a suspension of the right of redemption or postpone the date of payment
or redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust or a
Series thereof of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust or a Series thereof fairly to determine
the value of its net assets, or (iv) during any other period when the Commission
may for the protection of Shareholders of the Trust by order permit suspension
of the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the Business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of the
Trust or of any Series of the Trust may be
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determined on the basis of the amortized cost of such securities, by appraisal
of the securities owned by the Trust or any Series of the Trust, or by such
other method as shall be deemed to reflect the fair value thereof, determined in
good faith by or under the direction of the Trustees. From the total value of
said assets, there shall be deducted all indebtedness, interest, taxes, payable
or accrued, including estimated taxes on unrealized book profits, expenses and
management charges accrued to the appraisal date, net income determined and
declared as a distribution and all other items in the nature of liabilities
which shall be deemed appropriate, as incurred by or allocated to any Series of
the Trust. The resulting amount which shall represent the total net assets of
the Trust or Series thereof shall, where the Trust or Series thereof is without
Classes, be divided by the number of Shares of the Trust or Series thereof
outstanding at the time and the quotient so obtained shall be deemed to be the
net asset value of the Shares of the Trust or Series thereof. The net asset
value per Share of any separate Class of Shares, either of the Trust if the
Trust does not have separate Series or of a Series having separate Classes,
shall be the quotient obtained by dividing the value of the aliquot portion of
such Class in the net assets of the Trust or Series, as the case may be (such
net assets being the current value of the aliquot portion of such Class in the
assets belonging to the Trust or the Series less the aliquot portion of such
Class in the then-existing liabilities of the Trust or Series), by the total
number of Shares of that Class then outstanding, all determined in accordance
with the methods and procedures established by the Trustees from time to time.
The aggregate net asset value of the several Classes of a Series having separate
Classes of Shares shall be separately computed, and may vary from one another.
The Trustees shall establish procedures for the allocation of investment income
or capital gains and expenses and liabilities of a Series having separate
Classes of Shares among the several Classes of such Series, in order to reflect
the varying net asset values of, and the liabilities and expenses attributable
to, such Classes. The net asset value of the Shares shall be determine at least
once on each business day as of the close of trading on the New York Stock
Exchange or as of such other time or times as the Trustees shall determine. The
power and duty to make the daily calculations may be delegated by the Trustees
to the Investment Adviser, the Custodian, the Transfer Agent or such other
Person as the Trustees by resolution may determine. The Trustees may suspend the
daily determination of net asset value to the extent permitted by the 1940 Act.
Section 7.2. Distributions to Shareholders. The Trustees shall
from time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets of the Trust or such Series, or allocable to such
Class, as they may deem proper. Such distributions may be made
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in cash or property (including without limitation any type of obligations of the
Trust or Series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust, Series or Class additional Shares thereof
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
the Trust, Series or Class at the time of declaring a distribution or among the
Shareholders thereof at such other date or time or dates or times as the
Trustees shall determine. The Trustees may in their discretion determine that,
solely for the purposes of such distributions, Outstanding Shares shall exclude
Shares for which orders have been placed subsequent to a specified time on the
date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which Boston banks are not open for
business, all as described in the then effective prospectus under the Securities
Act of 1933. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or a Series
thereof or to meet obligations of the Trust or a Series thereof, or as they may
deem desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholder such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof on the books,
the above provisions shall be interpreted to give the Trustees the power in
their discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series thereof to avoid or deduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset
Value; Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net
income of the Series of the Trust shall be determined in such manner as the
Trustees shall provide by resolution. Expenses of the Trust or of a Series
thereof, including the advisory or management fee, shall be accrued each day.
Such net income may be determined by or under the direction of the Trustees as
of the close of trading on the New York Stock Exchange on each day on which such
market is open or as of such other time or times as the Trustees shall
determine, and, except as provided herein, all the net income of any Series of
the Trust, as so determined, may be declared as a dividend on the Outstanding
Shares of such Series. If, for any reason, the net income of any Series of the
Trust determined at any time is a negative amount, the Trustees shall have the
power with respect to such Series (i) to offset each Shareholder's pro rata
share of such negative amount from the accrued dividend account of such
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<PAGE>
Shareholder, or (ii) to reduce the number of Outstanding Shares of such Series
by reducing the number of Shares in the account of such Shareholder by that
number of full and fractional Shares which represents the amount of such excess
negative net income, or (iii) to cause to be recorded on the books of the Trust
an asset account in the amount of such negative net income, which account may be
reduced by the amount, provided that the same shall thereupon become the
property of the Trust with respect to such Series and shall not be paid to any
Shareholder, of dividends declared thereafter upon the Outstanding Shares of
such Series on the day such negative net income is experienced, until such asset
account is reduced to zero; or (iv) to combine the methods described in clauses
(i) and (ii) and (iii) of this sentence, in order to cause the net asset value
per Share of such Series to remain at a constant amount per Outstanding Share
immediately after each such determination and declaration. The Trustees shall
also have the power to fail to declare a dividend out of net income for the
purpose of causing the net asset value per Share to be increased to a constant
amount. The Trustees shall have full discretion to determine whether any cash or
property received shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend the practice of maintaining the
net asset value per Share of a Series at a constant amount.
Section 7.4. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VII, but subject
to Section 5.11 hereof, the Trustees may prescribe, in their absolute
discretion, such other bases and times for determining the per Share net asset
value of the Shares of the Trust or a Series or Class or net income of the Trust
or a Series thereof, or the declaration and payment of dividends and
distributions as they may deem necessary or desirable. Without limiting the
generality of the foregoing, the Trustees may establish several Series or
Classes of Shares in accordance with Section 5.11, and declare dividends thereon
in accordance with Section 5.11(d).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without
limitation of time but subject to the provisions of this
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Article VIII.
Section 8.2. Termination of the Trust or a Series. The Trust
or any Series thereof may be terminated by (i) the affirmative vote of the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote at any meeting of Shareholders of the Trust or the appropriate Series
thereof or (ii) an instrument in writing signed by a majority of the Trustees,
stating that a majority of the Trustee has determined that the continuation of
the Trust or a Series thereof is not in the best interest of such Series, the
Trust or their respective shareholders as a result of such factors or events
adversely affecting the ability of such Series or the Trust to conduct its
business and operations in an economically viable manner. Such factors and
events may include the inability of a Series or the Trust to maintain its assets
at an appropriate size, changes in laws or regulations governing the Series or
the Trust or affecting assets of the type in which such Series or the Trust
invests or economic developments or trends having a significant adverse impact
on the business or operations of such Series or the Trust. Upon the termination
of the Trust or the Series,
(i) The Trust or the Series shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust or the Series and all of the powers of
the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property or Trust Property allocated or
belonging to such Series to one or more persons at public or
private sale for consideration which may consist in whole or
in part of 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, transfer or other
disposition of all or substantially all the Trust Property or
Trust Property allocated or belonging to such Series shall
require Shareholder approval in accordance with Section 8.4
hereof.
(iii) 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 or the
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<PAGE>
remaining property of the terminated Series, in cash or in
kind or partly each, among the Shareholders of the Trust or
the Series according to their respective rights.
(b) After termination of the Trust or the Series and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust and file with the Office
of the Secretary of the Commonwealth of Massachusetts an instrument in writing
setting forth the fact of such termination, and the Trustees shall thereupon be
discharge from all further liabilities and duties with respect to the Trust or
the terminated Series, and the rights and interests of all Shareholders of the
Trust or the terminated Series shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be
amended by a vote of the holders of a majority of the Shares outstanding and
entitled to vote or by any instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of a majority of the
Shares outstanding and entitled to vote. The Trustees may amend this Declaration
without the vote or consent of Shareholder if they deem it necessary to conform
this Declaration to the requirements of applicable federal or state laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be liable for failing
so to do. The Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary or desirable to change the
name of the Trust or to make any other changes in the Declaration which do not
materially affect the rights of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which
would change any rights with respect to any Shares of the Trust or Series
thereof by reducing the amount payable thereon upon liquidation of the Trust or
Series thereof or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of the holders of two-thirds of the
Shares of the Trust or such Series outstanding and entitled to vote. 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.
(c) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Shareholders or
by the Trustees 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.
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Section 8.4. Merger, Consolidation and Sale of Assets. The
Trust or any Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property or Trust Property allocated or belonging
to such Series, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares of the Trust or such Series outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the Shares of the Trust or such Series outstanding and
entitled to vote, or by an instrument or instruments in writing without a
meeting, consented to by the holders of two-thirds of the Shares of the Trust or
such Series; provided, however, that, if such merger, consolidation, sale, lease
or exchange is recommended by the Trustees, the vote or written consent of the
holders of a majority of the Shares of the Trust or such Series outstanding and
entitled to vote shall be sufficient authorization; and any such merger,
consolidation, sale, lease or exchange shall be deemed for all purposes to have
been accomplished under and pursuant to Massachusetts law.
Section 8.5. Incorporation. With the approval of the holders
of a majority of the Shares of the Trust or a Series thereof outstanding and
entitled to vote, 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 the Trust Property allocated or belonging to such Series 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 or the Trust
Property allocated or belonging to such Series to any such corporation, trust,
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, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, 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, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property to such organization or
entities.
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ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of the Trust,
including financial statements which shall at least annually be certified by
independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any
amendment hereto shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts and in such other places as may be required under
the laws of Massachusetts and may also be filed or recorded in such other places
as the Trustees deem appropriate. Each amendment so filed 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 unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its execution. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and filed with the Secretary of the Commonwealth of
Massachusetts. A restated Declaration shall, upon execution, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by
the Trustees and delivered in The Commonwealth of Massachusetts 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 and construed
according to the laws of said State.
Section 10.3. 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.
Section 10.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust appears to
be a Trustee hereunder, certifying (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any
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instrument or writing, (c) the form of any vote passed at a meeting of Trustees
or Shareholders, (d) the fact that the number of Trustees or Shareholders
present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-laws adopted by or the
identity of any officers elected by the Trustees, or (f) 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 Trustees and their successor.
Section 10.5. Provision in Conflict with Law or Regulations.
(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
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; 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 provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
Section 10.6. The Trustees shall maintain a resident agent in
The Commonwealth of Massachusetts which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees may designate
from time to time a successor resident in The Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the undersigned, consisting of a majority
of the Trustees, have executed this instrument, all as of the 8th day of April,
1997.
/s/ Albert G. Lowenthal /s/ Michael Mendelson
- ----------------------------------- -------------------------------
Albert G. Lowenthal, Michael Mendelson, as
as Trustee and not individually. Trustee and not individually.
110 Wall Street 110 Wall Street
New York, NY 10005 New York, NY 10005
/s/ Keith Gunzenhauser
- ----------------------------------- -------------------------------
Keith Gunzenhauser, as Richard E. Landau, as
Trustee and not individually. Trustee and not individually.
2649 360th Street 4490 Riverwatch Drive
Van Meter IA 50261 #201 Bonita Bay
Bonita Springs, FL 34134
/s/ James D. McQuaid
- -----------------------------------
James D. McQuaid, as
Trustee and not individually.
Metromail Corporation
360 E. 22nd Street
Lombard, IL 60148
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<PAGE>
Exhibit 2
BY-LAWS OF
THE FAHNESTOCK FUNDS
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Principal Office 1
Section 2. Other Offices 2
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 3
Section 4. Proxies 3
Section 5. Inspection of Records 4
Section 6. Action without Meeting 5
ARTICLE IV - TRUSTEES 5
Section 1. Meetings of the Trustees 5
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 7
Section 1. Executive and Other Committees 7
Section 2. Meetings, Quorum and Manner of Acting 8
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 9
Section 3. Removal 9
Section 4. Powers and Duties of the Chairman 9
Section 5. Powers and Duties of the President 10
Section 6. Powers and Duties of Vice Presidents 11
Section 7. Powers and Duties of the Treasurer 11
Section 8. Powers and Duties of the Secretary 11
Section 9. Powers and Duties of Assistant Treasurers 12
Section 10. Powers and Duties of Assistant Secretaries 12
Section 11. Compensation of Officers and Trustees
and Members of Advisory Board 13
ARTICLE VII - FISCAL YEAR 13
ARTICLE VIII - SEAL 13
ARTICLE IX - SUFFICIENCY AND WAIVERS OF NOTICE 14
<PAGE>
<PAGE>
ARTICLE X - CUSTODY OF SECURITIES 14
Section 1. Employment of A Custodian 14
Section 2. Action Upon Termination of
Custodian Agreement 15
Section 3. Provisions of Custodian Contract 15
Section 4. Central Certificate System 17
Section 5. Acceptance of Receipts in Lieu of
Certificate 18
ARTICLE XI - AMENDMENTS 18
ARTICLE XII - MISCELLANEOUS 19
<PAGE>
<PAGE>
BY-LAWS
OF
THE FAHNESTOCK FUNDS
(As amended and restated April 8, 1997)
ARTICLE I
DEFINITIONS
The terms "By-laws", "Class", "Commission", "Custodian",
"Declaration", "Distributor", "Fund" or "Funds", "His", "Interested Person",
"Investment Adviser", "1940 Act", "Person", "Series", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", "Trustees", and "vote of a majority
of the Shares outstanding and entitled to vote", have the respective meanings
given them in the Declaration of Trust of The Fahnestock Funds, as amended from
time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust shall be in New York, New York.
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Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a
Series thereof, or of the holders of a Class of Shares of such Series or of the
Trust, shall be held as provided in the Declaration at such place within or
without the Commonwealth of Massachusetts as the Trustees shall designate. At
any meeting of Shareholders, the holders of a majority of the outstanding Shares
of the Trust entitled to be voted at the meeting, present in person or by proxy,
shall constitute a quorum.
Section 2. Notice of Meetings. 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 entitled to vote at his address as recorded
on the register of the Trust mailed at least (10) days and not more than sixty
(60) days before the meeting, provided, however, that notice of a meeting need
not be given to a shareholder to whom such notice need not be given under the
proxy rules of the Commission under the 1940 Act and the Securities Exchange Act
of 1934, as amended. Only the
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business stated in the notice of the meeting shall be considered at such
meeting. Any adjourned meeting may be held as adjourned without further notice.
No notice need be given to any Shareholder who shall have failed to inform the
Trust of his current address or if a written waiver of notice, executed before
or after the meeting by the Shareholder or his attorney thereunto authorized, is
filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the
purpose of determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for the purpose
of any other action, the Trustees may from time to time close the transfer books
for such period, not exceeding thirty (30) days, as the Trustees may determine;
or, without closing the transfer books, the Trustees may fix a date not more
than sixty (60) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes, except for
dividend payments which shall be governed by the Declaration.
Section 4. Proxies. 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 of the Trust, or with such other officer or agent of the Trust as the
Secretary may
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direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. 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 executed by or on behalf of a
Shareholder 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 the legal control of any other person as regards the charge or
management of such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
Section 5. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
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Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written
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waiver of notice, executed by him before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him. A
notice or waiver of notice need not specify the purpose of any meeting. The
Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
all the Trustees consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be treated
as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may
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adjourn the meeting from time to time until a quorum shall be present. Notice of
an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series thereof, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers which by law, the Declaration or these By-laws they are
prohibited from delegating. The Trustees may also elect from their own number
other Committees from time to time, the number composing such Committees, the
powers conferred upon the same (subject to the same limitations as with respect
to the Executive Committee) and the term of membership on such Committees to be
determined by the Trustees. The Trustees may designate a chairman of any such
Committee. In the absence of such designation the Committee may elect its own
Chairman.
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Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meeting and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant
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Secretaries, and one or more Assistant Treasurers. The Trustees may delegate to
any officer or committee the power to appoint any subordinate officers or
agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these By-laws, the President, the Treasurer
and the Secretary shall each hold office until his successor shall have been
duly elected and qualified, and all other officers shall hold office at the
pleasure of the Trustees. The Secretary and the Treasurer may be the same
person. A Vice President and the Treasurer or a Vice President and the Secretary
may be the same person, but the offices of Vice President, Secretary and
Treasurer shall not be held by the same person. The President shall hold no
other office. Except as above provided, any two offices may be held by the same
person. Any officer may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer without cause, by a vote of a majority of
the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Trustees may, but
need not, appoint from among their number a
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<PAGE>
Chairman. When present he shall preside at the meetings of the shareholders and
of the Trustees. He may call meetings of the Trustees and of any committee
thereof whenever he deems it necessary. He shall be an executive officer of the
Trust and shall have, with the President, general supervision over the business
and policies of the Trust, subject to the limitations imposed upon the
President, as provided in Section 5 of this Article VI.
Section 5. Powers and Duties of the President. In the absence of the
Chairman, the President may call meetings of the Trustees and of any Committee
thereof when he deems it necessary and shall preside at all meetings of the
Shareholders. Subject to the control of the Trustees and to the control of any
Committees of the Trustees, within their respective spheres, as provided by the
Trustees, he shall at all times exercise a general supervision and direction
over the affairs of the Trust. He shall have the power to employ attorneys and
counsel for the Trust or any Series thereof and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust or any Series thereof. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust or any Series thereof. The President shall have such
other powers and duties as, from time to time, may be conferred upon or assigned
to him by the Trustees.
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Section 6. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust or any Series thereof which may come into his hands to
such Custodian as the Trustees may employ pursuant to Article X of these
By-laws. He shall render a statement of condition of the finances of the Trust
or any Series thereof to the Trustees as often as they shall require the same
and he shall in general perform all the duties incident to the office of a
Treasurer and such other duties as from time to time may be assigned to him by
the Trustees. The Treasurer shall give a bond for the faithful discharge of his
duties, if required so to do by the Trustees, in such sum and with such surety
or sureties as the Trustees shall require.
Section 8. Powers and Duties of the Secretary. The Secretary shall
keep the minutes of all meetings of the Trustees and of the Shareholders in
proper books provided for that purpose;
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he shall have custody of the seal of the Trust; he shall have charge of the
Share transfer books, lists and records unless the same are in the charge of the
Transfer Agent. He shall attend to the giving and serving of all notices by the
Trust in accordance with the provisions of these By-laws and as required by law;
and, subject to these By-laws, he shall in general perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Treasurers. In the absence
or disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each such officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to do
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
-12-
<PAGE>
<PAGE>
Section 11. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of an Advisory Board shall
be fixed from time to time by the Trustees or, in the case of officers, by any
Committee or officer upon whom such power may be conferred by the Trustees. No
officer shall be prevented from receiving such compensation as such officer by
reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
[December] in each year and shall end on the last day of [November] in each
year, provided, however, that the Trustees may from time to time change the
fiscal year. The fiscal year of the Trust shall be the taxable year of each
Series of the Trust.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
-13-
<PAGE>
<PAGE>
ARTICLE IX
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these By-laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instructions that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place and at all
times maintain in the custody of one or more Custodians (including any
sub-custodian for the Custodian) all funds, securities and similar investments
included in the Trust Property or the Trust Property allocated or belonging to a
Series thereof. The Custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided profits and shall
be appointed from time to time by the Trustees, who shall fix its remuneration.
-14-
<PAGE>
<PAGE>
Section 2. Action Upon Termination of Custodian Agreement. Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders of the Trust or a Series thereof
to determine whether the Trust or Series thereof shall function without a
custodian or shall be liquidated. If so directed by vote of the holders of a
majority of the outstanding voting securities, the Custodian shall deliver and
pay over all Trust Property or the Trust Property allocated or belonging to a
Series thereof held by it as specified in such vote.
Section 3. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a Custodian and to any contract entered into
with the Custodian so employed:
The Trustee shall cause to be delivered to the Custodian all
securities included in the Trust Property or the Trust
Property allocated or belonging to a Series thereof or to
which the Trust or such Series may become entitled, and shall
order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of
securities to another person, or other disposition thereof,
all as the Trustees may generally or
-15-
<PAGE>
<PAGE>
from time to time require or approve or to a successor
Custodian; and the Trustees shall cause all funds included in
the Trust Property or the Trust Property allocated or
belonging to a Series thereof or to which it may become
entitled to be paid to the Custodian, and shall order the same
disbursed only for investment against delivery of the
securities acquired, or the return of cash held as collateral
for loans of fund securities, or in payment of expenses,
including management compensation, and liabilities of the
Trust or Series thereof, including distributions to
shareholders, or for other proper Trust purposes, or to a
successor Custodian. Notwithstanding anything to the contrary
in these By-laws, upon receipt of proper instructions, which
may be standing instructions, the Custodian may deliver funds
in the following cases: In connection with repurchase
agreements, the Custodian shall transmit, prior to receipt on
behalf of the Trust or Series thereof of any securities or
other property, funds from the custodian account of the Trust
or Series thereof to a special custodian approved by the
Trustees of the Trust, which funds shall be used to pay for
securities to be purchased by the Trust or Series thereof
subject to the obligation of the Trust or Series thereof to
sell and the seller's obligation to repurchase such
securities. In such case, the securities shall be held in the
custody
-16-
<PAGE>
<PAGE>
of the special custodian. In connection with the purchase or
sale of financial futures contracts, the Custodian shall
transmit, prior to receipt on behalf of the Trust of any
securities or other property, funds from the custodian account
of the Trust or Series thereof in order to furnish to and
maintain funds with brokers as margin to guarantee the
performance of the futures obligations of the Trust or Series
thereof in accordance with the applicable requirements of
commodities exchanges and brokers.
Section 4. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust or
Series thereof in a system for the central handling of securities established by
a national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or Series thereof.
-17-
<PAGE>
<PAGE>
Section 5. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or
new By-laws may be adopted by (a) vote of a majority of the Shares outstanding
and entitled to vote or (b) by the Trustees, provided, however, that no By-law
may be amended, adopted or repealed by the Trustees if such amendment, adoption
or repeal requires, pursuant to law, the Declaration or these By-laws, a vote of
the Shareholders.
ARTICLE XII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or
-18-
<PAGE>
<PAGE>
Trustee of the Trust and no partner, officer, director or shareholder of the
Investment Adviser of the Trust (as that term is defined in the Investment
Company Act of 1940) or of the underwriter of the Trust, and no Investment
Adviser or underwriter of the Trust, shall take long or short positions in the
securities issued by the Trust or any Series thereof.
(1) The foregoing provisions shall not prevent the underwriter
from purchasing Shares from the Trust or any Series if such
purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and
cancellation of orders) to purchases for the purpose of
filling orders for such Shares received by the underwriter,
and provided that orders to purchase from the Trust or any
Series thereof are entered with the Trust or any Series
thereof or the Custodian promptly upon receipt by the
underwriter of purchase orders for such Shares, unless the
underwriter is otherwise instructed by its Customer.
(2) The foregoing provision shall not prevent the underwriter
from purchasing Shares of the Trust or any Series thereof as
agent for the account of the Trust or any Series thereof.
-19-
<PAGE>
<PAGE>
(3) The foregoing provisions shall not prevent the purchase of
Shares issued by the Trust or any Series thereof by any
officer, or Trustee of the Trust or any Series thereof or by
any partner, officer, director or shareholder of the
Investment Adviser of the Trust or any Series thereof or of
the underwriter of the Trust from the Trust or any Series
thereof or from the underwriter at the price available to the
public generally at the moment of such purchase, or as
described in the then currently effective Prospectus of the
Trust.
(4) The foregoing shall not prevent the Investment Adviser, or
any affiliate thereof, of the Trust or any Series thereof from
purchasing Shares prior to the effectiveness of the first
registration statement relating to the Shares under the
Securities Act of 1933.
(B) Neither the Trust nor any Series thereof shall lend assets of the
Trust or of such Series to any officer or Trustee of the Trust or Series, or to
any partner, officer, director or shareholder of, or person financially
interested in, the Investment Adviser of the Trust or Series or the underwriter
of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer of
the Shares of the Trust or any Series thereof except as provided in the
Declaration or as may be required to comply with
-20-
<PAGE>
<PAGE>
federal or state securities laws, but this requirement shall not prevent the
charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the Trust, or
any partner, officer or director of the Investment Adviser of the Trust or any
Series thereof or underwriter of the Trust to deal for or on behalf of the Trust
or a Series thereof with himself as principal or agent, or with any partnership,
association or corporation in which he has a financial interest; provided that
the foregoing provisions shall not prevent (a) officers and Trustees of the
Trust or partners, officers or directors of the Investment Adviser of the Trust
or any Series thereof or underwriter of the Trust from buying, holding or
selling shares in the Trust or a Series thereof, or from being partners,
officers or directors or otherwise financially interested in the Investment
Adviser of the Trust or any Series thereof or any underwriter of the Trust; (b)
purchases or sales of securities or other property by the Trust or a Series
thereof from or to an affiliated person or to the Investment Adviser of the
Trust or any Series thereof or underwriter of the Trust if such transaction is
not prohibited by or is exempt from the applicable provisions of the 1940 Act;
(c) purchases of investments by the Series of the Trust or sales of investments
owned by the Trust or a Series thereof through a security dealer who is, or one
or more of whose partners, shareholders, officers or directors is, an officer or
Trustee of the Trust, or a partner, officer or director of the
-21-
<PAGE>
<PAGE>
Investment Adviser of the Trust or any Series thereof or underwriter of the
Trust, if such transactions are handled in the capacity of broker only and
commissions charged do not exceed customary brokerage charges for such services;
(d) employment of legal counsel, registrar, Transfer Agent, dividend disbursing
agent or Custodian who is, or has a partner, shareholder, officer, or director
who is, an officer or Trustee of the Trust, or a partner, officer or director of
the Investment Adviser of the Trust or any Series thereof or underwriter of the
Trust, if only customary fees are charged for services to the Trust or Series
thereof; (e) sharing statistical research, legal and management expenses and
office hire and expenses with any other investment company in which an officer
or Trustee of the Trust, or a partner, officer or director of the Investment
Adviser of the Trust or a Series thereof or underwriter of the Trust, is an
officer or director or otherwise financially interested.
END OF BY-LAWS
-22-
<PAGE>
<PAGE>
NUMBER SHARES
- ------ ------
- ------ ------
THE FAHNESTOCK FUNDS
A Business Trust Organized Under the Laws of the Commonwealth of Massachusetts
THIS CERTIFIES that HUDSON CAPITAL APPRECIATION CLASS A
is the holder of
_____________________________
| |
| CUSIP 303128102 |
|___________________________|
SEE REVERSE SIDE FOR CERTAIN
DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST ($.01 PAR VALUE)
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. The
aforesaid holder is entitled to require the Trust to purchase all or any part of
the shares represented by this certificate at net asset value, all as more fully
set forth on the reverse of this certificate.
Witness the seal of the Trust and the signatures of its duly authorized
officers.
THE FAHNESTOCK FUNDS Dated:
SEAL
/s/ RUSSELL L. POLLACK MASSACHUSETTS /s/ ALBERT G. LOWENTHAL
- ----------------------- -----------------------
SECRETARY 1990 CHAIRMAN
COUNTERSIGNED
Investors Fiduciary Trust Company: TRANSFER AGENT
BY
________________________________________________________
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
THE FAHNESTOCK FUNDS
The registered holder of this certificate is entitled to all the rights,
interest and privileges of a shareholder as provided by the Declaration of Trust
and By-Laws of the Trust as from time to time amended, which are incorporated by
reference herein. In particular, the shares represented by this certificate are
transferable by the holder in person or by his duly authorized attorney, but
only on surrender of this certificate properly endorsed and when the transfer
is made on the books of the Trust.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST FOR
FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT -____________Custodian___________
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors Act
in common _________________________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
FOR VALUE RECEIVED, ________________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
| |
|______________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of The Fahnestock Funds represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said shares on the Books of the said Trust with full power of
substitution in the premises.
Dated:______________________________________(Sign Here)_________________________
Signature Guaranteed By:
____________________________________
NOTICE: The Signature to this Assignment must correspond with the name as
written upon the face of this certificate, in every particular, without
alteration, or any change whatever.
<PAGE>
<PAGE>
NUMBER SHARES
- ------ ------
- ------ ------
THE FAHNESTOCK FUNDS
A Business Trust Organized Under the Laws of the Commonwealth of Massachusetts
THIS CERTIFIES that HUDSON CAPITAL APPRECIATION CLASS B
is the holder of
_____________________________
| |
| CUSIP 303128201 |
|___________________________|
SEE REVERSE SIDE FOR CERTAIN
DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST ($.01 PAR VALUE)
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. The
aforesaid holder is entitled to require the Trust to purchase all or any part of
the shares represented by this certificate at net asset value, all as more fully
set forth on the reverse of this certificate.
Witness the seal of the Trust and the signatures of its duly authorized
officers.
THE FAHNESTOCK FUNDS Dated:
SEAL
/s/ RUSSELL L. POLLACK MASSACHUSETTS /s/ ALBERT G. LOWENTHAL
- ----------------------- -----------------------
SECRETARY 1990 CHAIRMAN
COUNTERSIGNED
Investors Fiduciary Trust Company: TRANSFER AGENT
BY
________________________________________________________
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
THE FAHNESTOCK FUNDS
The registered holder of this certificate is entitled to all the rights,
interest and privileges of a shareholder as provided by the Declaration of Trust
and By-Laws of the Trust as from time to time amended, which are incorporated by
reference herein. In particular, the shares represented by this certificate are
transferable by the holder in person or by his duly authorized attorney, but
only on surrender of this certificate properly endorsed and when the transfer
is made on the books of the Trust.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST FOR
FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT -____________Custodian___________
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors Act
in common _________________________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
FOR VALUE RECEIVED, ________________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
| |
|______________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of The Fahnestock Funds represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said shares on the Books of the said Trust with full power of
substitution in the premises.
Dated:______________________________________(Sign Here)_________________________
Signature Guaranteed By:
____________________________________
NOTICE: The Signature to this Assignment must correspond with the name as
written upon the face of this certificate, in every particular, without
alteration, or any change whatever.
<PAGE>
<PAGE>
NUMBER SHARES
- ------ ------
- ------ ------
THE FAHNESTOCK FUNDS
A Business Trust Organized Under the Laws of the Commonwealth of Massachusetts
THIS CERTIFIES that HUDSON CAPITAL APPRECIATION CLASS N
is the holder of
_____________________________
| |
| CUSIP 303128300 |
|___________________________|
SEE REVERSE SIDE FOR CERTAIN
DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST ($.01 PAR VALUE)
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. The
aforesaid holder is entitled to require the Trust to purchase all or any part of
the shares represented by this certificate at net asset value, all as more fully
set forth on the reverse of this certificate.
Witness the seal of the Trust and the signatures of its duly authorized
officers.
THE FAHNESTOCK FUNDS Dated:
SEAL
/s/ RUSSELL L. POLLACK MASSACHUSETTS /s/ ALBERT G. LOWENTHAL
- ----------------------- -----------------------
SECRETARY 1990 CHAIRMAN
COUNTERSIGNED
Investors Fiduciary Trust Company: TRANSFER AGENT
BY
________________________________________________________
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
THE FAHNESTOCK FUNDS
The registered holder of this certificate is entitled to all the rights,
interest and privileges of a shareholder as provided by the Declaration of Trust
and By-Laws of the Trust as from time to time amended, which are incorporated by
reference herein. In particular, the shares represented by this certificate are
transferable by the holder in person or by his duly authorized attorney, but
only on surrender of this certificate properly endorsed and when the transfer
is made on the books of the Trust.
SEE CURRENT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST FOR
FURTHER INFORMATION CONCERNING REDEMPTION OF SHARES.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT -____________Custodian___________
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors Act
in common _________________________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
FOR VALUE RECEIVED, ________________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
| |
|______________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of The Fahnestock Funds represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said shares on the Books of the said Trust with full power of
substitution in the premises.
Dated:______________________________________(Sign Here)_________________________
Signature Guaranteed By:
____________________________________
NOTICE: The Signature to this Assignment must correspond with the name as
written upon the face of this certificate, in every particular, without
alteration, or any change whatever.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
March 5, 1991
Amended and Restated effective April 14, 1997
Fahnestock & Co. Inc.
110 Wall Street
New York, New York 10005
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned The Fahnestock Funds (the "Trust"), a
business trust created under the laws of the Commonwealth of Massachusetts, has
agreed that Fahnestock & Co. Inc. ("Fahnestock") shall be, for the period of
this Agreement, the distributor of shares of beneficial interest ("Shares") of
the Trust.
1. Services as Distributor
1.1 Fahnestock will act as agent for the distribution
of shares of each series of Shares of the Trust covered by the Trust's
registration statement on Form N-1A (the "Registration Statement") under the
Securities Act of 1933 (the "1933 Act"), and the Investment Company Act of 1940,
as amended (the "1940 Act").
1.2 Fahnestock agrees to use its best efforts to
solicit orders for the sale of Shares of each series of the Trust which are
being publicly offered at the public offering price, as determined in accordance
with the Registration Statement, and will undertake such advertising and
promotion as it believes is reasonable in connection with such solicitation.
Fahnestock agrees to bear all selling expenses, including the cost of printing
prospectuses and statements of additional information and distributing them to
prospective shareholders.
1.3 All activities by Fahnestock as distributor of
the Trust's shares shall comply with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted by the
Securities and Exchange Commission (the "SEC") or by any securities association
registered under the Securities Exchange Act of 1934.
1.4 Fahnestock will provide one or more persons
during normal business hours to respond to telephone questions concerning the
Trust and each series of its Shares offered to the public by Fahnestock.
<PAGE>
<PAGE>
1.5 Fahnestock acknowledges that, whenever in the
judgment of the Trust's officers such action is warranted for any reason,
including, without limitation, market, economic or political conditions, those
officers may decline to accept any orders for or make any sales of, the Trust's
Shares or the Shares of a particular series of the Trust's Shares until such
time as those officers deem it advisable to accept such orders and to make such
sales.
1.6 Fahnestock will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others.
1.7 As promptly as is possible after the last day of
each month this Agreement is in effect, the Trust may reimburse Fahnestock for
certain expenses incurred by Fahnestock in connection with the offering and
sales of the Trust's Shares ("distribution expenses") under this Agreement and
the provision of shareholder services ("service expenses"); provided that
payment shall be made in any month only to the extent that such payment,
together with any other payments made by the Trust pursuant to its applicable
Distribution Plan adopted in accordance with Rule 12b-1 under the 1940 Act
(each, a "Plan"), shall not exceed the amount permitted under such Plan. If
distribution or service expenses incurred during a month are not fully
reimbursed by said monthly payment, the unpaid portion of the expenses may be
carried forward for payment by the Trust at the end of the following month(s)
and interest, at the end prevailing broker loan rate, may be charged thereon,
but only if such payment would not cause the particular series or class of
shares to exceed for that month the monthly or annual limitations on
distribution or service expenses stated in its Plan. The reimbursement by the
Trust of distribution and service expenses incurred by Fahnestock is authorized
pursuant to the Plans.
Expenses incurred in connection with promotional activities
will be identified to the series or class involved, although it is anticipated
that some promotional activities will be conducted in respect of all series or
classes in common, with the result that expenses incurred in connection with
those activities will not be identifiable to any particular series or class. In
the latter case, expenses will be allocated among the series or classes on the
basis of their relative net assets.
For purposes of this Agreement, "distribution expenses" and
"service expenses" of Fahnestock shall mean those expenses borne by Fahnestock,
or by any other person with which Fahnestock has an agreement, for which
reimbursement is contemplated in the various Plans.
1.8 Each written request for reimbursement under
section 1.7 shall be directed to the Treasurer of the Trust and shall show in
reasonable detail the expenses incurred by Fahnestock.
<PAGE>
<PAGE>
1.9 Fahnestock shall prepare and deliver reports to the
Treasurer of the Trust, for review by the Trustees, on a regular, at least
quarterly, basis showing the distribution and/or service expenses expected to be
incurred in the ensuing quarter pursuant to this Agreement and the Plan and the
purposes therefor. Fahnestock shall also prepare and deliver reports to the
Treasurer of the Trust, for review by the Trustees, in a regular, at least
quarterly, basis showing the distribution and/or service expenses actually
incurred in the past quarter, as well as any supplemental reports as the
Trustees, from time to time, may reasonably request.
1.10 Fahnestock acknowledges that payments under the Plans are
subject to the approval of the Trust's Board of Trustees and that the Trust is
not contractually obligated to make payments in any amount or at any time,
including those in reimbursement of Fahnestock for expenses and interest thereon
incurred in a prior month or year.
2. Duties of the Trust
2.1 The Trust agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with the qualification of the Trust's
Shares for sale in those states that Fahnestock may designate.
2.2 The Trust shall furnish from time to time, for use in
connection with the sale of the Trust's Shares, such information and reports
with respect to the Trust and its shares as Fahnestock may reasonably request,
all of which shall be signed by one or more of the Trust's duly authorized
officers; and the Trust warrants that the statements contained in any such
reports, when so signed by one or more of the Trust's officers, shall be true
and correct. The Trust shall also furnish Fahnestock upon request with: (a)
annual audits of the Trust's books and accounts made by independent public
accountants regularly retained by the Trust, (b) semi-annual unaudited financial
statements pertaining to the Trust and each of its series, (c) quarterly
earnings statements prepared by the Trust for each of its series, (d) a monthly
itemized list of the securities in the portfolio of each series of the Trust,
(e) monthly balance sheets for the Trust and each of its series as soon as
practicable after the end of each month and (f) from time to time such
additional information regarding the financial condition of the Trust and each
of its series as Fahnestock may reasonably request.
3. Representations and Warranties
The Trust represents to Fahnestock that the Registration
Statement, including the prospectuses and statement of additional information
forming parts thereof, has been prepared in conformity with the requirements of
the 1933 Act and
<PAGE>
<PAGE>
1940 Act, and the rules and regulations of the SEC thereunder. As used in this
Agreement, the terms "Registration Statement", "prospectus" and "statement of
additional information" shall mean any registration statement, prospectus and
statement of additional information filed by the Trust with the SEC and any
amendments and supplements thereto which at any time shall have been filed with
the SEC. The Trust represents and warrants to Fahnestock that the Registration
Statement, when such becomes effective, will include all statements required to
be contained therein in conformity with the 1933 Act, the 1940 Act and the rules
and regulations of the SEC; that all statements of fact contained in the
Registration Statement will be true and correct when such becomes effective; and
that the Registration Statement when such becomes effective will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading to
a purchaser of Shares of the Trust or any of its series. Fahnestock may, but
shall not be obligated to, propose from time to time such amendment or
amendments to the Registration Statement and such supplement or supplements to
any prospectus or statement of additional information as, in the light of future
developments, may, in the opinion of Fahnestock's counsel, be necessary or
advisable. If the Trust shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Trust of a
written request from Fahnestock to do so, Fahnestock may, at its option,
terminate this Agreement. The Trust shall not file any amendment to the
Registration Statement or supplement to any prospectus or statement of
additional information without giving Fahnestock reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall in
any way limit the Trust's right to file at any time such amendments to the
Registration Statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Trust may deem advisable,
such right being in all respects absolute and unconditional.
4. Indemnification
4.1 The Trust authorizes Fahnestock and any dealers
with whom Fahnestock has entered into dealer agreements to use any prospectus or
statement of additional information furnished by the Trust from time to time, in
connection with the sale of the Shares of the Trust and any of its series of
Shares. The Trust agrees to indemnify, defend and hold Fahnestock, its several
officers and directors, and any person who controls Fahnestock within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Fahnestock, its officers and
directors, or any such controlling person, may incur under the 1933 Act, the
1940 Act or common law or otherwise, arising out of or based upon any untrue
statement or alleged
<PAGE>
<PAGE>
untrue statement of a material fact contained in the Registration Statement, any
prospectus or any statement of additional information, or arising out of or
based upon any omission or alleged omission to state a material fact required to
be stated in the Registration Statement, any prospectus or any statement of
additional information, or necessary to make the statements in any of them not
misleading; provided, however , that the Trust's agreement to indemnify
Fahnestock, its officers or directors, and any such controlling person shall not
be deemed to cover any claims, demands, liabilities or expenses arising out of
or based upon any statements or representations made by Fahnestock or its
representatives or agents other than such statements and representations as are
contained in the Registration Statement, prospectus or statement of additional
information and in such financial and other statements as are furnished to
Fahnestock pursuant to paragraph 2.2 hereof; and further provided that the
Trust's agreement to indemnify Fahnestock and the Trust's representations and
warranties hereinbefore set forth in paragraph 3 shall not be deemed to cover
any liability to the Trust or its shareholders to which Fahnestock would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of Fahnestock's
reckless disregard of its obligations and duties under this Agreement. The
Trust's agreement to indemnify Fahnestock, its officers and directors, and any
such controlling person, as aforesaid, is expressly conditioned upon the Trust's
being notified of any action brought against Fahnestock, its officers or
directors, or any such controlling person, such notification to be given by
letter or by telegram addressed to the Trust at its principal office in New
York, New York and sent to the Trust by the person against whom such action is
brought, within ten days after the summons or other fist legal process shall
have been served. The failure so to notify the Trust of any such action shall
not relieve the Trust from any liability that the Trust may have to the person
against whom such action is brought by reason of any such untrue or alleged
untrue statement or omission or alleged omission otherwise than on account of
the Trust's indemnity agreement contained in this paragraph 4.1. The Trust will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Trust and approved by Fahnestock. In the
event the Trust elects to assume the defense of any such suit and retain counsel
of good standing approved by Fahnestock, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained by any
of them; but in case the Trust does not elect to assume the defense of any such
suit, or in case Fahnestock does not approve of counsel chosen by the Trust, the
Trust will reimburse Fahnestock, its officers and directors, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Fahnestock or them. The Trust's
indemnification agreement contained in this paragraph 4.1 and the Trust's
representations and warranties in this Agreement shall remain
<PAGE>
<PAGE>
operative and in full force and effect regardless of any investigation made by
or on behalf of Fahnestock, its officers and directors, or any controlling
person, and shall survive the delivery of any of the Shares of the Trust or any
of its series. This agreement of indemnity shall inure exclusively to
Fahnestock's benefit, to the benefit of its several officers and directors, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees to notify Fahnestock promptly of the
commencement of any litigation or proceeding against the Trust or any of its
officers or trustees in connection with the issuance and sale of any of the
Shares of the Trust or any of its series of Shares.
4.2 Fahnestock agrees to indemnify, defend and hold the Trust,
its several officers and trustees, and any person who controls the Trust within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the Trust, its officers or trustees
or any such controlling person may incur under the 1933 Act, the 1940 Act or
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or trustees or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any unauthorized sales literature, advertisements, information, statements or
representations or (b) any untrue or alleged untrue statement of a material fact
contained in information furnished in writing by Fahnestock to the Trust and
used in the answers to any of the items of the Registration Statement, or shall
arise out of or be based upon any omission or alleged omission to state a
materials fact in connection with such information furnished in writing by
Fahnestock to the Trust and required to be stated in such answers or necessary
to make such information not misleading. Fahnestock's agreement to indemnify the
Trust, its officers and trustees, and any such controlling person, as aforesaid,
is expressly conditioned upon fahnestock's being notified of any action brought
against the Trust, its officers or trustees, or any such controlling person,
such notification to be given by letter or telegram addressed to Fahnestock at
its principal office in New York, New York and sent to Fahnestock by the person
against whom such action is brought within ten days after the summons or other
first legal process shall have been served. Fahnestock shall have the right of
first control of the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on Fahnestock's part; in any other event, the Trust,
its officers or trustees or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such action. The
failure so to notify Fahnestock of any such action shall not relieve Fahnestock
from any liability that Fahnestock may have to the Trust, its officers or
trustees, or to such controlling person by reason of
<PAGE>
<PAGE>
any such untrue or alleged untrue statement or omission or alleged omission
other wise than on account of Fahnestock's indemnity agreement contained in this
paragraph 4.2. Fahnestock agrees to notify the Trust promptly of the
commencement of any litigation or proceedings against Fahnestock or any of its
officers or directors in connection with the issuance and sale of any of the
Shares of the Trust or any of its series of Shares.
5. Effectiveness of Registration
None of the Shares of the Trust or any of its series
shall be offered by either Fahnestock or the Trust under any of the provisions
of this Agreement and no orders for the purchase or sale of the Shares hereunder
shall be accepted by the Trust or its agents if and so long as the effectiveness
of the Registration Statement or any necessary amendments thereto shall be
suspended under any of the provisions of the 1933 Act or if and so long as a
current prospectus as required by Section 5(b)(2) of the 1933 Act is not on file
with the SEC with respect to such Shares; provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Trust's obligation to repurchase Shares of the Trust or
any of its series of Shares from any shareholder in accordance with the
provisions of the prospectuses or statements of additional information for the
Trust or any of its series of Shares of the Trust's declaration of trust.
6. Notice to Fahnestock
The Trust agrees to advise Fahnestock immediately
in writing:
(a) of any request by the SEC for amendments to the
Registration Statement, prospectus or statement of additional information then
in effect with respect to the Trust or any of its series of Share or for
additional information;
(b) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue
any statement of a material fact made in the Registration Statement then in
effect or that requires the making of a change in the Registration Statement in
order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any
amendment to the Registration Statement which may from time to time be filed
with the SEC.
7. The Trust hereby acknowledges that Fahnestock and
Fahnestock-Viner Holdings, Inc. ("FVH"), its parent, each has a proprietary
right and interest in the name "Fahnestock" and
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<PAGE>
agrees that the name "Fahnestock" will be used by it only so long as this
agreement or any extension, renewal or amendment of this agreement remains in
effect. In the event that Fahnestock ceases to be the distributor of Shares of
the Fund and that the successor distributor of Shares is not affiliated with
FVH, the Trust agrees that, to the extent that it is legally able to do so, the
Fund will cease to use the name "Fahnestock" and will not use the name
"Fahnestock" or any other name indicating that its shares are distributed by or
otherwise connected with Fahnestock or FVH. The Trust further acknowledges and
agrees that Fahnestock and FVH may grant the nonexclusive right to use the name
"Fahnestock" or any similar names to any other corporation or entity, including
but not limited to any investment company of which Fahnestock or any affiliate
of FVH, or any successor to the business of Fahnestock or such affiliate, shall
be the investment adviser or the distributor.
8. Term of Agreement
This Agreement shall continue until March 5, 1993 and
thereafter shall continue automatically for successive annual periods ending on
March 5th of each year, provided that such continuance is specifically approved
at least annually by (a) the Trust's board of Trustees or (b) a vote of a
majority (as defined int he 1940 Act) of the Trust's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Trustees of the Trust who are not interested persons (as defined
in the 1940 Act) of any party to this Agreement, by vote case in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' written notice, by the Trust's Board of
Trustees or by vote of the holders of a majority of the Trust's Shares, or on 90
days' written notice, by Fahnestock. This agreement shall also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
This distribution Agreement is made by the Trustees, and
executed on their behalf by the undersigned officer, not individually, but as
Trustees under the Trust's declaration of trust, and the obligations of the
Trust of any of its series of Shares are not binding upon any of the Trustees or
Shareholders individually, but bind only the Trust property or the Trust
property of the applicable series of its Shares.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
<PAGE>
<PAGE>
Very truly yours,
THE FAHNESTOCK FUNDS
By:/s/ Albert G. Lowenthal
-------------------------------
Albert G. Lowenthal, President
Accepted and Agreed to:
FAHNESTOCK & CO. INC.
By:/s/ Albert G. Lowenthal
----------------------------------
Albert G. Lowenthal, CEO
<PAGE>
<PAGE>
Exhibit 9(c)
SUB-ADMINISTRATION AGREEMENT
AGREEMENT, made as of this 1st day of October, 1996, by and
between FAHNESTOCK & CO. INC., a New York corporation ("Fahnestock") and
FEDERATED ADMINISTRATIVE SERVICES, a Delaware business trust ("FAS").
WHEREAS, Fahnestock serves as Administrator and Distributor to
various entities registered as open-end management investment companies under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Fahnestock desires to retain FAS to assist in
rendering administrative services to such investment companies and/or such
separate and distinct portfolio or portfolios as may from time to time be
created and designated thereby, each of which is listed in Schedule A hereto
(each a "Fund" and, collectively, the "Funds"), and FAS is willing to render
such services on the terms hereinafter set forth;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. Fahnestock hereby appoints FAS to act as its
Sub-Administrator in respect of the Funds for the period and on the terms set
forth in this Agreement. FAS accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Duties as Sub-Administrator. FAS shall, on a continuous
basis, furnish Fahnestock with such administrative services with respect to the
Funds as set forth on Schedule B to this Agreement, or such additional services
as agreed to from time to time, in writing, by Fahnestock and FAS. It is
understood by the parties: (a) that counsel to the Funds (currently, Faith
Colish, P.C.) provides legal and corporate secretarial services to the Funds;
and (b) that the responsibilities of FAS are limited solely to the services
specifically listed on Schedule B hereto.
3. Allocation of Expenses. Except as herein otherwise
provided, FAS shall bear all expenses in connection with the performance of its
services under this Agreement.
FAS shall not be required to pay, and Fahnestock and/or each
respective Fund, as applicable, shall assume and pay, any of the following
expenses incurred by the Funds, or in connection
<PAGE>
<PAGE>
with the administration of the Funds: shareholder servicing expenses; costs of
preparing, printing and mailing stock certificates, prospectuses, sales
literature, proxies, reports and notices; interest on borrowed money; taxes and
fees payable to Federal, state and other governmental agencies; fees of Trustees
of the Funds; outside auditing and legal expenses; postage and courier expenses;
travel expenses; insurance premiums; trade association dues; or other expenses
not specified in this Article 3 which may be properly payable by a Fund and/or
Fahnestock, as applicable.
4. Compensation of FAS.
(a) For the services to be rendered and the payments to be
made by FAS, as provided in Articles 2 and 3 hereof, FAS shall
receive from Fahnestock an annual fee, payable monthly,
computed as specified in Schedule A hereto. It is expressly
understood and agreed that such fee shall be paid solely by
Fahnestock and, except as expressly provided in Article 3
hereof, no Fund shall incur any liability or obligation by
reason of this Agreement.
(b) Fee Accrual and Payment. Remuneration under this Agreement
shall begin to accrue on the date hereof. The fee for the
previous calendar month shall be paid in a timely manner,
provided that in the event this Agreement is terminated as of
a date other than the last day of a calendar month, the fee
shall be computed pursuant to paragraph (c) of this Article 4
and paid on the effective date of such termination.
(c) Proration. If this Agreement commences on any date other
than the first day of a calendar month, the fee payable with
respect to such initial fractional calendar month shall be
prorated according to the proportion that such period bears to
the full calendar monthly period.
5. Limitation of Liability.
(a) FAS shall not be liable for any error of judgment or
mistake of law or for any loss suffered by Fahnestock, a Fund,
or a Fund's Trustees in connection with the performance of its
obligations and duties under this Agreement, except a loss
resulting from willful misfeasance, bad faith or gross
negligence in the performance of such obligations and duties,
or by reason of a reckless disregard thereof.
(b) FAS, and the companies controlling, controlled by, and
under common control with FAS, shall be kept indemnified and
held harmless by Fahnestock and be without liability for any
action taken or thing done by
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them: (i) in reliance on any information concerning the
Funds furnished by Fahnestock or its agent(s); and (ii)
in performing the sub-administrative services in
accordance with the above standards.
6. Duration and Termination. The initial term of this
Agreement shall commence on the date hereof, and extend for a period of three
years. Thereafter, this Agreement shall be automatically renewed each year for
an additional term of one year, unless notice of termination has been delivered
by either party to the other no less than six months before the beginning of any
such additional term. Notwithstanding the foregoing, this Agreement may be
terminated by FAS upon sixty days' written notice to Fahnestock.
7. Representations and Warranties. Fahnestock and FAS each
hereby represents and warrants to the other that it has all requisite authority
to enter into, execute, deliver, and perform its obligations under this
Agreement and that, with respect to it, this Agreement is legal, valid, and
binding and enforceable in accordance with its terms.
8. Non-Exclusivity. The services of FAS to Fahnestock and/or
the Funds hereunder are not to be deemed exclusive and FAS shall be free to
render similar or other services to others.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to conflicts of law principles thereof.
10. Notices. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, to Fahnestock & Co. Inc., 110 Wall Street, New York, New York
10005, Attention: Albert Lowenthal (if such notice is given by FAS), or to
Federated Administrative Services, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, Attention: Ronald M. Petnuch.
11. Amendments. This Agreement or any of the schedules
attached hereto may be amended upon written agreement between the parties. Any
such amendments shall be signed by both Fahnestock and FAS.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers thereunto duly authorized as of the
day and year first above written.
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<PAGE>
ATTEST: FAHNESTOCK & CO. INC.
/s/ Teresa Cafaro /s/ Albert G. Lowenthal
- ----------------------------- -----------------------------
By: Albert G. Lowenthal
Title: Chairman and CEO
ATTEST: FEDERATED ADMINISTRATIVE
SERVICES
/s/ C. Todd Gibson /s/ Ronald M. Petnuch
- ----------------------------- -----------------------------
By: Ronald M. Petnuch
Title: Senior Vice President
<PAGE>
<PAGE>
Schedule A to Sub-Administration Agreement
List of Funds/Fee Schedule
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Fund Fee
- -------------------------------------------------------------------------------------------------
The Fahnestock Funds MAX. ADMIN. AVERAGE DAILY
Hudson Capital Appreciation FEE NET ASSETS OF
Fund THE FUND
<S> <C> <C>
.15% on the first $250 million
.125% on the next $250 million
.100 on the next $250 million
.075 on assets in excess of
$750 million
MINIMUM FEE (PER FUND)=$75,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
Schedule B to Sub-Administration Agreement
List of Administrative Services
FINANCIAL REPORTING AND ADMINISTRATION
Review transfer agent's monthly reports for compliance with fund asset
diversification requirements and Subchapter M.
Coordinate Annual and Semi-Annual Reports: (a) Gather financial
information for the Fund audit and prepare schedules and summary sheet
for audit; (b) draft (and review) financial statements excluding
portfolio holdings list prepared by Fahnestock; and (c) put the
portfolio holdings list into a financial statement format and reconcile
to the adjusted trial balance.
Provide quarterly schedules on capital share activity and
average net assets for the quarter to Fahnestock.
Prepare annual fund budget (i.e., fund expense projections) and
periodically review fund expenses.
Calculate investment advisory fee and arrange for payment
with Fund's custodian/transfer agent.
Coordinate with auditors calculation of required dividends
and distributions to shareholders.
Calculate sub-administration fee and arrange for payment
with Fund's custodian/transfer agent.
Coordinate payment of dividends and distributions with
transfer agent.
Monitor the Fund for wash sales: Monitor quarterly reports
from transfer agent.
LEGAL ADMINISTRATION
Review corporate calendar prepared by fund counsel.
Circulate Fund contracts for execution, including investment
advisory contract, sub-administration contract, transfer agency
contract, and custodian contract, and respective exhibits thereto.
Review drafts of agendas and minutes for Board of Trustees
meetings.
Maintain minute books.
Review SEC filing calendar with counsel.
Review N-1A filings with counsel and auditors.
Review 24f-2 and 24e-2 filings.
Review and transmit Form N-SAR to SEC via EDGAR.
Review proxy statements.
Review of Annual and Semi-Annual Reports of the Fund.
Assist in negotiation of contracts with suppliers including
printers.
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EXHIBIT 11
COOPERS Coopers & Lybrand L.L.P.
& LYBRAND a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 9
to the Registration Statement of the Hudson Capital Appreciation Fund (a series
of The Fahnestock Fund) on Form N-1A of our report dated February 17, 1997 on
our audits of the financial statements and financial highlights of the Hudson
Capital Appreciation Fund, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1996 which is incorporated by
reference in the Post-Effective Amendment to the Registration Statement. We also
consent to the reference in the Statement of Additional Information to our Firm
under the caption "Independent Auditors and Counsel."
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
April 14, 1997
<PAGE>
<PAGE>
Exhibit 15.1
DISTRIBUTION PLAN
(as amended and restated as of April 14, 1997)
This Distribution Plan (the "Plan") is adopted in accordance
with Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as
amended (the "Act"), by the Fahnestock Funds, a business trust created under the
laws of the Commonwealth of Massachusetts (the "Trust"), subject to the
following terms and conditions:
Section 1. Reimbursement of Expenses.
The Trust will reimburse the distributor of its shares,
Fahnestock & Co. Inc., a New York corporation ("Fahnestock"), for certain
expenses incurred by Fahnestock in connection with the offering and sale of
Class A shares of beneficial interest ("Class A Shares") of the Hudson Capital
Appriciation series of the Trust's shares (the "Fund"). The Trust may reimburse
Fahnestock for distribution expenses at an annual rate not exceeding .50% of the
average daily net value of those assets in the Fund which are represented by
Class A Shares and which have been continuously included in its portfolio for
four (4) years or less; no reimbursement for distribution expenses will be
payable during the fiscal year of the Fund with respect to the portion of its
assets represented by Class A Shares which has been continuously included in its
portfolio for more than four (4) years, as measured by the net asset value of
all Class A Shares of the Fund which have been continuously outstanding for a
period of four (4) years or more as of the last day of its preceding fiscal
year. Distribution expenses incurred in a year in excess of .50% of the daily
net asset value of those assets in the Fund which are represented by Class A
Shares and which have been included in its portfolio for a period of four (4)
years or less may be carried forward and sought to be reimbursed in future
years. Interest at the prevailing broker loan rate may be charged to the Trust
on behalf of the Fund on any expenses carried forward.
Section 2. Expenses Covered by the Plan.
The Trust may reimburse Fahnestock under Section 1 of the Plan
for any expenses primarily intended to result in the sale of the Fund's Class A
Shares, including, but not limited to: (a) the continuing compensation to
Fahnestock's account representatives and others who engage in or support
distribution of Class A Shares; (b) payments to persons who service Class A
shareholder accounts, including, but not limited to, answering routine inquiries
regarding the Trust or the Fund, processing shareholder transactions and
providing any other shareholder services not otherwise provided by the Trust's
transfer agent;
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(c) costs relating to the formation and implementation of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
costs of printing and distributing prospectuses, statements of additional
information and reports of the Fund to prospective Class A shareholders of the
Fund; (e) costs involved in preparing, printing and distributing sales
literature pertaining to Class A Shares; and (f) costs involved in obtaining
whatever information analyses and reports with respect to marketing and
promotional activities that the Trust may, from time to time, deem advisable
with respect to the Funds.
Section 3. Approval by Shareholders.
The Plan will not take effect, and no fee will be payable in
accordance with Section 1 of this Plan with respect to the Fund, until the Plan
has been approved by a vote of at least a majority of the outstanding Class A
voting securities of that Fund. Except as otherwise provided or under applicable
law, the Plan will be deemed to have been approved with respect to the Fund so
long as a majority of the outstanding Class A voting securities of the Fund
votes for the approval of the Plan, notwithstanding that: (a) the Plan has not
been approved by a majority of the outstanding voting securities of any other
Class of the Fund, or (b) the Plan has not been approved by a majority of the
outstanding voting securities of the Trust.
Section 4. Approval by Trustees.
Neither the Plan nor any related agreements will take effect
until approved by a majority vote of both (a) the full Board of Trustees of the
Trust and (b) those Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to it (the "Qualified Trustees"), cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
Section 5. Continuation of the Plan.
The Plan will continue in effect until December 20, 1991 and
thereafter for so long as its continuance is specifically approved at least
annually by the Trust's Board of Trustees in the manner described in Section 4
above.
Section 6. Termination.
The Plan may be terminated with respect to the Fund at any
time without penalty by a majority vote of the Qualified Trustees or by vote of
a majority of the outstanding Class A voting securities of the Fund. The Plan
may remain in effect with respect to the Fund even if the Plan has been
terminated in accordance with this Section 6, or not continued in accordance
<PAGE>
<PAGE>
with Section 5, with respect to the Fund.
Section 7. Amendments.
The Plan may not be amended so as to increase materially the
amount of the fee described in Section 1 above, unless the amendment is approved
by a vote of at least a majority of the outstanding Class A voting securities of
the Fund involved. In addition, no material amendment to the Plan may be made
unless approved by the Trust's Board of Trustees in the manner described in
Section 4 above.
Section 8. Selection of Certain Trustees.
While the Plan is in effect, the selection and nomination of
the Fund's Trustees who are not interested persons of the Fund will be committed
to the discretion of the Trustees then in office who are not interested persons
of the Trust or the Fund.
Section 9. Written Reports.
In each year during which the Plan remains in effect, any
person authorized to direct the disposition of monies paid or payable by the
Trust pursuant to the Plan or any related agreement will prepare and furnish to
the Fund's Board of Trustees, and the Board will review, at least quarterly,
written reports, complying with the requirements of the Rule which set out the
amounts expended under the Plan with respect to the Fund and purposes for which
those expenditures were made.
Section 10. Preservation of Materials.
The Trust will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section 9 above for a
period of not less than six years (the first two years in an easily accessible
place) from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the Act and the rules and regulations under
the Act, subject to any exemption that may be granted to the Trust under the Act
by the Securities and Exchange Commission.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Trust has adopted the Plan as of
December 20, 1990 and amended it as of April 14, 1997.
THE FAHNESTOCK FUNDS
By:/s/ Albert G. Lowenthal
---------------------------------
Albert G. Lowenthal, President
<PAGE>
<PAGE>
Exhibit 15.2
DISTRIBUTION PLAN - CLASS B SHARES
This Distribution Plan (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"Act"), by the Fahnestock Funds, a business trust created under the laws of the
Commonwealth of Massachusetts (the "Trust"), subject to the following terms and
conditions:
Section 1. Reimbursement of Expenses.
The Trust will reimburse the distributor of its shares, Fahnestock &
Co., Inc., a New York corporation ("Fahnestock"), for certain expenses incurred
by Fahnestock in connection with the distribution of Class B shares of
beneficial interest ("Class B Shares") of the Hudson Capital Appreciation series
of the Trust's shares (the "Fund") and the provision of shareholder services
with respect to such shares.
The Trust may reimburse Fahnestock for distribution expenses at an
annual rate not exceeding .75% of the average daily net value of the assets of
the Fund which are attributable to Class B Shares. In addition, the Trust may
reimburse Fahnestock for shareholder service expenses with respect to Class B
Shares at an annual rate not exceeding 0.25% of the average daily net value of
the assets of the Fund which are attributable to Class B Shares. Payments will
be made to Fahnestock under this Section 1 only from assets of the Fund
attributable to Class B Shares. Expenses incurred in a year in excess of such
rate may be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the Trust on
behalf of the Fund on any expense carried forward.
Section 2. Expenses Covered by the Plan.
Distribution Expenses. The Trust may reimburse Fahnestock under Section
1 of the Plan for any expenses primarily intended to result in the sale of the
Fund's Class B Shares, including but not limited to: (a) the continuing
compensation to Fahnestock's account representatives and others who engage in or
support distribution of Class B Shares; (b) payments to persons who service
Class B Shareholder accounts, including, but not limited to, answering routine
inquiries regarding the Trust or the Fund, processing shareholder transactions
and providing any other shareholder services not otherwise provided by the
Trust's transfer agent; (c) costs relating to the formation and implementation
of marketing and promotional activities,
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including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) costs of printing and
distributing prospectuses, statements of additional information and reports of
the Fund to prospective Class B shareholders of the Fund; (e) costs involved in
preparing, printing and distributing sales literature pertaining to Class B
Shares of the Fund; and (f) costs involved in obtaining whatever information
analyses and reports with respect to marketing and promotional activities that
the Trust may, from time to time, deem advisable with respect to the Funds.
Shareholder Service Expenses. The Trust may also reimburse Fahnestock
under Section 1 of the Plan for payments to broker-dealers and other persons and
organizations pursuant to arrangements whereby such persons provide various
shareholder services to holders of Class B Shares, including but not limited to
answering inquiries regarding the Trust or the Fund; assistance in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; assistance in processing purchase and redemption transactions;
providing periodic statements showing a Class B shareholder's account balance;
and the integration of such statements with those of other transactions and
balances in the shareholder's other accounts serviced by such person.
Section 3. Approval by Shareholders.
The Plan will not take effect, and no fee will be payable in accordance
with Section 1 of this Plan with respect to a particular Fund, until the Plan
has been approved by a vote of at least a majority of the outstanding Class B
voting securities of that Fund, provided, however, that no such shareholder
approval shall be required if the Plan is adopted prior to any public offering
of Class B Shares of the Fund or the sale of Class B Shares of the Fund to
persons who are not affiliated persons or promoters (or affiliated persons of
such persons) of the Trust or the Fund. Except as otherwise provided by or under
applicable law, the Plan will be deemed to have been approved with respect to a
Fund so long as the foregoing provision is satisfied, notwithstanding that: (a)
the Plan has not been approved by a majority of the outstanding voting
securities of any other Fund or of any other Class of the Fund, or (b) the Plan
has not been approved by a majority of the outstanding voting securities of the
Trust.
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Section 4. Approval by Trustees.
Neither the Plan nor any related agreements will take effect until
approved by a majority vote of both (a) the full Board of Trustees of the Trust
and (b) those Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan and the related agreements.
Section 5. Continuation of the Plan.
The Plan will continue in effect for one year from its effective date
and thereafter for so long as its continuance is specifically approved at least
annually by the Trust's Board of Trustees in the manner described in Section 4
above.
Section 6. Termination.
The Plan may be terminated with respect to a Fund at any time without
penalty by a majority vote of the Qualified Trustees or by a vote of a majority
of the outstanding Class B voting securities of the Fund.
Section 7. Amendments.
The Plan may not be amended so as to increase materially the amounts of
the fees described in Section 1 above, unless the amendment is approved by a
vote of at least a majority of the outstanding Class B voting securities of the
Fund. In addition, no material amendment to the Plan may be made unless approved
by the Trust's Board of Trustees in the manner described in Section 4 above.
Section 8. Selection of Certain Trustees.
While the Plan is in effect, the selection and nomination of the Fund's
Trustees who are not interested persons of the Fund will be committed to the
discretion of the Trustees then in office who are not interested persons of the
Trust or a Fund.
Section 9. Written Reports.
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to the Plan or any related agreement will prepare and furnish to the
Trust's Board of Trustees, and the Board will review, at least quarterly,
written reports complying with the requirements
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of the Rule which set out the amounts expended under the Plan and the purposes
for which these expenditures were made.
Section 10. Preservation of Materials.
The Trust will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above for a period of not
less than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the Act and the rules and regulations under the Act,
subject to any exemption that may be granted to the Trust under the Act by the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the Trust has adopted the Plan as of April 14,
1997.
THE FAHNESTOCK FUNDS
By:/s/ Albert G. Lowenthal
-----------------------------
Albert G. Lowenthal, President
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Exhibit 15.3
DISTRIBUTION PLAN - CLASS N SHARES
This Distribution Plan (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"Act"), by the Fahnestock Funds, a business trust created under the laws of the
Commonwealth of Massachusetts (the "Trust"), subject to the following terms and
conditions:
Section 1. Reimbursement of Expenses.
The Trust will reimburse the distributor of its shares, Fahnestock &
Co., Inc., a New York corporation ("Fahnestock"), for certain expenses incurred
by Fahnestock in connection with the distribution of Class N shares of
beneficial interest ("Class N Shares") of the Hudson Capital Appreciation series
of the Trust's shares (the "Fund") and the provision of shareholder services
with respect to such shares.
The Trust may reimburse Fahnestock for distribution and shareholder
service expenses with respect to Class N Shares at an annual rate not exceeding
0.25% of the average daily net value of the assets of the Fund which are
attributable to Class N Shares. Expenses incurred in a year in excess of such
rate may be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the Trust on
behalf of the Fund on any expense carried forward. Payments will be made to
Fahnestock under this Section 1 only from assets of the Fund attributable to
Class N Shares.
Section 2. Expenses Covered by the Plan.
Distribution Expenses. The Trust may reimburse Fahnestock under Section
1 of the Plan for any expenses primarily intended to result in the sale of the
Fund's Class N Shares, including but not limited to: (a) the continuing
compensation to Fahnestock's account representatives and others who engage in or
support distribution of Class N Shares; (b) payments to persons who service
Class N Shareholder accounts, including, but not limited to, answering routine
inquiries regarding the Trust or the Fund, processing shareholder transactions
and providing any other shareholder services not otherwise provided by the
Trust's transfer agent; (c) costs relating to the formation and implementation
of marketing and promotional activities, including, but not limited to, direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising; (d) costs of printing and distributing
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prospectuses, statements of additional information and reports of the Fund to
prospective Class N shareholders of the Fund; (e) costs involved in preparing,
printing and distributing sales literature pertaining to Class N Shares of the
Fund; and (f) costs involved in obtaining whatever information analyses and
reports with respect to marketing and promotional activities that the Trust may,
from time to time, deem advisable with respect to the Fund.
Shareholder Service Expenses. The Trust may also reimburse Fahnestock
under Section 1 of the Plan for payments to broker-dealers and other persons and
organizations pursuant to arrangements whereby such persons provide various
shareholder services to holders of Class N Shares, including but not limited to
answering inquiries regarding the Trust or the Fund; assistance in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; assistance in processing purchase and redemption transactions;
providing periodic statements showing a Class N shareholder's account balance;
and the integration of such statements with those of other transactions and
balances in the shareholder's other accounts serviced by such person.
Section 3. Certain Other Payments Authorized.
It is acknowledged that Fahnestock and/or the investment adviser to the
Fund (the "Investment Adviser"), an affiliated person of Fahnestock, may make
payments for their own account for expenses described in Section 2 or for
certain other expenses from their own resources, other than current investment
management fees. It is further acknowledged that the profits, if any, of the
Investment Adviser in relation to the Fund are dependent primarily upon the
management fees paid by the Fund. If and to the extent that any investment
management fees paid by the Fund might, in view of the foregoing, be considered
to be primarily intended indirectly to result in sales of Class N shares, such
payments are authorized by the Plan.
Section 4. Approval by Shareholders.
The Plan will not take effect, and no fee will be payable in accordance
with Section 1 of this Plan with respect to a particular Fund, until the Plan
has been approved by a vote of at least a majority of the outstanding Class N
voting securities of that Fund, provided, however, that no such shareholder
approval shall be required if the Plan is adopted prior to any public offering
of Class N
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Shares of the Fund or the sale of Class N Shares of the Fund to persons who are
not affiliated persons or promoters (or affiliated persons of such persons) of
the Trust or the Fund. Except as otherwise provided by or under applicable law,
the Plan will be deemed to have been approved with respect to a Fund so long as
the foregoing provision is satisfied, notwithstanding that: (a) the Plan has not
been approved by a majority of the outstanding voting securities of any other
Fund or of any other Class of the Fund, or (b) the Plan has not been approved by
a majority of the outstanding voting securities of the Trust.
Section 5. Approval by Trustees.
Neither the Plan nor any related agreements will take effect until
approved by a majority vote of both (a) the full Board of Trustees of the Trust
and (b) those Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan and the related agreements.
Section 6. Continuation of the Plan.
The Plan will continue in effect for one year from its effective date
and thereafter for so long as its continuance is specifically approved at least
annually by the Trust's Board of Trustees in the manner described in Section 5
above.
Section 7. Termination.
The Plan may be terminated with respect to a Fund at any time without
penalty by a majority vote of the Qualified Trustees or by a vote of a majority
of the outstanding Class N voting securities of the Fund.
Section 8. Amendments.
The Plan may not be amended so as to increase materially the amounts of
the fees described in Section 1 above, unless the amendment is approved by a
vote of at least a majority of the outstanding Class N voting securities of the
Fund. In addition, no material amendment to the Plan may be made unless approved
by the Trust's Board of Trustees in the manner described in Section 5 above.
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Section 9. Selection of Certain Trustees.
While the Plan is in effect, the selection and nomination of the Fund's
Trustees who are not interested persons of the Fund will be committed to the
discretion of the Trustees then in office who are not interested persons of the
Trust or a Fund.
Section 10. Written Reports.
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to the Plan or any related agreement will prepare and furnish to the
Trust's Board of Trustees, and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule which set out the
amounts expended under the Plan and the purposes for which these expenditures
were made.
Section 11. Preservation of Materials.
The Trust will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 10 above for a period of not
less than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
Section 12. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the Act and the rules and regulations under the Act,
subject to any exemption that may be granted to the Trust under the Act by the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the Trust has adopted the Plan as of April 14,
1997.
THE FAHNESTOCK FUNDS
By:/s/ Albert G. Lowenthal
-------------------------
Albert G. Lowenthal, President
4
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Exhibit 18
RULE 18-f.3 PLAN
THE FAHNESTOCK FUNDS
PLAN PURSUANT TO INVESTMENT COMPANY ACT RULE 18f-3
April 8, 1997
WHEREAS, to date The Fahnestock Funds, a Massachusetts business trust
(the "Trust") has issued only one class of shares, representing interests in its
Hudson Capital Appreciation Fund portfolio (the "Fund"), which shares have been
offered and sold only by Fahnestock & Co., Inc. ("Fahnestock"), as Distributor,
with a current maximum sales load of 4.5% of the public offering price and with
respect to which the Trust has adopted a Plan of Distribution under Investment
Company Act Rule 12b-1 providing for reimbursement of certain distribution
expenses in an amount not to exceed 0.50% of the daily average annual net asset
value of certain assets of the Fund; and
WHEREAS, the Trust's Board of Trustees has determined that it is in the
interest of the Trust and its shareholders to increase sales of Fund shares so
as to achieve economies of scale and facilitate the efficient operation of the
Fund and the management of the Fund's portfolio, and to hold and attract a high
quality of personnel; and
WHEREAS, the Board of Trustees has determined that it is therefore in
the interest of the Trust, the Fund, and is current and future shareholders to
create additional classes of shares with different arrangements for shareholder
services or the distribution of shares, or both;
NOW, THEREFORE, the following Plan is hereby adopted pursuant to
Investment Company Act Rule 18f-3.
1. Classes of Shares.
The Trust is hereby authorized to issue the following classes of
shares, having the characteristics set forth below:
1.1 Class A.
The class of shares heretofore issued by the Trust is hereby
designated Class A Shares. It shall continue to have the
following characteristics:
1.1.1 Initial Sales charge. The Class A Shares shall be
subject to a sales charge at the
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time of sale as stated in the then current prospectus
of the Fund with respect to said Class A Shares. Said
sales charges may be waived under the conditions
specified from time to time in the Fund's then
current Registration Statement on Form N-1A (the
"Registration Statement"). Class A Shares as to which
the initial sales charge has been waived may be
subject to a contingent deferred sales charge under
circumstances specified in the Registration
Statement.
1.1.2 12b-1 Plan. The Current Distribution Plan shall
continue to apply to the Class A Shares.
1.1.3 Distribution. The Class A Shares shall continue to be
sold by Fahnestock and any other broker-dealers with
whom Fahnestock may enter into a Selected Dealer's
Agreement.
1.1.4 Conversion. The Class A Shares shall not be
convertible into any other class of shares of the
Trust.
1.2 Class B.
The Trust shall issue Class B Shares of the Fund, which
shall have the following characteristics:
1.2.1 Initial Sales charge. The Class B Shares shall be
sold at net asset value and shall not be subject to a
sales charge at the time of sale.
1.2.2 Contingent Deferred Sales Charge ("CDSC"). The Class
B Shares shall be subject to a CDSC as specified in
the then current prospectus of the Fund with respect
to said Class B Shares. The CDSC may be waived under
the conditions specified from time to time in the
Registration Statement.
1.2.3 12b-1 Plan. The Class B Shares shall be subject to a
Plan of Distribution under Investment Company Act
Rule 12b-1 which shall provide for a reimbursement to
Fahnestock (a) at a maximum annual rate of 0.25% of
the average daily net asset value of the Fund
attributable to the Class B Shares for expenses of
providing personal service to Class B shareholders or
the maintenance of
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Class B shareholder accounts, or payments by
Fahnestock to others for such activities, and (b) at
a maximum annual rate of 0.75% of the average daily
net asset value of the Fund attributable to the Class
B Shares for other distribution expenses related to
Class B Shares.
1.2.4 Distribution. The Class B Shares shall be sold by
Fahnestock and any other broker-dealers with whom
Fahnestock may enter into a Selected Dealer's
Agreement.
1.2.5 Conversion. The Class B Shares shall not be
convertible into any other class of shares of the
Trust.
1.3 No-Load Class.
The Trust shall issue a No-Load Class of Shares of the
Fund, which may also be referred to as "Class N
Shares," and which shall have the following
characteristics:
1.3.1 Initial Sales charge. The Class N Shares shall be
sold at net asset value and shall not be subject to a
sales charge at the time of sale.
1.3.2 Contingent Deferred Sales Charge ("CDSC"). The Class
N Shares shall not be subject to a CDSC upon
redemption.
1.3.3 12b-1 Plan. The Class N Shares shall be issued
pursuant to a Distribution Plan providing for
reimbursement of expenses the maximum amount of 0.25%
of the average net assets of the Fund attributable to
the Class N Shares.
1.3.4 Distributor. Fahnestock shall be the principal
underwriter of the No-Load Shares, which shall be
offered to the public directly and through
arrangements with other broker-dealers selected by
Fahnestock and approved by the Board of Trustees of
the Trust from time to time.
1.3.5 Conversion. The Class N Shares shall not be
convertible into any other class of shares of the
Trust.
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2. Allocation of Expenses.
Except as expressly set forth above and as hereinafter
provided, each class shall bear the expenses of the
operation of the Fund based on the respective average daily
net asset value of such class. In addition to expenses that
are borne specifically by the separate Classes under their
respective Distribution Plans, the Trustees may allocate
certain other expenses ("Class Expenses") to specific
Classes as they deem appropriate. Class Expenses shall be
limited to shareholder servicing fees, transfer agency fees
identified by the Transfer Agent as attributable
specifically to holders of particular Classes of shares;
printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses and proxy material to current shareholders;
registration fees paid to the Securities and Exchange
Commission and to state securities commissions; expenses
related to administrative personnel and services as required
to support holders of specific Classes of shares; legal or
accounting fees relating solely to a particular Class or
Classes; and Trustees' fees incurred in connection with
issues relating solely to a particular Class or Classes.
Expenses may be waived or reimbursed by the Fund's
investment adviser, principal underwriter, or any other
provider of services to the Fund.
3. Voting Rights.
Each share, regardless of class, shall be entitled to one
vote on any matter submitted to the vote of shareholders,
provided, however, that if any matter would affect a
particular class differently from any other class, each
class shall vote separately on such matter, and provided,
further, that a matter that affects some, but not all,
classes, shall be submitted to a vote of only the class or
classes affected.
4. Allocation of Income and Realized and Unrealized Capital
Gains and Losses.
Subject to the provisions of Section 2 of this Plan relating
to allocation of expenses, all items of income, and all
realized and unrealized capital gains and losses shall be
allocated to each class in direct proportion to the
respective net asset value of such class in relation to the
net asset value of the Fund.
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5. Amendment of Plan.
This Plan may be amended from time to time by a majority
vote of the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Fund,
provided that no such amendment shall adversely affect the
holders of any outstanding shares of the Trust without the
vote of a majority of the holders of such class.
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