FAHNESTOCK FUNDS, 485BPOS, 1999-04-27

FAHNESTOCK FUNDS
485BPOS, 1999-04-27

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SECURITIES ACT FILE NO. 33-36697
INVESTMENT COMPANY ACT FILE NO. 811-6166

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]

Pre-Effective Amendment No. [_]

Post-Effective Amendment No. 13 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]

Amendment No. 15 [x]

(Check appropriate box or boxes)
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THE FAHNESTOCK FUNDS
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(Exact Name of Registrant as Specified in Charter)

125 Broad Street, New York, New York 10004
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(Address of Principal Executive Offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212) 668-8000

Albert G. Lowenthal
Fahnestock & Co. Inc
125 Broad Street
New York, New York 10004
(NAME AND ADDRESS OF AGENT FOR SERVICES)
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Copies to:

Faith Colish, A Professional Corporation
63 Wall Street
New York, New York 10005

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective (check appropriate box):

[_] immediately upon filing pursuant to paragraph (b)

[X] on May 1, 1999 pursuant to paragraph (b)

[_] 60 days after filing pursuant to paragraph (a)(1)

[_] on __________ pursuant to paragraph (a)(1)

[_] 75 days after filing pursuant to paragraph (a)(2)

[_] on (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.

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CLASS A SHARES
HUDSON CAPITAL CLASS B SHARES

APPRECIATION FUND 125 Broad Street
(A Series of The Fahnestock Funds) New York, New York 10004

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PROSPECTUS

May 1, 1999

Hudson Capital Appreciation Fund is the first (and, to date, the only) se-
ries of The Fahnestock Funds, a Massachusetts business trust (the "Trust").

The Fund seeks long term growth through capital appreciation by investing
primarily in equity securities. Current income is not an important consider-
ation.

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The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representa-
tion to the contrary is a criminal offense.
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THE FUND'S INVESTMENT OBJECTIVE AND GOAL

The principal objective of Hudson Capital Appreciation Fund is long-term capi-
tal appreciation through investment in equity securities.

THE PRINCIPAL STRATEGY USED BY THE FUND TO ACHIEVE THIS GOAL

. Opportunity Investing. To achieve this goal the Fund's Portfolio Manager,
James Gerson, uses the strategy of opportunity investing. This is a process in
which the Portfolio Manager looks for investments that he believes meet two
criteria:

. Value Element. The Portfolio Manager seeks to identify and invest in compa-
nies that he believes have a promising future and that may not have been ade-
quately recognized by the market. This typically involves comparison of the
market price of a company's stock with the company's net assets, historical
earnings, and cash flow and is sometimes referred to as "value investing."
Value investing means looking for investments that are low in price in rela-
tion to the Portfolio Manager's estimate of their actual value.

. Growth Element. At the same time the Portfolio Manager looks for companies
whose earnings are expected to grow faster than the earnings of other poten-
tial investment candidates. This involves looking at the prospects for the
industries that a company serves and its growth record.

The principal objective of the Fund's research activities is to identify com-
panies that have a promising future ("growth element") and can be purchased at
a reasonable price ("value element"). A company's ability to grow is deter-
mined by a review of the industry it serves; its historical ability to grow,
achieve high returns on capital, successfully introduce new products or enter
new markets; and its ability to build market share and maintain a healthy fi-
nancial condition. A company's value is determined by an analysis of its share
price in relation to its earnings, cash flow generation, and net assets, as
well as a comparison to a peer group of companies.

The opportunity to invest in companies that meet both of these criteria can
occur because of temporary or unusual circumstances that the Portfolio Manager
believes will be corrected. These opportunities may be caused by:

. results in similar companies which may not be relevant but nevertheless af-
fect market price,

. the temporary illiquidity of a stock,

. a negative earnings surprise or disappointment, or

. inadequate research coverage by Wall Street analysts.

The Portfolio Manager believes these conditions create an opportunity for in-
vestors with a long-term perspective to identify investments that may appreci-
ate.

. Small-Cap and Mid-Cap Investing. Often these opportunities occur in smaller
capitalization stocks which are not as liquid or as widely followed by Wall
Street analysts as larger companies. As a result the Portfolio Manager often
invests in small- and mid-cap companies. The Fund considers companies with a
market capitalization (price per share multiplied by outstanding shares) of
under $1 billion as small-cap, and companies between $1 billion and $5 billion
as mid-cap. However, the Fund's portfolio is not limited to small- and mid-cap
investments; from time to time a significant proportion may be invested in
large-capitalization stocks.

. Diversification.

. By industry. The Fund's portfolio is diversified as to industry categories.
Diversification tends to reduce the risk of sharp fluctuations in the value
of the Fund's entire portfolio.

. By company. For the same reasons the Fund does not invest more than 5% of
its assets in the securities of any one issuer.

-2-
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PRINCIPAL RISKS OF INVESTING IN THE FUND

. General market conditions. Most of the Fund's performance depends on what
happens in the stock market. The market's behavior depends, in turn, on a wide
variety of factors beyond the control of any money manager. It is unpredict-
able, particularly in the short term. Because of this, the value of your in-
vestment will rise and fall, and you could lose money.

. Risks related to Portfolio Manager's investment strategy.

. Effect of opportunity investment style. The Fund's Portfolio Manager seeks
investments in companies that may be less recognized in the market, with the
result that their price does not fully reflect his analysis of true value.
The fact that these securities are less well followed by securities analysts
results in a risk that they may not achieve the price-earnings multiples of
more popular investments, or the Portfolio Manager's analysis may be incor-
rect.

. Investment in small- and mid-cap companies. As indicated above, the Portfo-
lio Manager frequently (although not exclusively) selects small- and mid-cap
securities for the Fund. These types of investments may be more volatile than
securities of companies with larger market capitalization, resulting in the
risk of wider price swings in up-and-down market conditions. Also, some of
these small- and mid-cap securities are relatively thinly traded, which may
call for greater skill and make it difficult to acquire or dispose of posi-
tions quickly, without affecting the market price.

. Full investment policy. The Fund's Portfolio Manager does not attempt to
anticipate or predict broad market trends. The Fund therefore does not usu-
ally hold a significant part of its assets in cash or cash equivalents, such
as U.S. government securities. This means that the Fund is more exposed to
the risks of market fluctuations than investors holding substantial positions
of cash or cash equivalents.

. Risks related to the small size of the Fund.

. Single Portfolio Manager. A consequence of the small size of the Fund is
that it does not have a large staff of in-house research personnel or an in-
vestment committee that reviews proposed portfolio transactions. Mr. Gerson
is the only individual responsible for management of the Fund's portfolio.
However, if he were unavailable for a significant period of time, Hudson Cap-
ital Advisors, Inc. believes that it would be able to assign another experi-
enced individual to this responsibility.

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RISK/RETURN CHARTS AND TABLES

The bar chart below shows how the performance of the Fund's Class A Shares has
varied from year to year for the past seven calendar years.

[THE FOLLOWING IS REPRESENTED BY A BAR CHART]

1992 1993 1994 1995 1996 1997 1998

8.54% 17.77% -11.22% 18.94% 40.68% 42.88% -10.35%

During the seven-year period illustrated above, the highest return for a quar-
ter was +19.60% (September 30, 1997) and the lowest return for a quarter was
- -25.18% (September 30, 1998). The figures above do not reflect the sales charge
on Class A shares, but do include Fund expenses.

The following table shows the Fund's returns averaged over different periods
of time. It shows past performance only and does not predict future results.

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S&P 500 Index................................... 28.61% 24.07% 19.54%
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</TABLE>

* Inception date of 3/5/91.

-4-
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<TABLE>
<CAPTION>
Average Annual Total Returns (for the periods
ending 12/31/98) Past One Year Since Inception
--------------------------------------------- ------------- ---------------
<S> <C> <C>
Class B (after redemption fee)*.............. -15.10% 9.79%

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S&P 500 Index................................ 28.61% 35.14%
</TABLE>

* Inception date of 4/17/97.

The information on this and the prior page assumes that all distributions were
reinvested in the Fund.

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FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.

Shareholder Fees
(fees paid directly from your investment)

<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.50% 0%
Maximum Deferred Sales Charge (CDSC)
(as a percentage of original purchase price) or 1.00% 0%
Maximum Deferred Sales Charge (CDSC)
(as a percentage of redemption proceeds) 0% 5.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) 0% 0%
Redemption Fees (as a percentage of amount redeemed, if
applicable) 0% 0%
</TABLE>

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Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)

<TABLE>
<CAPTION>
Class A Class B
------- -------
<S> <C> <C>
Management Fee/1/ 1.00% 1.00%
12b-1 Fees/2/ 0.50% 1.00%
Other Expenses/3/ 0.68% 0.97%
----- -----
Total Fund Operating Expenses/4/ 2.18% 2.97%
</TABLE>

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These fees are the maximum direct charges imposed on Class A or Class B
shares. You may pay lower actual charges depending upon the amount invested or
method of investing. You will find more details on reduction or waiver of the
sales charge on pages 12 and 13 of this prospectus.

/1/The management fee is reduced to 0.75% per annum for assets of the Fund in
excess of $25,000,000. As of April 9, 1999, the Fund's net assets were ap-
proximately $25.5.

/2/The Class A 12b-1 fee is calculated based on assets that have been invested
in the Fund for four calendar years or less. This amount is then assessed,
pro rata, on all Class A shares. Therefore, if there are Class A assets that
have been invested in the Fund for more than four calendar years, the Fund
will pay a 12b-1 fee less than .50%. For the year 1998, the average Class A
12b-1 fee was 0.22%.

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/3/"Other Expenses" in the table include fees for shareholder services, custo-
dial fees, legal and accounting fees, printing costs and registration fees.

/4/Hudson Capital Advisors, Inc. has voluntarily undertaken to waive its man-
agement fee and to reimburse Other Expenses in order to cap Total Fund Ex-
penses at 2.00% for Class A shares and 2.50% for Class B shares.

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<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>
$661 $800 $1,101 $1,218 $1,567 $1,662 $2,850 $3,290
---- ---- ------ ------ ------ ------ ------ ------

You would pay the following expenses if you did not redeem your shares:

$661 $300 $1,161 $918 $1,567 $1,562 $2,850 $3,290
---- ---- ------ ------ ------ ------ ------ ------
</TABLE>

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INVESTMENT OBJECTIVES

The Fund's objective is to achieve long-term growth through capital apprecia-
tion by investing primarily in equity securities. Current income is not an im-
portant consideration. Although the Fund does not intend to change its objec-
tive, it reserves the right to do so without shareholder vote. The Fund's fun-
damental investment policies, which are stated in the Statement of Additional
Information, cannot be changed without shareholder vote.

PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

. Investment in companies whose value has not been fully recognized by the
marketplace. This is part of the opportunity investment strategy used by the
Fund's Portfolio Manager. The advantage of this type of investment is that it
offers the potential for appreciation. The Portfolio Manager seeks to identify
companies that may have had relatively little market attention. However, the
related risk is that other investors will continue to ignore the possibilities
of the securities selected by the Portfolio Manager, that recognition will not
come within a reasonable time, or that, for any other reason, initial expecta-
tions do not materialize.

Because investments are made based on both value and growth characteristics,
the Portfolio Manager seeks to manage this risk by selecting securities that
he believes will experience above-average earnings growth.

. Investment in companies whose earnings are expected to grow at an above-av-
erage rate. A part of the Portfolio Manager's opportunity investment strategy
is to seek to identify companies whose income will grow faster than those of
other companies. This means that, assuming the ratio of price to earnings re-
mains constant, the prices of these companies' stock will outperform the aver-
ages. However, this evaluation depends on an ap-praisal of the rate of earn-
ings growth of a particular company, comparison of this projection with the
projections for other companies, and an evaluation of probable future price-
to-earnings ratios for that type of company's stock. All of these steps re-
quire the Portfolio Manager to make judgements about future events, as to
which there can be no certainty.

Because investments are made based on both value and growth characteristics,
the Portfolio Manager seeks to manage this risk by selecting investments that
he believes are undervalued, and which he therefore expects to be less
volatile.

. Investment in small- and mid-cap securities. These securities may tend to be
more volatile, reacting more sharply to ups and downs in the market or rele-
vant market sector.

The Portfolio Manager attempts to minimize this risk by creating a portfolio
for the Fund that has a combined volatility factor, sometimes called its beta
factor, that is below the beta factor of comparable investments. Also, the
opportunity investment strategy, combining value and growth elements, may
tend to reduce the volatility of the Fund's portfolio.

In addition, smaller market cap securities may tend to be less liquid than
larger capitalization stocks. This may result in additional costs in both ac-
cumulating and liquidating securities for the Fund's portfolio.

The Portfolio Manager seeks to manage this type of risk by including in the
Fund's portfolio larger capitalization securities that meet his opportunity
investment criteria and maintaining a portfolio of securities that are diver-
sified both as to industry categories and as to size of individual holdings.

-8-
<PAGE>

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amounts of cash or other "defensive" positions, such as U.S. government secu-
rities, to offset the impact of anticipated market swings.

Notwithstanding this general policy, the Fund reserves the right to make de-
fensive investments when the Portfolio Manager decides that this is appropri-
ate.

In addition, the fact that the Fund is fully invested may require it to sell
portfolio securities to meet unanticipated large redemption orders. These
sales could have a depressing effect on the market for the remaining shares
held by the Fund. If this were to happen it could reduce the net asset value
of the shares held by the non-redeeming shareholders. The Fund has reserved
the right to satisfy redemption orders by distribution of portfolio securities
to the redeeming shareholder. This authority has not been used to date. It is
discussed in more detail in the section of this Prospectus called "How to Re-
deem Shares."

In light of the relatively small size of the Fund, it is less likely to expe-
rience problems associated with illiquidity of its portfolio. The Portfolio
Manager seeks to minimize this risk by investing in a combination of larger-
capitalization securities and small- and mid-capitalization securities in
which the historic trading volume has been significant in relation to the
size of the Fund's positions.

In addition, the Fund seeks to avoid having a single investor (or a related
group of investors) own a significant block of its shares. This is expected
to tend to reduce the likelihood of disproportionately large redemption or-
ders.

In light of these risk factors, including the risks associated with any secu-
rities market investment, the Fund may not be suitable as the sole or primary
investment vehicle for all kinds of investors. You are strongly encouraged to
discuss this question with a Fahnestock Account Executive (or a representative
of a Selling Dealer), who should be able to help you evaluate the Fund in re-
lation to your income, needs, existing and planned investments, and other rel-
evant factors.

MANAGEMENT OF THE FUND

James Gerson has been the Fund's Portfolio Manager since October 1, 1995. He
is solely responsible for the day-to-day management of the Fund. Mr. Gerson is
a Senior Vice President of Hudson Capital Advisors, Inc. and of Fahnestock.
From April 1993 until October 1994, he was a Senior Vice President and Manag-
ing Director of Fahnestock's Corporate Finance Department. From October 1994
to September 1995, he was an Equity Research Analyst with Fahnestock. Hudson
Capital Advisors, Inc. has been the investment manager since the Fund's incep-
tion in 1991.

Hudson began operation in 1986 and offers investment management services to
individuals and investment entities. Hudson is located at 780 Third Avenue,
New York, NY 10022.

For 1998 Hudson earned an investment management fee of 0.92% of average net
assets. However, Hudson waived a portion of this fee to reduce the Fund's ex-
penses in line with its voluntary commitment to cap Class A expenses at 2% of
average annual net assets, and Class B expenses at 2.5% of average annual net
assets. This commitment, being voluntary, can be withdrawn by Hudson at any
time. However, Hudson currently has no intention to change the expense caps.

YEAR 2000 RISKS

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companies whose securities are in the Fund's portfolio will be affected by the
Year 2000 problem. However, it is impossible to be sure if the Year 2000 prob-
lem, which could disrupt Fund operations and investments if uncorrected, has
been adequately addressed until after the end of 1999.

SHARE PRICES

The price per share for each Class is the net asset value, which means the to-
tal value of assets, minus total liabilities, attributable to that Class, di-
vided by the number of shares of that Class. The price 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 NYSE is open for unrestricted
trading.

Portfolio securities are normally valued at market prices. The Fund may occa-
sionally hold securities that are traded primarily in markets outside the U.S.
and which are not located in the same time zone as New York. Normally such se-
curities are valued at the most recent closing price on the principal market.
The price of such securities in the principal market may change on a day when
the NYSE is not open and on which shareholders may not be able to purchase or
redeem shares of the Fund.

In addition, the price of a foreign security may have changed by the time the
Fund's portfolio is priced at 4:00 p.m. New York time, or, in the opinion of
the Fund's Portfolio Manager, the last closing price may not accurately re-
flect the value of this security as of the next time the Fund's portfolio is
priced. The Fund has not experienced the types of situations described in the
preceding sentence, and has not adopted any formal procedures to deal with
these contingencies. However, if the Portfolio Manager were to determine that
the most recent closing price of a portfolio security traded in a foreign mar-
ket was materially different from his appraisal of the current value of this
security, he would notify the Board of Trustees, which would decide whether it
was appropriate to determine the "fair value" of the security. The Portfolio
Manager would present his evaluation of the "fair value" and the Board, by ma-
jority vote, would decide how that security should be valued on that date.

HOW TO BUY SHARES

. General. You may buy Class A or Class B shares through representatives of
Fahnestock or the Selling Dealers (broker/dealers that have signed Selling
Agreements with Fahnestock). You may be charged a fee if you purchase Class A
or Class B shares through someone not affiliated with Fahnestock or a Selling
Dealer. The minimum initial investment in either Class is $1,000. Purchases
must be paid for in U.S. dollars. Additional investments may be made in
amounts of $50 or more.

A third class of shares, Class N, is offered by a different prospectus.

. Retirement Plans. You may also use the Fund to accumulate and hold assets
for various types of qualified retirement plans, such as Individual Retirement
Accounts (including Roth IRAs, and Education IRAs), Keogh plans, pension and
profit sharing plans, tax sheltered annuity retirement plans, and 401(k)
plans. The initial investment minimum for these retirement plans is $1,000 ex-
cept that the minimum initial investment for Education IRAs is $500. The mini-
mum additional investment is $50. The amount you can contribute to such plans
is subject to limits set by the Internal Revenue Code and may be deducted
within limits set by the Code.

-10-
<PAGE>

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a charge of $10 will be deducted from a shareholder's Fund account if a sys-
tematic withdrawal is rejected by the bank for insufficient funds. (This
charge will be waived for qualified retirement plan accounts.) If you chose
this form of investment you can terminate it at any time, without charge or
penalty; it can also be terminated by the Fund, IFTC or Fahnestock. For fur-
ther information about the Systematic Investment Plan ask your Fahnestock ac-
count representative or any Selling Dealer.

. Forward Pricing. An order to purchase Fund shares will be processed at the
next price computed after the order is received by Fahnestock or a Selling
Dealer. This means that orders received before 4:00 pm New York Time will gen-
erally be computed as of 4:00 pm the same day. Orders received after 4:00 pm
will receive the price computed on the next business day.

. Payment for Shares. The money to pay for your shares must be received by
Fahnestock or IFTC within three business days after you place your order, or
your order may be canceled.

HOW TO REDEEM SHARES

. Through Fahnestock or a Selling Dealer. You may redeem your Fund shares
through Fahnestock or your Selling Dealer. You may be charged a fee if you re-
deem shares through a person who is not affiliated with Fahnestock or Selling
Dealer.

. Systematic Withdrawal Plan. If you own Fund shares worth a total of $10,000
or more, you may elect to receive payments monthly, quarterly, semi-annually
or annually in varying amounts without paying a CDSC. Each payment under this
Plan must be at least $100. It would probably not be to your advantage to have
a Systematic Withdrawal Plan at the same time as you are purchasing additional
Class A shares because of the sales load payable on such purchases. Similarly,
it would probably not be to your advantage to have a Systematic Withdrawal
Plan under which you redeem more than 12% of your investment per year at the
same time as you are purchasing additional Class B shares because of the CDSC
payable on such withdrawals. A Systematic Withdrawal Plan requires that all
dividends and distributions be taken in additional shares of the Fund. You can
establish a Systematic Withdrawal Plan by completing an application form
available from Fahnestock or your Selling Dealer. For additional details, see
the Statement of Additional Information, "Additional Services and Programs."

. Written Request. You may also redeem your shares by making a written request
directly to IFTC. Each request must be signed by the shareholder and accompa-
nied 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 instru-
ment executed by a shareholder in order to facilitate the legal transfer of
shares of the Fund. For more specific details on how to redeem your shares by
written request, please see pages 17 and 18 of the Statement of Additional In-
formation.

. Forward Pricing. As in the case of share purchases, redemption orders are
processed at the next price determined after Fahnestock or a Selling Dealer
receives a complete redemption request, including any share certificates and
stock papers.

. Payment for Redeemed Shares. Payment for shares redeemed will ordinarily be
made on the next business day after Fahnestock or the Selling Dealer receives
a redemption order which contains all necessary information and documentation.
However, the Fund reserves the right to pay redemption proceeds within seven
days after the order if, in its judgment, immediate payment would adversely
affect the Fund.

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<PAGE>

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ditions for such in-kind redemptions. Any securities used to satisfy redemp-
tion orders would be valued at the same value used in determining net asset
value. The Fund has made a legal election under which it 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.

. Suspension of Redemptions. The Fund may suspend the right of redemption and
may postpone payment for redeemed Fund shares when the NYSE is closed for
other than weekends or holidays, or if permitted by the rules of the Securi-
ties and Exchange Commission during periods when trading on the NYSE is re-
stricted or during an emergency which makes it impracticable for the Fund to
dispose of its securities or fairly to determine the value of its net assets,
or during any other period by order of the Securities and Exchange Commission
for the protection of investors.

. Other Restrictions on Redemptions. Due to the proportionately high cost of
maintaining smaller accounts, the Fund reserves the right to redeem all shares
in a Fund account which has a value of less than $500 as the result of redemp-
tions (except accounts which constitute the assets of retirement plans) 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.
-12-
<PAGE>

Sales Charges and Redemption Fees

Class A Shares

The offering price of Class A shares is the net asset value per share next de-
termined after acceptance of the purchase order, plus a sales charge as fol-
lows:

<TABLE>
<CAPTION>
Sales Charge Sales Charge
Amount of as a Percentage as a Percentage
Purchase of the Amount of the
(Including Sales Charge) Invested Offering Price
------------------------ --------------- ---------------
<S> <C> <C>
Less than $100,000........................ 4.71 4.50
$100,000 but less than $250,000 3.63 3.50
$250,000 but less than $500,000........... 2.56 2.50
$500,000 but less than $1 million 2.04 2.00
$1 million or more........................ * *
</TABLE>

* There is no sales charge on purchases of $1 million or more. However, such
purchases are subject to a CDSC of 1.00% on redemptions within 18 months af-
ter purchase. Fahnestock will pay Selling Dealers who initiate and are re-
sponsible 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.
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Reduction or Waiver of Class A Sales Charge

Combination Privilege: You may be able to combine your purchase of Class A
shares with purchases by family members or fiduciaries to take advantage of a
reduction or waiver of the sales charge. Ask a Fahnestock or Selling Dealer
representative. See pages 16 and 17 of the SAI for more details.

Accumulation Privilege: You may combine your current purchase of Class A
shares with the net asset value of Class A shares you already own to qualify
for a reduction or waiver of the sales charge. For example, if you plan to
purchase $5,000 worth of Class A shares at a time when you already own
$100,000 worth of Class A shares, you would pay a 3.50% sales charge.

Reinvestment Privilege: If you have redeemed Class A shares, you may, within
two years after the redemption date, reinvest any part of your redemption pro-
ceeds in Class A shares without payment of a sales charge. You should notify
Fahnestock or the Selling Dealer who handled your purchase and redemption in
writing of your intention to use this reinvestment privilege. If you reinvest
in the Fund within 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 although your tax basis may be readjusted.

Letter of Intent: If you enter into a Letter of Intent, in which you agree to
purchase a specified dollar amount of Class A shares of the Fund in a 13-month
period, you may qualify for a reduction or waiver of the sales charge. Class A
shares purchased during the 90-days before the Fund receives your Letter of
Intent, and still owned by you, may also be counted in determining the appli-
cable sales-charge reduction.

Other Waivers: You can purchase Class A shares without a sales charge if you
are:

. a trustee or officer of The Fahnestock Funds;

. a director, officer, employee or retired employee of Hudson, Fahnestock, a
Selling Dealer or Fahnestock Viner Holdings, Inc. and its affiliates;

-13-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

. a state, county, or city, or a department or agency of this type of govern-
ment body that is prohibited by investment laws from paying a sales charge; or

. a wrap account.

Class B Shares

Because it will normally be preferable to an investor who qualifies for re-
duced 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 you may
be charged a CDSC on any redemption of your Class B shares if you hold these
shares for less than six years, unless you are redeeming:

. shares that represent appreciation of your original investment, or

. shares purchased through reinvestment of dividends and distributions.

The amount of the CDSC you pay is based on the length of time you hold shares,
according to the following table:

<TABLE>
<CAPTION>
Years Shares are Held CDSC
- --------------------- ----
<S> <C>
Less than one year......................................................... 5%
One but less than two years................................................ 4%
Two but less than four years............................................... 3%
Four but less than five years.............................................. 2%
Five but less than six years............................................... 1%
Six or more years.......................................................... 0%
</TABLE>

For purposes of calculating the applicable CDSC, it is assumed that redemp-
tions 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.

Fahnestock will pay a concession or discount equal to 4% of the net asset
value of all Class B shares sold through Selling Dealers, and other NASD mem-
bers, with whom it has entered into a written agreement providing for such
concession. Neither Fahnestock nor the Fund has any special compensation ar-
rangements with any Selling Dealers.

Waiver of Class B CDSC

General: You will not be charged a CDSC on redemptions of Class B shares that
would have qualified for a waiver of the sales charge if you had purchased
Class A shares.

Systematic Withdrawal: You will not be charged a CDSC on Systematic Withdrawal
Plan payments that do not exceed on an annual basis 12% of the value of in-
vestment in Class B shares.

Death or Disability: Redemptions following death or disability are not subject
to a CDSC.

Wrap Accounts: If a dealer has entered into a Dealer Wrap Agreement with Fah-
nestock to purchase Class B shares solely for its clients with whom it has
wrap accounts or similar arrangements, the Class B shares may be sold without
being subject to any CDSC at redemption. Wrap accounts are discussed in the
SAI.

Other Waivers: Redemptions of Class B shares in connection with certain re-
quired post-retirement withdrawals from a retirement plan are not subject to a
CDSC.

Distribution Expenses

The Fund has adopted 12b-1 Plans under which it may reimburse Fahnestock for
certain expenses for distributing the shares of a particular Class or for pro-
viding services to the shareholders of that Class.

Because the fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.

. Class A 12b-1 Plan

The Fund may reimburse Fahnestock for distribution and service expenses at a
maximum annual rate of 0.50% of the average daily net asset value of the Class

-14-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A shares. The amount of Class A 12b-1 fees is calculated based on assets that
have been continuously invested in the Fund for four calendar years or less.
This fee is borne, pro rata, by all Class A shares. Whenever a shareholder re-
deems Class A shares, the Fund will deem the shares that have been held the
longest to be redeemed before shares acquired later. This method is commonly
known as "first-in, first-out."

. Class B 12b-1 Plan

The Fund may reimburse Fahnestock at the maximum annual rate of 0.25 percent
of the average daily net asset value of the Class B shares for the expenses of
providing personal service to Class B shareholders or the maintenance of Class
B shareholder accounts. Also the Fund may reimburse Fahnestock at the maximum
annual rate of 0.75 percent for expenses incurred in distributing Class B
shares. In either case the length of time you have held Class B shares will
not affect the amount of Class B 12b-1 fee.

DISTRIBUTIONS TO SHAREHOLDERS AND TAXATION

The Fund pays out to shareholders any net income and net capital gains. Ordi-
narily, the Fund makes these distributions once a year (in December).

Unless you tell us otherwise, your income and capital gains distributions from
the Fund will be reinvested in the Fund. However, if you prefer you may:

. receive all distributions in cash, or

. reinvest capital gain distributions, but receive income distributions in
cash.

To take advantage of one of these options, please indicate your choice on your
application.

How Distributions are Taxed. Except for tax-advantaged retirement accounts,
all Fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them.

Distributions are taxable in the year you receive them. In some cases, distri-
butions you receive in January are taxable as if they had been paid the previ-
ous year. Your tax statement will help you clarify this.

Income distributions and short-term capital gain distributions are generally
taxed as ordinary income. The tax treatment of capital gain distributions de-
pends on how long the Fund held the securities it sold, not when you bought
your shares of the Fund, or whether you reinvested your distributions.

How Transactions are Taxed. When you sell Fund shares, you generally realize a
taxable gain or loss.

-15-
<PAGE>

These Financial Highlights tables are intended to help you understand the
Fund's financial performance for the past five years or, in the case of Class
B, since inception in April 1997. Certain information reflects financial re-
sults for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). The information
has been audited by PricewaterhouseCoopers LLP (formerly, Coopers & Lybrand
L.L.P.), whose report, along with the Fund's financial statements, are in-
cluded in the annual report, which is available upon request.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------ --- --- --- ---
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.. $ 16.18 $ 12.99 $ 11.39 $ 10.95 $ 13.72
Income from investment
operations:
Net investment loss... (0.24)* (0.21)* (0.10) (0.03) (0.06)
Net realized and
unrealized gain
(loss) on
investments.......... (1.43) 5.67 4.72 2.09 (1.48)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations........... (1.67) 5.46 4.62 2.06 (1.54)
------- ------- ------- ------- -------
Less dividends paid to
shareholders:
Dividends paid from
net realized gain on
investments.......... (0.38) (2.27) (3.02) (1.62) (1.23)
------- ------- ------- ------- -------
Net asset value, end
of period............ $ 14.13 $ 16.18 $12.99 $ 11.39 $ 10.95
======= ======= ======= ======= =======
Total return............ (10.35%) 42.88% 40.68% 18.94% (11.22%)
Ratios/Supplemental Data
Net assets, end of
period (000
omitted)............. $25,336 $29,325 $15,671 $12,097 $15,874
Ratio of gross
expenses to average
net assets........... 2.18% 3.07% 3.50% 3.42% 2.76%
Ratio of net expenses
to average net
assets............... 2.00% 2.03%** 2.50% 2.50% 2.49%
Ratio of net
investment loss to
average net assets... (1.46%) (1.38%) (1.13%) (0.16%) (0.46%)
Portfolio turnover
rate................. 40.98% 50.46% 85.37% 197.71% 194.55%
</TABLE>
- --------

* Per share information presented is based on the average number of shares
outstanding.

** Effective February 1, 1997, Class A Shares changed its expense limit from
2.50% to 2.00%.

-16-
<PAGE>

<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------
1998 1997*
------- ------
<S> <C> <C>
Net asset value, beginning of period.................. $ 16.11 $13.54
Income from investment operations:
Net investment loss................................... (0.34)** (0.09)**
Net realized and unrealized gain (loss) on
investments.......................................... (1.37) 4.93
------- ------
Total income from investment operations............. (1.71) 4.84
------- ------
Less dividends paid to shareholders:
Dividends paid from net realized gain on investments.. (0.38) (2.27)
------- ------
Net asset value, end of period........................ $ 14.02 $16.11
======= ======
Total return............................................ (10.64%) 36.54%
Ratios/Supplemental Data
Net assets, end of period (000 omitted)............... $ 2,682 $2,125
Ratio of gross expenses to average net assets......... 2.97% 3.54%
Ratio of net expenses to average net assets........... 2.50% 2.50%***
Ratio of net investment loss to average net assets.... (1.95%) (0.77%)***
Portfolio turnover rate............................... 40.98% 50.46%
</TABLE>
- --------

* Reflects operations from April 17, 1997 (date of initial public offer-
ing) to December 31, 1997.

** Per share information presented is based on the average number of shares
outstanding.

*** Annualized.

-17-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOR MORE INFORMATION

The following information about the Fund is available without charge upon re-
quest:

. Statement of Additional Information

This document includes additional information about the Fund's investment pol-
icies, risks and operations. It is incorporated by reference into this Pro-
spectus (which means it is legally part of this Prospectus).

. Annual and Semi-Annual Reports

Additional information about the Fund's investments and performance is avail-
able in the Fund's Annual and Semi-Annual Reports to Shareholders. The Annual
Report includes a discussion of market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal
year. It is also incorporated by reference into this Prospectus.

You can request the Statement of Additional Information, the Annual and Semi-
Annual Reports and other information about the Fund or your account:

By Telephone: Call Investors Fiduciary Trust Company toll-free at 1-800-367-
0068.

By Mail: Write to Investors Fiduciary Trust Company, 111 West 10th Street,
Kansas City, Missouri 64105.

From the SEC: You can also obtain copies of the Statement of Additional Infor-
mation and other Fund documents and reports by visiting the SEC's Public Ref-
erence Room in Washington, D.C. (phone 1-800-SEC-0330) or the SEC's Internet
website at http://www.sec.gov. Copies may be obtained upon payment of a dupli-
cating fee by writing to the SEC's Public Reference Section, Washington, D.C.
20549-6009.

No one has been authorized to provide any information about the Fund or to
make any representation about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.

The Fund's shares are distributed by: Fahnestock & Co. Inc.

SEC File No. 811-06166

HUDSON CAPITAL
-----------------------------------
APPRECIATION
--------------------------------
FUND

(A Series of the Fahnestock Funds)

Prospectus Class A Shares
May 1, 1999 Class B Shares

A mutual fund seeking to achieve long-term growth of capital through invest-
ment in equity securities. The Fahnestock Funds is an open-end diversified in-
vestment company.

FAHNESTOCK
----------------
ESTABLISHED 1881
----------------
<PAGE>

- -------------------------------------------------------------------------------
CLASS N SHARES
HUDSON CAPITAL

APPRECIATION FUND 125 Broad Street
(A Series of The Fahnestock Funds) New York, New York 10004

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROSPECTUS

May 1, 1999

Hudson Capital Appreciation Fund is the first (and, to date, the only) se-
ries of The Fahnestock Funds, a Massachusetts business trust (the "Trust").

The Fund seeks long term growth through capital appreciation by investing
primarily in equity securities. Current income is not an important consider-
ation.

- -------------------------------------------------------------------------------

The principal objective of Hudson Capital Appreciation Fund is long-term capi-
tal appreciation through investment in equity securities.

THE PRINCIPAL STRATEGY USED BY THE FUND TO ACHIEVE THIS GOAL

The principal objective of the Fund's research activities is to identify
companies that have a promising future ("growth element") and can be purchased
at a reasonable price ("value element"). A company's ability to grow is
determined by a review of the industry it serves; its historical ability to
grow, achieve high returns on capital, successfully introduce new products or
enter new markets; and its ability to build market share and maintain a
healthy financial condition. A company's value is determined by an analysis of
its share price in relation to its earnings, cash flow generation, and net
assets, as well as a comparison to a peer group of companies.

. results in similar companies which may not be relevant but nevertheless af-
fect market price,

. the temporary illiquidity of a stock,

. a negative earnings surprise or disappointment, or

. inadequate research coverage by Wall Street analysts.

The Portfolio Manager believes these conditions create an opportunity for in-
vestors with a long-term perspective to identify investments that may appreci-
ate.

. Diversification.

. By industry. The Fund's portfolio is diversified as to industry categories.
Diversification tends to reduce the risk of sharp fluctuations in the value
of the Fund's entire portfolio.

. By company. For the same reasons the Fund does not invest more than 5% of
its assets in the securities of any one issuer.

-2-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

PRINCIPAL RISKS OF INVESTING IN THE FUND

. Risks related to Portfolio Manager's investment strategy.

. Risks related to the small size of the Fund.

-3-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RISK/RETURN CHARTS AND TABLES

The bar chart below shows the performance of the Fund's Class N Shares for
1998.

[THE FOLLOWING IS REPRESENTED BY A BAR CHART]

1998

-10.35%

During the one-year period illustrated above, the highest return for a quarter
was +17.93% (December 31, 1998) and the lowest return for a quarter was -
25.18% (September 30, 1998)

The following table shows the Fund's returns averaged over the year 1998. It
shows past performance only and does not predict future results.

<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending 12/31/98) Past One Year Since Inception
-------------------------------------------------------------------------
<S> <C> <C>
Class N* -10.35% 12.82%
-------------------------------------------------------------------------
S&P 500 Index 28.61% 35.14%
</TABLE>

*Inception date of 4/17/97.

The information on this page assumes that all distributions were reinvested in
the Fund. The figures include Fund expenses.

-4-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

FEES AND EXPENSES OF THE FUND

This table shows the fees and expenses that you may pay if you buy and hold
shares of the Fund.

Shareholder Fees
(fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 0%
Maximum Deferred Sales Charge (CDSC)
(as a percentage of original purchase price) or 0%
Maximum Deferred Sales Charge (CDSC)
(as a percentage of redemption proceeds) 0%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) 0%
Redemption Fees (as a percentage of amount redeemed, if applicable) 0%
</TABLE>

--------------------------------------

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<S> <C>
Management Fee/1/ 1.00%
12b-1 Fees 0.25%
Other Expenses/2/ 0.97%
-----
Total Fund Operating Expenses/3/ 2.22%
</TABLE>

--------------------------------------

/1/The management fee is reduced to 0.75% per annum for assets of the Fund
in excess of $25,000,000. As of April 9, 1999, the Fund's net assets were
approximately $25.5.

/2/"Other Expenses" in the above table include fees for shareholder servic-
es, custodial fees, legal and accounting fees, printing costs and regis-
tration fees.

/3/Hudson Capital Advisors, Inc. has voluntarily undertaken to waive its
management fee and to reimburse Other Expenses in order to cap Total Fund
Expenses at 2.00% for Class N shares.

-5-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C>
$225 $694 $1,190 $2,554
</TABLE>

-6-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVES

The Fund's objective is to achieve long-term growth through capital appreci-
ation by investing primarily in equity securities. Current income is not an
important consideration. Although the Fund does not intend to change its ob-
jective, it reserves the right to do so without shareholder vote. The Fund's
fundamental investment policies, which are stated in the Statement of Addi-
tional Information, cannot be changed without shareholder vote.

PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

. Investment in companies whose earnings are expected to grow at an above-av-
erage rate. A part of the Portfolio Manager's opportunity investment strategy
is to seek to identify companies whose income will grow faster than those of
other companies. This means that, assuming the ratio of price to earnings re-
mains constant, the prices of these companies' stock will outperform the aver-
ages. However, this evaluation depends on an appraisal of the rate of earnings
growth of a particular company, comparison of this projection with the projec-
tions for other companies, and an evaluation of probable future price-to-earn-
ings ratios for that type of company's stock. All of these steps require the
Portfolio Manager to make judgements about future events, as to which there
can be no certainty.

. Investment in small- and mid-cap securities. These securities may tend to be
more volatile, reacting more sharply to ups and downs in the market or rele-
vant market sector.

. Policy of full investment. The Portfolio Manager does not attempt to predict
or anticipate broad market trends. He seeks high quality, suitable investments
within the guidelines described in this Prospectus. He does not usually cause
the Fund to hold significant amounts of cash or other "defensive" positions,
such as U.S. government securities, to offset the impact of anticipated market
swings.

-7-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Notwithstanding this general policy, the Fund reserves the right to make de-
fensive investments when the Portfolio Manager decides that this is appropri-
ate.

MANAGEMENT OF THE FUND

Hudson began operation in 1986 and offers investment management services to
individuals and investment entities. Hudson is located at 780 Third Avenue,
New York, NY 10022.

For 1998 Hudson earned an investment management fee of 0.92% of average net
assets. However, Hudson waived a portion of this fee to reduce the Fund's ex-
penses in line with its voluntary commitment to cap Class N expenses at 2% of
average annual net assets. This commitment, being voluntary, can be withdrawn
by Hudson at any time. However, Hudson currently has no intention to change
the expense cap.

YEAR 2000 RISKS

Like other mutual funds, the Fund could be adversely affected if the computer
systems used by Hudson, Fahnestock and its other service providers (primarily
IFTC, the transfer agent and custodian) do not properly process and calculate
date-related information beginning January 1, 2000. This is sometimes called
the "Year 2000" problem. The Fund, Hudson, Fahnestock and other service
providers have been actively working on necessary changes to their computer
systems to deal with the Year 2000 and expect that their systems will be
adapted in time for that event. In addition, the Fund's Portfolio Manager
makes efforts to determine if the companies whose securities are in the Fund's
portfolio will be affected by the Year 2000 problem. However, it is impossible
to be sure if the Year 2000 problem, which could disrupt Fund operations and
investments if uncorrected, has been adequately addressed until after the end
of 1999.

-8-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SHARE PRICES

HOW TO BUY SHARES

To Purchase Shares From Fahnestock or a Selling Dealer.

. General. You may buy Class N shares through representatives of Fahnestock or
the Selling Dealers (broker/dealers that have signed Selling Agreements with
Fahnestock). You may be charged a fee if you purchase Class N shares through
someone not affiliated with Fahnestock or a Selling Dealer. The minimum ini-
tial investment is $1,000. Purchases must be paid for in U.S. dollars. Addi-
tional investments may be made in amounts of $50 or more.

Two other classes of shares, Class A and Class B, are offered by a different
prospectus.

. Retirement Plans. You may also use the Fund to accumulate and hold assets
for various types of qualified retirement plans, such as Individual Retirement
Accounts (including Roth IRAs, and Education IRAs), Keogh plans, pension and
profit sharing plans, tax sheltered annuity retirement plans, and 401(k)
plans. The initial investment minimum for these retirement plans is $1,000
except that the minimum initial investment for Education IRAs is $500. The
minimum additional investment is $50. The amount you can contribute to such
plans is subject to limits set by the Internal Revenue Code and may be
deducted within limits set by the Code.

. Systematic Investment. You may choose to invest through the Systematic In-
vestment Plan, under which the Fund's transfer agent, IFTC, will deduct an
amount that you specify from your bank account on a regular basis. The initial
minimum investment for a Systematic Investment Plan is $100 and each subse-
quent transfer must be at least $50 on a monthly or quarterly basis. While
there is no charge to shareholders for this service, a charge of $10 will be
deducted from a shareholder's Fund account if a systematic withdrawal is re-
jected by the bank for insufficient funds. (This charge will be waived for
qualified retirement plan accounts.) If you chose this form of investment you
can terminate it at any time, without charge or penalty; it can also be termi-
nated by the Fund, IFTC or Fahnestock. For further information about the Sys-
tematic Investment Plan ask your Fahnestock account representative or any
Selling Dealer.

-9-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

. Payment for Shares. The money to pay for your shares must be received by
Fahnestock or IFTC within three business days after you place your order, or
your order may be canceled.

To Purchase Shares From Fund Supermarkets

. In addition to the methods of buying shares described above, you may also
purchase shares through

Fund Supermarkets. Fund Supermarkets are financial intermediaries that make
Class N shares, as well as shares of other mutual funds, available to their
customers. They may charge account maintenance fees and transaction fees for
purchases and redemptions. Fund Supermarkets may impose certain restrictions
on their clients which are in addition to or different from those described in
this Prospectus. They may also modify or waive certain features of the Fund,
such as investment minimums. Therefore, if you are a Fund Supermarket client,
you should read this Prospectus in light of the terms of your account with the
Fund Supermarket.

Fund Supermarkets are responsible for promptly transmitting your orders to the
Fund and for payment of your shares. You should ask your Fund Supermarket rep-
resentative about the pricing of and payment for shares. Payment for purchases
of Class N shares must be received by the Fund by the time the Fund prices the
shares the next day. If the Fund does not receive payment from the Fund Super-
market on time, the Fund Supermarket may be liable for resulting fees or loss-
es.

If you purchase shares through a Fund Supermarket, you must contact the Fund
Supermarket for information about your shares.

HOW TO REDEEM SHARES

If Your Shares Are Registered In Your Own Name.

. Redemption by Telephone. If you own Class N shares that are not represented
by share certificates you may redeem these shares by telephone by calling 1-
800-367-0068. To redeem Class N shares by telephone, you must have completed
and returned to IFTC an account application electing the telephone redemption
privilege. You 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 IFTC will be liable for following redemption instructions
received by telephone that it reasonably believes to be genuine. Reasonable
procedures will be used to confirm the genuineness of such instructions, in-
cluding requesting specific personal information from you and written confir-
mation of telephone transactions. IFTC may also record telephone redemptions.
Proceeds of telephone redemptions will be sent only to the shareholder's ad-
dress 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 you are unable to

-10-
<PAGE>

IF YOU HAVE PURCHASED SHARES THROUGH A FUND SUPERMARKET.

. If you have an account with a Fund Supermarket, you can redeem your shares
through your account. You should contact your Fund Supermarket representative
for more details.

RESTRICTIONS ON REDEMPTIONS

The following restrictions apply both to shares held in your own name and to
shares purchased through Fund Supermarkets.

. Redemptions in Kind. 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. The Fund's Trustees have the right to set conditions for
such in-kind redemptions. Any securities used to satisfy redemption orders
would be valued at the same value used in determining net asset value. The
Fund has made a legal election under which it 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.

Distribution Expenses

The Fund has adopted a 12b-1 Plan under which it may reimburse Fahnestock for
certain expenses for distributing the Class N shares or for providing services
to the Class N shareholders. The Fund may reimburse Fahnestock at a maximum
annual rate of 0.25% of the average daily net asset value of the Class to re-
imburse Fahnestock for its expenses in distributing Class N shares or provid-
ing personal service to Class N shareholders or the maintenance of Class N
shareholder accounts, or for payments by Fahnestock to others for such activi-
ties.

Through the 12b-1 Plan the Fund may, through Fahnestock, pay Fund Supermarkets
for administration subaccounting and/or shareholder services up to 0.25% of
the average annual value of accounts maintained by Fund Supermarkets. Fahnes-
tock may supplement this fee from its own resources.

-11-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS AND TAXATION

The Fund pays out to shareholders any net income and net capital gains. Ordi-
narily, the Fund makes these distributions once a year (in December).

Unless you tell us otherwise, your income and capital gains distributions from
the Fund will be reinvested in the Fund. However, if you prefer you may:

. receive all distributions in cash, or

. reinvest capital gain distributions, but receive income distributions in
cash.

To take advantage of one of these options, please indicate your choice on your
application.

How Transactions are Taxed. When you sell Fund shares, you generally realize a
taxable gain or loss.

-12-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

This Financial Highlights table is intended to help you understand the Fund's
financial performance since inception in April 1997. Certain information re-
flects financial results for a single Fund share. The total returns in the ta-
ble represent the rate that an investor would have earned or lost on an in-
vestment in the Fund (assuming reinvestment of all dividends and distribu-
tions). The information has been audited by PricewaterhouseCoopers LLP (for-
merly, Coopers & Lybrand L.L.P.) whose report, along with the Fund's financial
statements, are included in the annual report, which is available upon re-
quest.

<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1998 1997*
------ ------
<S> <C> <C> <C>
Net asset value, beginning of period............... $16.18 $13.54
Income from investment operations:
Net investment loss................................ (0.24)** (0.18)**
Net realized and unrealized gain (loss) on
investments....................................... (1.43) 5.09
------ ------
Total income from investment operations.......... (1.67) 4.91
------ ------
Less dividends paid to shareholders:
Dividends paid from net realized gain on
investments....................................... (0.38) (2.27)
------ ------
Net asset value, end of period..................... $14.13 $16.18
====== ======
Total return......................................... (10.35%) 37.09%
Ratios/Supplemental Data
Net assets, end of period (000 omitted)............ $3,432 $5,846
Ratio of gross expenses to average net assets...... 2.22% 3.04%
Ratio of net expenses to average net assets........ 2.00% 2.00%***
Ratio of net investment loss to average net
assets............................................ (1.47%) (1.48%)***
Portfolio turnover rate............................ 40.98% 50.46%
</TABLE>
- --------

*Reflects operations from April 17, 1997 (date of initial public offering)
to December 31, 1997.

**Per share information presented is based on the average number of shares
outstanding.

***Annualized.

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<PAGE>

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FOR MORE INFORMATION

The following information about the Fund is available without charge upon re-
quest:

. Statement of Additional Information

. Annual and Semi-Annual Reports

You can request the Statement of Additional Information, the Annual and Semi-
Annual Reports and other information about the Fund or your account:

By Telephone: Call Investors Fiduciary Trust Company toll-free at 1-800-367-
0068.

By Mail: Write to Investors Fiduciary Trust Company, 111 West 10th Street,
Kansas City, Missouri 64105.

From Fund Supermarkets: You can request copies of Fund documents from your
Fund Supermarket representative.

SEC File No. 811-06166

HUDSON CAPITAL
-----------------------------------
APPRECIATION
---------------------------------
FUND

(A Series of the Fahnestock Funds)

Prospectus Class N Shares
May 1, 1999

A mutual fund seeking to achieve long-term growth of capital through invest-
ment in equity securities. The Fahnestock Funds is an open-end diversified in-
vestment company.

FAHNESTOCK
----------------
ESTABLISHED 1881
----------------
<PAGE>

(A Series of The Fahnestock Funds) 125 Broad Street CLASS N SHARES
New York, New York 10004

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- -------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1999

This Statement of Additional Information is not a Prospectus. It provides in-
formation about Hudson Capital Appreciation Fund (the "Fund") in addition to
the information contained in the Fund's Prospectuses dated May 1, 1999. This
document should be read together with the Prospectuses.

You can obtain copies of the Prospectuses, free of charge, by writing to the
Fund's Transfer Agent, Investors Fiduciary Trust Company, at 111 West 10th
Street, Kansas City, Missouri 64105 or by calling 1-800-367-0068.

The following documents are incorporated by reference:

-- The Fund's Prospectuses, both dated May 1, 1999,

-- Annual Report to Shareholders, and

-- Semi-Annual Report to Shareholders.
<PAGE>

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- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Cross-Reference
to Prospectus
---------------
Contents Page A/B N
- -------- ---- ---------------
<S> <C> <C> <C>
Investment Strategies and Risks............................ 3 3, 8 3, 7
Investment Policies........................................ 4 2 2
Temporary Defensive Investments............................ 5 8 7
Management of the Fund..................................... 6 9 8
Principal Underwriter...................................... 10 N/A N/A
Other Service Agreements................................... 10 N/A N/A
Distribution Plans......................................... 11 14 11
Brokerage Transactions and Commissions..................... 13 N/A N/A
Capital Stock.............................................. 14 N/A N/A
How to Buy Shares.......................................... 15 13 9
Reductions in Class Sales Charges.......................... 16 13 N/A
Offering Price............................................. 17 13 9
Computation of Net Asset Value............................. 17 10 9
How to Redeem Shares....................................... 17 11 10
Redemptions in Kind........................................ 18 11 11
Taxes...................................................... 18 15 12
Distribution............................................... 19 15 12
Calculation of Performance................................. 20 N/A N/A
</TABLE>

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<PAGE>

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Hudson Capital Appreciation Fund is the first (and, to date, the only) series
of The Fahnestock Funds, a Massachusetts business trust (the "Trust") created
under the laws of Massachusetts on August 29, 1990. The Trust is an open-end
diversified management investment company commonly known as a mutual fund.

INVESTMENT STRATEGIES AND RISKS.

The Fund's principal investment strategies are described in the Prospectuses.
This section contains supplemental information about the types of securities
and other instruments in which the Fund may invest, the investment policies
and portfolio strategies that the Fund may use, and certain risks associated
with those investments, policies and strategies.

. Warrants. The Fund may invest in 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, and because it does not represent any rights in the assets of the is-
suer, 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 before its expiration date.

. Lending of Securities. The Fund has the authority to lend securities to bro-
kers, dealers and other financial organizations. The Fund will not lend secu-
rities to Hudson Capital Advisors, Inc. ("Hudson"), the Fund's adviser, or to
Fahnestock & Co. Inc. ("Fahnestock"), the Fund's administrator and distribu-
tor, or to their affiliates. If the Fund were to lend its securities, it would
continue to benefit or lose based on the changes in market price of the loaned
securities, and would continue to be entitled to any income, such as divi-
dends, on those securities. At the same time, it would receive collateral from
the stock borrower, which the Fund could invest on a short-term basis to in-
crease its income. It would also receive a fee from the stock borrower. 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 in-
terest 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.

Hudson believes the risk of loss on these transactions is slight because, if a
borrower were to default for any reason, the collateral should satisfy the ob-
ligation. However, as with other extensions of secured credit, loans of port-
folio securities involve some risk of loss of rights in the collateral should
the borrower fail financially. The Fund has not engaged in securities lending
prior to the date of this Statement of Additional Information.

. Investment in foreign securities. The Fund does not invest a substantial
portion of its assets in foreign securities. However, this may be done when,
in the Portfolio Manager's judgement, a foreign security appears to meet his
opportunity investing criteria. The Fund's investments in foreign securities
will be securities listed on U.S. exchanges, or available to U.S. investors in
the form of American Depository Receipts and American Depository Shares.

Foreign stocks can be riskier than comparable U.S. stocks. This is partly be-
cause most foreign markets are less developed and foreign governments, econo-
mies, and laws may be less stable. Also key information about

-3-
<PAGE>

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foreign companies may be unavailable or inaccurate. As a result, foreign
stocks can fluctuate more widely in price than stocks of comparable U.S. com-
panies.

. U.S. Government Securities. Examples of the types of U.S. Government securi-
ties that the Fund may hold include are U.S. Treasury Bills, the obligations
of the Federal Housing Administration, Farmers Home Administration, Small
Business Administration, General Services Administration, Central Bank for Co-
operatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks and the Maritime Administration.

. Temporary Defensive Investments. When the Portfolio Manager believes that
current market or economic conditions warrant, the Fund may use a temporary
defensive strategy. The principal risk of the Fund implementing a defensive
investment strategy is the effect it may have on portfolio turnover. A high
rate of portfolio turnover will increase the Fund's brokerage expenses and may
increase the amount of its taxable short-term gains.

INVESTMENT POLICIES

The Fund has adopted the following policies relating to the investment of
its assets and its activities. The Fund may not:

(1) Issue senior securities, except to the extent covered in paragraph 2, be-
low.

(2) Borrow money, except that the Fund may borrow from banks as a temporary
measure for emergency purposes where such borrowings would not exceed (i) 33
1/3% of total assets of the Fund taken at market or other fair value less lia-
bilities other than borrowings, and (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.

(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, securi-
ties which it has acquired.

(4) Purchase a security if 25% or more of the Fund's total assets would be in-
vested in a particular industry.

(5) Purchase real estate or interests in real estate, or commodities or com-
modity contracts (including futures contracts).

(6) Make loans except through the purchase of bonds and other marketable obli-
gations of corporate enterprises, and except for stock loans, which are dis-
cussed above.

(7) Effect a short sale of any security.

(8) 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.

(9) Invest for the purpose of exercising control over or management of any
company.

(10) Invest more than 10% of the Fund's total assets in the securities of
other investment companies. (The Investment Company Act of 1940 (the "1940
Act") imposes additional limitations on investment in securities of investment
companies.)

(11) 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.

(12) Purchase or retain securities of any issuer if those officers and trust-
ees 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 issu-
er, 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 distribu-
tor, portfolio securities of the Fund.

-4-
<PAGE>

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(13) 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.

(14) 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 pur-
chase more than 10% of the voting securities or of any other class of securi-
ties of any one issuer.

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 re-
sulting from a change in values or assets will not constitute a violation of
such restriction.

Fundamental Policies.

The policies listed above, with the exception of the first policy with respect
to senior securities, are fundamental policies and can not be changed without
the approval of the holders of a majority of the Fund's outstanding voting se-
curities.

Under the 1940 Act a "majority" is defined as the lesser of:

. 67% of the shares present or represented by proxy at a shareholder meeting,
if the holders of more than 50% of the outstanding shares are present or rep-
resented by proxy, or

. more than 50% of the outstanding shares.

Temporary Defensive Investments

Temporary defensive investing is not a principal investment strategy of the
Fund. However, when the Portfolio Manager deems it necessary, the Fund may
temporarily retain cash or invest in preferred stock, nonconvertible bonds or
other fixed income securities, U.S. Government securities, money market in-
struments and repurchase agreements.

-5-
<PAGE>

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- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUND

The Trustees oversee the management of the Fund. They elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Some of the officers of the Fund and Trustees of
the Trust are also officers and directors of the Fund's investment adviser,
Hudson, or officers and directors of the Fund's principal distributor, Fahnes-
tock.

The names and ages of the Trustees and officers of the Fund and their princi-
pal 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
125 Wall Street, New York, New York 10004.

<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address, and Age with Fund During Past 5 Years
- ---------------------- --------------------- ----------------------------------
<S> <C> <C>
*Albert G. Lowenthal, 54 Trustee, Chairman of Mr. Lowenthal is Chairman of the
the Board and Chief Board, and Chief Executive Officer
Executive 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, President of Pace
Securities, Inc., a broker-dealer,
and is President, Director and a
Principal of Hudson.

*Michael Mendelson, 57 Trustee and President Mr. Mendelson is Managing Director
of Fahnestock Asset Management, a
division of Fahnestock.

Keith Gunzenhauser, 65 Trustee Mr. Gunzenhauser is retired. He
2649 360th Street was formerly Executive Vice
Van Meter, IA 50261 President-Finance and Chief
Investment Officer of Finance
Central Life Assurance Company
(Des Moines, Iowa).

Richard E. Landau, 55 Trustee Mr. Landau is a private investor.
4490 Riverwatch Drive
#201 Bonita Bay
Bonita Springs, FL 33923

</TABLE>
(list continued on next page)

-6-
<PAGE>

James D. Gerson, 55 Senior Vice President Mr. Gerson is also Senior Vice
and Portfolio Manager President of Fahnestock and since,
October 1, 1995 of Hudson.
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).
Richard Wohlman, 54 Treasurer Mr. Wohlman is Chief Financial
Officer of Fahnestock.
Russell L. Pollack, 45 Secretary Mr. Pollack is Benefits Director
and Manager--Corporate Tax of
Fahnestock.
</TABLE>

Trustee Compensation

In 1998, the non-interested trustees received the following compensation:

<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation as a part of Fund Benefits Upon Compensation
Name from the Fund Expenses Retirement from Fund
---- ------------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
Keith Gunzenhauser $6,750 0 0 $6,750
Richard Landau $6,750 0 0 $6,750
James McQuaid $6,750 0 0 $6,750
</TABLE>

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<PAGE>

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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 Hudson, Fah-
nestock, Fahnestock Viner Holdings, Inc. or Selling Dealers, or affiliates of
any of them, or to the bona fide, full-time employees and their relatives, re-
tired 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 in-
vestment purposes and that the shares will not be resold except through re-
demption 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 relation-
ships and because the sales effort, if any, involved in making such sales is
negligible. Shares sold on these terms must be registered solely in the name
of the eligible party or in the names of the eligible party and his or her im-
mediate family members.

Control Persons

As of the close of business on April 19, 1999, the Trustees and Officers of
the Trust beneficially owned as a group 4.9% of the Fund's shares, comprised
of 6.0 % of the Class A shares, 0% of the Class B shares and 0% of the Class N
shares.

Neither the Trust nor management is aware of any shareholder who beneficially
owned 5% or more of any Class of Fund shares as of April 19, 1999 except as
follows:

Fahnestock & Co. Inc. 401(k) Plan, 125 Broad Street, New York, NY, 10004, was
the owner of record of 13% of the outstanding Class A shares and of 48% of the
outstanding Class N shares.

Hudson Capital Advisors, Inc., a wholly-owned subsidiary of Fahnestock-Viner
Holdings, Inc., serves as Investment Manager to the Fund. Listed below are the
names of all of the directors and officers of Hudson as of April 19, 1999,
their positions with the Trust, if any, and, under the heading "Other Busi-
nesses" any business, profession, vocation or employment of a substantial na-
ture (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
with Hudson Position with Fund Other Businesses
- -------------------- --------------------- ----------------------------------
<S> <C> <C>
Albert G. Lowenthal Trustee, Chairman of Chairman of Board of Directors,
President and Director Board of Trustees, Chief Executive Officer and Chief
and Chief Executive Financial Officer of Fahnestock &
Officer Co., Inc., its holding company
parent, Fahnestock-Viner Holdings,
Inc., and its affiliated
companies.

A.W. Oughtred None Solicitor, Borden & Elliot;
Director Director of Fahnestock & Co., Inc.
and its affiliated companies.

</TABLE>
(list continued on next page)

-8-
<PAGE>

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- -------------------------------------------------------------------------------
(list continued from previous page)
<TABLE>
<CAPTION>
Name and Position
with Hudson Position with Fund Other Businesses
----------------- --------------------- ----------------------------------
<S> <C> <C>
E. K. Roberts Director, None President, Fahnestock-Viner
Treasurer and Secretary Holdings, Inc.; Treasurer and
Director, Fahnestock & Co., Inc.
and Director of its affiliated
companies.
James D. Gerson Senior Vice President Director, Ag Services of America,
Senior Vice President and Portfolio Manager Inc., American Power Conversion
Corporation, Arguss Holdings,
Inc., Energy Research Corp.,
Evercel, Inc., and Hilite
Industries, Inc., and various non-
public companies.
</TABLE>
As discussed in the Prospectuses and as provided in the Management Agreement,
the Fund pays Hudson 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. The investment manage-
ment fee is borne by all three Classes of shares in proportion to each Class'
daily average net asset value. However, the net asset value of the entire Fund
is used to determine the breakpoint in the fee.

For the fiscal year ended December 31, 1996, the Fund incurred investment man-
agement fees of $133,239. Hudson waived all of the investment management fee.

For the fiscal year ended December 31, 1997, the Fund incurred investment man-
agement fees of $252,355. Hudson waived all of the investment management fee
and reimbursed the Fund $11,496 for operating expenses.

For the fiscal year ended December 31, 1998, the Fund incurred investment man-
agement fees of $339,258. Hudson waived $78,060 of the investment management
fee.

From time to time Hudson in its sole discretion and as it deems appropriate,
may assume certain expenses of the Fund while retaining the ability to be re-
imbursed 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. Hudson will not be reimbursed for
such amounts if such action would violate the provisions of the Fund's appli-
cable expense limitations. Hudson reserves the right to request the Trustees
to authorize in subsequent years recovery of prior expense reimbursements or
waived fees.

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<PAGE>

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PRINCIPAL UNDERWRITER

Fahnestock is principal underwriter of the Fund. Its principal office is at
125 Broad Street, New York, NY 10004. Listed below are the names of all per-
sons affiliated with the Trust and Fahnestock and their positions at both:

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Fahnestock with Registrant
------------------ ------------------------------ ------------------------------
<S> <C> <C>
Albert G. Lowenthal Chairman or the Board of Trustee, Chairman of the Board
Directors and Chief Executive of Trustees, and Chief
Officer Executive Officer
Michael Mendelson Managing Director of Trustee, President
Fahnestock Asset Management a
division of Fahnestock & Co.,
Inc.
Richard Wohlman Chief Financial Officer Treasurer
Russell L. Pollack Benefits Director and Manager, Secretary
Corporate Tax
James D. Gerson Senior Vice President Senior Vice President and
Portfolio Manager
</TABLE>

In addition to investment management services, Hudson supplies office facil-
ities for the investment services, and, with respect to the Fund's invest-
ments, supplies statistical and research data, data processing services, cler-
ical, accounting and bookkeeping services, and stationery and office supplies.

OTHER SERVICE AGREEMENTS.

Administrative Services

The Trust has entered into an Administration Agreement with Fahnestock pursu-
ant 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 facilities for meetings of the Board of Trustees
and shareholders of Trust to the extent reasonably requested by the Trust, of-
fice facilities (which may be Fahnestock's own offices) and personnel to as-
sist Trust's officers and Hudson in the performance of Hudson's duties under
the Investment Management Agreement between the Trust and Hudson, and with re-
spect to operations of Trust and the Fund other than those relating to
Hudson's management of the investments of the Fund, statistical and research
data, data processing services, clerical services, internal auditing and legal
services, internal executive and administrative services, stationery and of-
fice supplies, preparation of reports to shareholders of the Fund, assistance
in preparation of tax return, reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities, and general assistance in
all aspects of the Trust's and the Fund's operations. Fahnestock has entered
into a Sub-Administration Agreement with Federated Services Company, under
which Federated performs some of these services. Pursuant to the Sub-Adminis-
tration Agreement, Fahnestock is responsible for any fees and out-of-pocket
expenses due to Federated. The Fund pays no administrative fee to Fahnestock
or Federated.

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<PAGE>

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Custodian and Transfer and Dividend Agent. Investors Fiduciary Trust Company
("IFTC") serves as the Fund's Custodian pursuant to a Custody Agreement and
the Fund's Transfer and Dividend Agent pursuant to a Transfer-Agency Agree-
ment. The Fund paid IFTC under the Custodian Agreement $6,704, $9,809 and
$9,564 for 1998, 1997 and 1996, respectively. The Fund paid IFTC under the
Transfer-Agency Agreement $133,459, $154,486 and $87,109 for 1998, 1997 and
1996 respectively.

Independent Accountants. PricewaterhouseCoopers LLP, the independent accoun-
tants of the Trust, audits and renders an opinion on the Fund's financial
statements.

Legal Counsel. The Trust has retained Faith Colish, A Professional Corpora-
tion, as counsel for the Fund.

Fahnestock may pay a portion of the Class A sales charge to Selling Dealers
whose representatives have sold or are expected to sell significant amounts of
Class A shares. Below is a list of the amounts paid to Selling Dealers as a
percentage of the offering price.

<TABLE>
<CAPTION>
Concession to Selling
Dealers as a Percentage
Amount of Purchase (Including Sales Charge) of the Offering Price
------------------------------------------- -----------------------
<S> <C>
Less than $100,000...................................... 4.00
$100,000 but less than $250,000......................... 3.00
$250,000 but less than $500,000......................... 2.00
$500,000 but less than $1 million....................... 1.50
$1 million or more...................................... *
</TABLE>
- --------
* In the case of purchases of $1 million or more, no initial sales charge is
payable but a contingent deferred sales charge, payable to Fahnestock, of
1.00% is imposed on redemptions within 18 months. Fahnestock will pay Sell-
ing Dealers who initiate and are responsible for purchases of $1 million or
more a concession 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 ex-
cess over $5 million.

DISTRIBUTION PLANS.

The Board of Trustees has adopted Plans of Distribution (the Plans) pursuant
to Rule 12b-1 under the 1940 Act.

Under the Class A Plan the Fund may reimburse Fahnestock for distribution and
service expenses at a maximum annual rate of 0.50% of the average daily net
asset value of the Class A shares. The amount of Class A 12b-1 fees is calcu-
lated based on assets that have been continuously invested in the Fund for
four calendar years or less. This fee is borne, pro rata, by all Class A
shares. Whenever a shareholder redeems Class A shares, the Fund will deem the
shares that have been held the longest to be redeemed before shares acquired
later.

With respect to the Class B Plan, the Fund may reimburse Fahnestock at a maxi-
mum 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 Fahnes-
tock to others for such activities, and at the maximum annual rate of 0.75
percent for expenses incurred in distributing Class B shares. In both cases
there is no limit on the length of time such net assets have been invested in
the Fund.

Under the Class N Plan, the Fund may reimburse Fahnestock a fee at a 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 shareholder or the maintenance of Class
N shareholder accounts, or for payments by Fahnestock to others for such ac-
tivities.

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

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- -------------------------------------------------------------------------------
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 under the Plans currently are applied first to distribu-
tion 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 pay-
ments 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 in-
terest 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 ma-
jority 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 re-
quires 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 represent-
atives and others who engage in or support distribution of shares of the
Class; (b) payments to persons who service shareholder accounts of the Class,
includ-ing, but not limited to, answering routine inquiries re-garding the
Fund, processing shareholder transactions and providing any other shareholder
services not otherwise provided by the Fund's transfer agent; (c) costs relat-
ing to the formation and implementation of marketing and promotional activi-
ties, 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 liter-
ature pertaining to shares of the Class; and (f) costs involved in obtaining
whatever information analyses and reports with respect to marketing and promo-
tional activities that the Fund may, from time to time, deem advisable. The
Class B and Class N Plans also provide for reimbursement of shareholder serv-
ice 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 in-
quiries 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 pur-
chase 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 Plan for Class N shares also con-
tains a "defensive" provision, which provides, in effect, that if payments out
of its own resources by Fahnestock or Hudson for distribution or shareholder
services are deemed to represent indirect payments by the Fund that are pri-
marily 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

-12-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
by counsel to the Fund (who is not counsel to Fahne-
stock or Hudson). The Board considered the factors suggested in the public re-
leases issued by the SEC in con nection with the proposal and adoption of Rule
12b-1, and concluded, in the exercise of their business judg-ment and in light
of their fiduciary duties under state law and the 1940 Act, that there is a
reasonable likelihood that the Plan will benefit the Fund and its sharehold-
ers.
For the year ended December 31, 1998 the Fund reimbursed expenses, attribut-
able to each Class as follows:

<TABLE>
<CAPTION>
Printing and
Mailing of Interest,
Prospectuses carrying or
to other Compensation Compensation Compensation other
Expenses than Current to to Broker- to Sales financing
Class Advertising Shareholders Underwriters Dealers Personnel charges
- -------- ----------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Class A $111,289 $ 0 $ 0 $ 0 $46,441 $ 0
Class B $ 0 $ 0 $ 0 $ 0 $ 6,134 $ 0
Class N $ 3,328 $ 0 $ 0 $ 0 $ 2,637 $ 0
</TABLE>

As of December 31, 1998 there were no unreimbursed expenses attributable to
Class A, Class B and Class N, respectively. These amounts are carried forward
and may be reimbursed at a later date.

Brokerage Transactions and Commissions

Decisions concerning the purchase and sale of portfolio securities and the al-
location of brokerage commissions are made by the Portfolio Manager and are
subject to review by the Trustees of the Fund. In effecting securities trans-
actions, Hudson generally seeks to obtain the best price and execution of or-
ders. Commission rates, being a component of price, are considered together
with other relevant factors. Hudson will use Fahnestock, of which Hudson's di-
rect parent, Fahnestock Viner Holdings, Inc., is the direct sole shareholder,
as its principal broker where, in Hudson's judgment, Fahnestock will be able
to obtain a price and execution at least as favorable as other qualified bro-
kers. All transactions through Fahnestock are made in accordance with guide-
lines established by the Board of Trustees. The Fund may not purchase from
Fahnestock securities of underwritten offerings in which Fahnestock partici-
pates 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 procedures adopted and reviewed periodically by the
Trustees.

The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution, con-
sidering 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 the National Association of Securities Dealers, Inc. and such other
policies as the Trustees may determine, Hudson may consider sales of shares of
the Fund as a factor in the selection of broker-dealers

During the years ended December 31, 1998, 1997 and 1996, the Fund paid
$45,102, $44,079, and $30,920, respectively, in brokerage commissions. Of
these amounts, $0, $0 and $3,810 were paid to Fahnestock, respectively. The
commissions paid to Fahnestock represent 0%, 0% and 12% of the aggregate bro-
kerage commissions for 1998, 1997 and 1996, respectively. The value of the se-
curities in these transactions effected

-13-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

by Fahnestock represent 0%, 0% and 0% of the aggregate values of securities in
transactions involving payment of commissions for 1998, 1997 and 1996, respec-
tively.

Purchases from underwriters of portfolio securities may include a commission
or commission paid by the issuer and transactions with dealers serving as mar-
ket makers reflect a "spread." Debt securities, and most other securities
traded in the over-the-counter market, are generally traded on a net basis
through dealers acting for their own accounts as principals and not as bro-
kers; no brokerage commissions are payable on such transactions.

Hudson is also governed in the selection of brokers and dealers, and the nego-
tiation 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 Hudson, 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 serv-
ices to be received from brokers and dealers. The research information and
statistical assistance furnished by brokers and dealers may benefit Hudson or
Hudson's other advisory clients and, conversely, brokerage commissions and
spreads paid by Hudson's other advisory clients may result in research infor-
mation and statistical assistance beneficial to the Fund. The Fund will make
no binding commitment to allocate amounts of portfolio transactions. While
Hudson will be primarily responsible for the allocation of the Fund's broker-
age business, Hudson's policies and practices in this regard must be consis-
tent 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 an-
other broker-dealer would have charged for effecting that transaction. This
practice is subject to a good faith determination by the Trustees that such
commission is reasonable in light of the brokerage and research services pro-
vided and to such policies as the Trustees may adopt from time to time.

CAPITAL STOCK

The Fund is authorized to issue Class A, Class B and Class N shares. All
shares have equal voting rights, except as to matters (such as a Plan of Dis-
tribution) 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 Contingent Deferred Sales Charge ("CDSC"). Dividends may vary
as between the Classes to the extent that different expenses are allocated to
a specific Class. All shares issued and outstanding are fully paid and nonas-
sessable by the Trust. Shares have no preemptive or conversion rights. Shares
are freely transferable, except those sold without a sales charge to affili-
ated persons of the Fund or Fahnestock. Certificates for shares will not be
issued unless requested in writing by an investor.

Currently, the Fund represents the only series of The Fahnestock Funds. 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. Share-
holders of all series of The Fahnestock Funds will vote collectively on cer-
tain matters affecting all series, such as the election of Trustees and the
selection of accountants; shareholders of one series would not be entitled to
vote on a matter that did not affect that series but that did require a sepa-
rate vote of another series, such as a particular series' investment manage-
ment agreement. As noted above, different classes would vote separately on
matters affecting only a particular class, or having different

-14-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
effects on different classes. Neither The Fahnestock Funds nor the Fund in-
tends to hold annual meetings. As a result, shareholders may not have an op-
portunity to vote each year on 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 addi-
tion, 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 Trust-
ees may call special shareholder meetings of one or more (including all) se-
ries or Classes of shares for such purposes as electing or removing Trustees,
changing fundamental policies, or adopting or amending investment 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 as-
sets for all losses and expenses of any shareholder of the Fund held person-
ally 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.

HOW TO BUY SHARES

General

You may buy Class A, Class B and Class N shares through representatives of
Fahnestock or the Selling Dealers (broker/dealers that have signed Selling
Agreements with Fahnestock). For Class N shares only, you may purchase shares
through Fund Supermarkets. You may be charged an additional service fee if you
purchase Class A or Class B shares through someone not affiliated with Fahnes-
tock or a Selling Dealer. The minimum initial investment in each Class is
$1,000. Purchases must be paid for in U.S. dollars. Additional investments may
be made in amounts of $50 or more.

Other Methods

Other methods of purchasing shares are referred to generally in the Prospec-
tuses. Listed below are some of those methods in more detail and others that
are not mentioned in the Prospectuses.

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 or her spouse and
their children under the age of 21, purchasing securities for his, her, 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. Fur-
ther information about combined purchases, including certain restrictions on
combined group purchases, is available from a representative of Fahnestock or
a Selling Dealer.

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 pro-
ceeds in the Fund without payment of a sales load. The Fund may modify or ter-
minate the reinvestment privilege at any time.

A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes. Any gain

-15-
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
or loss realized is recognized for such purposes even if the reinvestment
privilege is exercised. If the shareholder reinvests in the Fund within 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.

Persons Entitled to Reduced Sales Charge

General. Class A shares may be sold without a sales charge to Trustees or of-
ficers of the Fund, and directors or officers of Hudson, 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 rep-
resentatives 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 as-
surance 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 regis-
tered management investment company (hereinafter "an eligible governmental au-
thority"). If an investment by an eligible governmental authority at net asset
value is made through a Selling Dealer or a registered representative of Fah-
nestock, 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 institu-
tion, as shareholder of record, on behalf of (i) investment advisers or finan-
cial 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 invest-
ment adviser or financial planner on the books and records of the record hold-
er.

Wrap Accounts. Some dealers offer their clients a "wrap account" service under
which the clients pay only a "wrap fee" and do not pay commissions or similar
charges. If a dealer has entered into a Dealer Wrap Agreement with Fahnestock
to purchase Class A shares solely for its clients with whom it has wrap ac-
counts or similar arrangements, the Class A shares may be sold at net asset
value, without imposition of a sales charge and without being subject to any
CDSC at redemption.

Reductions in Class A Sales Charges.

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 pro-
ceeds from the redemption made within the preceding 60 days of shares of an-
other mutual fund not affiliated with Hudson, whose shares were purchased sub-
ject to a sales charge, or (b) the net proceeds of the sale within the preced-
ing 60 days of shares of any closed-end investment company. When making a pur-
chase at net asset value pursuant to these provisions, the investor must for-
ward 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.

-16-
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- -------------------------------------------------------------------------------

Additional information relating to the methods of obtaining reduced sales
loads is contained in the Fund's prospectuses and may be obtained from a reg-
istered representative of Fahnestock or a Selling Dealer.

Offering Price.

The offering price of shares will be the net asset value per share next deter-
mined after acceptance of the purchase order. In the case of Class A shares, a
sales load is added to net asset value as follows:

<TABLE>
<CAPTION>
Sales Charge Sales Charge
as a as a
Percentage Percentage
of the of the
Amount of Purchase (Including Amount Offering
Sales Charge) Invested Price
----------------------------- ------------ ------------
<S> <C> <C>
Less than $100,000 4.71 4.50
$100,000 but less than $250,000 3.63 3.50
$250,000 but less than $500,000 2.56 2.50
$500,000 but less than $1 million 2.04 2.00
$1 million or more * *
</TABLE>
- --------
* 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.

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 ("NYSE") (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 mar-
ket 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 and in
the U.S. over-the-counter markets at the price of the last sale on such ex-
change on the date as of which assets are valued. If no sale has occurred on
the date as of which assets are valued, it will normally be valued at its cur-
rent bid price. Debt securities having a remaining maturity of 60 days or less
may be valued at amortized cost, which approximates market value. These in-
struments may include U.S. Government securities, corporate debt securities
and money market instruments, such as bank certificates of deposit and commer-
cial paper. Portfolio securities for which current quotations are not readily
available are valued at fair value as determined in good faith by the Trust-
ees.

Foreign securities are valued at the last sale price on the principal exchange
or in the principal over-the-counter market in which such securities are trad-
ed, as of the close of regular trading on the NYSE on the day the securities
are being valued or, if there are no sales, at the last available bid price on
that day. If Hudson believes that the price of a security obtained by this
method does not represent the amount that Hudson reasonably expects to receive
on a current sale of the security, the security is valued at fair value as de-
termined in good faith by the Trustees.

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.

-17-
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- -------------------------------------------------------------------------------

Written Request. Any shareholder of record may require the Fund to redeem his
or her shares by making written application to IFTC. 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 writ-
ten 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 guaran-
teed, except that (subject to the restriction in the next sentence) a signa-
ture 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 sharehold-
er's address of record. A redemption request must be accompanied by a signa-
ture 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 IFTC by verifying the signature on your request. The following institu-
tions 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. na-
tional 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 de-
termined after receipt by IFTC of such application and certificates or stock
powers, if any, in proper form for redemption.

Through a Fund Supermarket. If you purchased your shares through a Fund Super-
market, you must redeem your shares through the Fund Supermarket.

General. Payment for shares redeemed will ordinarily be made on the next busi-
ness 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 ad-
dition, 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. Please refer to the Prospectuses for more
details.

The redemption price of shares of the Fund may be more or less than the share-
holder'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.

REDEMPTIONS IN KIND

Although it would not normally do so, the Fund has the right to pay the re-
demption price of shares of the Fund in whole or in part in portfolio securi-
ties as prescribed by the Trustees. If a shareholder sells portfolio securi-
ties received in this fashion he would incur a brokerage charge. Any such se-
curities 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 1940 Act, as amended. Under that rule,
the Fund must redeem its shares for cash except to the extent that the redemp-
tion 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 pe-
riod.

TAXES

Set forth below is a summary of certain general Federal income tax considera-
tions which may affect the Fund

-18-
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and its shareholders. As the summary is not intended as a substitute for indi-
vidual tax planning, investors are urged to consult their own tax advisers
with specific reference to their particular Federal, state or local tax situa-
tions.

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 sepa-
rate taxpayer for Federal income tax purposes. Accordingly, the amounts of in-
vestment 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 invest-
ment company" within the meaning of the Internal Revenue Code of 1986. A qual-
ified 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 rein-
vested automatically in additional shares of a Fund will be treated as dis-
tributed to its shareholders.) In addition, in order to avoid a 4% excise tax,
the Fund must distribute, or be treated as having distributed, before each
January 1, at least 98% of its ordinary income earned during the prior calen-
dar year and 98% of the net capital gains earned during the twelve months end-
ing on the preceding October 31.

Among other requirements, to qualify as a regulated investment company, the
Fund must earn at least 90% of its gross income from dividends, interest, pay-
ments with respect to securities loans, gains from the disposition of equity
or debt securities and income or gains from options on securities. The Fund
does not expect this test to have a significant effect on its investment
policy.

If the Fund did not qualify under Regulation M, the Fund would be treated for
tax purposes as an ordinary business trust and receive no tax deduction for
payments made to shareholders.

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 se-
curity at a discount, however, the portion of any gain upon its sale or re-
demption 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 securi-
ties, shareholders will not receive credits against their Federal income tax
due for foreign taxes paid by the Fund, if any.

DISTRIBUTION

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 is
a member of the National Association of Securities Dealers, Inc. and of the
New York, American and other principal national securities exchanges. Fahne-
stock has entered 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 and may enter into such agreements with other Selling Dealers in the
future. The offering of Fund shares is continuous.

The aggregate dollar amount of underwriting commissions for 1998, 1997 and
1996 were approximately $22,000, $29,000 and $37,000, respectively. Of these
amounts, Fahnestock retained $19,000, $27,000 and $35,000, respectively.

-19-
<PAGE>

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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
----------------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Fahnestock & Co. Inc. $19,000 $0 $0 $102,000
</TABLE>

CALCULATION OF PERFORMANCE

AVERAGE ANNUAL TOTAL RETURN.

<TABLE>
<CAPTION>
Average Annual Total Returns (for the periods Past One Past Since
ending 12/31/98) Year 5 Years Inception
--------------------------------------------- -------- ------- ---------
<S> <C> <C> <C>
Class A*........................................ -14.37% 12.68% 13.72%
- -----------------------------------------------------------------------------
Class B**....................................... -15.10% N/A 9.79%
- -----------------------------------------------------------------------------
Class N**....................................... -10.35% N/A 12.82%
</TABLE>

*Inception date of March 5, 1991.

**Inception date of April 17, 1997.

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 for-
mula:

ERV = P(1xT)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 years and since inception, assuming reinvestment of
all dividends and distribution.

The calculation assumes that the maximum current sales charges are 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 reinvest-
ment dates during the period.

The Yield Quotation and Tax Equivalent Yield Quotation for the 30 days ended
December 31, 1998 are 0.

-20-
<PAGE>

PART C
OTHER INFORMATION

Item 23. EXHIBITS

(b)Exhibits:

EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------

a. -- Amended and Restated Declaration of Trust of Registrant*
b. -- Amended and Restated By-Laws*
c.1 -- Rule 18f-3 Plan*
c.2 -- Articles V, VI, VII, VIII and IX and Section 4.1
of Amended and Restated Declaration of Trust of Registrant*
c.3 -- Articles III, XI and XII(c) of Amended and Restated By-Laws*
d. -- Investment Management Agreement effective February 23, 1993
e.1 -- Amended and Restated Distribution Agreement*
e.2 -- Sample Selling Dealer Agreement
f. -- Not applicable.
g. -- Custody Agreement
h.1 -- Transfer Agency Agreement
h.2 -- Administration Agreement
h.3 -- Sub-Administration Agreement*
i. -- Opinion and Consent of Gaston & Snow
j. -- Consent of PricewaterhouseCoopers L.L.P.
k. -- Not applicable
l. -- Not applicable
m.1 -- Amended and Restated Plan of Distribution with respect to Class A
shares*
m.2 -- Plan of Distribution with respect to Class B shares*
m.3 -- Plan of Distribution with respect to Class N shares*
n. -- Financial Data Schedule
o. -- Rule 18f 3 Plan*

* Incorporated by reference to Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A filed on April 15, 1997.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.

ITEM 25. INDEMNIFICATION

Under Article IV, Section 3, of the Registrant's Declaration of Trust, any past
or present Trustee or officer of Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or otherwise involved by reason of his being or having been a trustee or
officer of Registrant. This provision does not authorize indemnification when it
is determined that such trustee or officer would otherwise be liable to
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties. Expenses may be paid by
Registrant in advance of the final disposition of any action, suit or proceeding
upon receipt of an undertaking by such trustee or officer to repay such expenses
to Registrant in the event that it is ultimately determined that indemnification
of such expenses is not authorized under the Declaration of Trust.

Insofar as indemnification for liability arising under the Securities Act of
1933 (the "1933 Act") may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceding) is
asserted by such trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.

ITEM 26. 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 the Fund.

<PAGE>

Hudson acts as investment manager primarily for institutional clients. Listed
below are the names of all of the directors and officers of Hudson as of April
19, 1999, their positions with the Fund, 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.
- --------------------------------------------------------------------------------
NAME AND POSITION POSITION WITH THE FUND OTHER BUSINESS
WITH HUDSON
- --------------------------------------------------------------------------------

Albert G. Lowenthal Trustee, Chairman of Chairman of Board of
President and Director Board of Trustees, and Directors, Chief Executive
Chief Executive Officer Officer and Chief Financial
Officer of Fahnestock &
Co., Inc., its holding
company parent, Fahnestock-
Viner Holdings, Inc., and
its affiliated companies.

A.W Oughtred None Solicitor, Borden & Elliot;
Director Director of Fahnestock &
Co., Inc., and its
affiliated companies.

E.K. Roberts None President, Fahnestock-Viner
Director, Treasurer Holdings, Inc.; Treasurer
and Secretary and Director of its
affiliated companies.

James D. Gerson Senior Vice President and Director, Ag Services of
Senior Vice President Portfolio Manager America, Inc., American
Power Conversion
Corporation, Arguss
Holdings Inc., Energy
Research Corp., Evercel,
Inc., and Hilite
Industries, Inc., and
various non-public
companies.
- --------------------------------------------------------------------------------

ITEM 27. PRINCIPAL UNDERWRITER

(a) Not applicable
(b) The following information is provided with respect to each director and
officer of Fahnestock as of April 19, 1999.

<PAGE>

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH FAHNESTOCK WITH REGISTRANT
------------------ --------------------- ---------------------
<C> <C> <S>
Albert G. Lowenthal Chairman or the Board of Trustee,
Directors and Chief Executive Chairman of
Officer the
Board of
Trustees, and
Chief
Executive
Officer
Michael Mendelson Managing Director of Fahnestock Trustee,
Asset Management a division of President
Fahnestock & Co., Inc.
Richard Wohlman Chief Financial Officer Treasurer
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 MSH 3M7
Angus Winn Oughtred Director N/A
Borden & Elliot
40 King Street West
Toronto, Canada MSH 3Y4
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

(1) Hudson Capital Advisors, Inc. 780 Third Avenue New York, NY 10017

(2) The Fahnestock Funds 125 Broad Street New York, New York 10004

(3) Investors Fiduciary Trust Company 111 West 10th Street Kansas City,
Missouri 64105

ITEM 29. MANAGEMENT SERVICES

Not applicable

- --------
* Except as otherwise indicated, principal business address is 125 Broad
Street, New York, NY 10004.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 27th day of
April, 1999.

THE FAHNESTOCK FUNDS

By:/s/ Albert G. Lowenthal
-----------------------------
Albert G. Lowenthal, Chairman

Pursuant to the requirements of the Securities Act, this amendment to
the registration statement has been signed by the following persons in the
capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ Albert G. Lowenthal Trustee, Chairman April 27, 1999
- ------------------------- of Board of Trustees
Albert G. Lowenthal, (Chief Executive Officer)
as officer and Trustee

/s/ Richard Wohlman Treasurer (Chief April 27, 1999
- ------------------------- Financial and
Richard Wohlman, as Accounting Officer)
officer and not
individually

/s/ Michael Mendelson Trustee and President April 27, 1999
- -------------------------
Michael Mendelson,
as officer and Trustee
and not individually

/s/ Keith Gunzenhauser Trustee April 27, 1999
- -------------------------
Keith Gunzenhauser,
as Trustee only and
not individually

/s/ Richard E. Landau Trustee April 27, 1999
- -------------------------
Richard E. Landau,
as Trustee only and
not individually

/s/ James D. McQuaid Trustee April 27, 1999
- -------------------------
James D. McQuaid,
as Trustee only and
not individually

<PAGE>

INDEX TO EXHIBITS

PAGE NUMBER
IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERING SYSTEM

a. -- Amended and Restated Declaration of Trust of Registrant*
b. -- Amended and Restated By-Laws*
c.1 -- Rule 18f-3 Plan*
c.2 -- Articles V, VII, VIII, IX and Section 4.1 of Amended and
Restated Declaration of Trust of Registrant*
c.3 -- Articles III, XI and XII(c) of Amended and Restated By-Laws*
d. -- Investment Management Agreement effective February 23, 1993
e.1 -- Amended and Restated Distribution Agreement*
e.2 -- Sample Selling Dealer Agreement
f. -- Not applicable.
g. -- Custody Agreement
h.1 -- Transfer Agency Agreement
h.2 -- Administration Agreement
h.3 -- Sub-Administration Agreement*
i. -- Opinion and Consent of Gaston & Snow
j. -- Consent of PricewaterhouseCoopers L.L.P.
k. -- Not applicable
l. -- Not applicable
m.1 -- Amended and Restated Plan of Distribution with respect to Class A
shares*
m.2 -- Plan of Distribution with respect to Class B shares*
m.3 -- Plan of Distribution with respect to Class N shares*
n. -- Financial Data Schedule
o. -- Rule 18f 3 Plan*

* Incorporated by reference to Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A filed on April 15, 1997.

<PAGE>

Exhibit (d)

INVESTMENT MANAGEMENT AGREEMENT
HUDSON CAPITAL APPRECIATION FUND
A SERIES OF THE FAHNESTOCK FUNDS

February 23, 1993

Hudson Capital Advisors, Inc.
3 East 54th Street
New York, New York 10022

Dear Sirs:

The Fahnestock Funds (the "Trust"), a business trust created pursuant
to a declaration of trust ("Declaration of Trust") under the laws of the
Commonwealth of Massachusetts, herewith enters into the following agreement with
Hudson Capital Advisors, Inc. ("Hudson"), a wholly-owned subsidiary of
Fahnestock-Viner Holdings, Inc. ("FVH") on behalf of Hudson Capital Appreciation
Fund (the "Fund"), a series of shares of the Trust, as follows:

1. Investment Description; Appointments
------------------------------------

The Trust desires the Fund to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in the Declaration of Trust of the Trust and in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect, and in
such manner and to such extent as may from time to time be approved by the Board
of Trustees of the Trust. Copies of the Fund's Prospectus and Statement of
Additional Information and of the Declaration of Trust of the Trust, as amended,
have been or will be submitted to Hudson. The Trust desires to employ and
hereby appoints Hudson to act as investment manager to its the Fund. Hudson
accepts the appointment and agrees to furnish the services set forth below for
the compensation set forth below.

2. Services as Investment Manager
------------------------------

Subject to the supervision and direction of the Board of Trustees of
the Trust, Hudson will (a) act in strict conformity with the Trust's Declaration
of Trust and by-laws, the Investment Company Act of 1940 (the "Act") and the
Investment Advisers Act of 1940, as the same may from time to time be amended;
(b) manage the Fund in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus and its Statement of Additional
Information as from time to time in effect; (c) make general investment
decisions for
<PAGE>

the Fund including decisions concerning (i) the specific types of
securities to be held by the Fund and the proportion of the Fund's assets to be
allocated to such investments during particular market cycles and (ii) the
specific issuers whose securities will be purchased or sold by the Fund; (d)
supply office facilities for the above services; and (e) with respect to the
Fund's investments, supply statistical and research data; data processing
services; clerical, accounting and bookkeeping services; and stationery and
office supplies. In providing those services, Hudson will supervise the Fund's
investments generally and conduct a continual program of evaluation of the
Fund's assets.

It is agreed that Hudson, in connection with the performance of its
duties under this Agreement, will from time to time employ or associate with
itself such person or persons as Hudson may believe to be particularly fitted to
assist it in the performance of this Agreement with the compensation of such
person or persons to be paid by Hudson and that the Trust will incur no
obligation for such compensation. Hudson, a corporation formed under the laws
of the state of New York, will notify the Trust of any change in its ownership
or in its senior management with responsibilities for investment management
within a reasonable time after such change.

3. Information Provided to the Trust; Books and Records
--------------------------------------------- -------

(a) Hudson will keep the Trust informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Trust from time
to time with whatever information Hudson believes is appropriate for this
purpose.

(b) In compliance with the requirements of Rule 31a-3 under the
Investment Company Act of 1940, Hudson hereby agrees that all records which it
maintains for the Trust and the Fund are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
request.

4. Standard of Care
----------------

Hudson shall exercise its best judgment in rendering the services
listed in paragraph 2 above. Hudson shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust or the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect Hudson against
any liability to the Trust or the Fund or to its shareholders to which Hudson
would otherwise be subject by reason

2
<PAGE>

of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of Hudson's reckless disregard of its
obligations and duties under this Agreement.

Any person who, even though also an officer, employee, or agent of
Hudson, may be or become a trustee, officer, employee or agent of the Trust
shall be deemed, when rendering services to the Trust or acting on any business
of the Trust, to be rendering such services to or acting solely for the Trust
and not as a director, officer, employee, or agent of, or one under the control
or direction of, Hudson even though paid by Hudson.

5. Compensation
------------

In consideration of the services rendered pursuant to this Agreement,
the Trust will pay Hudson on the first business day of each quarter a fee for
the previous quarter, calculated daily, at the annual rate of 1.00% of the
Fund's average daily net assets on the first $25,000,000.00 of average daily net
assets, and 0.75% of the Fund's average daily net assets in excess of
$25,000,000.00. Upon any termination of this Agreement before the end of a
quarter, the fee for such part of that quarter shall be prorated according to
the proportion that such period bears to the full quarterly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Hudson, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information as from time to time in effect.

6. Expenses
--------

Hudson will bear all expenses in connection with the performance of
its services under this Agreement. The Fund will bear certain other expenses to
be incurred in its operation, including, but not limited to: taxes, interest,
brokerage fees and commissions, if any; fees of trustees of the Trust who are
not officers or employees of Hudson, Fahnestock & Co. Inc. or FVH; Securities
and Exchange Commission fees and state Blue Sky qualification fees; management,
advisory and administration fees; distribution expenses; charges of custodians
and transfer and dividend disbursing agents; certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of trust existence; costs of
share certificates, if any are issued; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the

3
<PAGE>

shareholders, officers or Board of Trustees of the Trust; dues payable in
connection with membership in any industry association; and any extraordinary
expenses.

7. Reimbursement to the Fund
-------------------------

If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement, but excluding interest, taxes, brokerage
expenses, an applicable portion of distribution expenses and, with the prior
written consent of the appropriate state securities commissions, extraordinary
expenses) exceed the applicable expense limitation of any state having
jurisdiction over the Fund, Hudson will reimburse the excess expense. Hudson's
expense reimbursement obligation will be limited to the amount of its fees
received pursuant to this Agreement; however, Hudson shall reimburse the Fund
for such excess expenses regardless of the amount of fees paid to it during such
fiscal year to the extent that the securities regulations of any state in which
Fund shares are registered and qualified for sale so require. This expense
reimbursement, if any, will be estimated, reconciled and paid on a quarterly
basis. From time to time Hudson, in its sole discretion and as it deems
appropriate, may assume certain expenses of the Fund and/or other of the Trust's
funds while retaining the ability to be reimbursed by the Fund or such other
fund of the Trust for such amounts prior to the end of the fiscal year. Hudson
will not be reimbursed for such amounts if such action would violate the
provisions of any applicable state securities laws relating to the limitation of
the applicable Fund's expenses.

8. Services to Other Companies or Accounts
---------------------------------------

The Trust understands that Hudson now acts and will continue to act as
investment adviser to fiduciary and other managed accounts and now acts and will
continue to act as investment manager, investment adviser, sub-investment
adviser and/or administrator to one or more other investment companies, and the
Trust has no objection to Hudson's so acting, provided that whenever and one or
more other accounts or investment companies advised by Hudson have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner believed to be equitable to each entity. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Fund. In addition, the Trust understands that
the persons employed by Hudson to assist in the performance of Hudson's duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of Hudson or any affiliate
of Hudson to engage in and devote time and

4
<PAGE>

attention to other businesses or to render services of whatever kind or nature.

9. Use of Name
-----------

The Trust hereby acknowledges that Hudson and FVH, its parent each has
a proprietary right and interest in the name "Hudson" and agrees that the name
"Hudson" 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
Hudson ceases to be the investment adviser to the Fund and that the successor
adviser 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 "Hudson" and will
not use the name "Hudson" or any other name indicating that it is advised by or
otherwise connected with Hudson or FVH. The Trust further acknowledges and
agrees that Hudson and FVH may grant the nonexclusive right to use the names
"Hudson" or any similar names to any other corporation or entity, including but
not limited to any investment company of which Hudson or any affiliate of FVH,
or any successor to the business of Hudson or such affiliate, shall be the
investment adviser or the distributor.

10. Term of Agreement
-----------------

This Agreement shall continue until February 23, 1994 and thereafter
shall continue automatically for successive annual periods ending on March 5th
of each year, provided such continuance is specifically approved at least
annually by (a) the Board of Trustees who are not "interested persons" (as
defined in the Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' written notice, by the Board of
Trustees of the Trust or by vote of holders of a majority of the Portfolio's
shares, or, upon 90 days' written notice, by Hudson. This Agreement will also
terminate automatically in the event of its assignment (as defined in the Act
and the Rules thereunder).

11. Amendment of this Agreement
---------------------------

No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund.

5
<PAGE>

12. Miscellaneous
-------------

The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be invalidated or rendered
unforceable thereby. This Agreement shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law.

This Investment Management 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 or 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 of beneficial interest.

If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.

Very truly yours,

THE FAHNESTOCK FUNDS

By:/s/ Charles E. Padgett
-----------------------------
Charles E. Padgett, Secretary

Accepted and Agreed:

HUDSON CAPITAL ADVISERS, INC.

By:/s/ Howard Shawn
-------------------------
Howard Shawn

<PAGE>

Exhibit (e)(2)

SELLING DEALER AGREEMENT
------------------------

Fahnestock & Co. Inc. ("Fahnestock") as the principal underwriter of
shares of beneficial interest ("Shares") of the Fahnestock Funds (the "Issuer"),
agrees to sell to _____________ __________ ("Dealer") Shares purchased by
Fahnestock as principal from the Issuer for resale by Dealer as principal upon
the following terms and conditions:

1. This Agreement shall apply only to such series of Shares and to
such class or classes of Shares of such series (each, a "Class") as are offered
by Fahnestock as principal underwriter for sale to Dealer hereunder and
designated as such by notice to Dealer. Each such series is referred to herein
as a "Fund".

2. (a) In all resales to the public of Shares sold to Dealer by
Fahnestock: (i) Dealer shall sell at the applicable public offering price giving
effect to cumulative or quantity discounts or other purchase programs, plans or
services described in the then current prospectus of the Fund whose Shares are
being resold; (ii) Dealer shall act as principal for its own account, and (iii)
the discount, if any, to which Dealer shall be entitled with respect to the
resale shall be as set forth in the applicable schedule of discounts issued by
Fahnestock and in effect at the time of the sale by Fahnestock to Dealer of such
Shares or as set forth in the then current prospectus. Such discount schedules
are subject to change or discontinuance by Fahnestock or the Funds from time to
time as set forth in paragraph 7 below.

(b) In the case of a Fund or Class with respect to which there is
a distribution and service plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (a "Plan"), Fahnestock may elect from time to time to make
payments to Dealer as provided under such Plan. In the case of a Fund or Class
with respect to which there is no currently effective Plan, Fahnestock may elect
to make payments to Dealer from Fahnestock's own funds. Any such payments shall
be made in the amount and manner set forth in the applicable schedule of
distribution and service payments issued by Fahnestock and then in effect or as
set forth in the then current prospectus. Such schedule of distribution and
service payments may be changed or discontinued by Fahnestock from time to time
and shall be in effect with respect to a Fund or Class with respect to which
there is a Plan in effect only so long as such Plan remains in effect with
respect to such Fund or Class.

-1-
<PAGE>

3. (a) The placing of orders with Fahnestock shall be governed by
instructions which Fahnestock shall issue from time to time. Payment for shares
ordered from Fahnestock shall be made in accordance with such instructions in
New York Clearing House funds received by Fahnestock within three business days,
within the meaning of Securities Exchange Act Rule 15c6-1, after acceptance by
Fahnestock of Dealer's order. If such payment is not received by Fahnestock,
Fahnestock reserves the right, without notice, forthwith to cancel the sale or,
at its option, to sell the Shares ordered back to the Issuer, in which latter
case Fahnestock may hold Dealer responsible for any loss, including loss of
profit, suffered by Fahnestock as a result of Dealer's failure to make payment
as aforesaid.

(b) Certificates evidencing Shares shall be available only upon
request and only upon payment for such Shares in accordance with paragraph 3(a)
above. A confirmation evidencing the purchase, transfer, redemption, repurchase
or sale ("Transaction") with respect to Shares shall be transmitted to Dealer.
Any Transaction in uncertificated shares shall be effected and evidenced by book
entry on the records maintained by the transfer agent for the applicable Fund.

(c) Dealer appoints the transfer agent for each Fund as its agent
(i) to execute Transactions in Shares of such Fund sold to Dealer by Fahnestock
in accordance with the terms and provisions of any account, program, plan or
service established or used by Dealer's customers, and (ii} to confirm each such
Transaction to Dealer's customers on Dealer's behalf. Each instruction from
Dealer with respect to a Transaction shall constitute a guarantee by Dealer that
its customer has the legal capacity to effect such Transaction.

(d) Dealer may instruct each Fund's transfer agent to register
Shares of such Fund purchased in Dealer's name and account as nominee for
Dealer's customers, in which event all prospectuses, proxy statements, periodic
reports and other printed material, and all confirmation and other
communications to shareholders will be transmitted to Dealer. Dealer shall be
responsible for forwarding such printed material, confirmations and
communications, or the information contained therein, to all customers for whom
Dealer holds such Shares as nominee. However, Fahnestock or the Funds' transfer
agent on behalf of itself or the Funds shall be responsible for the costs
associated with Dealer's forwarding such printed material, confirmations and
communications and shall reimburse Dealer in full for such costs. Dealer shall
also be responsible for complying with all reporting and tax withholding
requirements with respect to the customers for whose account Dealer is holding
such shares.

-2-
<PAGE>

4. Upon request, Fahnestock will furnish Dealer a reasonable number
of copies of the then current prospectus and statement of additional information
of each of the Funds and the printed information referred to in paragraph 6
below issued as supplements thereto.

5. (a) Dealer represents that it is and will remain a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
will abide by all NASD rules and regulations, including the Rules of Fair
Practice. Dealer further agrees to comply with all applicable state and federal
laws and rules and regulations of regulatory agencies having jurisdiction over
Transactions in the Shares. Reference is hereby specifically made to NASD Rule
2830, which is incorporated herein as if set forth in full. The termination of
Dealer's membership in the NASD or any breach of said Rule 2830 will immediately
and automatically terminate this Agreement.

(b) Fahnestock shall not purchase Shares from the Issuer except
for the purpose of covering purchase orders already received by Fahnestock, and
Dealer shall not purchase Shares from Fahnestock other than for investment
except for the purpose of covering purchase orders already received by Dealer.

(c) Dealer shall not withhold placing customers' orders for
Shares so as to result in a profit to Dealer, e.g., by virtue of a change in the
net asset value per Share from that used in determining the offering price to
Dealer's customers.

(d) Fahnestock will not accept a conditional order for Shares.

(e) If, within seven business days after confirmation by
Fahnestock of Dealer's original purchase order for Shares, such Shares are
repurchased by the Issuer or by Fahnestock for the account of the Issuer or are
tendered for redemption by the customer: (i) Dealer shall forthwith refund to
Fahnestock the full discount, if any, retained by Dealer on the original sale
and any distribution and service payments made to Dealer pursuant to paragraph
2(b) above; and (ii) Fahnestock shall forthwith pay to the Issuer in respect of
the appropriate Fund Fahnestock's share of the sales charge, if any, on the
original sale by Fahnestock and shall also pay the Issuer in respect of the
appropriate Fund the refund received under clause (i) when Fahnestock receives
it. Dealer shall refund to the Issuer in respect of the appropriate Fund
immediately upon receipt by Dealer the amount of any dividends or distributions
paid to Dealer as nominee for Dealer's customers with respect to redeemed or
repurchased Shares to the extent that the proceeds of such redemption or
repurchase may include the dividends or distributions payable on such Shares. In
the case of certificated Shares, Dealer shall be notified by Fahnestock of

-3-
<PAGE>

such repurchase or redemption within ten days of the date on which a properly
executed share certificate and stock power together with appropriate supporting
papers are delivered to Fahnestock or to the appropriate Fund. In the case of
uncertificated Shares, Dealer shall be notified by Fahnestock of such repurchase
or redemption within ten days of such repurchase or redemption. Delivery to a
Fund's transfer agent is delivery to the Fund.

(f) If any adjustment in the discount retained by Dealer on any
sale under paragraph 2(a) or in the distribution and service payments made to
Dealer under paragraph 2(b) shall result in an overpayment by Fahnestock of such
discount or payment, Dealer shall forthwith remit such overpayment. The term
"adjustment" as used in the preceding sentence shall not include any changes in
amounts paid to, retained by, or due to Dealer because a change in or
discontinuance of such discounts or distribution and service payments (as
provided under paragraphs 2(a), 2(b) and 7) prior to the effective date of such
change or discontinuance of the discount or distribution and service payment.
Dealer acknowledges that the foregoing shall in no way limit Fahnestock's right
to change or discontinue such discounts or distribution and service payment as
provided in paragraphs 2 and 7 hereof, and that, after the effective date of a
change in or discontinuance by Fahnestock of the discount schedules or of the
distribution and service payments or termination of any Plan, discounts retained
by Dealer under paragraph 2(a) or amounts paid under 2(b) shall be in amounts
and made in accordance with such change, discontinuation or termination.

(g) Neither Fahnestock nor Dealer shall, as principal, purchase
Shares from a holder of record of such Shares at a price lower than the bid
price next quoted by or for such Shares.

(h) Nothing in this Agreement shall prevent Dealer from selling
Shares for the account of an owner to Fahnestock or the Issuer and charging the
owner a reasonable handling charge, provided that Dealer discloses to the owner
that direct redemption of the shares can be accomplished by the record owner
without incurring such charge.

6. (a) Nothing in this Agreement shall authorize Dealer to act or
hold it out as an agent for Fahnestock, the Issuer, or any Fund, and nothing in
this Agreement, including the use of the words "discount" or "payment", shall
cause Dealer to be a partner, employee, or agent nor give Dealer any authority
to act for Fahnestock, the Issuer or any Fund. Neither Fahnestock, the Issuer
nor any Fund shall be liable for any of Dealer's acts or obligations under this
Agreement.

-4-
<PAGE>

(b) No person is authorized to make any representations
concerning Fund shares except those contained in such Fund's then current
prospectus and statement of additional information and in such printed
information subsequently issued to Dealer by Fahnestock or by the Issuer with
respect to a Fund as a supplement to such prospectus or statement of additional
information. In buying Shares from Fahnestock or selling Shares to Fahnestock
hereunder, Dealer shall rely solely on the representations contained in the
appropriate prospectus and statement of additional information and in any
supplemental information referred to in the preceding sentence. Fahnestock or
the Issuer shall bear the expense of qualifying Shares under the securities laws
of the various states. Any printed information which Fahnestock shall furnish
Dealer (other than the Fund's prospectuses, statements of additional
information, periodic reports and supplemental information) is the sole
responsibility of Fahnestock and not the responsibility of the Issuer or the
respective Funds, and Dealer agrees that the Issuer shall have no liability or
responsibility to Dealer with respect to any such printed information. No sales
literature or advertising material (including material disseminated through
radio, television or other electronic media) concerning Shares, other than such
printed information furnished to Dealer by Fahnestock, shall be used by Dealer
in connection with the offer or sale of Shares without obtaining the prior
written approval of Fahnestock. Dealer shall not distribute or make available to
investors any printed information furnished by Fahnestock which is marked "FOR
DEALER USE ONLY" or which otherwise indicates that it is confidential or not
intended to be distributed to investors.

(c) Dealer will comply with all applicable state and federal laws
and with the rules and regulations of authorized regulatory agencies thereunder.
Dealer will not offer Shares for sale unless such Shares are duly registered
under the applicable state and federal statutes and the rules and regulations
thereunder.

7. All orders are subject to acceptance or rejection by Fahnestock.
Fahnestock reserves the right in its discretion, without notice, to suspend
sales or to withdraw the offering of Shares, in whole or in part, or to make a
limited offering of Shares. Either of the parties hereto may cancel this
Agreement by telephonic or written notice to the other. Upon telephonic or
written notice to Dealer, Fahnestock may also change or amend any provision of
this Agreement. Upon telephonic or written notice to Dealer, Fahnestock or the
Issuer may, with respect to any Fund, change, amend or discontinue any schedule
or schedules of discounts or distribution and service payments issued by
Fahnestock from time to time and may issue a new or replacement schedule or
schedules of discounts or distribution and service payments from time to time.
Dealer hereby agrees that it shall have no vested interest in any type, amount
or rate of discount

-5-
<PAGE>

or distribution and service payment and that Dealer shall have no claim against
Fahnestock, the Issuer or any Fund by virtue of any change or diminution in the
rate or amount of, or discontinuance of, any discount or distribution and
service payment in connection with the Shares of any Fund.

8. Failure of either party to terminate this Agreement upon the
occurrence of any event set forth in this Agreement as a cause for termination
shall not constitute a waiver of the right to terminate this Agreement at a
later time on account of such occurrence.

9. Any dispute arising under or with respect to this Agreement shall
be settled by arbitration in New York, New York in accordance with the rules
then in effect of the National Association of Securities Dealers, Inc. The
arbitrators shall act by majority decision and their award may allocate
attorneys' fees and arbitration costs between the parties. Such award shall be
final and binding between the parties and judgement thereon may be entered in
any court of competent jurisdiction.

10. All communications to Fahnestock should be sent to its address as
set forth on the discount schedule as in effect from time to time. Any notice
to Dealer shall be duly given if mailed or telegraphed to Dealer at the address
specified by Dealer below. This Agreement shall become binding upon receipt by
Fahnestock of a counterpart hereof duly accepted and signed by you. This
Agreement is made in, and shall be construed in accordance with the laws of, the
State of New York.

11. This Agreement supersedes and cancels all previous agreements
between Fahnestock, whether oral or written.

Dated: _____________

FAHNESTOCK & CO. INC.

By________________________

Accepted:

Firm_______________________

By_________________________
Authorized Representative

Address:___________________

-6-

<PAGE>

EXHIBIT 99.(g)
CUSTODY AGREEMENT
-----------------

THIS AGREEMENT made the 5th day of March, 1991 by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at l27 West 10th Street, 14th
Floor, Kansas City, Missouri 64105 ("Custodian"), and THE FAHNESTOCK FUNDS, a
Massachusetts business trust having its principal office and place of business
at 110 Wall Street, New York, New York 10005 ("Trust").

WITNESSETH:

WHEREAS, Trust desires to appoint Investors Fiduciary Trust Company as
Custodian of the securities and monies of the investment portfolios of each
series of Trust's share of beneficial interest; and

WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;

NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant
and agree as follows:

1. APPOINTMENT OF CUSTODIAN. Trust hereby constitutes and appoints
-------------------------
Custodian as custodian of Trust which is to include:

A. Appointment as custodian of the securities and monies at any time
owned by Trust securities and monies attributed to each series of
shares of Trust's shares of beneficial interest being separately held
and accounted for; and

B. Appointment as agent to perform certain accounting and recordkeeping
functions required of a duly registered investment company in
compliance with applicable provisions of federal, state and local
laws, rules and regulations including, as may be required:

1. Provide information necessary for Trust to file required
financial reports; maintaining and preserving required books,
accounts and records as the basis for such reports; and
performing certain daily functions in connection with such
accounts and records.

<PAGE>

2. Calculating daily net asset value of each series of shares of
beneficial interest of Trust, and

3. Acting as liaison with independent auditors.

2. DELIVERY OF CORPORATE DOCUMENTS. Trust has delivered or will deliver
-------------------------------
to Custodian prior to the effective date of this Agreement, copies of
the following documents and all amendments or supplements thereto,
properly certified or authenticated:

A. Resolutions of the Board of Trustees of Trust appointing Custodian as
custodian hereunder and approving the form of this Agreement; and

B. Resolutions of the Board of Trustees of Trust designating certain
persons to give instructions on behalf of Trust to Custodian and
authorizing Custodian to rely upon written instructions over their
signatures.

3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
----------------------------------------

A. Delivery of Assets
------------------
Trust will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it except as
permitted by the Investment Company Act of 1940 or from time to time
coming into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies not so
delivered. All securities so delivered to Custodian (other than
bearer securities) shall be registered in the name of a particular
series of Trust's shares of beneficial interest or its nominee, or
of a nominee of Custodian, or shall be properly endorsed and in form
for transfer satisfactory to Custodian.

B. Delivery of Accounts and Records
--------------------------------
Trust shall turn over to Custodian all of Trust's relevant accounts
and records previously maintained by it. Custodian shall be entitled
to rely conclusively on the completeness and correctness of the
accounts and records turned over to it by Trust, and Trust shall
indemnify and hold Custodian harmless of and

2
<PAGE>

from any and all expenses, damages and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy or other
deficiency of such accounts and records or in the failure of Trust to
provide any portion of such or to provide any information needed by
Custodian knowledgeably to perform its function hereunder.

C. Delivery of Assets to Third Parties
-----------------------------------
Custodian will receive delivery of and keep safely the assets of
Trust delivered to it from time to time segregated in a separate
account for each series of Trust's shares of beneficial interest.
Custodian will not deliver, assign, pledge or hypothecate any such
assets to any person except as permitted by the provisions of this
Agreement or any agreement executed by it according to the terms of
Section 3.S. of this Agreement. Upon delivery of any such assets to a
subcustodian pursuant to Section 3.S.2 of this agreement, Custodian
will create and maintain records identifying those assets which have
been delivered to the subcustodian as belonging to the relevant
series of the shares of beneficial interest of Trust. Custodian is
responsible for the securities and monies of Trust only until they
have been transmitted to and received by other persons as permitted
under the terms of this Agreement, except for securities and monies
transmitted to United Missouri Bank of Kansas City, N.A. (UMBKC) and
United Missouri Trust Company of New York (UMBNY), for which
Custodian remains responsible. Custodian shall be responsible for the
monies and securities of Trust held by eligible foreign custodians or
subcustodians under this Agreement to the extent the domestic
subcustodian with which Custodian contracts is responsible to
Custodian. Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company or Treasury/Federal
Reserve Book Entry System or Participant Trust Company (PTC) (as such
entities are defined at 17 CFR Section 270.17f-4(b)) or other
depository approved by the Trust and with which Custodian has a
satisfactory direct or indirect contractual relationship.

3
<PAGE>

D. Registration of Securities
--------------------------
Custodian will hold stocks and other registerable portfolio
securities of Trust registered in the name of the appropriate series
of the shares of beneficial interest of Trust or in the name of any
nominee of Custodian for whose fidelity and liability Custodian will
be fully responsible, or in street certificate form, so-called, with
or without any indication of fiduciary capacity. Unless otherwise
instructed. Custodian will register all such portfolio securities in
the name of its authorized nominee. All securities, and the
ownership thereof by a series of the shares of beneficial interest of
Trust, which are held by Custodian hereunder, however, shall at
all times be identifiable on the records of Custodian to the
appropriate series of Trust's shares of beneficial interest. Trust
agrees to hold Custodian and its nominee harmless for any liability
as a record holder of securities held in custody.

E. Exchange of Securities
----------------------
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of a particular series of the
shares of beneficial interest of Trust for other securities or cash
issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change
of par value, conversion or other vise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value
of the stock is changed, and, upon receiving payment therefore to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.

F. Purchases of Investments of Trust
---------------------------------
Trust will, through its authorized representative, on each business
day on which a purchase of securities shall be made by it, deliver to
Custodian

4
<PAGE>

instructions which shall specify with respect to each such purchase:

1. The name of the series of its shares of beneficial interest for
which the securities have been acquired;

2. The name of the issuer and description of the security;
3. The number of shares or the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through
whom the purchase was made.

In accordance with such instructions, Custodian will pay for out of
monies held for the account of the particular series of the shares of
beneficial interest of Trust, but only insofar as monies are
available therein for such purpose, and receive the portfolio
securities so purchased by or for the account of that series of
shares of beneficial interest of Trust except that Custodian may in
its sole discretion advance funds to Trust which may result in an
overdraft because the monies held by Custodian on behalf of the
relevant series of the shares of beneficial interest of Trust are
insufficient to pay the total amount payable upon such purchase. Such
payment will be made only upon receipt by Custodian of the securities
so purchased in form for transfer satisfactory to Custodian.

G. Sales and Deliveries of Investments of Trust - Other than Options and
---------------------------------------------------------------------
Futures
-------
Trust will, through its authorized representative, on each business
day on which a sale of investment securities held on behalf of a
series of the shares of beneficial interest of Trust has been made,
deliver to Custodian instructions specifying with respect to each
such sale:

5
<PAGE>

1. The name of the series of its shares beneficial interest for which
the securities have been acquired;
2. The name of the issuer and description of the securities;
3. The number of shares or principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date:
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Trust upon such sale; and
9. The name of the broker or dealer through whom or person to whom
the sale was made.

In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the
account of the relevant series of the shares of beneficial interest
of Trust to the broker or other person specified in the instructions
relating to such sale, such delivery to be made only upon receipt of
payment therefor in such form as is satisfactory to Custodian, with
the understanding that Custodian may deliver or cause to be delivered
securities for payment in accordance with the customs prevailing
among dealers in securities.

H. Purchases or Sales of Security Options. Options on Indices and
--------------------------------------------------------------
Security Index Futures Contracts
--------------------------------
Trust will, through its authorized representative, on each business
day on which a purchase or sale of the following options and/or
futures shall be made by it, deliver to Custodian instructions which
shall specify with respect to each such purchase or sale the name of
the series of its shares of beneficial interest which has engaged in
the transactions and the following:

1. Security Options

6
<PAGE>

a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring or
closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom the sale
or purchase was made.

2. Options on Indices

a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring or
closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer through whom the
sale or purchase was made, or other applicable settlement
instructions.

3. Security Index Futures Contracts

a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;

7
<PAGE>

c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Trust shall deliver a substantially complete and
executed custodial safekeeping account and procedural agreement
which shall be incorporated by reference into this Custody
Agreement); and
f. The name and address of the futures commission merchant through
whom the sale or purchase was made, or other applicable
settlement instructions.

4. Options on Index Future Contracts

a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.

I. Securities Pledged or Loaned
----------------------------
If specifically described and permitted in the prospectus for the
particular series of shares of beneficial interest of Trust:

1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Trust on behalf of a particular series of the
shares of beneficial interest of Trust; provided, however, that
the securities shall

8
<PAGE>

be released only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is required to
secure a borrowing already made, further securities may be
released or caused to be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian will pay,
but only from funds available for such purpose, any such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing such
loan.

2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that the relevant series of the shares of
beneficial interest of Trust will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.

J. Routine Matters
---------------
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution,
purchase, transfer, or other dealings with securities or other
property of Trust except as may be otherwise provided in this
Agreement or directed from time to time by the Board of Trustees of
Trust.

K. Deposit Account
---------------
Custodian will open and maintain a special purpose deposit account or
accounts in the name of Custodian for each series of shares of
beneficial interest of Trust ("Account"), subject only to draft or
order by Custodian upon receipt of instructions. All monies received
by Custodian from or for the account of a series of the shares of
beneficial interest of Trust shall be deposited in said Account,
barring events not in the control of Custodian such as strikes,
lockouts or labor disputes, riots, war or equipment or transmission

9
<PAGE>

failure or damage, fire, flood, earthquake or other natural disaster,
action or inaction of governmental authority or other causes beyond
its control, at 9:00 a.m., Kansas City time, on the second business
day after deposit of any check into such Account, Custodian agrees to
make Fed Funds available to the relevant series of the shares of
beneficial interest of Trust in the amount of the check. Deposits
made by Federal Reserve wire will be available to Trust immediately
and ACH wires will be available to Trust on the next business day.
Income earned on the portfolio securities will be credited to the
applicable series of the shares of beneficial interest of Trust based
on the schedule attached as Exhibit A. Custodian will be entitled to
reverse any credited amounts nowhere credits have been made and
monies are not finally collected. If monies are collected after such
rex reversal, Custodian will credit the applicable portfolio in that
amount. Custodian may open and maintain an Account in such other
banks or trust companies as may be designated by it or by properly
authorized resolution of the Board of Trustees of Trust; such
Account, however, shall be in the name of custodian and subject only
to its draft or order.

L. Income and other Payments to Trust
----------------------------------

Custodian will:

1. Collect, claim and receive and deposit for the Account of the
appropriate series of shares of beneficial interest of Trust all
income and other payments which become due and payable on or after
the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of each series of the shares of beneficial interest of Trust in
accordance with the schedule attached hereto as Exhibit A; and if,
for any reason, a series of the shares of beneficial interest of
Trust is credited with income that is not subsequently collected,
Custodian may reverse that credited amount.

10
<PAGE>

2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and

3. Take such other action as may be necessary or proper in connection
with:

a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:

1. all coupons and other income items requiring presentation;
and

2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and regarding
which the Custodian has actual knowledge, or notice of which
is contained in publications of the type to which it
normally subscribes for such purpose; and

b. the endorsement for collection, in the name of the appropriate
series of shares of beneficial interest of Trust, of all
checks, drafts or other negotiable instruments.

Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction
against the costs and expenses of such suit or other actions.
Custodian will receive, claim and collect all stock dividends, rights
and other similar items and will deal with the same pursuant to
instructions. Unless prior instructions have been received to the
contrary, Custodian will, without further instructions, sell any
rights held for the account of any series of shares of beneficial
interest of Trust on the last trade date prior to the date of
expiration of such rights.

11
<PAGE>

M. Payment of Dividends and other Distributions
--------------------------------------------

On the declaration of any dividend or other distribution on any
series of the shares of the beneficial interest of Trust by the Board
of Trustees of Trust, Trust shall deliver to Custodian instructions
with respect thereto, including a copy of the Resolution of said
Board of Trustees certified by the Secretary or an Assistant
Secretary of Trust wherein there shall be set forth the record date
as of which shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such
dividend or distribution, and the amount payable per share on such
dividend or distribution.

Unless the ex-dividend date and the reinvestment date of any
dividend are the same, in which case funds shall remain in the
custody account, on the date specified in such resolution for the
payment of such dividend or other distribution, Custodian will pay
out of the monies held for the account of the relevant series of the
shares of beneficial interest of Trust, insofar as the same shall be
available for such purposes, and credit to the account of the
Dividend Disbursing Agent for Trust, such amount as may be necessary
to pay the amount per share payable in cash on shares of the relevant
series of the shares of beneficial interest of Trust issued and
outstanding on the record date established by such Resolution.

N. Shares of Trust Purchased by Trust
----------------------------------
Whenever any shares of a series of shares of beneficial interest of
Trust are repurchased or redeemed by Trust, Trust or its agent shall
advise Custodian of the aggregate dollar amount to be paid for such
shares and shall confirm such advice in writing. Upon receipt of such
advice, Custodian shall charge such aggregate dollar amount to the
Account of the appropriate series of shares of beneficial interest of
Trust and either deposit the same in the account maintained for the
purpose of paying for the repurchase or redemption of shares of that
series or deliver the same in accordance with such advice.

12
<PAGE>

Custodian shall not have any duty or responsibility to determine that
shares have been removed from the proper shareholder account or
accounts or that the proper number of such shares have been cancelled
and removed from the shareholder records.

O. Shares of Trust Purchased from Trust
------------------------------------
Whenever shares of a series of shares of beneficial interest of Trust
are purchased from Trust, Trust will deposit or cause to be deposited
with Custodian the amount received for such shares.

Custodian shall not have any duty or responsibility to determine that
shares of a series of shares of beneficial interest of Trust
purchased from Trust have been added to the proper shareholder
account or accounts or that the proper number of such shares have
been added to the shareholder records.

P. Proxies and Notices
-------------------
Custodian will promptly deliver or mail or have delivered or mailed
to Trust all proxies properly signed, all notices of meetings, all
proxy statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for Trust and
will, upon receipt of instructions, execute and deliver or cause itS
nominee to execute and deliver or mail or have delivered or mailed
such proxies or other authorizations as may be required. Except as
provided by this Agreement or pursuant to instructions hereafter
received by Custodian, neither it nor its nominee will exercise any
power inherent in any such securities, including any power to vote
the same, or execute any proxy, power of attorney, or other similar
instrument voting any of such securities, or give any consent,
approval or waiver with respect thereto, or take any other similar
action.

Q. Disbursements
-------------
Custodian will pay or cause to be paid insofar as funds are available
for the purpose, bills, statements and other obligations of Trust
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Trust,
interest charges, dividend

13
<PAGE>

disbursements, taxes, management fees, custodian fees, legal fees,
auditors' fees, transfer agents' fees, brokerage commissions,
compensation to personnel, and other operating expenses of Trust)
pursuant to instructions of Trust setting forth the name of the
series of the shares of beneficial interest of Trust, the name of the
person to whom payment is to be made, the amount of the payment, and
the purpose of the payment.

R. Daily Statement of Accounts
---------------------------
Custodian will, within a reasonable time, render to Trust as of the
close of business on each day, a detailed statement of the amounts
received or paid and of securities received or delivered for the
account of each series of the shares of beneficial interest of Trust
during said day. Custodian will, from time to time, upon request by
Trust, render a detailed statement of the securities and monies held
for each series of the shares of beneficial interest of Trust under
this Agreement, and Custodian will maintain such books and records as
are necessary tO enable it to do so and will permit such persons as
are authorized by Trust including Trust's independent public
accountants, access to such records or confirmation of the contents
of such records; and if demanded, will permit federal and state
regulatory agencies to examine the securities, books and records.
Upon the written instructions of Trust or as demanded by federal or
state regulatory agencies, Custodian will instruct any subcustodian
to permit such persons as are authorized by Trust including Trust's
independent public accountants, access to such records or
confirmation of the contents of such records; and if demanded, to
permit federal and state regulatory agencies to examine the books,
records and securities held by subcustodian which relate to Trust.

S. Appointment of Subcustodian
---------------------------
1. Notwithstanding any other provisions of this Agreement, all or any
of the monies or securities of Trust may be held in Custodian's
own custody or in the custody of one or more other banks or trust
companies acting as subcustodians as may be selected by Custodian

14
<PAGE>

and approved by Trust. Any such subcustodian must have the
qualifications required for a custodian under the Investment
Company Act of 1940, as amended. The subcustodian may participate
directly or indirectly in the Depository Trust Company or
Treasury/Federal Reserve Book Entry System, PTC (as such entity)
is defined at 17 CFR Section 270.17f-f(b)) or other depositor
approved by Trust and with which Custodian has a satisfactory
direct or indirect contractual relationship. Custodian will
appoint UMBKC and UMBNY as subcustodians and Custodian shall be
responsible for UMBKC and UMBNY to the same extent it is
responsible to Trust under Section 5 of this Agreement. Custodian
is not responsible for DTC, the Treasury/Federal Reserve Book
Entry System, and PTC except to the extent such entities are
responsible to Custodian. Upon instruction of Trust, Custodian
shall be willing to contract with such entities as Bank of New
York (BONY), Morgan Guaranty and Trust Company (MGTC), Chemical
Bank (CB), and Bankers Trust Company (BT) for variable rate
securities and Custodian avid be responsible to Trust to the same
extent those entities are responsible to Custodian. Trust shall be
entitled to review Custodian's contracts with BONY, MGTC, CB, and
BT.

2. Notwithstanding any other provisions of this Agreement, Trust's
foreign securities (as defined in Rule 17f-5(c)(1) under the
Investment Company Act of 1940) and Trust's cash or cash
equivalents, in amounts reasonably necessary to effect Trust's
foreign securities transactions, may be held in the custody of one
or more banks or trust companies acting as subcustodians,
according to Section 3.S.1; and thereafter, pursuant to a written
contract or contracts as approved by Trust's Board of Trustees,
may be transferred to an account maintained by such subcustodian
with an eligible foreign custodian, as defined in Rule 17f-
5(c)(2), provided that any such arrangement

15
<PAGE>

involving a foreign custodian shall be in accordance with the
provisions of Rule 17f-5 under the Investment Company Act of 1940
as that Rule may be amended from time to time. Trust shall be
provided the contract with the domestic subcustodian who shall
contract with the eligible foreign subcustodians. Custodian shall
be responsible for the monies and securities of Trust held by
eligible foreign subcustodians to the extent the domestic
Subcustodian with which Custodian contracts is responsible to
Custodian.

T. Accounts and Records
--------------------
Custodian with the direction and as interpreted by Trust. Trust's
accountants and/or other tax advisors will prepare and maintain
complete, accurate and current all accounts and records required to
be maintained by Trust under the Internal Revenue Code of 1986
("Code") as amended and under the General Rules and Regulations under
the Investment Company Act of 1940 ("Rules") as amended, and as
agreed upon between the parties and will preserve said records in the
manner and for the periods prescribed in said Code and Rules, or for
such longer period as is agreed upon by the parties.
Custodian relies upon Trust to furnish, in writing, accurate and
timely information to complete Trust's records and perform daily
calculation of the net asset value of each series of the shares of
beneficial interest of Trust, as provided in Section 3.W. below.
Custodian shall incur no liability and Trust shall indemnify and hold
harmless Custodian from and against any liability arising from any
failure of Trust to furnish such information in a timely and accurate
manner, even if Trust subsequently provides accurate but untimely
information. It shall be the responsibility of Trust to furnish
Custodian with the declaration, record and payment dates and amounts
of any dividends or income and any other special actions required
concerning each of its securities when such information is not
readily available from generally accepted securities industry
services or publications.

16
<PAGE>

U. Accounts and Records Property of Trust
--------------------------------------

Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the property
of Trust, and will be made available to Trust for inspection or
reproduction within a reasonable period of time, upon demand.
Custodian will assist Trust's independent auditors, or upon approval
of Trust, or upon demand, any regulatory body, in any requested
review of Trust's accounts and records but shall be reimbursed for
all expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from Trust of the
necessary information, Custodian will supply necessary data for
Trust's completion of any necessary tax returns, questionnaires,
periodic reports to Shareholders and such other reports and
information requests as Trust and Custodian shall agree upon from
time to time.

V. Adoption of Procedures
----------------------

Custodian and Trust may front time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved by Trust, or directed by Trust, conflicts with or violates
any requirements of the prospectus for any series of the shares of
beneficial interest of the Trust, Declaration of Trust, Bylaws, or
any rule or regulation of any regulatory body or governmental agency.
Trust will be responsible to notify Custodian of any changes in
statutes, regulations, rules or policies which might necessitate
changes in Custodian's responsibilities or procedures.

W. Calculation of Net Asset Value
------------------------------

Custodian will calculate the net asset value and the net asset value
per share of each series of the shares of beneficial interest of
Trust, in accordance with the prospectus for that series, once daily.
Custodian will prepare and maintain a daily evaluation of securities
for which market quotations are available by the use of outside
services normally used and contracted for this purpose; all other
securities will be evaluated in accordance with Trust's instructions.
Custodian will have no responsibility for the accuracy of the

17
<PAGE>

prices quoted by these outside services or for the information
supplied by Trust or upon instructions.

X. Overdrafts
----------

If Custodian shall in its sole discretion advance funds to the
account of a particular series of the shares of beneficial interest
of Trust which results in an overdraft because the monies held by
Custodian on behalf of that series of the shares of beneficial
interest of Trust are insufficient to pay the total amount payable
upon a purchase of securities as specified in Trust's instructions or
for some other reason, the amount of the overdraft shall be payable
out of the assets held by Custodian for the account of such series of
the shares of beneficial interest of Trust to Custodian upon demand
and shall bear an interest rate determined by Custodian from the date
advanced until the date of payment.

4. INSTRUCTIONS.
-------------

A. The term "instructions", as used herein, means written or oral
instructions to Custodian from a designated representative of Trust.
Certified copies of resolutions of the Board of Trustees of Trust
naming one or more designated representatives to give instructions in
the name and on behalf of Trust, may be received and accepted from
time to time by Custodian as conclusive evidence of the authority of
any designated representative to act for Trust and may be considered
to be in full force and effect (and Custodian will be fully protected
in acting in reliance thereon) until receipt by Custodian of notice
to the contrary. Unless the resolution delegating authority to any
person to give instructions specifically requires that the approval
of anyone else will first have been obtained, Custodian will be under
no obligation to inquire into the right of the person giving such
instructions to do so. Notwithstanding any of the foregoing
provisions of this Section 4. no authorizations or instructions
received by Custodian from Trust, will be deemed to authorize or
permit any director, trustee, officer, employee, or agent of Trust to
withdraw any of the securities or similar investments of Trust upon
the mere receipt of such

18
<PAGE>

authorization or instructions from such director, trustee, officer,
employee or agent.

Notwithstanding any other provision of this Agreement, Custodian,
upon receipt (and acknowledgement if required at the discretion of
Custodian) of the instructions of a designated representative of
Trust will undertake to deliver for the account of the designated
series of the shares of beneficial interest of Trust monies,
(provided such monies are on hand or available) in connection with
Trust's transactions with respect to such series of the shares of
beneficial interest of Trust and to wire transfer such monies to such
broker, dealer, subcustodian, bank or other agent specified in such
instructions by a designated representative of Trust.

B. No later than the next business day immediately following each oral
instruction, Trust will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may
record on tape, or otherwise, any oral instruction whether given in
person or via telephone, each such recording identifying the parties,
the date and the time of the beginning and ending of such oral
instruction.

5. LIMITATION OF LIABILITY OF CUSTODIAN.
-------------------------------------

A. Custodian shall hold harmless and indemnify Trust from and against
any loss or liability arising out of Custodian's failure to comply
with the terms of this Agreement or arising out of Custodian's
negligence, bad faith or willful misconduct. Custodian shall not be
liable for consequential, special or punitive damages. Custodian may
request and obtain the advice and opinion of counsel for Trust, or of
its own counsel with respect to questions or matters of law, and it
shall be without liability to Trust for any action taken or omitted
by it in good faith, in conformity with such advice or opinion. If
Custodian reasonably believes that it could not prudently act
according to the instructions of Trust or Trust's counsel, it may in
its discretion, with notice to Trust, not act according to such
instructions.

19
<PAGE>

B. Custodian may rely upon the advice of Trust and upon statements of
Trust's accountants or other persons believed by, it in good faith,
to be expert in matters upon which they are consulted, and Custodian
shall not be liable for any actions taken, in good faith, upon such
statements.

C. If Trust requires Custodian in any capacity to take, with respect to
any securities, any action which involves the payment of money by it,
or which in Custodian's opinion might make it or its nominee liable
for payment of monies or in any other way. Custodian. upon notice to
Trust given prior to such actions, shall be and be kept indemnified
by Trust in an amount and form satisfactory to Custodian against any
liability on account of such action.

D. Custodian shall be entitled to receive, and Trust agrees to pay to
Custodian, on demand, reimbursement for such cash disbursements,
costs and expenses as may be agreed upon from time to time by
Custodian and Trust.

E. Custodian shall be protected in acting as custodian hereunder upon
any instructions, advice, notice, request, consent, certificate or
other instrument or paper reasonably appearing to it to be genuine
and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive
proof of any fact or matter required to be ascertained from Trust
hereunder, a certificate signed by Trust's President, or other
officer specifically authorized for such purpose.

F. Without limiting the generality of the foregoing, Custodian shall be
under no duty or obligation to inquire into, and shall not be liable
for:

1. The validity of the issue of any securities purchased by or for
Trust, the legality of the purchase thereof or evidence of
ownership required by Trust to be received by Custodian, or the
propriety of the decision to purchase or amount paid therefor;

2. The legality of the sale of any securities by or for any series
of the shares of beneficial interest of Trust, or the propriety
of the amount for which the same are sold;

20
<PAGE>

3. The legality of the issue or sale of any shares of beneficial
interest of Trust, or the sufficiency of the amount to be
received therefor;

4. The legality of the repurchase or redemption of any shares of
beneficial interest of Trust, or the propriety of the amount to
be paid therefor; or

5. The legality of the declaration of any dividend by Trust on any
series of the shares of beneficial interest of Trust, or the
legality of the issue of any shares of beneficial interest of any
series of the shares of beneficial interest of Trust in payment
of any stock dividend.

G. Custodian shall not be liable for, or considered to be custodian of,
any money represented by any check, draft, wire transfer, clearing
house funds, uncollected funds, or instrument for the payment of
money received by it on behalf of Trust, until Custodian actually
receives such money, provided only that it shall advise Trust
promptly if it fails to receive any such money in the ordinary course
of business, and use its best efforts and cooperate with Trust toward
the end that such money shall be received.

H. Except to the extent Custodian is responsible under other provisions
of this Agreement for subcustodians or eligible foreign
subcustodians, Custodian shall not be responsible for loss occasioned
by the acts, neglects, defaults or insolvency of any broker, bank,
trust company, or any other person with whom Custodian may deal in
the absence of negligence, bad faith, or willful misconduct on the
part of Custodian.

I. Notwithstanding anything herein to the contrary, Custodian may, and
with respect to any foreign subcustodians appointed under Section
3.S.2 must, provide Trust for its approval, agreements with banks or
trust companies which will act as subcustodians for Trust pursuant to
Section 3.S of this Agreement.

6. COMPENSATION. Trust will pay to Custodian such compensation as is stated
------------
in the Fee Schedule attached hereto as Exhibit B which may be changed from
time to time as agreed to in writing by Custodian and Trust. Custodian may
charge to the

21
<PAGE>

account of the appropriate series of shares of beneficial interest of
Trust such compensation against monies held by it for the account of such
series. Custodian will also be entitled, notwithstanding the provisions of
Sections 5.C. or 5.D. hereof, to charge against any monies held by it for
the account of Trust the amount of any loss, damage, liability, advance,
or expense for which it shall be entitled to reimbursement under the
provisions of this Agreement including fees or expenses due to Custodian
for other Services provided to Trust by Custodian. Custodian will not be
entitled to reimbursement by Trust for any loss or expenses of any
subcustodian.

7. TERMINATION. Either party to this Agreement may terminate the same by
-----------
notice in writing, delivered or mailed, postage prepaid, to the other
party hereto and received not less than ninety (90) days prior to the date
upon which such termination will take;e effect. Upon termination of this
Agreement, Trust will pay to Custodian such compensation for its
reimbursable disbursements, costs and expenses paid or incurred to such
date and Trust will use its best efforts to obtain a successor custodian.
Unless the holders of a majority of the outstanding shares of beneficial
interest vote to have the securities, funds and other properties held
under this Agreement delivered and paid over to some other person, firm or
corporation specified in the vote, having not less the Two Million Dollars
(S2,000,000) aggregate capital, surplus and undivided profits, as shown by
its last published report, and meeting such other qualifications for
custodian as set forth in the Bylaws of Trust, the Board of Trustees of
Trust will, forthwith upon giving or receiving notice of termination of
this Agreement, appoint as successor custodian a bank or trust company
having such qualifications. Custodian will, upon termination of this
Agreement, deliver to the successor custodian so specified or appointed,
at Custodian's office, all securities then held by Custodian hereunder,
duly endorsed and in form for transfer, all funds and other properties of
Trust deposited with or held by Custodian hereunder, or will co-operate in
effecting changes in book-entries at the Depository Trust Company in the
Treasury/Federal Reserve Book-Entry System pursuant to 31 CFR Sec.
306.118. In the event no such vote has been adopted by the holder of
shares of beneficial interest of Trust and no written order designating a

22
<PAGE>

successor custodian has been delivered to Custodian on or before the
date when such termination becomes effective, then Custodian will deliver
the securities, funds and properties of Trust to a bank or trust company
at the selection of Custodian and meeting the qualifications for
custodian, if any, set forth in the Bylaws of Trust and having not less
that Two Million Dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report. Upon either such
delivery to a successor custodian, Custodian will have no further
obligations or liabilities under this Agreement. Thereafter such bank or
trust company will be the successor custodian under this Agreement and
will be entitled to reasonable compensation for its services. In the event
that no such successor custodian can be found, Trust will submit to its
shareholders, before permitting delivery of the cash and securities owned
by Trust to anyone other than a successor custodian, the question of
whether Trust will be liquidated or function without a custodian.
Notwithstanding the foregoing requirement as to delivery upon termination
of this Agreement, Custodian may make any other delivery of the
securities, funds and property of Trust which is permitted by the
Investment Company Act of 1940, Trust's Declaration of Trust and Bylaws
then in effect or apply to a court of competent jurisdiction for the
appointment of a successor custodian.

8. NOTICES. Notices, requests, instructions and other writings received by
--------
Trust at 110 Wall Street, New York, New York 10005 or at such other
address as Trust may have designated to Custodian in writing, will be
deemed to have been properly given to Trust hereunder; and notices,
requests, instructions and other writings received by Custodian at its
offices at 127 West 10th Street, 14th Floor, Kansas City, Missouri 64105,
or to such other address as it may have designated to Trust in writing,
will be deemed to have been properly given to Custodian hereunder.

9. MISCELLANEOUS.
--------------

A. This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of said state.

23
<PAGE>

B. All the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successor
and assigns of the parties hereto.

C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and executed
by both parties hereto.

D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.

E. This Agreement shall become effective at the close of business on
_______ day of January, 1991.

F. This Agreement may be executed simultaneously in two or more
counterparts, each of X which will be deemed an original but all of
which together will constitute one and the same instrument.

G. If any part, term or provision of this Agreement is by the courts held
to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be
construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid.

H. This Agreement may not be assigned by either party without prior
written consent of the other party.

I. If any provision of the Agreement, either in its present form or as
amended from time to time, limits, qualifies or conflicts with the
Investment Company Act of 1940 and the rules and regulations
promulgated thereunder, such statutes, rules and regulations shall be
deemed to control and supercede such provision without nullifying or
terminating the remainder of the provisions of this Agreement.

J. Custodian will not release the identity of Trust to an issuer which
requests such information pursuant to the Shareholder communications
Act of 1985

24
<PAGE>

for the specific purpose of direct communications between such issuer
and Trust unless Trust directs Custodian otherwise.

K. A copy of the Declaration of Trust of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and notice is hereby
given that the Agreement has been executed on behalf of Trust by the
undersigned officer of Trust in his/her capacity as an officer of
Trust. The obligations of this Agreement shall only be binding upon
the assets and property of Trust and shall not be binding upon any
Trustee, officer or shareholder of Trust individually.

25
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST COMPANY

By: /s/ R. Winegar
-----------------------------
Title: Executive Vice Pres.
--------------------------

ATTEST

/s/ Cheryl J. Naegler
- ---------------------------
Cheryl J. Naegler
Assistant Secretary

THE FAHNESTOCK FUNDS

By: /s/ Albert G. Lowenthal
-----------------------------
Title: Chairman
--------------------------

ATTEST:

/s/ Charles E. Padgett
- --------------------------
Charles E. Padgett
Secretary

26
<PAGE>

EXHIBIT A
---------
IFTC AVAILABILITY SCHEDULE BY TRANSACT1ON TYPE
<TABLE>
<CAPTION>

TRANSACTION DTC PHYSICAL FED
- ----------------- ----------------------- ----------------------- -----------------------
TYPE CR DATE FDS TYPE CR DATE FDS TYPE CR DATE FDS TYPE
- ------------ ----------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*

Maturities As Received C or F* Mat. Date C or F* Mat. Date F

Tender Reorgs. As Received C As Received C N/A

Dividends Paydate C Paydate C N/A

Floating Paydate C Paydate C N/A
Rate Int.

Floating N/A As Rate C N/A
Rate Int. Received
(No Rate)

Mtg. Backed Paydate C Paydate + 1 C Paydate F
P&I Bus. Day

Fixed Rate Paydate C Paydate C Paydate F
Int.

Euroclear N/A C Paydate C
</TABLE>

Legend
------
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.

<PAGE>

EXHIBIT (h)(1)

AGENCY AGREEMENT

THIS AGREEMENT made the 5th day of March, 1991, by and between THE
FAHNESTOCK FUNDS, a Massachusetts business trust having its principal place of
business at 111 Wall Street, New York, New York 10005 ("Trust"), and INVESTORS
FIDUCIARY TRUST COMPANY, a state chartered trust company organized and existing
under the laws of the State of Missouri, having its principal place of business
at 127 West 10th Street, Kansas City, Missouri 64105 ("IFTC");

WITNESSETH:

WHEREAS, Fund desires to appoint IFTC as Transfer Agent and Dividend
Disbursing Agent, and IFTC desires to accept such appointment;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

1. Documents to be Filed with Appointment.
-----------------------------------------
In connection with the appointment of IFTC as Transfer Agent and
Dividend Disbursing Agent for Trust, there will be filed with IFTC the
following documents:

A. A certified copy of the resolutions of the Board of Trustees of Trust
appointing IFTC as Transfer Agent and Dividend Disbursing Agent,
approving the form of this Agreement, and designating certain persons
to sign certificates of shares of beneficial interest, if any, and
give written instructions and requests on behalf of Trust;

B. A certified copy of the Declaration of Trust of Trust and all
amendments thereto;

C. A certified copy of the Bylaws of Trust;

D. Copies of Registration Statements, and amendments thereto, filed
with the Securities and Exchange Commission.

1
<PAGE>

E. Specimens of all forms of outstanding certificates of shares of
beneficial interest, in the forms approved by the Board of Trustees
of Trust, with a certificate of the Secretary of Trust, as to such
approval;

F. Specimens of the signatures of the officers of Trust authorized to
sign certificates of shares of beneficial interest and individuals
authorized to sign written instructions and requests;

G. An opinion of counsel for Trust with respect to:

(1) Trust's organization and existence under the laws of its state of
organization,
(2) The status of all shares of beneficial interest of Trust covered
by the appointment under the Securities Act of i933, as amended,
and any other applicable federal or state statute and
(3) That all issued shares are, and all unissued shares will be, when
issued, validly issued, fully paid and nonassessable by Trust.

2. Certain Representations and Warranties of IFTC. IFTC represents and
-----------------------------------------------
warrants to Trust that:

A. It is a trust company duly organized and existing and in good
standing under the laws of Missouri.

B. It is duly qualified to carry on its business in the State of
Missouri.

C. It is empowered under applicable laws and by its Declaration of Trust
and bylaws to enter into and perform the services contemplated in
this Agreement.

D. It is registered as a transfer agent to the extent required under the
Securities Exchange Act of 1934, as amended.

E. All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.

F. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.

2
<PAGE>

3. Certain Representations and Warranties of Trust. Trust represents and
-----------------------------------------------
warrants to IFTC that:

A. It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
B. It is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been
filed and will be effective with respect to all shares of Trust being
offered for sale.
D. All requisite steps have been or will be taken to register Trust's
shares for sale in all applicable states.
E. Trust is empowered under applicable laws and by its Declaration of
Trust and bylaws to enter into and perform this Agreement.

4. Scope of Appointment.
--------------------

A. Subject to the conditions set forth in this Agreement, Tr-ust hereby
employs and appoints IFTC as Transfer Agent and Dividend Disbursing
Agent effective the ____ day of January, 1991.
B. IFTC hereby accepts such employment and appointment and agrees that
it will act as Trust's Transfer Agent and Dividend Disbursing Agent
for the current series of shares and each subsequently created series
of shares of Trust. IFTC agrees that it will also act as agent in
connection with Trust's periodic withdrawal payment accounts and
other open accounts or similar plans for shareholders, if any.
C. IFTC agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in
accordance with industry practice.
D. Trust agrees to use its best efforts to deliver to IFTC in Kansas
City, Missouri, as soon as they are available, all of its shareholder
account records.
E. Subject to the provisions of Sections 19. and 20. hereof, IFTC agrees
that it will perform all of the usual and ordinary services of
Transfer Agent and

3
<PAGE>

Dividend Disbursing Agent and as Agent for the various shareholder
accounts, including, without limitation, the following: issuing,
transferring and cancelling certificates of shares of beneficial
interest, if any, maintaining all shareholder accounts, preparing
shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses, withholding
taxes on non-resident alien and foreign corporation accounts, for
pension and deferred income, backup withholding or other instances
agreed upon by the parties, preparing and mailing checks for
disbursement of income dividends and capital gains distributions,
preparing and filing U.S. Treasury Department Form 1099 for all
shareholders, preparing and mailing confirmation forms to
shareholders, principal distributor, and dealers with respect to all
purchases and redemptions of Trust shares and other transactions in
shareholder accounts for which confirmations are required, recording
reinvestments of dividends and distributions in Trust shares, and
cooperating with broker-dealers and financial intermediaries who
represent shareholders of Trust.

5. Limit of Authority
------------------
Unless otherwise expressly limited by the resolution of appointment or
by subsequent action by Trust, the appointment of IFTC as Transfer Agent
will be construed to cover the full amount of the shares of beneficial
interest for which IFTC is appointed as the same may, from time to time,
be constituted and any subsequent increases in such authorized amount.

In case of such increase Trust will file with IFTC:

A. If the appointment of IFTC was theretofore expressly limited, a
certified copy of a resolution of the Board of Trustees of Trust
increasing the authority of IFTC;
B. A certified copy of the amendment to the Declaration of Trust of
Trust authorizing the increase of stock;
C. A certified copy of the order or consent of each governmental or
regulatory authority required by law to consent to the issuance of
the increased stock,

4
<PAGE>

and an opinion of counsel that the order or consent of no other
governmental or regulatory authority is required;

D. Opinion of counsel for Trust stating:

(1) The status of the additional shares of stock of Trust under the
Securities Act of 1933, as amended, and any other applicable
federal or state statute; and

(2) That the additional shares are, or when issued will be, validly
issued, fully paid and non-assessable by Trust.

6. Compensation and Expenses.
-------------------------

A. In consideration for its services hereunder as Transfer Agent and
Dividend Disbursing Agent, Trust will pay to IFTC from time to time a
reasonable compensation for all services rendered as Agent, and also,
all its reasonable out-of-pocket expenses, charges, counsel fees, and
other disbursements (Compensation and Expenses) incurred in
connection with the agency. Such compensation is set forth in a
separate schedule to be agreed to by Trust and IFTC, a copy of which
is attached hereto and incorporated herein by reference. If Trust has
not paid such Compensation and Expenses to IFTC within a reasonable
time, IFTC may charge against any monies held under this Agreement
with respect to a separate series of shares of Trust. The amount of
any Compensation and/or Expenses for which it shall be entitled to
reimbursement under this Agreement with respect to that series.

B. Fund agrees to promptly reimburse IFTC for all reasonable out-of-
pocket expenses or advances incurred by IFTC in connection with the
performance of services under this Agreement, for postage (and first
class mail insurance in connection with mailing stock certificates),
envelopes, check forms, continuous forms, forms for reports and
statements, stationery, and other similar items, telephone and
telegraph charges incurred in answering inquiries from dealers or
shareholders, microfilm used each year to record the previous year's
transactions in shareholder accounts and computer tapes used for
permanent storage of records and cost of insertion of materials in
mailing

5
<PAGE>

envelopes by outside firms. IFTC will provide to Trust no less
often than monthly a detailed accounting of all such expenses on
behalf of Trust.

7. Efficient Operation of IFTC System.
-----------------------------------

A. In connection with the performance of its services under this
Agreement, IFTC is responsible for such items as:

(1) The accuracy of all entries in IFTC's records reflecting orders
and instructions received by IFTC from dealers, shareholders,
Trust or its principal underwriter;
(2) The availability and the accuracy of shareholder lists,
shareholder account verifications, confirmations and other
shareholder account information to be produced from its records
or data;
(3) The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from Trust;
(4) The accuracy of redemption transactions and payments in
accordance with redemption instructions received from dealers,
shareholders or Trust;
(5) The deposit daily in Trust's appropriate special bank account or
accounts of all checks and payments received from dealers or
shareholders for investment in shares;
(6) The requiring of proper forms of instructions, signatures and
signature guarantees and any necessary documents supporting the
legality of transfers, redemptions and other shareholder account
transactions, all in conformance with IFTC's present procedures
with such changes as may be required or approved by Trust; and
(7) The maintenance of a current duplicate set of Trust's essential
records at a secure distant location, in form available and
usable forthwith in the event of any breakdown or disaster
disrupting its main operation.

8. Indemnification.
----------------

A. IFTC will not be responsible for, and Trust will hold harmless and
indemnify IFTC from and against any loss by or liability to Trust or
a third party,

6
<PAGE>

including attorney's fees, in connection with any claim or suit
asserting any such liability arising out of or attributable to
actions taken or omitted by IFTC pursuant to this Agreement, unless
IFTC has acted negligently, in bad faith or with willful misconduct.
The matters covered by this indemnification include but are not
limited to those of Section 14 hereof. Trust will be responsible for,
and will have the right to conduct or control the defense of any
litigation asserting liability against which IFTC is indemnified
hereunder. IFTC will not be under any obligation to prosecute or
defend any action or suit in respect of the agency relationship
hereunder, which, in its opinion, may involve it in expense or
liability, unless Trust will, as often as requested, furnish IFTC
with reasonable, satisfactory security and indemnity against such
expense or liability.

B. IFTC will hold harmless and indemnify Trust from and against any loss
or liability arising out of IFTC's failure to comply with the terms
of this Agreement including any breach of any representation or
warranty of IFTC or arising out of IFTC's negligence, bad faith or
willful misconduct.

9. Certain Covenants of IFTC and Trust.
------------------------------------

A. All requisite steps will be taken by Trust from time to time when and
as necessary to register Trust's shares for sale in all states in
which Trust's shares shall at the time be offered for sale and
require registration. If at any time Trust will receive notice of any
stop order or other proceeding in any such state affecting such
registration or the sale of Trust's shares, or of any stop order or
other proceeding under the Federal securities laws affecting the sale
of Trust's shares, Trust will give prompt notice thereof to IFTC.

B. IFTC hereby agrees to perform such transfer agency functions as are
set forth in section 4.E. above and establish and maintain facilities
and procedures reasonably acceptable to Trust for safekeeping of
stock certificates, check forms, and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and

7
<PAGE>

devices, and to carry insurance as specified in Exhibit B which will
not be lowered without notice to Trust.

C. To the extent required by Section 31 of the Investment Company Act of
1940, as amended, and Rules thereunder, IFTC agrees that all records
maintained by IFTC relating to the services to be performed by IFTC
under this Agreement are the property of Trust and will be preserved
and will be surrendered promptly to Trust on request.
D. IFTC agrees to furnish Trust semi-annual reports of its financial
condition, consisting of a balance sheet, earnings statement and any
other financial information reasonably requested by Trust. The annual
financial statements will be certified by IFTC's certified public
accountants.
E. IFTC represents and agrees that it will use its best efforts to keep
current on the trends of the investment company industry relating to
shareholder services and will use its best efforts to continue to
modernize and improve its system without additional cost to Fund.
F. IFTC will permit Trust and its authorized representatives to make
periodic inspections of its operations at reasonable times during
business hours.

10. Recapitalization or Readjustment.
---------------------------------

In case of any recapitalization, readjustment or other change in the
capital structure of Trust requiring a change in the form of share
certificates, IFTC will issue or register certificates in the new form
in exchange for, or in transfer of, the outstanding certificates in the
old form, upon receiving:

A. Written instructions from an officer of Trust;
B. Certified copy of the amendment to the Declaration of Trust or other
document effecting the change;
C. Certified copy of the order or consent of each governmental or
regulatory authority required by law to the issuance of the shares in
the new form, and an opinion of counsel that the order or consent of
no other government or regulatory authority is required;

8
<PAGE>

D. Specimens of the new certificates in the form approved by the Board
of Trustees of Trust, with a certificate of the Secretary of Trust as
to such approval;
E. Opinion of counsel for Trust stating:
(1) The status of the shares of beneficial interest of Trust in the
new form under the Securities Act of 1933, as amended and any
other applicable federal or state statute; and
(2) That the issued shares in the new form are, and all unissued
shares will be, when issued, validly issued, fully paid and non-
assessable by Trust.

11. Share Certificates.
------------------
Fund will furnish IFTC with a sufficient supply of blank certificates of
shares of beneficial interest and from time to time will renew such
supply upon the request of IFTC. Such certificates will be signed
manually or by facsimile signatures of the officers of Trust authorized
by law and by bylaws to sign share certificates, and if required, will
bear Trust's seal or facsimile thereof.

12. Death, Resignation or Removal of Signing Officer.
------------------------------------------------
Fund will file promptly with IFTC written notice of any change in the
officers authorized to sign share certificates, written instructions or
requests, together with two signature cards bearing the specimen
signature of each newly authorized officer. In case any officer of Trust
who has signed manually or whose facsimile signature has been affixed to
blank share certificates dies, resigns, or is removed prior to the
issuance of such certificates, IFTC may issue or register such share
certificates as the share certificates of Trust notwithstanding such
death, resignation, or removal, until specifically directed to the
contrary by Trust in writing. In the absence of such direction, Trust
will file promptly with IFTC such approval, adoption, or ratification as
may be required by law.

13. Future Amendments of Declaration of Trust and Bylaws.
----------------------------------------------------
Trust will promptly file with IFTC copies of all material amendments to
its Declaration of Trust or bylaws made after the date of this
Agreement.

9
<PAGE>

14. Instructions, Opinion of Counsel and Signatures.
------------------------------------------------
At any time IFTC may apply to any person authorized by Trust to give
instructions to IFTC, and may, with the approval of Trust officer,
consult with legal counsel for Trust or its own legal counsel at the
expense of Trust, with respect to any matter arising in connection with
the agency and it will not be liable for any action taken or omitted by
it in good faith in reliance upon such instructions or upon the opinion
of such counsel. IFTC will be protected in acting upon any paper or
document reasonably believed by it to be genuine and to have been signed
by the proper person or persons and will not be held to have notice of
any change of authority of any person, until receipt of written notice
thereof from Trust. It will also be protected in recognizing share
certificates which it reasonably believes to bear the proper manual or
facsimile signatures of the officers of Trust, and the proper
countersignature of any former Transfer Agent or Registrar, or of a Co-
Transfer Agent or Co-Registrar.

15. Papers Subject to Approval of Counsel.
--------------------------------------
The acceptance by IFTC, of its appointment as Transfer Agent and
Dividend Disbursing Agent and all documents filed in connection with
such appointment and thereafter in connection with the agencies, will be
subject to the approval of legal counsel for IFTC (which approval will
be not unreasonably withheld).

16. Certification of Documents.
---------------------------
The required copy of the Declaration of Trust of Trust and copies of all
amendments thereto will be certified by the Secretary of State (or other
appropriate official) of the Commonwealth of Massachusetts, and if such
Declaration of Trust and amendments are required by law to be also filed
with a county, city or other officer of official body, a certificate of
such filing will appear on the certified copy submitted to IFTC. A copy
of the order of consent of each governmental or regulatory authority
required by law for the issuance of the shares will be certified by the
Secretary or Clerk of such governmental or regulatory authority, under
proper seal of such authority. The copy of the Bylaws and copies of all
amendments thereto, and

10
<PAGE>

copies of resolutions of the Board of Trustees of Trust, will be
certified by the Secretary or an Assistant Secretary of Trust under
Trust's seal.

17. Records.
--------
IFTC will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained
pursuant to sub-paragraph (2)(iv) of paragraph (b) of Rule 31a-1, under
the Investment Company Act of 1940, if any.

18. Disposition of Books, Records and Cancelled Certificates.
---------------------------------------------------------
IFTC will send periodically to Trust, or to such other place as may be
designated by the Secretary or an Assistant Secretary of Trust, all
books, documents, and all records no longer deemed needed for current
purposes and share certificates which have been cancelled in transfer or
in exchange, upon the understanding that such books, documents, records,
and share certificates will not be destroyed by Trust without the
consent of IFTC (which consent will not be unreasonably withheld), but
will be safely stored for possible future reference.

19. Provisions Relating to IFTC as Transfer Agent.
---------------------------------------------
A. IFTC will make original issues of share certificates upon written
request of an officer of Trust and upon being furnished with a
certified copy of a resolution of the Board of Trustees authorizing
such original issue, an opinion of counsel as outlined in paragraphs
1.D. and G. of this Agreement, any documents required by paragraphs
5. or 10. of this Agreement, and necessary funds for the payment of
any original issue tax.

B. Before making any original issue of certificates Trust will furnish
IFTC with sufficient funds to pay all required taxes on the original
issue of shares of beneficial interest, if any. Trust will furnish
IFTC such evidence as may be required by IFTC to show the actual
value of the shares.

C. Shares of beneficial interest will be transferred and new
certificates issued in transfer, or shares of beneficial interest
accepted for redemption and funds remitted therefor, upon surrender
of the old certificates in form deemed by IFTC properly endorsed for
transfer or redemption accompanied by such

11
<PAGE>

documents as IFTC may deem necessary to evidence the authority of the
person making the transfer or redemption, and bearing satisfactory
evidence of the payment of any applicable transfer taxes. IFTC
reserves the right to refuse to transfer or redeem shares until it is
satisfied that the endorsement or signature on the certificate or any
other document is valid and genuine, and for that purpose it may
require a guaranty of signature by a firm having membership in the
New York Stock Exchange, Midwest Stock Exchange, American Stock
Exchange, Pacific Coast Stock Exchange, or any other exchange
acceptable to IFTC or by a bank or trust company approved by it. IFTC
also reserves the right to refuse to transfer or redeem shares until
it is satisfied that the requested transfer or redemption is legally
authorized, and it will incur no liability for the refusal in good
faith to make transfers or redemptions which, in its judgment, are
improper or unauthorized. IFTC may, in effecting transfers or
redemptions, rely upon Simplification Acts or other statutes which
protect it and Trust in not requiring complete fiduciary
documentation. In cases in which IFTC is not directed or otherwise
required to maintain the consolidated records of shareholder's
accounts, IFTC will not be liable for any loss which may arise by
reason of not having such records, provided that such loss could
not have been prevented by the exercise of ordinary diligence. IFTC
will be under no duty to use a greater degree of diligence by reason
of not having such records.

D. When mail is used for delivery of share certificates IFTC will
forward share certificates in "negotiable" form by first class or
registered mail and share certificates in "negotiable" form by
registered mail, all such mail deliveries to be covered while in
transit to the addressee by insurance arranged for by IFTC.

E. IFTC will issue and mail subscription warrants, certificates
representing dividends, exchanges or split ups, or act as Conversion
Agent upon receiving written instructions from any officer of Trust
and such other documents as IFTC deems necessary.

12
<PAGE>

F. IFTC will issue, transfer, and split up certificates and will issue
certificates of beneficial interest representing full shares upon
surrender of scrip certificates aggregating one full share or more
when presented to IFTC for that purpose upon receiving written
instructions from an officer of Trust and such other documents as
IFTC may deem necessary.

G. IFTC may issue new certificates in place of certificates represented
to have been lost, destroyed, stolen or otherwise wrongfully taken
upon receiving instructions from Trust and indemnity satisfactory to
IFTC and Trust, and may issue new certificates in exchange for, and
upon surrender of, mutilated certificates. Such instructions from
Trust will be in such form as will be approved by the Board of
Trustees of Trust and will be in accordance with the provisions of
law and the bylaws of Trust governing such matter.

H. IFTC will supply a shareholder's list to Trust for each shareholder
meeting upon receiving a request from an officer of Trust. It will
also supply lists at such other times as may be requested by an
officer of Trust.

I. Upon receipt of written instructions of an officer of Trust, IFTC
will address and mail notices to shareholders.

J. In case of any request or demand for the inspection of the
shareholder records of Trust or any other books in the possession of
IFTC, IFTC will endeavor to notify Trust promptly and endeavor to
secure instructions as to permitting or refusing such inspection.
IFTC reserves the right, however, to exhibit the shareholder records
or other books to any person in case it is advised by its counsel
that it may be held responsible for the failure to exhibit the
shareholder records or other books to such person.

20. Provisions Relating: to Dividend Disbursing Agency.
--------------------------------------------------

A. IFTC will, at the expense of Trust, provide a special form of check
containing the imprint of any device or other matter desired by
Trust. Said checks must, however, be of a form and size convenient
for use by IFTC.

B. If Trust desires to include additional printed matter, financial
statements, etc., with the dividend checks the same will be furnished
IFTC within a reasonable

13
<PAGE>

time prior to the date of mailing of the dividend checks, at the
expense of Trust.

C. If Trust desires its distributions mailed in any special form of
envelopes, sufficient supply of the same will be furnished to IFTC
but the size and form of said envelopes will be subject to the
approval of IFTC. If stamped envelopes are used, they must be
furnished by Trust; or if postage stamps are to be affixed to the
envelopes, the stamps or the cash necessary for such stamps must be
furnished by Trust.

D. IFTC will maintain one or more deposit accounts as Agent for Trust,
into which the funds for payment of dividends, distributions,
redemptions or other disbursements provided for hereunder will be
deposited, and against which checks will be drawn.

E. IFTC is authorized and directed to stop payment of checks theretofore
issued hereunder, but not presented for payment, when the payees
thereof allege either that they have not received the checks or that
such checks have been mislaid, lost, stolen, destroyed or through no
fault of theirs, are otherwise beyond their control, and cannot be
produced by them for presentation and collection, and, to issue and
deliver duplicate checks in replacement thereof.

21. Assumption of Duties By Trust.
-----------------------------

Trust may assume certain duties and responsibilities of IFTC or those
usual and ordinary services of Transfer Agent and Dividend Disbursement
Agent as those terms are referred to in Section 4.E. of this Agreement
including but not limited to accepting shareholder instructions and
transmitting orders based on such instructions to IFTC, preparing and
mailing confirmations, obtaining certified TIN numbers, and disbursing
monies of the Fund. To the extent Trust assumes such duties and
responsibilities, IFTC shall be relieved from all responsibility and
liability therefor.

22. Termination of Agreement.
------------------------

A. This Agreement may be terminated by either party upon receipt of
ninety (90) days written notice from the other party.

B. Trust, in addition to any other rights and remedies, shall have the
right to

14
<PAGE>

terminate this Agreement forthwith upon the occurrence at any time of
any of the following events:

(1) Any interruption or cessation of operations by IFTC or its
assigns which materially interferes with the business operation
of Trust;

(2) The bankruptcy of IFTC or its assigns or the appointment of a
receiver for IFTC or its assigns;

(3) Any merger, consolidation or sale of substantially all the assets
of IFTC or its assigns;

(4) The acquisition of a controlling interest in IFTC or its
assigns, by any broker, dealer, investment adviser or investment
company except as may presently exist; or

(5) Failure by IFTC or its assigns to perform its duties in
accordance with the Agreement, which failure materially adversely
affects the business operations of Trust and which failure
continues for thirty (30) days after receipt of written notice
from Trust.

C. In the event of termination, Trust will promptly pay IFTC all amounts
due to IFTC hereunder.

D. In the event of termination, IFTC will use its best effort to
transfer the books and records of Trust to the designated successor
transfer agent and to provide other information relating to its
service provided hereunder for a reasonable compensation therefore.

23. Assignment.
-----------

A. Neither this Agreement nor any rights or obligations hereunder may be
assigned by IFTC the written consent of Trust; provided, however, no
assignment will relieve IFTC of any of its obligations hereunder.
IFTC may, however, employ agents to assist it in performing its
duties hereunder.

B. This Agreement will inure to the benefit of and be binding upon the
parties and their respective successors and assigns.

24. Confidentiality.
----------------

A. IFTC agrees that, except as provided in the last sentence of Section
19.J

15
<PAGE>

hereof, or as otherwise required by law, IFTC will keep confidential
all records of and information in its possession relating to Trust or
its shareholders or shareholder accounts and will not disclose the
same to any person except at the request or with the consent of
Trust.

B. Trust will keep confidential all financial statements and other
financial records (other than statements and records relating solely
to Trust's business dealings with IFTC) and all manuals, systems and
other technical information and data, not publicly disclosed,
relating to IFTC's operations and programs furnished to it by IFTC
pursuant to this Agreement and will not disclose the same to any
person except at the request or with the consent of IFTC.

C. Trust acknowledges that IFTC and DST Systems, Inc. (DST) have
proprietary rights in and to the computerized data processing
recordkeeping system used by IFTC to perform services hereunder
including, but not limited to the maintenance of shareholder accounts
and records, processing of related information and generation of
output (the MFS System), including, without limitation any changes or
modifications of the MFS System and any other IFTC or DST programs,
data bases, supporting documentation, or procedures ("collectively
IFTC Protected Information") which Trust's access to the MFS System
or computer hardware or software may permit Trust or its employees or
agents to become aware of or to access and that the IFTC Protected
Information constitutes confidential material and trade secrets of
IFTC. Trust agrees to maintain the confidentiality of the IFTC
Protected Information. Trust acknowledges that any unauthorized use,
misuse, disclosure or taking of IFTC Protected Information which is
confidential as provided by law, or which is a trade secret, residing
or existing internal or external to a computer, computer system or
computer network, or the knowing and unauthorized accessing or
causing to be accessed of any computer, computer system, or computer
network, may be subject to civil liabilities and criminal penalties
under applicable state law. Trust will advise all of its employees
and agents who have access to any IFTC Protected Information or to
any computer

16
<PAGE>

equipment capable of accessing IFTC or DST hardware or software of
the foregoing. IFTC and DST are intended to be, and shall be, third
party beneficiaries of Trust's obligations and undertakings contained
in this Section.

25. Survival of Representations and Warranties.
------------------------------------------

A. All representations and warranties by either party herein contained
will survive the execution and delivery of this Agreement.

26. Miscellaneous.
-------------

A. This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of said state.

B. All the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective
successor and assigns of the parties hereto.

C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and executed
by both parties hereto.

D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.

E. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

F. If any part, term or provision of this Agreement is by the courts
held to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions shall be considered severable and
not be affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid.

G. A copy of the Declaration of Trust of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and notice is hereby
given that the Agreement has been executed on behalf of Fund by the
undersigned officer

17
<PAGE>

of Trust in his/her capacity as an officer of Trust. The obligations
of this Agreement shall only be binding upon the assets and property
of Trust and shall not be binding upon any Trustee, officer or
shareholder of Trust individually.

18
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST COMPANY

By: /s/ R. Winegar
-----------------------------
Title: Executive Vice Pres.
--------------------------

ATTEST

/s/ Cheryl J. Naegler
- ---------------------------
Cheryl J. Naegler
Assistant Secretary

THE FAHNESTOCK FUNDS

By: /s/ Albert G. Lowenthal
-----------------------------
Title: Chairman
--------------------------

ATTEST:

/s/ Charles E. Padgett
- --------------------------
Charles E. Padgett
Secretary

19
<PAGE>

EXHIBIT A

TRANSFER AGENCY SERVICES AND SYSTEMS FEATURES
---------------------------------------------

FUNCTIONS
- ---------

A. Issuance of stock certificates
B. Recording of non-certificate shares
C. Purchase, redemptions, exchanges, transfers and legals
D. Changes of address, etc.
E. Daily balancing of fund
F. Dividend calculation and disbursement
G. Mailing of quarterly and annual reports
H. Filing of 1099/1042 information to shareholders and government
I. Provide NSAR information
J. Systematic withdrawal plans
K. Pre-authorized checks
L. Purchase reminders
M. Reconciliation of dividend and disbursement accounts
N. Provide research and correspondence to shareholder's inquiries
0. Daily communication of reports to funds
P. Provide listings, labels and other special reports
Q. Proxy issuance and tabulation
R. Annual statements of shareholders on microfilm
S. Blue-sky reports
T. Wire order processing
U. 12(b)(1) processing

<PAGE>

Exhibit (h)(2)

ADMINISTRATION AGREEMENT

THIS ADMINISTRATION AGREEMENT is made as of March 5, 1991, by and
between Fahnestock & Co. Inc., a New York corporation ("Fahnestock"), and The
Fahnestock Funds, a business trust created under the laws of the Commonwealth of
Massachusetts ("Trust").

WHEREAS, Fahnestock is the distributor of shares of Trust, an open-
end, diversified management investment company registered under the Investment
Company Act of 1940, as amended; and

WHEREAS, Trust desires to retain Fahnestock as administrator to
perform certain administrative services for Trust in addition to its services as
distributor of Trust's shares and Fahnestock is willing to render such services
on the terms and conditions hereinafter set forth:

NOW, THEREFORE, the parties agree as follows:

1. Trust hereby appoints Fahnestock as administrator of Trust with
respect to the Hudson Capital Appreciation Fund series of shares of beneficial
interest (the Fund") and all other series of shares of beneficial interest of
Trust which may subsequently be created for the period and on the terms set
forth below. Fahnestock hereby accepts such appointment and agrees to render the
services described herein for the compensation herein provided, subject to the
overall supervision of the Board of Trustees of Trust.

2. Fahnestock shall provide (a) facilities for meetings of the Board
of Trustees and shareholders of Trust (to the extent reasonably requested by
Trust); (b) office facilities (which may be Fahnestock's own offices) and
personnel to assist Trust's officers and Hudson Capital Management, Inc.
("Hudson"), its investment adviser, in the performance of Hudson's duties under
the Investment Management Agreement between Trust and Hudson; and (c) with
respect to operations of Trust and the Fund other than those relating to
Hudson's management of the investments of the Fund, statistical and research
data; data processing services; clerical services; internal auditing and legal
services; internal executive and administrative services; stationery and office
supplies; preparation of reports to shareholders of the Fund; assistance in
preparation of tax returns; reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities; and general assistance in
all aspects of Trust's and the Fund's operations.

All services to be furnished by Fahnestock under this Agreement may be
furnished through the medium of any employees of
<PAGE>

Fahnestock. Fahnestock is expressly authorized to delegate any of its duties
hereunder to a sub-administrator for such period of time as Fahnestock, in its
sole discretion, deems to be appropriate, having at all times the best interest
of Trust as its standard.

3. Trust will pay Fahnestock a fee, computed at the rate of 0.1% per
annum of the average net assets of each series of shares of beneficial interest
of Trust, plus out of pocket expenses, as may be agreed upon in advance,
incurred by Fahnestock in the performance of services hereunder. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly on the
first business day of each calendar month for services performed hereunder
during the preceding month. The minimum fee to be paid to Fahnestock shall be
$2,500.00 per calendar month for each series. If a series of shares of
beneficial interest of Trust is not in operation for a full calendar month, the
monthly minimum fee shall be prorated accordingly. For the purpose of
determining fees payable to Fahnestock, the value of the net assets of a series
of shares of beneficial interest of Trust shall be computed at the times and in
the manner specified in the current Prospectus and Statement of Additional
Information for that series of shares of beneficial interest of Trust.

4. Fahnestock assumes no responsibility under this Agreement other
than to render the services called for hereunder and specifically assumes no
responsibilities for investment advice, the investment or reinvestment of the
assets of Trust or the determination of the net asset value or net asset value
per share of any series of shares of beneficial interest of Trust.

5. Nothing in this Agreement shall prevent Fahnestock or any officer
or employee thereof from acting as administrator for or with any other person,
firm or corporation. While the administrative services supplied to Trust may be
different from those supplied to other persons, firms or corporations,
Fahnestock shall give Trust equitable treatment in supplying services.

6. If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the investment management
agreement with Hudson, but excluding interest, taxes, brokerage expenses, an
applicable portion of distribution expenses and, with the prior written consent
of the appropriate state securities commissions, extraordinary expenses) exceed
the applicable expense limitation of any state having jurisdiction over the
Fund, Fahnestock will reimburse the excess expense to the extent that Hudson
does not do so. Fahnestock's expense reimbursement obligation will be limited
to the amount of its fees received pursuant to this Agreement; however,
Fahnestock shall reimburse the Fund for such excess expenses regardless of the
amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state in which Fund shares are registered and
qualified for sale so require. This expense
<PAGE>

reimbursement, if any, will be estimated, reconciled and paid on a quarterly
basis. From time to time Fahnestock, in its sole discretion and as it deems
appropriate, may assume certain expenses of the Fund and/or other of Trust's
series of the shares of beneficial interest while retaining the ability to be
reimbursed by the Fund or such other series of the shares of beneficial interest
of Trust for such amounts prior to the end of the fiscal year. Fahnestock will
not be reimbursed for such amounts if such action would violate the provisions
of any applicable state securities laws relating to the limitation expenses of
the applicable series of shares of beneficial interest of Trust.

7.(a) Fahnestock will keep Trust informed of developments materially
affecting the Fund, and will, on its own initiative, furnish Trust from time to
time with whatever information Fahnestock believes is appropriate for this
purpose.

(b) In compliance with the requirements of Rule 31a-3 under the
Investment Company Act of 1940, Fahnestock hereby agrees that all records which
it maintains for Trust and the Fund are the property of Trust and further agrees
to surrender promptly to Trust any of such records upon Trust's request.

8. Fahnestock and its directors, officers, employees, shareholders
and agents shall not be liable for any error of judgment or mistake of law or
for any loss suffered by Trust or its Trustees in connection with the
performance of this Agreement, except a loss resulting from willful misfeasance
or non-feasance, bad faith, or gross negligence on the part of Fahnestock in the
performance of its obligations and duties under this Agreement. Fahenstock
agrees to indemnify Trust and its Trustees against any such loss.

9. Fahnestock shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent Trust in any way or otherwise be deemed to be an agent of
Trust.

10. This Agreement shall become effective as of the date first written
above and shall thereafter continue in effect unless terminated as herein
provided. This Agreement may be terminated by either party hereto (without
penalty) at any time upon not less than 60 days' prior written notice to the
other party hereto and shall terminate upon its assignment by either party
hereto.

11. This Agreement may be amended by mutual written consent.

12. This Agreement shall be construed in accordance with the laws of
the State of New York.

13. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed to have been given if delivered or sent by
registered or certified mail, return
<PAGE>

receipt requested, to Fahnestock & Co. Inc., 110 Wall Street, New York, New York
10005, Attention: Secretary; or The Fahnestock Funds at 110 Wall Street, New
York, New York 10005, Attention: Secretary.

14. This Agreement sets forth the agreement and understanding of the
parties hereto solely with respect to the relationship between Trust and
Fahnestock and the matters covered hereby. Nothing in this Agreement shall
govern, restrict or limit in any way other business dealings between the parties
hereto other than as expressly provided herein.

This Administration 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 or any of its
series of shares of beneficial interest 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 of beneficial interest.

IN WITNESS HEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the date and year first above written.

FAHNESTOCK & CO. INC.

By: /s/ Charles E. Padgett
--------------------------
Charles E. Padgett,
Senior Vice President

THE FAHNESTOCK FUNDS

By: /s/ Albert G. Lowenthal
--------------------------
Albert G. Lowenthal,
President
<PAGE>

AMENDATORY AGREEMENT

THIS AMENDATORY AGREEMENT is made as of January 1, 1993, by and between
Fahnestock & Co. Inc., a New York corporation ("Fahnestock"), and The Fahnestock
Funds, a business trust created under the laws of the Commonwealth of
Massachusetts ("Trust").

WHEREAS, Fahnestock is the distributor of shares of Trust, an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended; and

WHEREAS, Trust has retained Fahnestock as administrator to perform certain
administrative services for Trust in addition to its services as distributor of
Trust's shares pursuant to an Administration Agreement dated as of March 5,
1991, a copy of which is Annex A hereto; and

WHEREAS, the parties desire to amend said Administration Agreement to
eliminate the fee payable to Fahnestock; and

WHEREAS, at its meeting on December 1, 1992 the Board of Trustees of the
Trust was informed that Fahnestock wished to delete any provision in this
Administration Agreement relating to compensation of Fahnestock.

NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by Fahnestock, the parties agree as follows:

1. The Administration Agreement is amended by deleting therefrom Section 3
in its entirety.

2. Except as provided in Section 1 of this Amendatory Agreement the
Administration Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the date and year first above written.

FAHNESTOCK & CO. INC.

By: /s/ Charles E. Padgett
---------------------------
Charles E. Padgett,
Senior Vice President

THE FAHNESTOCK FUNDS

By: /s/ Albert G. Lowenthal
---------------------------
Albert G. Lowenthal,
President

<PAGE>

[LETTERHEAD OF GASTON & SNOW]

January 14, 1991

The Fahnestock Funds
110 Wall Street
New York, New York 10005

Gentlemen:

The Fahnestock Funds (the "Trust" ) is a trust created under a written
Declaration of Trust dated August 29, 1990 and executed in Boston, Massachusetts
on that date (the "Trust Agreement"). The Trustees have the powers set forth in
the Trust Agreement subject to the terms, provisions and conditions therein
provided. We have acted as special Massachusetts counsel for the Trust with
respect to the Organization of the Trust, and in such capacity we are furnishing
you with this opinion.

We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such certificates, records and other documents as we
have deemed necessary or appropriate for the purpose of this opinion, including
the Trust Agreement. The Trust Agreement has been duly filed with the Secretary
of The Commonwealth of Massachusetts. All filing requirements under the law of
Massachusetts have been complied with (other than the requirements of the
Massachusetts Uniform Securities Act).

Under Article V, Section 5.l of the Trust Agreement, the beneficial
interest in the Trust is represented by an unlimited number of transferable
shares S.01 par value. Under Article Section 5.4, the Trustees are empowered
in their discretion to issue shares of beneficial interest to such party or
parties and for such amount (not less than par value) and type of considerations
including cash or property, at such time or times and on such terms as the
Trustees may deem best. By vote adopted on December 20, l990, the Trustees
authorized the
<PAGE>

[GASTON & SNOW]

The Fahnestock Funds
January 14, 1991
Page 2

officers of the Trust to issue and sell to the public an unlimited number of
shares of beneficial interest of the Trust.

Based upon the foregoing, and with respect to Massachusetts law (other
than the Massachusetts Uniform Securities Act), only to the extent that
Massachusetts law may be applicable and without reference to the laws of the
other several states or of the United States of America, we are of the opinion
that, under existing law:

(1) The Trust is a trust with transferable shares of beneficial
interest, organized in compliance with the laws of The Commonwealth of
Massachusetts, and the Trust Agreement is legal and valid.

(2) Shares of beneficial interest may be legally and validly issued from
time to time in accordance with the Trust Agreement upon receipt by the Trust of
payment in compliance with Article V, Section 5.4 of the Trust Agreement and the
December 20, 1990 vote of the Trustees described above. We are further of the
opinion that such shares when so issued will be fully paid and nonassessable by
the trust.

We understand that this opinion will be filed with the Securities and
Exchange Commission as an exhibit to the Trust's registration statement, We
hereby consent to such use of this opinion.

Very truly yours,

/s/ Gaston & Snow

<PAGE>

Exhibit j

Consent of Independent Accounts

We consent to the incorporation by reference in Post-Effective Amendment No. 13
to the Registration Statement under the Securities Act of 1933 (File No.
33-36697) and in Post-Effective Amendment No. 15 to the Registration Statement
under the Investment Company Act of 1940 of the Hudson Capital Appreciation Fund
(a series of the Fahnestock Funds) on Form N-1A of our report dated February 19,
1999 on our audit 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, 1998 which is incorporated by
reference in the Post-Effective Amendment to each Registration Statement. We
also consent to the reference in the Statement of Additional Information to our
Firm under the caption "Independent Accountants."

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri
April 26, 1999

<PAGE>

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<NAME> HUDSON CAPITAL APPRECIATION FUND CLASS A

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<PAGE>

<ARTICLE> 6
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<NAME> HUDSON CAPITAL APPRECIATION FUND CLASS B

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</TABLE>

<PAGE>

<ARTICLE> 6
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<NUMBER> 013
<NAME> HUDSON CAPITAL APPRECIATION FUND CLASS N

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</TABLE>