As filed with the Securities and Exchange Commission on June 1, 2000
Registration No. 33-92982
Registration No. 811-9054
================================================================================
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. 14 |X|
(Check appropriate box or boxes)
DLJ Winthrop Opportunity Funds
(Exact name of registrant as specified in charter)
277 Park Avenue
New York, New York 10172
(Address of Principal Executive Offices)
(800) 892-4000
(Registrant's Telephone Number, Including Area Code)
Brian A. Kammerer
One Pershing Plaza, 10th Floor
Jersey City, NJ 07399
(Name and Address of Agent for Service)
Copy to:
Earl D. Weiner
125 Broad Street
New York, NY 10004
It is proposed that this filing will become effective (check appropriate box)
|_| Immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|X| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2), or
|_| 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.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
------------- --------
Part A for the DLJ Winthrop Opportunity Funds
<S> <C> <C>
Item 1. Front and Back Cover Pages................................. Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks The Opportunity Funds'
and Performance............................................ Risk/Return Summary
Item 3. Risk/Return Summary: Fee Table............................ Summary of DLJ Winthrop Fund
Expenses
Item 4. Investment Objectives, Principal Investment The Opportunity Funds' Investment
Strategies and Related Risks............................... Objectives and Policies
Item 5. Management's Discussion of Fund Performance................ Not Applicable
Item 6. Management, Organization, and Capital Structure............ Fund Management
Item 7. Shareholder Information.................................... How to Buy and Sell Shares, Other
Shareholder Information, Taxes
Item 8. Distribution Arrangements.................................. Dividend and Distribution
Information
Item 9. Financial Highlights Information........................... Not Applicable
Part B for the DLJ Winthrop Developing Markets Fund and DLJ Winthrop International Equity Fund
Item 10. Cover Page and Table of Contents........................... Cover Page
Item 11. Fund History............................................... Fund History
Item 12. Description of the Fund and Its Investments and Risks...... Investment Policies and Restrictions
Item 13. Management of the Fund .................................... Management
Item 14. Control Persons and Principal Holders of Securities........ Shares of Beneficial Interest
Item 15. Investment Advisory and Other Services..................... Management, Expenses of the
International Funds
Item 16. Brokerage Allocation and Other Practices................... Expenses of the International
Funds, Portfolio Transactions
Item 17. Capital Stock and Other Securities......................... General Information, Purchases,
Redemptions, Exchanges and
Systematic Withdrawal Plan
Item 18. Purchase, Redemption and Pricing of Shares................. Purchases, Redemptions, Exchanges
and Systematic Withdrawal Plan, Net
Asset Value
Item 19. Taxation of the Fund....................................... Dividends, Distributions and Taxes
Item 20. Underwriters............................................... Expenses of the International Funds
Item 21. Calculation of Performance Data............................ Investment Performance
Information
Item 22. Financial Statements....................................... Not Applicable
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
N-1A Item No. Location
------------- --------
Part B for the DLJ Winthrop Municipal Money Fund, DLJ Winthrop U.S. Government Money Fund and
the DLJ Winthrop High Income Fund
<S> <C> <C>
Item 10. Cover Page and Table of Contents........................... Cover Page
Item 11. Fund History............................................... Fund History
Item 12. Description of the Fund and Its Investments and Risks...... Investment Policies and Restrictions
Item 13. Management of the Fund .................................... Management
Item 14. Control Persons and Principal Holders of Securities........ Shares of Beneficial Interest
Item 15. Investment Advisory and Other Services..................... Management, Expenses of the Funds
Item 16. Brokerage Allocation and Other Practices................... Expenses of the Funds, Portfolio
Transactions
Item 17. Capital Stock and Other Securities......................... General Information, Purchases,
Redemptions, Exchanges and
Systematic Withdrawal Plan
Item 18. Purchase, Redemption and Pricing of Shares................. Purchases, Redemptions, Exchanges
and Systematic Withdrawal Plan, Net
Asset Value
Item 19. Taxation of the Fund....................................... Dividends, Distributions and Taxes
Item 20. Underwriters............................................... Expenses of the Funds
Item 21. Calculation of Performance Data............................ Investment Performance
Information
Item 22. Financial Statements....................................... Not Applicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
3
<PAGE>
DLJ Funds
Prospectus
August [ ], 2000
Leadership through Experience
DLJ Core Equity Fund
DLJ Growth and Income Fund
DLJ Small Company Value Fund
DLJ Growth Fund
DLJ Technology Fund
DLJ Developing Markets Fund
DLJ International Equity Fund
DLJ Fixed Income Fund
DLJ Municipal Trust Fund
DLJ High Income Fund
DLJ Municipal Money Fund
DLJ U.S. Government Money Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in any of the Funds is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
CONTENTS
4 DLJ Funds' Risk Return Summary
14 Summary of DLJ Fund Expenses
15 Annual Fund Operating Expenses
17 Purchase Information
18 DLJ Funds' Investment Objectives and Policies
29 Additional Information on Investment Policies and Risks
32 Fund Management
34 How to Buy and Sell Shares
37 Other Shareholder Information
41 Additional Shareholder Services
43 Distribution Charges
44 Dividend and Distribution Information
50 Taxes
51 Financial Highlights
56 For More Information
This part of the prospectus summarizes each Fund's investment objective,
principal investment strategies and principal risks. This section also contains
limited performance data. More information about the DLJ Funds is contained in
"DLJ Funds' Investment Objectives and Policies", and "Additional Information on
Investment Policies and Risks." Please read the entire prospectus carefully
before investing and save it for future reference.
DLJ FUNDS' RISK RETURN SUMMARY
1
<PAGE>
DLJ DOMESTIC EQUITY FUNDS
The DLJ Core Equity Fund
The DLJ Core Equity Fund's (previously named the DLJ Winthrop Growth Fund)
investment objective is long-term capital appreciation. The Fund seeks to
achieve its objective by investing in companies that offer long-term capital
appreciation. The Fund invests in common stock, securities convertible into
common stock and other equity securities of well-known and established
companies. The Fund takes a long-term view of each stock it buys, holding each
company until its long-term growth potential no longer meets the Fund's
requirements. Generally, the Fund attempts to identify companies with growth
rates that will exceed that of the S&P 500 Index. The Core Equity Fund is
"sector neutral". This means that its investments are allocated to industries in
proportion to the sector allocation of the S&P 500 Index, with the exception of
the electric and the gas utilities sectors. In the opinion of the Adviser, this
strategy enables the Fund to properly diversify its portfolio within the most
important and central realm ("core") of the U.S. equity universe. The Fund may
also make an investment to earn income when its Adviser believes that it will
not compromise the investment objective. To achieve this objective, the Fund may
invest up to 35% of the value of its assets in investment-grade fixed income
securities, including bonds, debentures, notes, asset and mortgage-backed
securities and money market instruments such as commercial paper and bankers'
acceptances and other financial instruments. The Fund may also invest in
non-U.S. securities.
Like any investment, an investment in the DLJ Core Equity Fund is subject to
risk and you could lose money. While investments are selected that the Adviser
believes will experience long-term appreciation, their value could decline. The
Fund is subject to risks that affect equity securities markets in general, such
as general economic conditions and adverse changes (generally increases) in
interest rates. These and other factors could adversely affect your investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1, 5 and 10 years compare to those of the S&P 500 Composite Index,
which is a broad measure of market performance. The Fund's past performance is
not necessarily an indication of how it will perform in the future.
Calendar Year Total Returns
1999 28%
1998 28%
1997 28%
1996 20%
1995 24%
1994 -4%
1993 14%
1992 2%
1991 28%
1990 -7%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was 21.16% (quarter ending 12/31/98)
and the lowest return for a quarter was -15.22% (quarter ending
9/30/90).
The total return for the quarter ended 6/30/00 was [ %].
2
<PAGE>
================================================================================
Average Annual Total Returns Past Year Past 5 years Past 10 years
(for the periods ending
December 31, 1999)
================================================================================
Core Equity Fund 20.57% 24.14% 14.54%
Class A
Core Equity Fund 22.93% N/A N/A
Class B
================================================================================
S&P 500* 21.04% 28.55% 18.21%
================================================================================
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect. The Fund commenced offering Class C and Class
D shares on February 28, 2000 and May 13, 1999, respectively. Prior to the date
of this prospectus, the Fund had not yet offered Class R shares. Therefore, the
Fund does not yet have a full calendar year of performance information for these
classes.
*The S & P 500(R) is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices. The returns for the
S&P 500 do not include any sales charges, fees or other expenses.
The DLJ Growth and Income Fund
The DLJ Growth and Income Fund's investment objective is long-term capital
appreciation and continuity of income. The Fund seeks to achieve its objective
by investing in dividend paying common stock and by diversifying its investments
among different industries and different companies. Securities are selected on
the basis of their investment merit and their potential for appreciation in
value and/or income, with a focus on stability. The Adviser identifies companies
that it believes are undervalued and waits for the market to discover that
value. A portion of the Fund may be invested in debt securities that are of
investment-grade quality, U.S. Government securities and money market
instruments. The Fund may also invest in non-U.S. securities. There is no fixed
percentage of the Fund's assets that must be invested in any particular type of
security.
Like any investment, an investment in the DLJ Growth and Income Fund is subject
to risk and you could lose money. While the Fund seeks investments that will
appreciate in value and/or provide income, the Adviser could select securities
that will decline in value and provide no income.
The Fund is also subject to risks that affect equity securities markets in
general, such as general economic conditions and adverse changes (generally
increases) in interest rates. These and other factors could adversely affect
your investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1, 5 and 10 years compare to those of the S&P 500 Composite Index,
which is a broad measure of market performance. The Fund's past performance is
not necessarily an indication of how it will perform in the future.
Calendar Year Total Returns
1999 10%
1998 19%
1997 33%
1996 22%
1995 30%
3
<PAGE>
1994 -2%
1993 16%
1992 6%
1991 24%
1990 -3%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was 16.00% (quarter ending 12/31/98)
and the lowest return for a quarter was -9.97% (quarter ending
9/30/90).
The total return for the quarter ended 6/30/00 was [ %].
================================================================================
Average Annual Total Returns
(for the periods ending
December 31, 1999) Past Year Past 5 years Past 10 years
================================================================================
Growth and Income Fund Class A 4.06% 20.94% 14.01%
Growth and Income Fund Class B 5.64% N/A N/A
================================================================================
S&P 500* 21.04% 28.55% 18.21%
================================================================================
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect. The Fund commenced offering Class C and Class
D shares on February 28, 2000 and May 13, 1999, respectively. Prior to the date
of this prospectus, the Fund had not yet offered Class R shares. Therefore, the
Fund does not yet have a full calendar year of performance information for these
classes.
*The S&P 500(R) is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices. The returns for the S&P 500
do not include any sales charges, fees or other expenses.
The DLJ Small Company Value Fund
The DLJ Small Company Value Fund's investment objective is a high level of
growth of capital. The Fund seeks to achieve its objective by investing in
common stock and other equity securities of "small cap" companies that appear to
be undervalued. Companies with market capitalizations of $2 billion or less at
the time of purchase are considered to be "small cap" companies.
This Fund's investment objective causes it to be riskier than other funds and
you could lose money. While the Fund seeks investments that provide a high level
of growth of capital, they may decline in value. You should not invest in this
Fund if your principal objective is assured income or capital preservation.
Investments in smaller companies often involve greater risks than investments in
larger, more established companies. Smaller companies may have less management
experience, fewer financial resources, and limited product diversification, all
of which may increase risks.
The frequency and trading volume for securities of smaller companies are
substantially less than for larger companies. This can result in greater and
more abrupt price fluctuations and can cause small cap stocks to be less liquid
than securities of larger companies. The Fund is also subject to risks that
affect equity
4
<PAGE>
securities markets in general, such as general economic conditions and adverse
changes (generally increases) in interest rates. These and other factors could
adversely affect your investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1, 5 and 10 years compare to those of the Russell 2000 Index, which
is a broad measure of market performance. The Fund's past performance is not
necessarily an indication of how it will perform in the future.
Calendar Year Total Returns
1999 1%
1998 -5%
1997 26%
1996 15%
1995 20%
1994 -1%
1993 22%
1992 18%
1991 51%
1990 -13%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 10 year period shown in the bar chart for Class A shares,
the highest return for a quarter was 17.81% (quarter ending 3/31/91)
and the lowest return for a quarter was -18.15% (quarter ending
9/30/98).
The total return for the quarter ended 6/30/00 was [ %].
================================================================================
Average Annual Total Returns
(for the periods ending
December 31, 1999) Past Year Past 5 years Past 10 years
================================================================================
Small Company Value Fund
Class A -4.35% 9.65% 11.48%
Small Company Value Fund
Class B -3.29% N/A N/A
================================================================================
Russell 2000* 21.26% 16.69% 13.40%
================================================================================
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect. The Fund commenced offering Class C shares on
February 28, 2000. Prior to the date of this prospectus, the Fund had not yet
commenced offering Class R shares. Therefore, the Fund does not yet have a full
calendar year of performance information for these classes.
*The Russell 2000 Index is an unmanaged index of common stock prices and is
composed of the 2,000 smallest companies in the Russell 3000 Index. The Russell
3000 Index is composed of 3,000 of the largest U.S. companies by market
capitalization. The returns for the Russell 2000 Index do not include any sales
charges, fees or other expenses.
5
<PAGE>
THE DLJ GROWTH FUND
The DLJ GROWTH FUND's investment objective is long-term growth of capital. The
Fund seeks to achieve this objective by investing in equity securities of a
limited number of large, carefully selected companies that the Adviser believes
will achieve superior growth. The Fund intends to hold securities of
approximately 50-60 companies, which may fluctuate depending on the Adviser's
view of market conditions. The Fund seeks to achieve superior performance as
compared to other U.S. domestic growth funds
Like any investment, an investment in the Growth Fund is subject to risk, and
you could lose money. While the Adviser believes that the investments it selects
will experience long-term appreciation, their value could decline. Growth
companies are typically characterized by higher price-to-earnings and
price-to-book ratios, lower dividend yields, greater volatility, and higher
historical and predicted earnings. The Fund is also subject to risks that affect
equity securities markets in general, such as general economic conditions and
adverse changes (generally increases) in interest rates. Because the Fund
normally invests in a smaller number of securities than many other equity funds,
an investment in this Fund has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value. These and other factors could adversely affect your
investment. The DLJ Growth Fund, previously the DLJdirect Strategic Growth Fund
commenced operations in November, 1999 and therefore does not have a full
calendar year of performance information.
THE DLJ TECHNOLOGY FUND
The DLJ TECHNOLOGY FUND's investment objective is growth of capital. The Fund
seeks to achieve this objective by investing in a broad number of industries
that comprise the U.S. domestic technology sector. The Fund seeks to create a
blend of stocks in companies that include the computer hardware, computer
software, electronics, semiconductor, semiconductor capital equipment,
telecommunication equipment, telecommunication services, and internet
industries.
Like any investment, an investment in the Technology Fund is subject to risk and
you could lose money. While the Fund seeks investments that will appreciate in
value, DLJ Asset Management Group ("DLJAM" or the "Adviser") could select
securities that will decline in value and provide no income. Technology stocks,
especially those of smaller, less-seasoned companies tend to be more volatile
than the overall stock market. When stock prices fall, you should expect the
value of your investment to fall as well, possibly to a greater extent than the
decline in equity markets generally. The fact that the Fund concentrates in a
single sector increases risk and volatility as compared to more diverse funds.
This is because factors that affect that sector are likely to directly affect
the Fund's performance, both negatively and positively. Even if the overall
direction of equity prices is upward, if technology stocks are headed lower,
Fund performance could be adversely affected. For example, technology companies
could be hurt by such factors as market saturation, price competition, and the
advent of competing technologies. The Fund is also subject to risks that affect
equity securities markets in general, such as general economic conditions and
adverse changes (generally increases) in interest rates. These and other factors
could adversely affect your investment. The DLJ Technology Fund was started in
November, 1999 and therefore does not have a full calendar year of performance
information.
DLJ INTERNATIONAL FUNDS
The DLJ Developing Markets Fund
The DLJ Developing Markets Fund's investment objective is to provide long-term
growth of capital by investing primarily in common stocks and other equity
securities of companies from developing countries. The Fund seeks to achieve its
objective by investing in companies from the countries included in the
6
<PAGE>
Morgan Stanley Capital Index ("MSCI") Emerging Markets Free Index that are
identified by the Adviser as being best positioned to take advantage of certain
economic and political factors. The Fund seeks to identify countries, and then
the industries within those countries, where economic and political factors are
likely to produce above average growth. The Fund uses a fundamental analysis on
common stock in countries the Adviser believes demonstrate a strong potential
for expansion, a trend toward modernizing production and high levels of economic
growth. The Fund invests in securities of issuers in at least three different
developing countries. You should not invest in this Fund if your principal
objective is assured income or capital preservation.
This Fund's investment objective causes it to be riskier than other mutual funds
and you could lose money. While the Fund seeks investments that provide a high
level of growth of capital, they may decline in value. The Fund invests
primarily in non-U.S. securities (securities of non-U.S. based issuers or
issuers that do business principally outside the United States) from issuers in
developing markets. Investments in non-U.S. securities present additional risks
including greater price volatility and a lack of liquidity. Investments in
developing markets present further risks because they tend to be smaller, less
mature and less stable than investments in developed markets. The Fund is also
subject to risks that affect equity securities markets in general, such as
general economic conditions and adverse changes in interest and foreign exchange
rates. These and other factors could adversely affect your investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1 year and from inception compare to those of the MSCI Emerging
Markets Free Index, which is a broad measure of market performance. The Fund's
past performance is not necessarily an indication of how it will perform in the
future.
Calendar Year Total Returns
1999 69%
1998 -22%
1997 -6%
1996 4%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 4 year period shown in the bar chart for Class A shares, the
highest return for a quarter was 27.74% (quarter ending 12/31/99) and
the lowest return for a quarter -21.96% (quarter ending 6/30/98). 1996
was the first full calendar year of operation.
The total return for the quarter ended 6/30/00 was [ %].
================================================================================
Average Annual Total Returns
(for the periods ending From Inception on 9/8/95
December 31, 1999) Past Year
================================================================================
Developing Markets Fund Class A 59.11% 4.16%
Developing Markets Fund Class B 63.45% 4.78%
================================================================================
MSCI Emerging Markets Free
Index* 66.41% 3.09%
================================================================================
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect.
7
<PAGE>
The Fund commenced offering Class C shares on February 28, 2000. Prior to the
date of this prospectus, the Fund had not yet commenced offering Class R shares.
Therefore, the Fund does not yet have a full calendar year of performance
information for these classes.
*The MSCI Emerging Markets Free Index is an unmanaged index composed of a sample
of companies representative of the market structure of developing countries
worldwide. The index is the property of Morgan Stanley & Co. Incorporated. The
returns for the Index do not include any sales charges, fees or other expenses.
The DLJ International Equity Fund
The DLJ International Equity Fund's investment objective is long-term growth of
capital by investing in equity securities from established non-U.S. markets. The
Fund seeks to achieve this objective by primarily investing in a diversified
portfolio of investments that primarily include companies from the countries of
the MSCI Europe, Australia and Far East Index (the "EAFE Index"), an unmanaged
index of over 1,000 foreign stock prices. The Fund seeks to identify countries
and industries with favorable growth prospects. Once, the countries have been
selected, the Adviser chooses the stocks and industries in such countries. The
Adviser employs a comprehensive top-down approach to invest in industries in
countries that are, in the opinion of the Adviser, likely to do well and in
stocks with reasonable value, reliable earnings and high quality management.
Like any investment, an investment in the Fund is subject to risk and you could
lose money. While the Fund selects investments that the Adviser believes will
appreciate in value, those securities could decline in value and provide no
income. The Fund invests primarily in non-U.S. securities (securities of
non-U.S. based issuers or issuers that do business principally outside the
United States). Investments in non-U.S. securities present additional risks
including greater price volatility and a lack of liquidity. The Fund is also
subject to risks that affect equity securities markets in general, such as
general economic conditions and adverse changes in interest (generally increase)
and foreign exchange rates. These and other factors could adversely affect your
investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1 year and from inception compare to those of the MSCI-EAFE(R)
Index, which is a broad measure of market performance. The Fund's past
performance is not necessarily an indication of how it will perform in the
future.
Calendar Year Total Returns
1999 28%
1998 18%
1997 7%
1996 6%
The annual returns, referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 4 year period shown in the bar chart for Class A shares, the
highest return for a quarter was 19.76% (quarter ending 12/31/99) and
the lowest return for a quarter was -15.46% (quarter ending 9/30/98).
1996 was the first full calendar year of operation.
The total return for the quarter ended 6/30/00 was [ %].
8
<PAGE>
================================================================================
Average Annual Total Returns From inception
(for the periods ending Past Year 9/8/95
December 31, 1999)
================================================================================
International Equity Fund
Class A 20.57% 12.10%
International Equity Fund
Class B 22.97% 12.81%
================================================================================
MSCI-EAFE* 27.30% 14.02%
================================================================================
The Average Annual Returns for the Fund reflect the maximum applicable sales
charges. The Fund commenced offering Class C and Class D shares on February 28,
2000 and May 13, 1999, respectively. Prior to the date of this prospectus, the
Fund had not yet offered Class R shares. Therefore, the Fund does not yet have a
full calendar year of performance information for these classes.
*The MSCI-EAFE(R) is an unmanaged index composed of a sample of companies
representative of the market structure of European and Pacific Basin Countries.
The index is the property of Morgan Stanley & Co. Incorporated. The returns for
the Index do not include any sales charges, fees or other expenses.
DLJ FIXED INCOME FUNDS
The DLJ Fixed Income Fund
The DLJ Fixed Income Fund's investment objective is to provide as high a level
of total return as is consistent with capital preservation by investing
principally in debt securities, including, without limitation, convertible and
non-convertible debt securities of foreign and domestic companies, including
both well-known and established and new and lesser-known companies. The Fund
seeks to achieve its objective by investing primarily in a diversified portfolio
of high-grade intermediate-term corporate bonds and U.S. Government securities,
as well as in commercial paper and obligations issued or guaranteed by national
or state banks. In addition, the Adviser actively manages the maturities of the
securities in the portfolio in response to the Adviser's anticipation of the
movement of interest rates and relative yields. The Fund seeks to limit risk by
selecting investment-grade debt securities.
While the Fund seeks investments that will satisfy its investment objective, the
investments could decline in value and you could lose money. Concerns about an
issuer's ability to repay its borrowings or to pay interest will adversely
affect the value of its securities.
The Fund is subject to risks that affect the bond markets in general, such as
general economic conditions and adverse changes (generally increases) in
interest rates. As interest rates rise, absent other factors, bond prices and
the value of your investments will fall. The Fund is also subject to the risk
that, in seeking to enhance total return, the Adviser will incorrectly forecast
changes in interest rates or improperly assess the value of debt securities.
These and other factors could adversely affect your investment.
The following chart and table illustrate the risk and the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1, 5 and 10 years compare to those of the Lehman Brothers
Government/Corporate Intermediate Bond Index, which is a broad measure of market
performance. The Fund's past performance is not necessarily an indication of how
it will perform in the future.
Calendar Year Total Returns
1999 -1%
1998 8%
9
<PAGE>
1997 8%
1996 3%
1995 15%
1994 -4%
1993 10%
1992 7%
1991 14%
1990 9%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 10 year period shown in the bar chart for Class A shares,
the highest return for a quarter was 5.09% (quarter ending 12/31/91)
and the lowest return for a quarter was -2.88% (quarter ending
3/31/94).
The total return for the quarter ended 6/30/00 was [ %].
================================================================================
Average Annual Total Returns
(for the periods ending
December 31, 1999) Past Year Past 5 years Past 10 years
================================================================================
Fixed Income Fund Class A -5.38% 5.16% 6.24%
================================================================================
Fixed Income Fund Class B -5.35% N/A N/A
================================================================================
Lehman Index** 0.39% 7.10% 7.26%
================================================================================
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect. The Fund commenced offering Class C and Class
D shares on February 28, 2000 and April 30, 1999, respectively. Prior to the
date of this prospectus, the Fund had not yet offered Class R shares. Therefore,
the Fund does not yet have a full calendar year of performance information for
these classes.
*The Lehman Brothers Government/Corporate Intermediate Bond Index is comprised
of securities in the Lehman Brothers Government/Corporate Bond Index that have
maturities of 5-10 years. The Lehman Brothers Government/Corporate Bond Index
includes the Lehman Brothers Government Bond Index and the Lehman Brothers
Corporate Bond Index and does not include sales charges, fees or expenses in its
calculation.
The DLJ Municipal Trust Fund
The DLJ Municipal Trust Fund's investment objective is to provide as high a
level of total return as is consistent with capital preservation by investing
principally in high-grade tax-exempt municipal securities. By high-grade
tax-exempt municipal securities, we mean securities rated Aaa, Aa, A or MIG-1 by
Moody's or AAA, AA, A or SP-1 by S&P. It is important to note that unlike most
other municipal bond funds, the Fund's objective is not to provide current
income that is exempt from federal and/or state income tax. The Fund seeks to
achieve its objective by investing primarily in a diversified portfolio of
high-grade, intermediate-term municipal securities. In addition, the Adviser
actively manages the maturities of the securities in the portfolio in response
to the Adviser's anticipation of the movement of interest rates and relative
yields. Certain investments are selected that the Adviser believes are
undervalued. The Fund attempts to limit risk by selecting investment-grade debt
securities and by maintaining an average maturity of between five and ten years.
10
<PAGE>
While the Fund seeks investments that will satisfy its investment objective,
these investments could decline in value and you could lose money. Concerns
about an issuer's ability to repay its borrowings or to pay interest will
adversely affect the value of its securities. The Fund is also subject to the
risk that, in seeking to enhance total return, the Adviser will incorrectly
forecast changes in interest rates or improperly assess the value of municipal
securities. Like all bond funds, this Fund is subject to risks that affect the
bond markets in general, such as general economic conditions and adverse changes
(generally increases) in interest rates. As interest rates rise, absent other
factors, bond prices and the value of your investment will fall. The Fund is
also subject to risks of investing in municipal securities. These risks include
uncertainties regarding the securities' tax status, political and legislative
changes and the rights of their holders. These and other factors could adversely
affect your investment.
The following chart and table illustrate risk by showing the variability of the
Fund's returns by showing the rate of return from year to year and how annual
returns for 1 and 5 years and from inception, compare to those of The Lehman
Brothers Seven Year Municipal Bond Index, which is a broad measure of market
performance. The Fund's past performance is not necessarily an indication of how
it will perform in the future.
Calendar Year Total Returns
1999 -1%
1998 5%
1997 8%
1996 4%
1995 12%
1994 -3%
The annual returns referenced in the bar chart are for the calendar
years ended December 31 and do not include sales charges. If sales
charges were included, the annual returns would be lower than those
shown.
During the 6 year period shown in the bar chart for Class A shares, the
highest return for a quarter was 4.52% (quarter ending 3/31/95) and the
lowest return for a quarter was -4.18% (quarter ending 3/31/94). 1994
was the first full calendar year of operations.
The total return for the quarter ended 6/30/00 was [ %].
<TABLE>
<CAPTION>
==========================================================================================
Average Annual Total Returns From inception on 7/28/93
(for the periods ending
December 31, 1999) Past Year Past 5 years
==========================================================================================
<S> <C> <C> <C>
Municipal Trust Fund Class A -6.10% 4.32% 3.22%
Municipal Trust Fund Class B -5.89% N/A N/A
==========================================================================================
LBSYMBI* -0.14% 6.35% 5.12%**
==========================================================================================
</TABLE>
The Average Annual Total Returns for the Fund reflect the maximum applicable
sales charges currently in effect. The Fund commenced offering Class C shares on
February 28, 2000. Prior to the date of this prospectus the Fund had not yet
commenced offering Class R shares. Therefore, the Fund does not yet have a full
calendar year of performance information for these classes.
11
<PAGE>
* The Lehman Brothers Seven Year Municipal Bond Index ("LBSYMBI") is comprised
of municipal securities having an average approximate maturity of seven years
and does not include sales charges, fees or expenses in its calculation.
**For comparative purposes the value of the index on 7/31/93 is used for the
beginning value on 7/28/93.
THE DLJ HIGH INCOME FUND
The DLJ High Income Fund's primary investment objective is to provide a high
level of current income and a secondary objective is capital appreciation. The
Fund seeks to achieve its objective by investing in fixed income securities of
U.S. issuers that are rated below investment-grade quality or unrated fixed
income securities deemed to be of comparable quality. Lower grade fixed income
securities are commonly known as "junk bonds".
This investment objective causes it to be riskier than other mutual funds and
you could lose money. Investments in lower grade securities are subject to
special risks, including greater price volatility and a greater risk of loss of
principal and non-payment of interest. The market value of longer maturity debt
securities, like those held by the Fund, is more sensitive to interest rate
changes than the market value of shorter maturity debt securities. The Fund is
not recommended for investors whose principal objectives are assured income or
capital preservation. This Fund is designed for investors willing to assume
additional risk in return primarily for the potential for high current income
and secondarily capital appreciation.
Because this Fund began operations on March 8, 1999, it does not have a full
calendar year of performance information. The total return for the quarter ended
6/30/00 was [ %].
The DLJ Municipal Money Fund
The DLJ Municipal Money Fund's investment objective is maximum current income,
consistent with liquidity and safety of principal, that is exempt from Federal
income taxation to the extent described herein. The Fund seeks to achieve this
objective by investing in a diversified portfolio of municipal securities. The
Fund earns income at current money market rates, and its yield generally
reflects short-term interest rates which vary from day to day. Such municipal
securities will have varying lengths of maturities but will generally have
remaining maturities of one year or less. In general, securities with longer
maturities are more vulnerable to price changes, although they may provide
higher yields.
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund seeks to preserve the value of your investment at $1.00 per share,
however, it is possible to lose money by investing in the Fund.
Because this Fund began operations in February, 1997, the first full calendar
year of performance was 1998. The Fund's past performance is not necessarily an
indication of how it will perform in the future.
Calendar Year Total Returns
1999 2%
1998 3%
During the 2 year period shown in the bar chart, the highest return for
a quarter was 0.70% (quarter ending 6/30/98) and the lowest return for
a quarter was .53% (quarter ending 3/31/99). The annual returns are for
the calendar years ended December 31.
The total return for the quarter ended 6/30/00 was [ %].
12
<PAGE>
================================================================================
Average Annual Total
Returns Past Year From Inception on 2/24/97
(for the periods
ending December 31,
1999)
================================================================================
Municipal Money Fund 2.44 % 2.67%
================================================================================
Seven Day Yield as of December 31, 1999 was 3.64%
The DLJ U.S. Government Money Fund
The DLJ U.S. Government Money Fund's investment objective is maximum current
income, consistent with liquidity and safety of principal. The Fund seeks to
achieve its objective by investing in a portfolio of U.S. Government securities,
including issues of the U.S. Treasury and other government agencies, which
generally have remaining maturities of one year or less and collateralized
repurchase agreements.
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The Fund seeks to preserve the value of your investment at $1.00 per
share, however, it is possible to lose money by investing in the Fund. The Fund
earns income at current market rates, and its yield generally reflects
short-term interest rates, which vary from day to day.
Because this Fund began operations in February, 1997, the first full calendar
year of performance was 1998. The Fund's past performance is not necessarily an
indication of how it will perform in the future.
Calendar Year Total Returns
1999 4%
1998 5%
During the 2 year period shown in the bar chart, the highest return for
a quarter was 1.19% (quarter ending 9/30/98) and the lowest return for
a quarter was 1.00% (quarter ending 3/31/99). The annual returns are
for the calendar years ended December 31.
The total return for the quarter ended 6/30/00 was [ %].
================================================================================
Average Annual Total Returns Past Year From Inception on 2/24/97
(for the periods ending
December 31, 1999)
================================================================================
U.S. Government Money Fund 4.34% 4.60%
================================================================================
Seven Day Yield as of December 31, 1999 was 4.54%
SUMMARY OF DLJ FUND EXPENSES
Shareholder Transaction Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the DLJ Funds.
13
<PAGE>
--------------------------------------------------------------------------------
Equity Funds*
--------------------------------------------------------------------------------
SHAREHOLDER FEES: Class A Class B Class C Class D Class R
(These fees are paid (1) (2)
directly from your
investment.)
---------------------------
Maximum sales charge 5.75% None None None
(load) imposed on
purchases (as a
percentage of offering
price)
---------------------------
Maximum sales charge None None None None
(load) imposed on
reinvested dividends (as
a percentage of offering
price)
---------------------------
Maximum deferred sales None 4% (3) 1% (4) None
charge (as a percentage
of original purchase
price or redemption
proceeds, as applicable)
---------------------------
Redemption Fees None None None None
---------------------------
Exchange Fee None None None None
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Fixed Income Funds** Money
Funds***
--------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES: Class A (1) Class B (2) Class C Class D Class R
(These fees are paid
directly from your
investment.)
--------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge 4.75% None None None None None
(load) imposed on
purchases (as a
percentage of offering
price)
--------------------------- -------------
Maximum sales charge None None None None None None
(load) imposed on
reinvested dividends (as
a percentage of offering
price)
--------------------------- -------------
Maximum deferred sales None 4% (3) 1% (4) None None None
charge (as a percentage
of original purchase
price or redemption
proceeds, as applicable)
--------------------------- -------------
Redemption Fees None None None None None None
--------------------------- -------------
Exchange Fee None None None None None None
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes the Core Equity Fund, the Growth and Income Fund, the Small Company
Value Fund, the Growth Fund, the Technology Fund, the Developing Markets Fund
and the International Equity Fund.
14
<PAGE>
** Includes the Fixed Income Fund, the Municipal Trust Fund and the High Income
Fund.
*** Includes the Municipal Money Fund and U.S. Government Money Fund.
(1) The maximum sales charge imposed is reduced for larger purchases. Purchases
of $1,000,000 or more are not subject to an initial sales charge but may be
subject to a 1% CDSC (Contingent Deferred Sales Charge) on redemptions made
within one year of purchase. See "Other Shareholder Information."
(2) Class B shares of each Fund automatically convert to Class A shares after
eight years. The effect of the automatic conversion feature is reflected in the
Examples on page 15. See "Other Shareholder Information".
(3) 4% during the first year decreasing 1% annually to 0% after the fourth year.
(4) 1% during the first year.
ANNUAL FUND OPERATING EXPENSES
These examples help you compare the cost of investing in the Funds with the cost
of investing in other mutual funds. They assume that you invest $10,000 in the
applicable Fund for the periods indicated and then sell all of your shares at
the end of those periods. The examples also assume that your investment has a 5%
return each year and that the Fund's operating expenses remain the same. For
each Fund that has Waived Fees below, the After 1 Year Examples and the first
year in each of the other Examples reflect the Waived Fees. For the Growth Fund
and the Technology Fund, the Waived Fees are also reflected in the 3,5 and 10
Year Examples through the period ended October 31, 2002. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Core Equity Fund Management Fee Distribution Other Expenses Total Annual
(12b-1) and Fund
Service Fees Operating
(a) Expenses
<S> <C> <C> <C> <C>
Class A .62% .25% .24% 1.11%
Class B .62% 1.00% .24% 1.86%
Class C .62% 1.00% .24% 1.86%
Class D .62% .00% .24% .86%
Class R .62% .25% .24% 1.11%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Growth and Income Management Fee Distribution Other Expenses Total Annual
Fund (12b-1) and Fund
Service Fees Operating
(a) Expenses
<S> <C> <C> <C> <C>
Class A .57% .25% .22% 1.04%
Class B .57% 1.00% .22% 1.79%
Class C .57% 1.00% .22% 1.79%
Class D .57% .00% .22% .79%
Class R .57% .25% .22% 1.04%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Small Company Management Fee Distribution Other Expenses Total Annual
Value Fund (12b-1) and Fund
Service Fees Operating
(a) Expenses
<S> <C> <C> <C> <C>
Class A .81% .25% .30% 1.36%
Class B .81% 1.00% .30% 2.11%
Class C .81% 1.00% .30% 2.11%
Class R .81% .25% .30% 1.36%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Growth Fund Management Fee Distribution Other Expenses Total Annual Waived Fees Total
(12b-1) and Fund (d) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .75% .25% 1.95% 2.95% (1.76%) 1.19%
Class B .75% 1.00% 1.95% 3.70% (1.76%) 1.94%
Class C .75% 1.00% 1.95% 3.70% (1.76%) 1.94%
Class D .75% 0.00% 1.95% 2.70% (1.76%) .94%
Class R .75% .25% 1.95% 2.95% (1.76%) 1.19%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Technology Fund Management Fee Distribution Other Expenses Total Annual Waived Fees Total
(12b-1) and Fund (e) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .88% .25% 1.02% 2.15% (.76%) 1.39%
Class B .88% 1.00% 1.02% 2.90% (.76%) 2.14%
Class C .88% 1.00% 1.02% 2.90% (.76%) 2.14%
Class R .88% .25% 1.02% 2.15% (.76%) 1.39%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Developing Markets Management Fee Distribution Other Expenses Total Annual Waived Fees Total
Fund (12b-1) and Fund (f) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses (c)
<S> <C> <C> <C> <C> <C> <C>
Class A 1.25% .25% 1.21% 2.71% (.56%) 2.15%
Class B 1.25% 1.00% 1.21% 3.46% (.56%) 2.90%
Class C 1.25% 1.00% 1.21% 3.46% (.56%) 2.90%
Class R 1.25% .25% 1.21% 2.71% (.56%) 2.15%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
International Management Fee Distribution Other Expenses Total Annual
Equity Fund (12b-1) and Fund
Service Fees Operating
(a) Expenses (c)
<S> <C> <C> <C> <C>
Class A 1.25% .25% .60% 2.10%
Class B 1.25% 1.00% .60% 2.85%
Class C 1.25% 1.00% .60% 2.85%
Class D 1.25% 0.00% .60% 1.85%
Class R 1.25% .25% .60% 2.10%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Fixed Income Fund Management Fee Distribution Other Expenses Total Annual Waived Fees Total
(12b-1) and Fund (g) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .58% .25% .25% 1.08% (.13%) .95%
Class B .58% 1.00% .25% 1.83% (.13%) 1.70%
Class C .58% 1.00% .25% 1.83% (.13%) 1.70%
Class D .58% 0.00% .25% .83% (.13%) .70%
Class R .58% .25% .25% 1.08% (.13%) .95%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Municipal Trust Management Fee Distribution Other Expenses Total Annual Waived Fees Total
Fund (12b-1) and Fund (h) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .63% .25% .56% 1.44% (.49%) .95%
Class B .63% 1.00% .56% 2.19% (.49%) 1.70%
Class C .63% 1.00% .56% 2.19% (.49%) 1.70%
Class R .63% .25% .56% 1.44% (.49%) .95%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
High Income Fund Management Fee Distribution Other Expenses Total Annual Waived Fees Total
(12b-1) and Fund (i) Expenses Less
Service Fees Operating Waived Fees
(a) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .70% .25% 2.38% 3.33% (2.23%) 1.10%
Class B .70% 1.00% 2.38% 4.08% (2.23%) 1.85%
Class C .70% 1.00% 2.38% 4.08% (2.23%) 1.85%
Class D .70% 0.00% 2.38% 3.08% (2.23%) .85%
Class R .70% .25% 2.38% 3.33% (2.23%) 1.10%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Municipal Money Management Fee Distribution Other Expenses Total Annual Waived Fees Total
Fund (12b-1) and Fund (j) Expenses Less
Service Fees Operating Waived Fees
(a)(b) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .40% .25% .38% 1.03% (.13%) .90%
Class R .40% .25% .38% 1.03% (.13%) .90%
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
U.S. Government Management Fee Distribution Other Expenses Total Annual Waived Fees Total
Fund (12b-1) and Fund (k) Expenses Less
Service Fees Operating Waived Fees
(a)(b) Expenses
<S> <C> <C> <C> <C> <C> <C>
Class A .40% .25% .38% 1.03% (.13%) .90%
Class R .40% .25% .38% 1.03% (.13%) .90%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Examples
--------------------------------------------------------------------------------
Core Equity Fund 1 Year 3 Years 5 Years 10 Years
Class A $682 $908 $1,151 $1,849
Class B* $589 $785 $1,006 $1.997
Class B** $189 $585 $1,006 $1,997
Class C* $289 $585 $1,006 $2,180
Class C** $189 $585 $1,006 $2,180
Class D $88 $274 $477 $1,061
Class R $113 $353 $612 $1,352
--------------------------------------------------------------------------------
Growth and Income 1 Year 3 Years 5 Years 10 Years
Fund
Class A $675 $887 $1,116 $1,773
Class B* $582 $763 $970 $1,921
Class B** $182 $563 $970 $1,921
Class C* $282 $563 $970 $2,105
Class C** $182 $563 $970 $2,105
Class D $81 $252 $439 $978
Class R $106 $331 $574 $1,271
--------------------------------------------------------------------------------
Small Company 1 Year 3 Years 5 Years 10 Years
Value Fund
Class A $706 $981 $1,277 $2,116
Class B* $614 $861 $1,134 $2,263
Class B** $214 $661 $1,134 $2,263
Class C* $314 $661 $1,134 $2,441
Class C** $214 $661 $1,134 $2,441
Class R $138 $431 $745 $1,635
--------------------------------------------------------------------------------
Growth Fund 1 Year 3 Years 5 Years 10 Years
Class A $689 $1,275 $1,877 $3,491
Class B* $597 $1,170 $1,762 $3,670
Class B** $197 $970 $1,762 $3,670
Class C* $297 $970 $1,762 $3,836
Class C** $197 $970 $1,762 $3,836
Class D $96 $671 $1,273 $2,902
Class R $121 $743 $1,381 $3,094
17
<PAGE>
--------------------------------------------------------------------------------
Technology Fund 1 Year 3 Years 5 Years 10 Years
Class A $708 $1,140 $1,597 $2,859
Class B* $617 $1,026 $1,461 $2,991
Class B** $217 $826 $1461 $2,991
Class C* $317 $826 $1,461 $3,169
Class C** $217 $826 $1,461 $3,169
Class R $142 $600 $1,085 $2,423
--------------------------------------------------------------------------------
Developing Markets 1 Year 3 Years 5 Years 10 Years
Fund
Class A $781 $1,318 $1,880 $3,403
Class B* $693 $1,210 $1,750 $3,533
Class B** $293 $1,010 $1,750 $3,533
Class C* $393 $1,010 $1,750 $3,702
Class C** $293 $1,010 $1,750 $3,702
Class R $218 $788 $1,385 $3,001
--------------------------------------------------------------------------------
International 1 Year 3 Years 5 Years 10 Years
Equity Fund
Class A $776 $1,192 $1,623 $2,816
Class B* $688 $1,083 $1,504 $2,998
Class B** $288 $883 $1,504 $2,998
Class C* $388 $883 $1,504 $3,176
Class C** $288 $883 $1,504 $3,176
Class D $188 $582 $1,001 $2,169
Class R $213 $655 $1,112 $2,378
--------------------------------------------------------------------------------
Fixed Income Fund 1 Year 3 Years 5 Years 10 Years
Class A $567 $790 $1,030 $1,718
Class B* $573 $763 $978 $1,940
Class B** $173 $563 $978 $1,940
Class C* $273 $563 $978 $2,137
Class C** $173 $563 $978 $2,137
Class D $72 $252 $448 $1,013
Class R $97 $331 $583 $1,305
--------------------------------------------------------------------------------
Municipal Trust 1 Year 3 Years 5 Years 10 Years
Fund
Class A $567 $863 $1,180 $2,077
Class B* $573 $838 $1,130 $2,295
Class B** $173 $638 $1,130 $2,295
Class C* $273 $638 $1,130 $2,485
Class C** $173 $638 $1,130 $2,485
Class R $97 $303 $525 $1,116
--------------------------------------------------------------------------------
High Income Fund 1 Year 3 Years 5 Years 10 Years
Class A $582 $1,252 $1,945 $3,780
Class B* $588 $1,237 $1,903 $3,975
Class B** $188 $1,037 $1,903 $3,975
Class C* $288 $1,037 $1,903 $4,136
Class C** $188 $1,037 $1,903 $4,136
Class D $87 $741 $1,420 $3,236
Class R $112 $816 $1,543 $3,470
--------------------------------------------------------------------------------
Municipal Money 1 Year 3 Years 5 Years 10 Years
Fund
$92 $315 $556 $1,248
18
<PAGE>
--------------------------------------------------------------------------------
U.S. Government 1 Year 3 Years 5 Years 10 Years
Fund
$92 $315 $556 $1,248
--------------------------------------------------------------------------------
* Assumes reinvestment of all dividends and redemption at end of period.
** Assumes reinvestment of all dividends and no redemption at end of period.
+ Ten year figures assume conversion of Class B shares to Class A shares at
the end of the eighth year following the date of purchase.
++ Shares purchased directly into a Money Fund will not be subject to a CDSC
and therefore expenses paid will remain unaffected by redemption.
(a) The Fund has adopted a Rule 12b-1 plan for the indicated classes of shares
that allows the Fund to pay distribution fees for the sale and
distribution of those classes of shares out of the assets applicable to
those classes. Because these fees are paid out over time, they will
increase the cost of your investment and may cost you more than paying
other types of sales charges. A portion of the 12b-1 fee represents an
asset-based sales charge.
(b) The maximum allowable amount payable for distributing these shares is .40
of 1% of the average daily net assets of each Money Fund. The Board of
Trustees has currently limited the amount payable to .25 of 1% of the
average daily net assets of each Money Fund.
(c) The expense ratios for each class of shares of the Developing Markets Fund
and the International Equity Fund are higher than those paid by most other
investment companies, but DLJ Asset Management Group, Inc. (as Adviser)
and AXA Investment Managers GS Ltd. (as subadviser) believe the fees are
comparable to those paid by investment companies of similar investment
orientation.
(d) The Adviser has undertaken, in writing to limit Total Expenses of the
Growth Fund to 1.19% for the Fund's Class A and Class R shares and 1.94%
for the Fund's Class B and Class C shares. This arrangement will remain in
place at least until October 31, 2002.
(e) The Adviser has undertaken, in writing, to limit Total Expenses of the
Technology Fund to 1.14% per year for the Fund' Class D shares, 1.39% per
year for the Fund's Class A and Class R shares, and 2.14% for the Fund's
Class B and Class C shares. This arrangement will remain in place at least
until October 31, 2002.
(f) The Adviser has undertaken, in writing, to limit Total Expenses of the
Developing Markets Fund to 2.15% per year for the Fund's Class A and Class
R shares and 2.90% for the Fund's Class B and Class C shares. This
arrangement will remain in place at least until October 31, 2000.
(g) The Adviser has undertaken, in writing, to limit Total Expenses of the
Fixed Income Fund to .70% for the Fund's Class D shares and .95% for the
Fund's Class A shares and R shares and 1.70% for the Fund's Class B and
Class C shares. This arrangement will remain in place at least until
October 31, 2000.
(h) The Adviser has undertaken, in writing, to limit Total Expenses of the
Municipal Trust Fund to .95% per year for the Fund's Class A shares and
Class R shares and 1.70% for the Fund's Class B and Class C shares. This
arrangement will remain in place at least until October 31, 2000.
19
<PAGE>
(i) The Adviser has undertaken, in writing, to limit Total Expenses, of the
High Income Fund to .85% per year for the Fund's Class D shares and 1.10%
for the Fund's Class A shares and Class R shares, and 1.85% for the Fund's
Class B and Class C shares. This arrangement will remain in place at least
until October 31, 2000.
(j) The Adviser has undertaken, in writing, to limit Total Expenses of the
Municipal Money Fund to .90% per year. This arrangement will remain in
place at least until October 31, 2000.
(k) The Adviser has undertaken, in writing, to limit Total Expenses of the
U.S. Government Money Fund to .90% per year. This arrangement will remain
in place at least until October 31, 2000.
PURCHASE INFORMATION
Shares of the DLJ Municipal Money Fund and the DLJ U.S. Government Money Fund
(the "Money Funds") or Class A, Class B or Class C shares of the other Funds may
be purchased directly by using the Share Purchase Application found in this
Prospectus, or through Donaldson, Lufkin & Jenrette Securities Corporation, the
Funds' distributor, or by contacting your securities dealer.
The minimum initial investment in each Fund is $1,000. The minimum for
additional investments is $25. These minimums are waived for certain types of
accounts. Share certificates will not be issued for full or fractional shares of
the Funds. Further information can be obtained from DLJ Funds at the address and
telephone number shown on the back cover of this Prospectus. See "How to Buy and
Sell Shares" and "Other Shareholder Services."
The Funds, except the Money Funds, offer Class A, Class B, Class C and Class R
shares. Class A shares may be purchased at the net asset value per share of the
Fund plus an initial sales charge imposed at the time of purchase and may be
subject to a contingent deferred sales charge ("CDSC") in cases where the
initial sales charge was not applied because of the size of the purchase. Class
B shares may be purchased at the net asset value per share, but are subject to a
CDSC upon redemption. The CDSC applicable to Class B shares declines from 4% for
redemptions made during the first year of purchase to zero after four years.
Class C shares may be purchased at the net asset value per share, but are
subject to a 1% CDSC if redeemed within the first year of purchase. Class R
shares are available for purchase by eligible institutions on behalf of their
clients (generally individuals who do not purchase shares directly). Class R
shares may be purchased at a price equal to the net asset value per share.
Institutions may charge direct fees in connection with transactions related to
Class R shares. The Core Equity Fund, Growth and Income Fund, Technology Fund,
International Equity Fund, Fixed Income Fund and High Income Fund also offer
Class D shares. Class D shares are offered without any initial sales charge or
CDSC to employees of Donaldson, Lufkin & Jenrette Inc. ("DLJ, Inc.") and its
subsidiaries that are eligible to participate in the DLJ 401(k) Retirement
Savings Plan. These employees should contact the DLJ 401(k) Hotline at
1-877-401k-DLJ concerning how to purchase Class D shares. See "How to Buy and
Sell Shares."
Shares of the Money Funds may be purchased at a price equal to the net asset
value per share of each Money Fund, which is expected to be $1.00 per share. See
"Net Asset Value" in the side-bar included on this page.
The DLJ Core Equity Fund, the DLJ Growth and Income Fund, the DLJ Small Company
Value Fund and the DLJ Municipal Trust Fund are each a series of the DLJ Focus
Funds. The DLJ International Equity Fund, the DLJ Developing Markets Fund, the
DLJ High Income Fund, the DLJ Municipal Money Fund and the DLJ U.S. Government
Money Fund are each a series of the DLJ Opportunity Funds. The DLJ Growth Fund
and the DLJ Technology Fund are each a series of the DLJ Select Funds.
The DLJ Opportunity Funds, DLJ Focus Funds, and DLJ Select Funds are different
legal entities and are separately offering their Funds through this Prospectus.
Based on the advise of counsel, the Funds believe
20
<PAGE>
that the potential liability of each Fund with respect to the disclosure in this
Prospectus extends only to the disclosure relating to that Fund.
[side bar]
Net Asset Value:
Net asset value per share (or "NAV") is determined separately for each class by
taking the total assets of each class of a Fund and subtracting its total
liabilities and then dividing the difference by the total number of shares
outstanding in each class.
The NAV is determined at the close of the New York Stock Exchange each day that
the New York Stock Exchange is open for trading. The price at which a purchase
or redemption is effected is based on the next calculation of NAV after the
order is placed.
For the Money Funds, the NAV is expected to be maintained at a constant $1.00
per share, although this price is not guaranteed.
For purposes of computing NAV, the securities in each Money Fund's portfolio are
valued at amortized cost, which minimizes the effect of changes in a security's
market value and helps maintain a stable $1.00 per share price. However, there
is a risk that we will sell a security for a price that is higher or lower than
amortized cost. Such an event could have an effect on our ability to maintain an
NAV of $1.00 per share.
In calculating the NAV of the DLJ Funds, except the Money Funds, each Fund's
investments are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
method as the Trustees of the applicable Fund believe in good faith would
accurately reflect their fair value.
[end side bar]
The investment objectives and policies of each Fund are set forth below. There
can be, of course, no assurance that any Fund will achieve its investment
objective. The Funds' investment objectives are fundamental policies that cannot
be changed without the approval of the shareholders of the applicable Fund. The
Board of Trustees of a Fund may change non-fundamental policies without
shareholder approval.
DLJ FUNDS' INVESTMENT OBJECTIVES AND POLICIES
DLJ Core Equity Fund
Goal: The investment objective of the DLJ Core Equity Fund is long-term capital
appreciation. Investments are made based on their potential for long-term
capital appreciation. The Core Equity Fund may make an investment to earn income
when, in the opinion of the Adviser, such an investment will not compromise the
Core Equity Fund's investment objective.
Strategy: The Core Equity Fund invests in common stock, securities convertible
into common stock and other equity securities (e.g., preferred stock and
interests in master limited partnerships). It invests primarily in well-known
and established companies (generally, companies in operation for more than three
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<PAGE>
years). The Fund may occasionally invest in new and unseasoned companies which,
in the opinion of the Adviser, have the potential for long-term capital
appreciation.
The Adviser applies extensive research that has been conducted primarily by
research analysts employed by DLJ on the growth prospects of stocks that are
considered for the Fund's portfolio. Target companies normally have market
capitalizations of at least $1 billion at the time of purchase. Generally, the
Adviser attempts to identify companies with growth rates that will exceed that
of the S&P 500 Index. The Core Equity Fund is "sector neutral." This means that
its investments are allocated to industries in proportion to the sector
allocation of the S&P 500 Index, with the exception of the electric and the gas
utilities sectors. Other factors considered in the selection of securities
include the economic and political outlook, the value of a particular security
relative to another security, trends in the determinants of corporate profits,
and management capability and practices. See "Risks for the Core Equity Fund and
the Growth and Income Fund" on page 19.
Investments: Under normal circumstances, the Core Equity Fund invests at least
65% of its total assets in equity securities of companies that the Adviser
believes have above-average long-term capital appreciation potential. For
temporary defensive purposes, the Core Equity Fund may invest in
investment-grade short-term fixed-income securities, enter into repurchase
agreements and hold cash. A temporary defensive position could affect the Fund's
ability to achieve its investment objective. In addition, the Fund may invest in
equity securities selected on a basis other than the potential for long-term
capital appreciation. The Fund may invest up to 35% of the value of its assets
in investment-grade fixed-income securities, including bonds, debentures, notes,
asset and mortgage-backed securities and money market instruments such as
commercial paper and bankers'-acceptances and other financial instruments. The
Fund may invest in both listed and unlisted securities and may also:
o invest up to 10% of the value of its total assets in non-U.S. securities;
o invest no more than 10% of its net assets in restricted securities or
other instruments with no ready market;
o invest up to 5% of its total assets in warrants; and
o attempt to minimize the effect of a market decline on the value of its
securities, subject to market conditions, by writing covered call options
on securities or stock indices. See "Additional Information on Investment
Policies and Risks."
[side bar]
Risks for the Core Equity Fund, and the Growth and Income Fund:
Like any investment, an investment in the Core Equity Fund or Growth and Income
Fund is subject to risk and you could lose money. While the Funds seek
investments that will appreciate in value and/or provide income, the value of
the securities could decline and provide no income.
The Funds are subject to risks that affect equity securities markets in general,
such as general economic conditions and adverse changes in interest rates
(generally increases). If the value of equity markets in general declines, you
can expect the value of your investment in the Funds to decline, possibly to a
greater extent than the decline in equity markets generally.
The Core Equity Fund may invest in new and unseasoned companies. Stocks of these
companies tend to be more volatile than stocks of larger and more established
companies. In addition, because stocks are selected on the basis of their
appreciation potential, they tend to be more risky than many investments that
provide current income.
The Growth and Income Fund may invest in debt securities. Debt securities are
subject to risks that the issuer will not repay its borrowings or pay interest.
They are also subject to the risk of declines in value because of increases in
interest rates and decreases in the credit quality of the issuer.
The Core Equity Fund and the Growth and Income Fund may each invest in unlisted
securities. Investments in unlisted securities may be less liquid and more
volatile than investments in listed securities and could result in losses to the
Funds if they had to be sold quickly.
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<PAGE>
The Core Equity Fund and the Growth and Income Fund may each invest in non-U.S.
securities. Non-U.S. securities carry the same risks as securities of U.S.
companies and the added risks of being traded in less liquid markets than U.S.
securities. Non-U.S. securities are also issued by companies that are not
subject to U.S. reporting requirements and involve political systems, economies
and markets that may not be as developed as in the U.S. See "Additional
Information on Investment Policies and Risks".
[end side bar]
DLJ Growth and Income Fund
Goal: The investment objective of the DLJ Growth and Income Fund is long-term
capital appreciation and continuity of income.
Strategy: The Growth and Income Fund pursues its investment objective by
investing principally in dividend-paying common stock and by diversifying its
investments among different industries and companies. Securities are selected
based on the Adviser's evaluation of their investment merit and their potential
for appreciation in value and/or income. The selection of securities on the
basis of their capital appreciation or income potential does not ensure against
possible loss in value.
Investments: The Growth and Income Fund invests in common stock, preferred stock
and securities convertible into common stock. The Growth and Income Fund may
invest in debt securities that are of investment-grade quality at the time of
purchase (including bonds, debentures, notes and asset and mortgage-backed
securities), U.S. government securities, municipal securities (including general
and special obligation securities and industrial revenue bonds) and money market
instruments. See "Additional Information on Investment Policies and Risks--
Mortgage and Asset-Backed Securities and Investment-Grade Debt Securities."
There is no fixed proportion of the Growth and Income Fund's assets that must be
invested in particular types of securities. The percentage of assets invested in
various types of securities may be changed from time to time by the Adviser.
The Growth and Income Fund invests in both listed and unlisted securities. The
Growth and Income Fund may invest in non-U.S. securities and restricted
securities. To minimize the effect of a market decline in the value of its
securities, the Fund may, depending on market conditions, write covered call
options on securities or stock indices. The Fund may invest up to 10% of its
assets in non-U.S. securities and up to 10% of its assets in restricted
securities. For additional information on the use, risks and costs of the above
referenced policies and practices, see "Additional Information on Investment
Policies and Risks."
DLJ Small Company Value Fund
Goal: The investment objective of the DLJ Small Company Value Fund is a high
level of growth of capital. The Small Company Value Fund is not intended for
investors whose principal objective is assured income or preservation of
capital.
Strategy: The Small Company Value Fund invests primarily in common stock and may
also invest in securities convertible into common stock, preferred stock, other
equity securities, bonds or other debt securities as described below. Under
normal market conditions, at least 65% of the Fund's assets are invested in
equity securities of small market capitalization companies. Small cap companies,
for purposes of this Fund, are considered to be companies with market
capitalizations of $2 billion or less at the time of purchase. If the market
capitalization of a small cap company in which the Fund has invested increases
to a level above $2 billion, the investment adviser will continue to hold the
securities of that company until the investment adviser determines that the
company no longer has growth potential.
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<PAGE>
Investments: The Small Company Value Fund pursues its investment objective by
employing a value-oriented investment approach. This means that the Adviser
seeks securities that appear to be underpriced. The Adviser looks for stocks
issued by companies with proven management, consistent earnings, sound finances
and strong potential for market growth. By investing in such companies, the
Small Company Value Fund tries to enhance its potential for appreciation and
limit the risk of decline in the value of its portfolio. The Small Company Value
Fund focuses on the fundamentals of each small-cap company instead of trying to
anticipate what changes might occur in the stock market, the economy, or the
political environment. This approach differs from that used by many other funds
investing in small-cap company stocks. Those other funds often buy stocks of
companies they believe will have above-average earnings growth, based on
anticipated future developments. In contrast, the Small Company Value Fund's
securities are generally selected with the belief that they are currently
undervalued based on existing conditions and that their earning power or
franchise value does not appear to be reflected in their current stock price. To
further reduce risk, the Small Company Value Fund diversifies its holdings among
many companies and industries. The Adviser also considers whether a company has
an established presence in its industry, a product or market niche and whether
management owns a significant stake in the company.
The Small Company Value Fund may also invest in special situation companies. A
special situation company is a company whose value may increase within a
reasonable period of time solely by reason of a development particularly or
uniquely applicable to that company. The securities of these companies may be
affected by particular developments unrelated to business conditions generally.
These investments may fluctuate without relation to general market trends. In
general, the principal risk associated with investing in special situation
companies is the potential decline in the value of these securities likely to
occur if the anticipated development fails to take place. Examples of special
situation companies are companies that are being reorganized or merged, have
unusual new products, enjoy particular tax advantages, or acquire new
management.
The Small Company Value Fund invests primarily in common stock. It may also
invest in securities convertible into common stock, preferred stock,
investment-grade debt securities (including bonds, debentures, notes, asset and
mortgage-backed securities), U.S. Government Securities, municipal securities
(including general and special obligation securities and industrial revenue
bonds), money market instruments (such as commercial paper and bankers'
acceptances) and other financial instruments.
The Small Company Value Fund may also invest in unlisted securities and
securities traded in the over-the-counter markets. The Small Company Value Fund
may allocate a larger percentage of its assets to unlisted securities than would
a typical large company mutual fund. The Small Company Value Fund may also:
o purchase or sell options on securities and on indices to seek to enhance
return or hedge its portfolio;
o purchase or sell financial futures contracts and options thereon for
hedging and risk management purposes;
o invest up to 20% of total assets in non-U.S.securities;
o invest up to 5% of total assets in rights or warrants; and
o invest not more than 10% of net assets in instruments having no ready
market.
However, the Fund does not invest in restricted securities.
[sidebar]
Risks for the Small Company Value Fund:
The investment objective for the Small Company Value Fund causes it to be
riskier than other funds and you could lose money. While it seeks investments
that will provide a high level of growth of capital, they may decline in value.
You should not invest in the Small Company Value Fund if your principal
objective is assured income or capital preservation. While smaller companies
generally have the potential for rapid growth, they often involve greater risks
than investments in larger, more established companies. Small companies may have
less management experience, fewer financial resources, and limited product
diversification.
24
<PAGE>
In addition, in many instances the frequency and trading volume for securities
of smaller companies are substantially less than those of larger companies,
causing such securities to be subject to greater and more abrupt price
fluctuations and to be less liquid than securities of larger companies. When
making large sales of portfolio securities, it may be necessary for the Small
Company Value Fund to sell such securities at discounts from quoted prices or to
execute a series of small sales over an extended period of time. These factors
cause an investment in the Small Company Value Fund to be riskier than an
investment in a typical "large company" mutual fund.
The Small Company Value Fund also is subject to risks that affect equity
securities markets in general, such as general economic conditions and adverse
changes in interest rates. These factors also could adversely affect an
investment in the Fund. If the value of equity markets in general declines, the
value of your investment in the Small Company Value Fund could also decline,
possibly to a greater extent than the decline in equity markets generally.
The Small Company Value Fund may invest in various types of debt securities.
Debt securities are subject to the risk that the issuer will not repay its
borrowings or pay interest. They are also subject to the risk of declines in
value because of increases in interest rates and decreases in the perceived
credit quality of the issuer.
The Fund may also invest in unlisted securities. Investments in unlisted
securities may be less liquid and more volatile than investments in listed
securities and could result in losses if they had to be sold quickly.
The Fund may also invest in non-U.S. securities. Not only do non-U.S. securities
carry the same risks as securities of U.S. companies, they also have the added
risks of generally being traded in less liquid markets than U.S. securities,
involve political systems, economies and markets that may not be as developed as
in the U.S. and may be issued by companies that are not subject to reporting
requirements that are as rigorous as those imposed on U.S. issuers.
The Fund also may invest in options, warrants and financial futures contracts.
Selecting options, warrants and financial futures contracts involves
determinations as to how a particular security, index, interest rate, or
currency will change. If the Adviser is wrong in its prediction, the Fund could
lose money. In addition, such instruments may not be available, or if available,
may be too expensive to utilize. See "Additional Information on Investment
Policies and Risks".
[end sidebar]
DLJ GROWTH FUND
Goal: The investment objective of the Growth Fund is long-term growth of
capital. Investments are made based on their potential for superior growth.
Strategy: The Fund seeks to achieve this objective by investing in equity
securities of a limited number of large, carefully selected companies that the
Adviser believes will achieve superior growth. Unlike most equity funds, the
Fund focuses on a relatively small number of intensely researched companies. The
Fund seeks to achieve superior performance as compared to other U.S. domestic
growth funds.
The Adviser applies extensive research that has been conducted primarily by
research analysts employed by Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC") on the growth prospects of stocks that are considered for
the Fund's portfolio. Unlike many equity funds, the Growth Fund seeks to limit
the number of Fund holdings to companies that offer the highest potential for
capital appreciation. The Fund intends to hold securities of approximately 50-60
companies, which may fluctuate depending on the Adviser's view of market
conditions. Growth companies tend to be concentrated in the technology, health
care, consumer, financial, telecommunications and commercial services sectors.
By emphasizing DLJSC research in the portfolio stock selection, this Fund will
try to deliver superior performance as compared to the U.S. domestic growth fund
peer universe. Other factors considered in the selection of securities include
the economic and political outlook, the value of a particular security relative
to another security, trends in
25
<PAGE>
the determinants of corporate profits, and management capability and practices.
See "Additional Information on Investment Policies and Risks."
Investments: Under normal circumstances, the Growth Fund invests at least 85% of
its total assets in equity securities in U.S. companies that the Adviser
believes have above-average long-term capital appreciation potential. The
Adviser expects the average market capitalization of companies in the portfolio
to be in the range of companies that are included in the Standard & Poor's 500
Index. The Fund may invest in both listed and unlisted securities and may also:
o invest up to 10% of the value of its total assets in non-U.S. securities;
o invest no more than 15% of its net assets in illiquid securities;
o invest up to 5% of its total assets in warrants;
o attempt to minimize the effect of a market decline on the value of its
securities, subject to market conditions, by writing covered call options
on securities or stock indices See "Additional Information on Investment
Policies and Risks."; and
o invest in investment-grade fixed income securities, including bonds,
debentures, notes and money market instruments such as commercial paper
and bankers acceptances and other financial instruments.
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Information on Investment Policies and
Risks."
DLJ TECHNOLOGY FUND
Goal: The DLJ Technology Fund's investment objective is growth of capital.
Strategy: The Technology Fund seeks to achieve this objective by investing in a
broad number of industries that comprise the U.S. domestic technology sector.
The Fund seeks to create a blend of stocks in companies that include the
computer hardware, computer software, electronics, semiconductor, semiconductor
capital equipment, telecommunication equipment, telecommunication services and
internet industries. Stock selection reflects a growth approach and is based on
fundamental research that assesses a company's prospects for above-average
earnings. The research applied by the Adviser is conducted primarily by research
analysts employed by DLJSC. In addition, the Adviser also obtains research from
other investment firms.
Investments: The Technology Fund invests in common stock, preferred stock and
securities convertible into common stock. The Fund will normally invest 80% of
its assets in securities of companies principally engaged in offering,
developing products, processes or services that will provide technological
advances and improvements. The types of companies include computer hardware,
computer software, electronics, semiconductor, telecommunication equipment,
telecommunication services and internet industries. The Fund may invest in
listed and unlisted securities, well-known and established companies and in new
and unseasoned companies. The Fund will not invest more than 25% of its total
assets in any one industry. The Fund may also:
o attempt to minimize the effect of a market decline on the value of its
securities, subject to market conditions, by writing covered call options
on securities or stock indices;
o invest up to 10% of its assets in non-U.S. securities;
o invest up to 15% of its net assets in illiquid securities; and
o invest in investment-grade fixed income securities, including bonds,
debentures, notes and money market instruments such as commercial paper
and bankers-acceptances and other financial instruments.
[side bar]
Risks for the Technology Fund and the Growth Fund:
Like any investment, an investment in the Technology Fund or Growth Fund is
subject to risk and you could lose money. While the Funds seek investments that
will appreciate in value, the value of the securities could decline and provide
no income. The Funds are subject to market risks that affect equity securities
markets in general, such as general economic conditions and adverse changes in
interest rates
26
<PAGE>
(generally increases). If the value of equity markets in general declines, you
can expect the value of your investment in the Funds to decline, possibly to a
greater extent than the decline in equity markets generally. The Funds are also
subject to investment risk, which is the possibility that the returns from a
specific type of stock will perform worse than the overall stock market or other
market sectors. Other general risks include the following:
The Technology Fund invests in technology companies. The fact that the Fund
concentrates in a single sector increases risk and volatility as compared to a
fund with a more diversified portfolio. This is because factors that affect that
sector are likely to directly affect the Fund's performance, both negatively and
positively. Even if the overall direction of equity prices is upward, if
technology stocks are headed lower, Fund performance could be adversely
affected. Certain factors or market conditions that affect technology companies
could have an impact on the Fund's net asset value and performance. For example,
companies in the rapidly changing technology sector often face unusually high
price volatility, both in terms of gains and losses. Products or services that
at first appear promising may not prove commercially successful or may become
obsolete quickly. Earnings disappointments could also result in sharp price
declines. In addition, stocks of small, less seasoned companies, tend to be more
volatile than the overall market.
The Growth Fund will limit the number of companies in its portfolio. As a
result, changes in the value of one security are more likely to have a greater
effect on the Fund's net asset value than other U.S. domestic growth funds with
more diversified portfolios.
In addition, each Fund may from time to time take temporary defensive positions
that are inconsistent with a Fund's investment strategies in attempting to
respond to adverse market conditions. If a Fund takes a temporary defensive
position, the Fund may not achieve its investment objective.
THE DLJ INTERNATIONAL FUNDS
DLJ Developing Markets Fund
Goal: The investment objective of the DLJ Developing Markets Fund is long-term
growth of capital by investing primarily in common stocks and other equity
securities of companies from developing countries. Under normal market
conditions, the Fund invests at least 65% of its assets in equity securities of
developing countries.
Strategy: The Fund seeks to identify those countries and industries where
economic and political factors are likely to produce above average growth rates.
The Fund seeks to invest in those companies and in such industries and countries
that are best positioned and managed to take advantage of these economic and
political factors. The assets of the Fund ordinarily will be invested in the
securities of issuers in at least three different developing countries.
Investments: Equity securities include common and preferred stock, warrants,
rights or options that are convertible into common stock, debt securities that
are convertible into common stock, depositary receipts for those securities and
other classes of stock that may exist. The Fund may purchase non-U.S. securities
in the form of sponsored or unsponsored depositary receipts or other securities
representing underlying shares of non-U.S. issuers. The Fund may purchase a
limited amount of restricted or otherwise illiquid securities. The Fund may
enter into forward foreign currency exchange contracts to attempt to protect the
value of its assets against future changes in the level of currency exchange
rates. The Fund may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes. The Fund may purchase
and sell financial futures contracts and related options, without limitation,
for bona fide hedging purposes. Subject to the foregoing, the value of all
financial futures contracts sold will not exceed the total market value of the
Fund's portfolio. These futures contracts and related options will be on
financial indices and foreign currencies or groups of foreign currencies.
27
<PAGE>
As used in this prospectus, a company in a developing country is an entity for
which either the principal securities trading market is in a developing country,
it is organized under the laws in a developing country or it has its principal
office in a developing country. The Fund invests primarily in countries
represented within the MSCI Emerging Markets Free Index. Those countries
currently include Argentina, Brazil, Chile, China, Colombia, Czech Republic,
Egypt, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia,
Mexico, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Sri Lanka,
Taiwan, Thailand, Turkey and Venezuela. The Fund generally does not invest more
than 25% of its total assets in developing countries not represented within the
MSCI Emerging Markets Free Index.
[side bar]
Risks for the Developing Markets Fund:
Like any investment, an investment in the Developing Markets Fund is subject to
risk and you could lose money. While the Fund selects investments that the Fund
believes will experience long-term appreciation, their value could decline. The
Fund is also subject to risks that affect equity securities markets in general,
such as general economic conditions and adverse changes (generally increases) in
interest rates.
There are certain risks involved in investing in non-U.S. securities, in
addition to the risks inherent in U.S. investments. These risks may include
currency fluctuations, currency revaluations, adverse political and economic
developments, currency exchange blockages, foreign governmental laws or
restrictions, reduced public information concerning issuers, and the lack of
uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements comparable for domestic companies.
Furthermore, non-U.S. securities may be less liquid and more volatile than
comparable U.S. securities. There is also a possibility of expropriation,
nationalization, confiscatory taxation, and limitations on use or removal of
Funds or assets. Investments in non-U.S. securities may result in higher
expenses due to currency conversions, brokerage commissions which generally are
higher than U.S. commissions and the expense of maintaining securities with
non-U.S. custodians.
In addition to the general risks of investing in non-U.S. securities,
characteristics of developing countries may affect certain investments, such as
national policies that restrict foreign investment and the absence of developed
legal structures governing private property and private and foreign investments.
The typically small size of securities markets and the possibility of a low or
nonexistent volume of trading in developing countries may also result in a lack
of liquidity and substantial price volatility.
You should be aware that investing in developing countries generally involves
exposure to economic structures that are generally less diverse and mature, and
to political systems with less stability than those of developed countries.
[end side bar]
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Information on Investment Policies and
Risks."
DLJ International Equity Fund
Goal: The investment objective of the DLJ International Equity Fund is long-term
growth of capital by investing primarily in common stocks and other equity
securities from established non-U.S. markets. During normal market conditions,
the Fund invests most of its assets in securities of issuers from at least three
different countries outside the United States. The Fund may invest in securities
of companies incorporated in the United States but having their principal
activities and interests outside of the United States.
Strategy: In pursuing its investment objective, the International Equity Fund
attempts to diversify its equity investments primarily among countries
represented within the EAFE Index. Those countries currently include Australia,
Austria, Belgium, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Portugal, Singapore, Spain, Switzerland, the United
Kingdom, and the
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<PAGE>
Scandinavian countries. The Fund generally does not intend to invest more than
10% of its total assets in countries not represented within the EAFE Index.
This Fund seeks to identify countries and industries with favorable growth
prospects. Then, the Fund invests in the companies and industries in such
countries that the Adviser believes are reasonably valued. Typically these
companies offer reliable earnings and high quality management.
Investments: Equity securities include common and preferred stock, warrants,
rights or options that are convertible into common stock, debt securities that
are convertible into common stock, depositary receipts for those securities and
other classes of stock that may exist. The Fund may purchase non-U.S. securities
in the form of sponsored or unsponsored depositary receipts or other securities
representing underlying shares of non-U.S. issuers. This Fund may invest a
limited amount of its assets in restricted or otherwise illiquid securities. The
Fund may enter into forward foreign currency exchange contracts to protect the
value of its assets against future changes in the level of currency exchange
rates. The Fund may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes. The Fund may purchase
and sell financial futures contracts and related options, without limitation,
for bona fide hedging purposes. Subject to the foregoing, the value of all
financial futures contracts sold will not exceed the total market value of the
Fund's portfolio. These futures contracts and related options will be on
financial indices and foreign currencies or groups of foreign currencies.
[ side bar]
ADRs:
ADRs are depositary receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a non-U.S.
corporation.
EDRs and GDRs are depositary receipts typically issued by non-U.S. banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
non-U.S. or a U.S. corporation.
[end side bar]
[side bar]
Risks for the International Equity Fund:
Like any investment, an investment in the International Equity Fund is subject
to risk and you could lose money. While the Fund selects investments the Fund
believes will experience long-term appreciation, their value could decline.
The Fund is also subject to risks that affect equity securities markets in
general, such as general economic conditions and adverse changes (generally
increases) in interest rates.
There are certain risks involved in investing in non-U.S. securities, in
addition to the risks inherent in U.S. investments. These risks may include
currency fluctuations, currency revaluations, adverse political and economic
developments, currency exchange blockages, foreign governmental laws or
restrictions, reduced public information concerning issuers, and the lack of
uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements comparable for domestic companies.
Furthermore, non-U.S. securities may be less liquid and more volatile than
comparable U.S. securities. There is also a possibility of expropriation,
nationalization, confiscatory taxation, and limitations on use or removal of
funds or assets. Investments in non-U.S. securities may result in higher
expenses due to currency conversions, brokerage commissions which generally are
higher than U.S. commissions and the expense of maintaining securities with
non-U.S. custodians.
29
<PAGE>
[end side bar]
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Information on Investment Policies and
Risks."
THE DLJ FIXED INCOME FUNDS
DLJ Fixed Income Fund
Goal: The investment objective of the DLJ Fixed Income Fund is to provide as
high a level of total return as is consistent with capital preservation by
investing principally in debt securities, including, without limitation,
convertible and nonconvertible debt securities of domestic and foreign
companies, including both well-known and established and new and lesser-known
companies. Total return means the sum of net investment income (if any) and
realized and unrealized gains less losses. Capital preservation means minimizing
the risk of capital loss in a period of falling prices (rising interest rates)
for debt securities.
Strategy: The Fund invests in and holds debt securities that the Adviser
believes will maximize total return at a level consistent with capital
preservation. The average maturity of the Fund's portfolio is adjusted based on
the Adviser's assessment of relative yields on debt securities and expectations
of future interest rate patterns.
A change in the price of a debt security generally is inversely related to
market interest rates. This means that the value of the Fund's investments will
tend to decrease during periods of rising interest rates and to increase during
periods of falling rates. In general, as the average maturity of the portfolio
increases, so does the potential volatility in share price. As a matter of
fundamental policy, the Fund will invest at least 80% of the value of its total
assets in debt securities. In normal circumstances, the Fixed Income Fund
invests at least 65% of the value of its total assets in fixed income
securities. However, the Fund may hold cash and short-term fixed income
securities and may enter into repurchase agreements for temporary defensive
purposes as determined by the Adviser without regard to the above limits. A
temporary defensive position could affect the Fund's ability to achieve its
investment objective.
Investments: The Fixed Income Fund may invest in bonds, including municipal
bonds (taxable and tax-exempt) and other debt securities rated Aaa, Aa, A or
MIG-1 by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or SP-1 by
Standard & Poor's Ratings Group ("S&P"), U.S. Government Securities, obligations
issued or guaranteed by national or state bank holding companies, and commercial
paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P.
The Fixed Income Fund may also invest not more than 25% of its total assets in
lower-rated debt securities that are not rated below BBB or SP-2 by S&P or Baa
or MIG-2 by Moody's to the extent the Adviser views such investments as
consistent with this fund's investment objective. See "Additional Information on
Investment Policies and Risks" for a description of securities rated BBB by S&P
and Baa by Moody's. The Fixed Income Fund may enter into repurchase agreements,
terminable within seven days or less, involving U.S. Treasury securities, with
member banks of the Federal Reserve System or primary dealers in U.S. Government
Securities. The Fixed Income Fund may invest up to 10% of its assets in
restricted securities and in instruments having no ready market value.
[side bar]
Risks for the Fixed Income Fund and Municipal Trust Fund:
While these Funds seek investments that will satisfy their investment
objectives, the Funds' investments could decline in value and you could lose
money. Concerns about an issuer's ability to repay its borrowings or to pay
interest will adversely affect the value of its securities. The Funds' Adviser
seeks to limit this risk generally by selecting higher-quality debt securities.
In addition, the Funds are subject to risks that affect the bond markets in
general, such as general economic conditions and adverse changes (generally
increases) in interest rates.
30
<PAGE>
Each Fund may invest in unlisted securities. Unlisted securities may be less
liquid and more volatile than listed securities and could result in losses if
they had to be sold quickly. The Municipal Trust Fund is also subject to risks
of investing in municipal securities. These risks include uncertainties
regarding the tax status of a particular security, political and legislative
changes and the rights of their holders. These factors could adversely affect
your investment.
[end of side bar]
[side bar]
High Quality Ratings:
High Quality Ratings are Aaa, Aa, A or MIG-1 by Moody's, or AAA, AA, A or SP-1
by S&P.
[end of side bar]
DLJ Municipal Trust Fund
Goal: The investment objective of the DLJ Municipal Trust Fund is to provide as
high a level of total return as is consistent with capital preservation by
investing principally in high-grade tax-exempt municipal securities. This
investment objective, unlike that of most other municipal bond funds, is not to
provide current income exempt from federal and/or state income tax. Total return
means the sum of net investment income and capital gains less capital losses.
The Fund intends to distribute annually its net capital gains. Such
distributions, if any, will be taxable to a shareholder as capital gain. See
"Dividend and Distribution Information" and "Taxes."
Strategy: The Municipal Trust Fund attempts to maximize total return by actively
managing the maturities of the bonds in its portfolio to reflect the Adviser's
assessment of anticipated interest rate movements and relative yields. The
Municipal Trust Fund currently maintains an average maturity of between 5 and 10
years in order to help reduce the interest rate risk associated with investing
in long-term bonds. However, the Fund may adjust this average maturity as the
Adviser's views on interest rate movements change, shortening maturities in
periods of rising interest rates and lengthening maturities in periods of
falling interest rates. The Fund attempts to supplement total return by
identifying and purchasing undervalued municipal securities.
As with any fixed income investment, the success of these strategies depends
upon the Adviser's ability to accurately forecast changes in interest rates and
to assess the value of municipal securities. You should be aware that there are
no assurances that the Fund's investment strategies will be successful. See
"Risks for the Fixed Income Fund and the Municipal Trust Fund" on page 22.
Investments: The Municipal Trust Fund seeks to achieve its objective by
investing primarily in a diversified portfolio of high-grade, intermediate-term
municipal securities. Municipal securities fall into two principal classes:
bonds and notes, both of which may have fixed, variable or floating rates of
interest. The Fund invests in tax-exempt municipal bonds and notes which are
rated Aaa, Aa, A or MIG-1 by Moody's or AAA, AA, A or SP-1 by S&P. The Fund may
also invest up to 25% of its total assets in lower-rated municipal securities to
the extent the Adviser views such investments as consistent with this Fund's
investment objective. See "Additional Information on Investment Policies and
Risks-- Investment-Grade Debt Securities" for a description of securities rated
BBB by S&P and Baa by Moody's. The Fund may also invest in unrated municipal
securities when the Adviser believes they are of comparable quality to that of
rated securities and are consistent with the Fund's objective and policies.
Because a change in the market value of a debt security generally is inversely
related to market interest rates, the market value of the Municipal Trust Fund's
investments will tend to decrease during periods of rising interest rates and to
increase during periods of falling rates. In general, as the average maturity of
the portfolio increases, so does the potential volatility in share price.
Fluctuations in market value of the
31
<PAGE>
Municipal Trust Fund's portfolio resulting from fluctuations in interest rates
will generally be greater at times when the average maturity of the Municipal
Trust Fund's portfolio is longer.
The Municipal Trust Fund may enter into repurchase agreements terminable within
seven days or less. The Fund may also invest in restricted securities, in
instruments having no ready market value and municipal bonds that are subject to
the alternative minimum tax. The Municipal Trust Fund reserves the right to hold
cash and short-term fixed income securities and to enter into repurchase
agreements as necessary for temporary defensive or emergency purposes as
determined by the Adviser, without regard for the above limitation. A temporary
defensive position could affect the Fund's ability to achieve its investment
objective. Dividends of the Municipal Trust Fund will consist of income exempt
from federal income tax, income subject to the federal alternative minimum tax
("AMT"), and taxable ordinary income and capital gains. See "Dividend and
Distribution Information" and "Taxes."
DLJ High Income Fund
Goal: The DLJ High Income Fund's primary investment objective is to provide a
high level of current income and a secondary objective is capital appreciation.
This Fund is not recommended for investors whose principal objective is assured
income or capital preservation.
Strategy: This Fund seeks to achieve its investment objectives by investing in
fixed-income securities, including corporate bonds and notes, convertible
securities and preferred stocks, that are rated in the lower rating categories
of the established rating services (Baa or lower by Moody's and BBB or lower by
S & P), or, if unrated, are of comparable quality. Securities rated Baa or lower
by Moody's and BBB or lower by S & P are commonly known as "junk bonds." These
bonds are considered by those rating agencies to have speculative
characteristics. These bonds can be expected to provide higher yields. However
these securities may be subject to greater market fluctuations and risk of loss
of income and principal than lower yielding, higher-rated fixed-income
securities. Investment in such high-yield securities entails relatively greater
risk of loss of income and principal.
Investments: This Fund seeks to achieve its objective by investing primarily in
a diversified portfolio of lower-rated fixed-income securities including
convertible and non-convertible debt securities and preferred stock. The Fund
may also hold assets in cash or cash equivalents. This Fund generally does not
invest in common stocks, rights or other equity securities. From time to time,
the Fund may acquire or hold such securities (if consistent with its objectives)
when they are acquired in unit offerings with fixed-income securities or in
connection with an actual or proposed conversion, exchange or restructuring of
fixed-income securities.
Selection and supervision by the Adviser of the Fund of investments in
lower-rated fixed-income securities involves continuous analysis of individual
issuers, general business conditions and other factors. The furnishing of these
services does not, of course, guarantee successful results. The Adviser's
analysis of issuers includes, among other things, historic and current financial
conditions, current and anticipated cash flow and borrowing requirements, value
of assets in relation to historical cost, strength of management, responsiveness
to business conditions, credit standing, and current and anticipated results of
operations. Analysis of general business conditions and other factors may
include anticipated changes in economic activity and interest rates, the
availability of new investment opportunities, and the economic outlook for
specific industries. While the Adviser considers as one factor in its credit
analysis the ratings assigned by the rating services, the Adviser performs its
own independent credit analysis of issuers and consequently, the High Income
Fund may invest, without limit, in unrated securities. The Fund's ability to
achieve its investment objective may depend on the Adviser's own credit analysis
to a greater extent than the funds that invest in higher-rated securities.
Although the High Income Fund primarily invests in lower-rated securities, it
will generally not invest in securities rated at the time of investment in the
lowest rating categories (Ca or below for Moody's and CC or below for S & P).
Securities which are subsequently downgraded may continue to be held and will be
sold only if, in the judgment of the Adviser, it is advantageous to do so.
32
<PAGE>
[side bar]
Risks for the High Income Fund:
While the Fund seeks investments that will satisfy our investment objective, our
investments could decline in value and you could lose money. Concerns about an
issuer's ability to repay its borrowings or to pay interest will adversely
affect the value of its securities. The Fund is also subject to risks that
affect the bond markets in general, such as general economic conditions and
adverse changes (generally increases) in interest rates.
The market value of longer maturity debt securities, like those held by the
Fund, is more sensitive to interest rate changes than the market value of
shorter maturity debt securities. In addition, the Fund's investments in lower
grade securities will subject investors to greater risk than normally
experienced in other fixed income securities.
Lower grade securities are regarded as being predominantly speculative as to the
issuer's ability to pay the principal and interest. Issuers of lower grade
securities are more likely to experience financial stress in periods of economic
downturn or rising interest rates. The issuer's ability to service its debt may
be adversely affected by poor management, inability to meet business forecasts
or unavailability of additional financing.
There is a higher default rate with lower grade securities because they may be
unsecured or subordinate to other securities of the issuer. There are fewer
dealers in lower grade securities which may make the market for these securities
less liquid and cause larger differences in prices quoted than that of
higher-rated fixed income securities.
In addition, the Fund may incur additional expense when it is required to seek
recovery upon a default or restructuring.
[end side bar]
THE DLJ MONEY FUNDS
DLJ Municipal Money Fund
Goal: The DLJ Municipal Money Fund seeks maximum current income, consistent with
liquidity and safety of principal, that is exempt from Federal income taxation
to the extent described herein.
Strategy: The Fund pursues its objectives by investing at least 80% of its total
assets in municipal securities. One hundred percent of the securities the Fund
invests in are high quality having remaining maturities of one year or less,
although their maturities may extend to 397 days. The Fund reserves the right to
lower the percentage of investments in municipal securities if economic or
political conditions warrant. To increase the Fund's ability to reach its
investment objectives, the dollar-weighted average maturity of its portfolio
securities is always 90 days or less. In general, securities with longer
maturities are more vulnerable to price changes, although they may provide
higher yields. It is possible that a major change in interest rates or a default
on the Municipal Money Fund's investments could cause its net asset value per
share to deviate from $1.00.
Investments: Normally, substantially all the Municipal Money Fund's income will
be exempt from Federal income taxation. Such income may be subject to state or
local and/or Federal AMT income taxes. The Fund invests in municipal notes and
short-term municipal bonds, which may have fixed, variable or floating rates of
interest. Municipal securities with variable rates may include participation
interests in industrial development bonds which may be backed by letters of
credit from banking or other financial institutions. The letters of credit of
any single institution in respect of all variable rate obligations will not
33
<PAGE>
cover more than the allowable percentage of the Municipal Money Fund's total
assets in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended ("1940 Act"). For a more complete discussion of Municipal Securities,
see "Additional Information on Investment Policies and Risks--Municipal
Securities." All of the Fund's municipal securities at the time of purchase are
rated within the two highest quality ratings of Moody's or S&P's, or judged by
the Adviser to be of comparable quality.
The Municipal Money Fund may also invest without limitation in tax-exempt
municipal securities subject to the AMT. (See"Dividend and Distribution
Information" and "Taxes.")
The Municipal Money Fund may invest to a limited extent in stand-by commitments,
delayed-delivery, when-issued securities and other illiquid securities. This
Fund may also invest a small percentage of its net assets in municipal leases,
which are leases or installment purchases used by state and local governments as
a means to acquire property, equipment or facilities without involving debt
issuance limitations. The Fund may from time to time invest in taxable
securities including obligations of the U.S. Government and its agencies, high
quality certificates of deposit and bankers' acceptances, prime commercial
paper, and repurchase agreements.
[side bar]
Cash Equivalents:
The International Funds may from time to time take a defensive position by
holding all or a portion of the Fund in other types of securities, including
commercial paper, bankers' acceptances, short-term debt securities (corporate
and government) or government and high quality money market securities of U.S.
and non-U.S. issuers, repurchase agreements, time deposits or cash (foreign
currencies or U.S. dollars). The International Funds may also temporarily hold
cash and invest in high quality foreign or domestic money market instruments
with up to 35% of their assets, pending investment of proceeds from new sales of
International Funds' shares or to meet ordinary daily cash needs.
[end side bar]
[sidebar]
Risks for the Municipal Money Fund:
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. This fund seeks to preserve the value of your investment at $1.00 per
share; however, it is possible to lose money by investing in this Fund. To seek
to reduce investment risk, the Municipal Money Fund may not invest in the
securities of any one issuer, (except the U.S. Government), in excess of the
percentage of the Municipal Money Fund's total assets allowed under Rule 2a-7 of
the 1940 Act.
The Municipal Money Fund earns income at current money market rates and its
yield varies from day to day and generally reflects current short-term interest
rates and other market conditions. It is important to note that neither the
Municipal Money Fund nor its yield are insured or guaranteed by the U.S.
Government.
[end sidebar]
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Information on Investment Policies and
Risks."
DLJ U.S. Government Money Fund
Goal: The DLJ U.S. Government Money Fund seeks maximum current income,
consistent with liquidity and safety of principal.
Strategy: This Fund pursues its objectives by maintaining a portfolio of high
quality money market securities, including the types described in the succeeding
paragraph, which at the time of investment generally have remaining maturities
of one year or less. Some maturities may extend to 397 days. The
34
<PAGE>
dollar weighted average maturity of the U.S. Government Money Fund's portfolio
securities will vary, but will always be 90 days or less. In general, securities
with longer maturities are more vulnerable to price changes, although they may
provide higher yields. It is possible that a major change in interest rates or a
default on the U.S. Government Money Fund's investments could cause its net
asset value per share to deviate from $1.00.
Investments: The Fund invests in U.S. Government Securities, including issues of
the U.S. Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress, including variable rate obligations such as floating rate
notes. The Fund also invests in repurchase agreements that are collateralized in
full each day by eligible mortgage related securities or the types of securities
listed above. These agreements are entered into with "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S. Government
Securities. This type of investment could create a loss to the Fund if, in the
event of a dealer default, the proceeds from the sale of the collateral were
less than the repurchase price. In addition, if the seller of repurchase
agreements becomes insolvent, the Fund's right to dispose of the securities
might be restricted. Investments in young companies with limited operating
histories may involve risks not present in investments in established and
well-known companies.
In addition to the investments listed, the Money Funds may take temporary
defensive measures by holding other types of securities which are permitted by
Rule 2a-7 of the 1940 Act.
[side bar]
Risks for the U.S. Government Money Fund:
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
This Fund seeks to preserve the value of your investment at $1.00 per share,
however, it is possible to lose money by investing in this Fund.
The U.S. Government Money Fund earns income at current money market rates and
its yield will vary from day to day and generally reflects current short-term
interest rates and other market conditions.
It is important to note that neither the U.S. Government Money Fund nor its
yield is insured or guaranteed by the U.S. Government.
[end side bar]
[side bar]
To maintain portfolio diversification and reduce investment risk, the Money
Funds do not:
(1) borrow money, except from banks on a temporary basis or through entering
into reverse repurchase agreements to be used exclusively to facilitate the
orderly maturation and sale of portfolio securities during any periods of
abnormally heavy redemption requests (the borrowings are not used to purchase
investments); or
(2) pledge, hypothecate or in any manner transfer, as security for indebtedness,
its assets, except to secure permitted borrowings.
[end sidebar]
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Information on Investment Policies and
Risks."
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISKS
35
<PAGE>
The following general investment policies and risks supplement those set forth
above for each Fund.
Equity Securities. "Equity securities" include common stock, preferred stock
(including convertible preferred stock), bonds convertible into common or
preferred stock, rights and warrants, equity interests in trusts and depositary
receipts for equity securities.
Convertible Securities. A "convertible security" is a bond or preferred stock
which may be converted at a stated price within a specified period of time into
a certain quantity of the common or preferred stock of the same or a different
issuer. Convertible securities have characteristics of both bonds and equity
securities. Like a bond, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in market value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the underlying stock. The price of a
convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines.
Warrants. A "warrant" gives the holder thereof the right to buy equity
securities at a specific price during a specified period of time. Warrants tend
to be more volatile than the underlying security, and if at a warrant's
expiration date the security is trading at a price below the price set in the
warrant, the warrant will expire worthless. Conversely, if at the expiration
date the underlying security is trading at a price higher than the price set in
the warrant, the holder of the warrant can acquire the security at a price below
its market value.
Mortgage-Backed Securities. Except for the Municipal Trust Fund, the DLJ Funds
may invest in mortgage and asset-backed securities. "Mortgage-backed securities"
are securities that directly or indirectly represent a participation in, or are
secured by and payable from mortgage loans on real property, including
pass-through securities such as Ginnie Mae, Fannie Mae and Freddie Mac
Certificates. The yield and credit characteristics of mortgage-backed securities
differ in a number of ways from traditional fixed income securities. The major
differences typically include more frequent interest and principal payments,
usually monthly, and the possibility that prepayment of principal may be made at
any time. Prepayment rates are influenced by changes in current interest rates
and a variety of other factors. In general, changes in the rate of prepayment on
a security will change the yield to maturity of that security. Under certain
interest rate or prepayment rate scenarios, a Fund may fail to recoup fully its
investment in such securities notwithstanding the credit quality of the issuers
of such securities. Based on historic prepayment patterns, amounts available for
reinvestment are likely to be greater during a period of declining interest
rates and, thus, are likely to be reinvested at lower interest rates, than
during a period of rising interest rates. Mortgage-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed income securities from declining interest rates because of
the risk of prepayment.
Asset-Backed Securities. "Asset-backed securities" have similar structural
characteristics to mortgage-backed securities, but the underlying assets include
assets such as motor vehicle installment sales or installment loan contracts,
leases of various types of real and personal property and receivables from
revolving credit agreements, rather than mortgage loans or interests in mortgage
loans. Asset-backed securities present certain risks that are not present in
mortgage-backed securities; primarily, these securities do not have the benefit
of the same security interest in the related collateral. There is the
possibility that recoveries of repossessed collateral may not, in some cases, be
available to support payments on these securities. For example, in the event
that the collateral underlying an asset-backed security must be disposed of, it
may be difficult to convert that collateral into a stream of payments to be paid
to the holders of the security.
Municipal Securities. "Municipal securities" are either bonds or notes.
Municipal bonds, which are longer-term debt obligations meeting long-term
capital needs, are either "general obligation" bonds or "revenue" bonds. Payment
of principal and interest on general obligation bonds is secured by the issuing
36
<PAGE>
municipality's pledge of its full faith and credit and taxing power. Payment on
revenue bonds is met from the revenues obtained from a certain facility, class
of facilities, special excise or other tax, but not from general tax revenues.
Variations on these two classifications exist, such as revenue bonds backed by a
municipality's general taxing power, or general obligation bonds backed by
limited taxing power.
Municipal notes are short-term debt obligations generally maturing in one year
or less meeting short-term capital needs and are also either "general
obligation" or "revenue" debt securities. They include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, construction loan notes and
tax-exempt commercial paper.
Municipal securities may have fixed, variable or floating rates of interest.
Variable and floating rate securities pay interest at rates that are adjusted
periodically, according to a specified formula, in order to minimize fluctuation
in the value of the principal of the securities. A "variable" interest rate
adjusts at predetermined intervals (e.g., daily, weekly, or monthly), while a
"floating" interest rate adjusts whenever a specified benchmark rate (such as
the bank prime lending rate) changes.
The Municipal Money Fund and Municipal Trust Fund may invest in variable rate
obligations. Such adjustments minimize changes in the market value of the
obligation, and in the case of the Municipal Money Fund enhances the ability of
such Fund to maintain a stable $1.00 net asset value. See "'Net Asset Value" on
page 17.
Investment-Grade Debt Securities. All of the DLJ Funds may invest in debt
securities of investment-grade quality. "Investment-grade debt securities" are
debt securities rated in one of the four highest rating categories by a
nationally recognized statistical rating organization, such as S&P or Moody's.
Investment-grade debt securities may also include debt securities believed by
the Adviser (on the basis of criteria believed by the Adviser to be comparable
to that applied by such rating agencies) to be of comparable quality to debt
securities so rated by the rating agencies.
Debt securities rated Baa or higher by Moody's or BBB or higher by S&P are
investment-grade securities. Securities rated BBB are regarded by S&P as having
an adequate capacity to pay interest and repay principal; while such securities
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely, in the opinion of S&P, to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Securities rated Baa by Moody's are considered to be medium-grade obligations.
These securities are neither highly protected nor poorly secured. The rating
organization determines that interest payments and principal security appear to
be adequate for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time. For a more
complete description of Moody's and S&P's ratings, see the Appendix to the
Statement of Additional Information of each of the DLJ Funds. The
investment-grade limitations referenced for each Fund are applicable at the time
of initial investment and a Fund may determine to retain securities of issuers
which have had their credit characteristics downgraded.
Repurchase Agreements. The DLJ Funds may enter into a repurchase agreement with
member banks of the Federal Reserve System or "primary dealers" (as designated
by the Federal Reserve Bank of New York) in such securities. Repurchase
agreements permit a Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
Adviser requires continual maintenance of collateral with a Fund's custodian in
an amount equal to, or in excess of, the market value of the securities that are
the subject of a repurchase agreement. In the event a counterparty defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral are less than the repurchase price. If
the counterparty becomes the subject of bankruptcy proceedings, the Fund might
be delayed in selling the collateral.
Non-U.S. Securities. All of the DLJ Funds, except the Money Funds and the
Municipal Trust Fund, may invest in "non-U.S. securities." There are additional
risks involved in investing in non-U.S. securities. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies,
37
<PAGE>
and the possible imposition of currency exchange blockages. In addition, there
are risks associated with future adverse political and economic developments and
a limited availability of public information concerning issuers. Non-U.S.
issuers typically are subject to different accounting, auditing and financial
reporting standards. Securities of many non-U.S. companies may be less liquid
and their prices more volatile than those of domestic companies. There is the
possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of Funds or other assets of a non-U.S. issuer,
including the withholding of dividends.
Non-U.S. securities may be subject to taxes imposed by foreign governments that
would reduce the net yield on such securities. Investment in non-U.S. securities
may result in higher expenses due to the cost of converting foreign currency
into U.S. dollars, the payment of fixed brokerage commissions on foreign
exchanges (which generally are higher than commissions on U.S. exchanges) and
the expense of maintaining securities with non-U.S. custodians.
Investments in non-U.S. securities include securities issued by European
issuers. On January 1, 1999, the countries participating in the European
Monetary Union ("EMU") implemented a new currency unit, the Euro, which is
reshaping financial markets, banking systems and monetary policies in Europe and
other parts of the world. Although it is not possible to predict the eventual
impact of the Euro implementation plan on the Funds, the transition to the Euro
may change the economic environment and behavior of investors, particularly in
European markets. Certain European investments may be subject to additional
risks as a result of this conversion. These risks include adverse tax and
accounting consequences, as well as difficulty in processing transactions. The
Funds are aware of such potential problems and are coordinating ways to prevent
or alleviate their adverse impact on the Funds.
Investment Companies. Certain Funds may invest a limited amount of their assets
in shares of other investment companies. Investments in other mutual funds may
involve the payment of substantial premiums above the value of such investment
companies' portfolio securities. In addition, such investments are subject to
limitations under the 1940 Act and market availability. Currently, the
International Funds and the Municipal Money Fund may invest in such investment
companies if, in the judgment of the Adviser or Subadviser, the potential
benefits of such investments justify the payment of any applicable premium or
sales charge. As a shareholder in an investment company, the Municipal Money
Fund or an International Fund would bear its ratable share of that investment
company's expenses, including its advisory and administrative fees. At the same
time shareholders of the Municipal Money Fund or an International Fund would
continue to pay their own management fees and other expenses.
Options. A call option is a contract that gives the holder the right to buy from
the seller the security underlying the call option at a pre-determined price
while a put option is a contract that gives the buyer the right to require the
seller to purchase the security underlying the put option at a pre-determined
price. The Core Equity Fund and the Growth and Income Fund may write covered
call options on individual securities or stock indices. For these Funds, this
practice will only be used to minimize the effect of a market decline in the
value of securities in their respective portfolios. We cannot guarantee that,
should a Fund seek to enter into such transactions, it could do so at all or on
terms that are acceptable. The Small Company Value Fund may purchase or sell put
and call options on individual securities or stock indices as a means of
achieving additional return or of hedging the value of its portfolio. The
International Funds may purchase and sell put and call options on securities,
currencies and financial indices that are traded on U.S. or non-U.S. securities
exchanges or in the over-the-counter market. Options traded in the
over-the-counter market are considered illiquid investments. The International
Funds may purchase and sell financial futures contracts and options thereon
which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes in accordance with
regulations of the CFTC. These futures contracts and related options will be on
financial indices and foreign currencies or groups of foreign currencies.
Each International Fund's successful use of options and financial futures
depends on the ability of the Adviser and Subadviser to predict the direction of
the market and is subject to various additional risks. The investment techniques
and skills required to use options and futures successfully are different from
those required to select international securities for investment. The ability of
an International Fund to close out an
38
<PAGE>
option or futures position depends on a liquid secondary market. There is no
assurance that liquid secondary markets will exist for any particular option or
futures contract at any particular time. The inability to close options and
futures positions also could have an adverse impact on each International Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the International Funds of margin deposits or collateral in the event of
bankruptcy of a broker with whom the International Funds have an open position
in an option, a futures contract or related option.
Lower-Grade or Unrated Securities. The High Income Fund will purchase lower or
unrated securities. "Lower-grade securities" are regarded as being predominantly
speculative as to the issuer's ability to make payments of principal and
interest. Investment in these securities involves substantial risk. Lower-grade
securities are commonly referred to as "junk bonds". Issuers of lower-grade
securities may be highly leveraged and may not have traditional methods of
financing. The risks associated with acquiring the securities of these issuers
generally are greater than is the case with higher-rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of lower-grade securities may be more likely to experience
financial stress, especially if such issuers are highly leveraged. The risk of
loss due to default is significantly greater for the holders of lower-grade
securities because such securities may be unsecured and may be subordinate to
other securities of the issuer.
FUND MANAGEMENT
DLJ Asset Management Group, Inc. (formerly known as Wood, Struthers & Winthrop
Management Corp.), a Delaware corporation with principal offices at 277 Park
Avenue, New York, New York 10172 ("DLJAM" or the "Adviser"), serves as the
investment adviser for each of the DLJ Funds. AXA Investment Managers GS Ltd, a
UK registered company with principal offices at 60 Gracechurch Street, London
EC3V 0HR, England serves as sub-investment adviser for the International Funds
and is a wholly-owned subsidiary of AXA Investment Managers, an investment
management subsidiary of AXA. Effective October 1, 1999, due to an internal
restructuring within the AXA Investment Managers Group of Companies, AXA
Investment Managers GS Ltd assumed the sub-investment advisory responsibilities
formerly undertaken by AXA Asset Management Partenaires, a French wholly-owned
subsidiary of AXA Investment Managers. Investment personnel and policies remain
unchanged.
DLJAM is a subsidiary of Donaldson, Lufkin & Jenrette Securities Corporation,
which is a member of the New York Stock Exchange and a wholly-owned subsidiary
of DLJ, Inc., a major international supplier of financial services. DLJ, Inc. is
an independently operated, indirect subsidiary of AXA Financial, Inc., a holding
company controlled by AXA, a member of a large French insurance group. AXA is
indirectly controlled by a group of four French mutual insurance companies.
The fees paid for the fiscal year ended October 31, 1999 were as follows:
Fund* % of Average Net Assets
--------------------------------------------------------------------------------
Core Equity Fund .67%
--------------------------------------------------------------------------------
Growth and Income Fund .58%
--------------------------------------------------------------------------------
Small Company Value Fund .79%
--------------------------------------------------------------------------------
Growth Fund .75%
--------------------------------------------------------------------------------
Technology Fund .88%
--------------------------------------------------------------------------------
Developing Markets Fund 1.25%
--------------------------------------------------------------------------------
International Equity Fund 1.25%
--------------------------------------------------------------------------------
Fixed Income Fund .625%
--------------------------------------------------------------------------------
Municipal Trust Fund .625%
--------------------------------------------------------------------------------
High Income Fund .70%
--------------------------------------------------------------------------------
Municipal Money Fund .40%
--------------------------------------------------------------------------------
39
<PAGE>
--------------------------------------------------------------------------------
U.S. Government Money Fund .40%
--------------------------------------------------------------------------------
* The Growth Fund and the Technology Fund commenced operations on November 18,
1999.
The following individuals are responsible for management of the DLJ's Funds.
Cathy A. Jameson is the portfolio manager of the Fixed Income Fund, a position
she has held since the Fund was started in 1986. Ms. Jameson is a Vice President
of the DLJ Focus Funds. She is also a Managing Director of DLJAM and has been an
employee of DLJAM since 1979.
Roger W. Vogel serves as the primary portfolio manager of the Small Company
Value Fund and as of February, 2000, the Growth and Income Fund. He has acted as
the portfolio co-manager of the Core Equity Fund, the Growth and Income Fund,
and the Small Company Value Fund since July 1993. Mr. Vogel is a Vice President
of the DLJ Focus Funds, and a Managing Director of DLJAM. Prior to becoming
associated with the Funds, Mr. Vogel was a Vice President and portfolio manager
with Chemical Banking Corp.
Marybeth B. Leithead is the portfolio manager of the Municipal Trust Fund, a
position she has held since the commencement of its operations on July 28, 1993.
Ms. Leithead is also a Vice President of the DLJ Focus Funds and a Senior Vice
President of DLJAM. She has been an employee of DLJAM since 1989. A tax-exempt
fixed income specialist, Ms. Leithead is responsible for short-term and
long-term municipal bond investment management for clients of the Adviser. Prior
to joining DLJAM, Ms. Leithead was an employee of Citicorp Securities Markets
Inc.
Hugh M. Neuburger is the primary portfolio manager of the Core Equity Fund,
Growth Fund and Technology Fund. He has also served as the co-portfolio manager
of the Core Equity Fund, the Growth and Income Fund and the Small Company Value
Fund since August 1995. Mr. Neuburger is a Managing Director and Director of
Quantitative Analysis of DLJAM and has been an employee of DLJAM since March
1995. Prior to March 1995, Mr. Neuburger was the president of Hugh M. Neuburger,
Inc., a consulting firm providing domestic and global tactical asset allocation
advice and other consulting services to large corporate and state pension plans.
From 1986 through 1991, Mr. Neuburger was Managing Director of Matrix Capital
Management, an investment management firm. Prior to 1986, Mr. Neuburger managed
asset allocation portfolios for Prudential Insurance Company of America.
Michael A. Snyder is the portfolio manager of the High Income Fund. Mr. Snyder
was appointed Vice President of the DLJ Opportunity Funds and Managing Director
of DLJAM in October 1998. Prior to becoming associated with the DLJ Funds and
joining DLJAM, Mr. Snyder spent two years as a Managing Director with Bear
Stearns Asset Management where he was responsible for the firm's high-yield bond
management effort. Prior to that position, Mr. Snyder spent ten years at
Prudential Investments where he was a senior portfolio manager in the firm's
High Yield Mutual Fund Group.
Robert de Guigne, an employee of the Subadviser, serves as portfolio manager of
the International Funds. Mr. de Guigne assumed the day-to-day investment
responsibilities of the Developing Markets Fund in August 1996 and the
International Equity Fund in June 1997. Mr. de Guigne has been an asset manager
responsible for emerging market equities for a subsidiary of AXA since April
1996. Previously, Mr. de Guigne was a portfolio manager for State Street Bank in
Paris.
HOW TO BUY AND SELL SHARES
Opening an Account:
40
<PAGE>
Decide whether your first payment will be delivered by check or wire. Initial
payment must be at least $1,000.
By check using U.S. mail:
Complete an application and send it along with a check made payable to the DLJ
Funds to:
DLJ Funds
PFPC, Inc.
P.O. Box 61503
King of Prussia, PA 19406-3101
By check using U.S. overnight delivery.
Complete an application and send it along with a check made payable to the DLJ
Funds to:
DLJ Funds
PFPC, Inc.
211 S. Gulph Road
King of Prussia, PA 19406-3101
By wire:
Call DLJ Funds at 1-800-225-8011 (option #2) to obtain an account number. A
representative will instruct you to send a completed, signed application to the
Transfer Agent, PFPC, Inc ("Transfer Agent"). Your account cannot be opened
without a completed, signed application and a Fund account number.
Contact your bank to arrange a wire transfer to:
Boston Safe Deposit & Trust
ABA #:011001234
Credit: (Insert Name of Your Fund)
ACCT#: 006068
FBO (Shareholder name and account number)
Your wire instructions must also include: the name of the Fund, your account
number and the name(s) of the account holders.
An account at the Fund will be established once the application and check are
received in good order.
If you purchase shares of the Money Funds through a wire transfer, you will be
eligible to receive the daily dividend declared on the date of purchase, as long
as the Transfer Agent is notified of such purchase by 12:00 noon. The funds must
be received by the Transfer Agent by 4:00 P.M.
Investors may also purchase shares of the DLJ Funds through their securities
dealer. For shares purchased through a securities dealer or by clients of an
eligible institution: call your broker or service representative for
instructions in opening an account. In addition, securities dealers may offer an
automatic sweep for the shares of the Money Funds in the operation of cash
accounts for their customers. Shares of the Money Funds purchased through an
automatic sweep by 1:00 P.M. are eligible to receive that day's daily dividend.
For more information, contact your securities dealer. Other information
regarding purchasing shares is contained in each Fund's Statement of Additional
Information.
Shareholder accounts established on behalf of the following types of plans will
be exempt from the Fund's minimum and additional investment amounts: 401(k)
Plans, 403(b) Plans, 457 Plans, SEP Plans, and SIMPLE Plans. An account
established for the Funds' Class D shares will also be exempt from the Funds'
41
<PAGE>
minimum and subsequent purchase requirements. In addition, the Funds reserve the
right to waive their minimum purchase requirements.
Additional investments may be made at any time by sending a check payable to the
Funds along with an investment stub found at the bottom of the Funds'
Shareholder Statement form. If the stub is not available, you may send a check
payable to the "DLJ Funds" directly to the Transfer Agent at the address listed
above. Please reference the account number to be credited on the check, as well
as the Fund you have selected to purchase.
Selling Shares of the Money Funds
or Class A, Class B or Class C shares of the Other DLJ Funds
Will you be requesting a redemption of your holdings in the DLJ Funds through
the Funds' Telephone Redemption Privilege?
Yes.
Call 1-800-225-8011 to sell your shares. Requests for redemptions of more than
$50,000 must be made in writing and be accompanied by a signature guarantee.
(A "signature guarantee" is a signature guaranteed by an eligible bank, broker,
dealer, credit union, national securities exchange, registered securities
association, clearing agency or savings association.)
Remember, the DLJ Funds require a minimum account size of $250.
No.
For shares held at the Fund, write to the Fund at:
DLJ Funds
PFPC, Inc. P.O. Box 61503
(211 S. Gulph Road)*
King of Prussia, PA 19406-3101
Remember, any account that has less than $250, the Fund may redeem.
* For overnight delivery.
For shares purchased through a broker-dealer: call your broker or securities
dealer representative.
Your redemption will be processed at the net asset value per share, next
computed following the receipt of your request in proper form. If you own Class
B or Class C shares or purchased Class A shares without paying an initial sales
charge, any applicable CDSC will be applied to the net asset value and deducted
from your redemption. The value of your shares may be more or less than your
investment depending on the net asset value of your Fund on the day you redeem.
The DLJ Funds have a minimum account size of $250. You may be requested to
increase your balance if it falls below $250. The Funds reserve the right to
close such account and send the proceeds to you. A Fund will not redeem
involuntarily any shareholder account with an aggregate balance of less than
$250 based solely on the market movement of such Fund's shares.
42
<PAGE>
For information concerning circumstances in which redemptions may be effected
through the delivery of in-kind portfolio securities, see your Statement of
Additional Information.
Purchasing additional shares
Decide if you are making additional purchases by mail, wire, or automatic
investment. If using mail or wire, please check to make sure funds meet the
$25.00 minimum.
By Mail:
Complete the investment stub found at the bottom of the Funds' shareholder
statement form, or if an investment stub is not available, reference on the
check the account number to be credited and the Fund you have selected to
purchase and mail to:
DLJ Funds
PFPC, Inc.
P.O. Box 61503
King of Prussia, PA. 19406-3101
By Wire:
Please call the Transfer Agent at 800-225-8011 (option #2) to notify them of the
impending wire.
Provide your bank with funds and with the following information:
Boston Safe Deposit & Trust
ABA #: 011001234
Credit: (Insert Name of Your Fund)
ACCT#: 006068
FBO (Shareholder name and account number)
Purchase should reference your name, account number, and name of Fund.
Automatic Investment Program:
The automatic investment program requires purchases of at least $25.00. Fill out
the application, designating the automatic investment option and provide your
bank information. The Fund automatically deducts payment from your account on a
regular basis.
Provide your bank with funds and with the following information:
Boston Safe Deposit & Trust
ABA #:011001234
Credit: (Insert Name of Your Fund)
ACCT#: 006068
FBO (Shareholder name and account number)
Shares of the Money Funds or Class A, Class B or Class C shares of the other DLJ
Funds may be purchased directly by using the Share Purchase Application found in
the prospectus, or through Donaldson, Lufkin & Jenrette Securities Corporation,
or by contacting your securities dealer. Shareholders should read the prospectus
carefully before investing in the Funds.
The minimum initial investment in each Fund is $1,000. The minimum for
additional investments is $25. There is a maximum purchase limitation in the
Funds' Class B shares of $250,000 and $1,000,000 in the Funds' Class C shares.
Each of the Funds, except the Money Funds, offers Class A, Class B and Class C
shares. Class A shares may be purchased at a price equal to net asset value of
the Fund plus an initial sales
43
<PAGE>
charge imposed at the time of purchase. On a purchase of $1,000,000 or more,
there is no initial sales charge, but there could be a CDSC if the shares are
redeemed within one year of purchase. Class B shares may be purchased for net
asset value, but may be subject to a CDSC upon redemption. The CDSC declines
from 4% during the first year of purchase to zero after four years. Class B
shares will convert to Class A shares approximately eight years from the time of
purchase. Class C shares may be purchased for net asset value, but may be
subject to a 1% CDSC if redeemed in the first year. Class R shares are available
for purchase by eligible institutions on behalf of their clients. Class D shares
are offered exclusively to employees of DLJ and its subsidiaries that are
eligible to participate in the DLJ 401(k) Retirement Savings Plan. These
employees should contact the DLJ Hotline at 1-877-401k-DLJ to learn how to
purchase Class D shares. Shares of the Money Funds may be purchased at a price
equal to the net asset value per share which is expected to be $1.00.
OTHER SHAREHOLDER INFORMATION
Classes of Shares and Sales Charges
The DLJ Funds, except the Money Funds, offer Class A shares, Class B shares and
Class C shares to the general public. Class R shares are offered to eligible
institutions on behalf of their clients. Class D shares are offered exclusively
to employees of DLJ and its subsidiaries who are eligible to participate in the
DLJ 401(k) Retirement Savings Plan. Class D shares are only offered by the Core
Equity Fund, the Growth and Income Fund, the Technology Fund, the Fixed Income
Fund, the High Income Fund and the International Equity Fund. Shares held in
each Fund are normally entitled to one vote (with proportional voting for
fractional shares) for all purposes.
Each class is identical in all respects except that each class bears different
distribution service fees (except for Class D shares, which are not subject to
any distribution service fees and are offered only to a limited group of
investors). Each class has different exchange privileges and only Class B shares
have a conversion feature. Class A, Class B, Class C and Class R have exclusive
voting rights with respect to that class's 12b-1 Plan.
Class A Shares
[side bar]
Offering Price:
The offering price for Class A shares (with a sales charge) is NAV plus the
applicable sales charge (unless you are entitled to a waiver).
[end side bar]
The offering price for Class A shares of the Funds is the net asset value plus
the applicable sales charge from the schedule below.
<TABLE>
<CAPTION>
INITIAL SALES CHARGE-CLASS A
DLJ Fixed Income Funds (1)
-------------------------------------------------------------------------------------------------------------
Amount Purchased As a % of Amount Invested As a % of Offering Price Commission to
Dealer/Agent as a % of
Offering Price
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.25%
-------------------------------------------------------------------------------------------------------------
$50,000 to less than 4.71% 4.50% 4.00%
$100,000
-------------------------------------------------------------------------------------------------------------
$100,000 to less than 3.63% 3.50% 3.25%
$250,000
-------------------------------------------------------------------------------------------------------------
$250,000 to less than 2.56% 2.50% 2.25%
$500,000
-------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
$500,000 to less than 2.04% 2.00% 1.75%
$1,000,000
-------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0 0 1.00%*
-------------------------------------------------------------------------------------------------------------
<CAPTION>
DLJ Equity Funds (2)
-------------------------------------------------------------------------------------------------------------
Amount Purchased As a % of Amount Invested As a % of Offering Price Commission to
Dealer/Agent as a % of
Offering Price
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000. 6.10% 5.75% 5.00%
-------------------------------------------------------------------------------------------------------------
$50,000 to less than 4.99% 4.75% 4.00%
$100,000
-------------------------------------------------------------------------------------------------------------
$100,000 to less than 3.90% 3.75% 3.00%
$250,000.
-------------------------------------------------------------------------------------------------------------
$250,000 to less than 2.56% 2.50% 2.00%
$500,000.
-------------------------------------------------------------------------------------------------------------
$500,000 to less than 2.04% 2.00% 1.75%
$1,000,000
-------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0 0 1.00%*
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The DLJ Fixed Income Funds include the Fixed Income Fund, the Municipal
Trust Fund and the High Income Fund.
(2) The DLJ Equity Funds include the Core Equity Fund, the Growth and Income
Fund, the Small Company Value Fund, the Growth Fund, the Technology Fund,
the Developing Markets Fund and the International Equity Fund.
*On purchases of $1,000,000 or more, there is no initial sales charge although
there could be a Limited CDSC (as described below). The Distributor may pay the
dealer a fee of up to 1% as follows: 1% on purchases up to and including $3
million, .50% on the next $47 million, .25% on purchases over $50 million. In
addition, Class A shares issued upon conversion of Class B shares of the Funds
are not subject to an initial sales charge.
From time to time, the Distributor may re-allow the full amount of the sales
charge to brokers as a commission for sales of such shares.
In addition, investors may be charged a fee by a securities dealer if they
effect transactions through a broker or agent.
The initial sales charge is waived for the following shareholders or
transactions:
(1) investment advisory clients of the Adviser;
(2) officers, Trustees and retired Trustees of the Funds, directors or trustees
of other investment companies managed by the Adviser, officers, directors and
full-time employees of the Adviser and of its wholly-owned subsidiaries or
parent entities ("Related Entities"); or the spouse, siblings, children, parents
or grandparents of any such person or any such person's spouse (collectively,
"relatives"), or any trust or individual retirement account or self-employed
retirement plan for the benefit of any such person or relative; or the estate of
any such person or relative, if such sales are made for investment purposes
(such shares may not be resold except to the Funds);
45
<PAGE>
(3) certain employee benefit plans for employees of the Advisers and Related
Entities;
(4) full-time employees of the Funds' Transfer Agent or an entity that provides
distribution to the Funds, an agent or broker of a dealer that has a sales
agreement with the Distributor, for their own account or an account of a
relative of any such person, or any trust or individual retirement account or
self-employed retirement plan for the benefit of any such person or relative; or
the estate of any such person or relative, if such sales are made for investment
purposes (such shares may not be resold except to the Funds);
(5) shares purchased by registered investment advisers on behalf of fee-based
accounts or by broker-dealers that have sales agreements with the Funds and for
which shares have been purchased on behalf of wrap fee client accounts and for
which such registered investment advisers or broker-dealers perform advisory,
custodial, record keeping or other services;
(6) shareholders who received shares in the DLJ Funds as a result of the merger
of Neuwirth Fund, Inc., Pine Street Fund, Inc. or deVegh Mutual Fund, Inc., and
who have maintained their investment in such shares;
(7) shares purchased for 401(k) Plans, 403(b) Plans and 457 Plans; and employee
benefit plans sponsored by an employer; non-U.S. nationalized pension plans; and
(8) Class B shares which are automatically converted to Class A shares.
Reduced sales charges are available to participants in the following programs:
Letter of Intent. By initially investing at least $1,000 and submitting a Letter
of Intent to the Funds' Distributor or Transfer Agent, you may purchase shares
of a DLJ Fund over a 13-month period at the reduced sales charge, which applies,
to the aggregate amount of the intended purchases stated in the Letter. The
Letter only applies to purchases made up to 90 days before the date of the
Letter.
Right of Accumulation. For investors who already have an account with the Funds,
reduced sales charges based upon the Funds' sales charge schedules are
applicable to subsequent purchases. The sales charge on each additional purchase
is determined by adding the current net asset value of the shares the investor
currently owns to the amount being invested. The Right of Accumulation is
illustrated by the following example: If a previous purchase currently valued in
the amount of $50,000 had been made subject to a sales charge and the shares are
still held, a current purchase of $50,000 will qualify for a reduced sales
charge (i.e., the sales charge on a $100,000 purchase).
The reduced sales charge is applicable only to current purchases. It is the
investor's responsibility to notify the Transfer Agent at the time of subsequent
purchases that the account is eligible for the Right of Accumulation.
Concurrent Purchases. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares purchased in any DLJ Fund. For example, if the
investor concurrently invests $25,000 in one Fund and $25,000 in another, the
sales charge would be reduced to reflect a $50,000 purchase. In order to
exercise the Concurrent Purchases privilege, the investor must notify the
Distributor or Transfer Agent prior to his or her purchase.
Combined Purchase Privilege. By combining the investor's holdings of shares in
any DLJ Fund, the investor can reduce the initial sales charges on any
additional purchases of Class A shares. The investor may also use these
combinations under a Letter of Intent. This allows the investor to make
purchases over a 13-month period and qualify the entire purchase for a reduction
in initial sales charges on Class A shares. A combined purchase of $1,000,000 or
more may trigger the payment of a dealer's commission and the applicability of a
Limited CDSC. See "Other Shareholder Information - Class A Limited CDSC."
Reinstatement Privilege. The Reinstatement Privilege permits shareholders to
reinvest the proceeds provided by a redemption of a Fund's Class A shares within
120 days from the date of redemption without
46
<PAGE>
an initial sales charge. It is the investor's responsibility to notify the
Transfer Agent prior to his or her purchase in order to exercise the
Reinstatement Privilege. In addition, a CDSC paid to the Distributor will be
eligible for reimbursement at the current net asset value of the applicable Fund
if a shareholder reinstates his Fund account holdings within 120 days from the
date of redemption.
Class B Shares
You may choose to purchase Class B shares at the Fund's net asset value although
such shares may be subject to a CDSC when you redeem your investment. The CDSC
does not apply to investments held for more than four years or shares received
pursuant to dividend reinvestment.
Where the CDSC is imposed, the amount of the CDSC will depend on the number of
years that you have held the shares according to the table on this page. The
CDSC will be assessed on an amount equal to the lesser of the then current net
asset value or the original purchase price of the shares identified for
redemption.
[sidebar]
Year after Purchase CDSC Percentage
1st 4%
2nd 3%
3rd 2%
4th 1%
After 4th year None
[end sidebar]
The CDSC on Class B shares will be waived for the following shareholders or
transactions:
(1) shares received pursuant to the exchange privilege which are currently
exempt from a CDSC;
(2) redemptions as a result of shareholder death or disability (as defined in
the Internal Revenue Code of 1986, as amended);
(3) redemptions made pursuant to a DLJ Fund's systematic withdrawal plan
pursuant to which up to 1% monthly or 3% quarterly of an account (excluding
dividend reinvestments) may be withdrawn, provided that no more than 12% of the
total market value of an account may be withdrawn over any 12 month period.
Shareholders who elect systematic withdrawals on a semi-annual or annual basis
are not eligible for the waiver; and
(4) liquidations, distributions or loans from the following types of retirement
plan accounts:
o Section 401(k) retirement Plans;
o Section 403(b) Plans; or
o Section 457 Plans; and
(5) A total or partial redemption related to certain distributions from
retirement plans or accounts at age 70 1/2, which are permitted without penalty
pursuant to the Internal Revenue Code.
Redemptions effected by the Funds pursuant to their right to liquidate a
shareholder's account with a current net asset value of less than $250 will not
be subject to the CDSC.
Class A Limited CDSC. A Limited Contingent Deferred Sales Charge ("Limited
CDSC") will be imposed by the Funds upon certain redemptions of Class A shares
(or shares into which such Class A shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above (i.e.,
purchases of $1,000,000 or more).
47
<PAGE>
The Limited CDSC will be paid to the Distributor and will be equal to the lesser
of 1% of:
o the net asset value at the time of purchase of the Class A shares being
redeemed; or
o the net asset value of such Class A shares at the time of redemption.
For purposes of this formula, the "net asset value at the time of purchase" will
be the net asset value at the time of purchase of such Class A shares even if
those shares are later exchanged, and in the event of an exchange of such Class
A shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares into which the Class A shares have been
exchanged. The Limited CDSC on Class A shares will be waived on redemptions made
pursuant to a DLJ Fund's systematic withdrawal plan under the same circumstances
as outlined in item (3) above related to the waiver of the CDSC on Class B
shares.
Class C Shares
You may choose to purchase Class C shares at the Fund's net asset value,
although such shares will be subject to a 1% CDSC if you redeem your shares
within 1 year. If you exchange your shares for Class C shares of another DLJ
Fund, the 1% CDSC also will apply to those Class C shares. The 1 year period for
the CDSC begins with the date of your original purchase, not the date of the
exchange for the other Class C shares. The 1% CDSC on Class C shares will be
waived under the circumstances that would result in a waiver of the CDSC on
Class B shares.
Class D Shares
Class D shares are offered only to employees of DLJ and its subsidiaries who are
eligible to participate in the DLJ 401(k) Retirement Savings Plan for Employees.
Class D shares are not subject to any sales charges or distribution fees. These
employees should contact the DLJ 401(k) Hotline at 1-877-401k -DLJ to learn how
to purchase Class D shares.
Class R Shares
Class R shares are offered only to eligible institutions who purchase shares on
behalf of their clients and are not available to individual investors directly.
Class R shares are not subject to any initial or contingent deferred sales
charge, but there is a distribution fee of .25% of average daily net assets.
Institutions may charge direct fees in connection with transactions related to
Class R shares.
ADDITIONAL SHAREHOLDER SERVICES
Exchange Privilege. You may exchange shares of a Fund for shares offered under
the same class of another DLJ Fund. Shareholders whose initial investment was
directly into a Money Fund may exchange such shares for either Class A, Class B,
Class C or Class R of another DLJ Fund. Shares of each Money Fund purchased
pursuant to the DLJ Funds' exchange privilege will be eligible for exchange into
another DLJ Fund provided that the exchange is directed into the same class of
shares upon which the initial investment was made. Shareholders whose initial
investment was invested directly into a Money Fund will, upon an exchange
request, automatically be exchanged into Class A shares of the requested Fund
(unless otherwise indicated on the purchase application or by written notice).
You should be aware that for federal income tax purposes an exchange is treated
as a sale and a purchase of shares which may result in recognition of a gain or
loss.
The following privileges are provided by the Transfer Agent and do not apply to
Class D or Class R shares:
48
<PAGE>
Automatic Monthly Investment Plan. You may elect on the Application to make
additional investments in a Fund automatically by authorizing DLJ to withdraw
funds from your bank or other cash account and purchase additional shares with
those funds. You select the date (either the 10th, 15th or 20th of each month)
and amount (subject to a minimum of $25). The plan may be terminated at any time
without penalty by you or the Fund.
Automatic Exchange Plan. You may authorize the DLJ Funds in advance to exchange
a set dollar amount of shares in one Fund for shares of the same class of
another Fund or for shares of the Money Funds on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum
exchange amount under the Automatic Exchange Plan is $50. These exchanges are
subject to the terms of the Exchange Privilege described above.
Dividend Direction Option. A shareholder may elect on the Application to have
his or her dividends paid to another individual or directed for reinvestment
within the same class of another Fund provided that an existing account in such
other Fund is maintained by the shareholder.
Systematic Withdrawal Plan. Any shareholder who owns or purchases shares of a
Fund having a current net asset value of at least $10,000 may establish a
Systematic Withdrawal Plan under which the shareholder or a third party will
receive payment by check in a stated amount of not less than $50 on a monthly,
quarterly, semi-annual or annual basis. A CDSC which may otherwise be imposed on
a redemption will be waived in connection with redemptions made pursuant to DLJ
Funds' Systematic Withdrawal Plan up to 1% monthly or 3% quarterly of an account
(excluding dividend reinvestment) not to exceed 12% over any 12 month rolling
period. Systematic withdrawals elected on a semi-annual or annual basis are not
eligible for the waiver.
Checkwriting Privileges. Shareholders of the Money Funds may redeem shares by
writing checks of at least $100 against their account balance. Investments in
the Money Funds will continue to earn dividends until a shareholder's check is
presented to the Money Funds for payment. Checks will be returned by the
Transfer Agent if there are insufficient shares to meet the withdrawal amount.
You should not attempt to close an account by check because the exact balance at
the time the check clears will not be known when the check is written. There is
currently no charge to shareholders for checkwriting, but the Money Funds
reserve the right to impose a charge in the future. The Money Funds may modify,
suspend or terminate checkwriting privileges at any time upon notice to
shareholders and will terminate checkwriting privileges without notice for
accounts whose assets are exchanged completely out of the Money Funds. In
addition, Boston Safe Deposit & Trust., as agent for the Transfer Agent in
processing redemptions via the checkwriting privilege, reserves the right to
terminate checkwriting privileges at any time without notice to you.
Checkwriting privileges are not available for accounts subject to a CDSC.
Retirement Plans. DLJ offers a range of qualified retirement plans including
Traditional, Educational and Roth IRAs, SEPs, SIMPLE plans and other pension and
profit sharing plans. Semper Trust Company serves as custodian under these
prototype retirement plans and charges an annual account maintenance fee of $15
per participant, regardless of the number of Funds selected. For more
information you should write or telephone the Transfer Agent at 1-800-225-8011.
For a more detailed explanation of the retirement plans offered by the Funds,
see each Fund's Statement of Additional Information.
Additional information concerning shareholder services is available by
contacting the Funds at the address or telephone number listed on the last page
of this Prospectus.
THE FUNDS DO NOT PERMIT MARKET-TIMING. DO NOT INVEST IN THESE FUNDS IF YOU ARE A
MARKET-TIMER. DLJ RESERVES THE RIGHT TO IMPOSE SHORT-TERM REDEMPTION FEES TO
DISCOURAGE MARKET-TIMING IN THE FUNDS.
49
<PAGE>
DISTRIBUTION CHARGES
Each Fund has adopted 12b-1 Plans pursuant to the rules of the 1940 Act. These
plans allow each Fund to collect distribution and service fees for the sale and
servicing of the individual classes of each Fund's shares. Since these fees are
paid out of each Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment. These fees may cost you more than paying
other types of sales charges. Effective as of the date of this prospectus, the
limitation on annual distribution and service fees for Class A shares of the
Core Equity Fund, Growth and Income Fund, Small Company Value Fund, Fixed Income
Fund and Municipal Trust Fund has been reduced from 0.30% to 0.25%. The Funds do
not pay any of the expenses for distributing Class D shares.
[side bar]
Distribution and Service Fees:
Distribution and service fees are used to pay the Distributor to promote the
sale of shares and the servicing of accounts of each Fund.
The expenses incurred by the Distributor under the 12b-1 Plans include the
preparation, printing and distribution of prospectuses, sales brochures and
other promotional materials sent to prospective shareholders. They also include
purchasing radio, television, newspaper and other advertising and compensating
the Distributor's employees or employees of the Distributor's affiliates for
their distribution assistance.
Distribution fees also allow the Distributor to compensate broker/dealers or
other persons or entities for providing distribution assistance, as well as
financial intermediaries for providing administrative and accounting services
for their account holders.
[end side bar]
DIVIDEND AND DISTRIBUTION INFORMATION
Dividends are declared daily and paid monthly to shareholders of the Money
Funds, the Fixed Income Fund, the Municipal Trust Fund and the High Income Fund
from net investment income. Dividends are paid to shareholders of the Growth and
Income Fund quarterly, if net investment income has been earned, and to
shareholders of the Core Equity Fund, the Small Company Value Fund, the Growth
Fund, the Technology Fund and the International Funds once a year. Capital gains
earned in any of the Funds are normally distributed to shareholders once a year.
For purposes of this calculation, net investment income consists of all accrued
interest income on Fund assets less the Fund expenses applicable to that
dividend period.
For your convenience, dividends and capital gains are automatically reinvested
in your Fund. If you ask us to pay the distributions in cash, the Fund will send
you a check instead of purchasing more shares of your Fund. You will receive a
confirmation that shows the payment amount and a summary of all transactions.
Checks are normally mailed within five business days of the payment date.
TAXES
As with any investment, you should consider how your investment in the Funds
will be taxed. If your account is not a tax-deferred retirement account, you
should be aware of these tax consequences. For federal income tax purposes, a
Fund's income and short-term capital gain distributions are taxed as ordinary
income. Long-term capital gain distributions are taxed as long-term capital
gains. Your distributions may also be subject to state and local income taxes.
The distributions are taxable when they are paid, whether you receive them in
cash or participate in the dividend reinvestment program. Each January, your
Fund will mail you a form indicating the federal tax status of your dividend and
capital gain
50
<PAGE>
distributions. For individuals, long-term capital gains are generally subject to
a maximum tax rate of 20%. If you hold shares in a tax-deferred retirement
account, your distributions will be taxed when you receive a distribution from
your tax-deferred account.
Distributions to shareholders of tax-exempt interest income earned by the
Municipal Trust Fund and the Municipal Money Fund are not subject to federal
income tax if, at the close of each quarter of each Fund's taxable year, at
least 50% of the value of each Fund's total assets consists of tax-exempt
obligations. Both Funds intend to meet this requirement. Because the Municipal
Trust Fund and Municipal Money Fund can invest in taxable municipal bonds and
other taxable securities as well as tax-exempt municipal bonds, the portion of
their dividends exempt from or subject to regular federal income taxes cannot be
predicted. In addition, these distributions may also be subject to state and
local taxes.
If you are subject to the AMT, you should be aware that a portion of the
distributions out of tax-exempt interest earned by the Municipal Trust Fund and
the Municipal Money Fund may be taxable.
When you redeem your shares, the tax treatment of any gains or losses may be
affected by the length of time for which you hold your shares.
As a shareholder, you must provide your Fund with a correct taxpayer
identification number (generally your Social Security number) and certify that
you are not subject to backup withholding. If you fail to do so, the IRS can
require your Fund to withhold 31% of your taxable distributions and redemptions.
Federal law also requires your Fund to withhold 30% or the applicable tax treaty
rate from dividends paid to certain non-resident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
Please see the Statement of Additional Information for your Fund for more
information on the tax consequences of your investment. You should also consult
your own tax adviser for further information.
[side bar]
The Taxpayer Relief Act of 1997:
The Taxpayer Relief Act of 1997 made certain changes to capital gains tax rates.
Under this law, certain taxpayers will pay a lower tax rate when it comes to
capital gains.
The Fund will provide information relating to the portion of any Fund
distribution that is eligible for the reduced capital gains tax rate.
[end side bar]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand your Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations.) Certain information reflects financial results 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 indicated Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited, except where indicated by Ernst & Young LLP, the Funds' independent
auditors, whose unqualified reports, along with the Funds' financial statements,
are included in the Statements of Additional Information, which are available
upon request. Additional information about the performance of the Funds is
contained in each Fund's annual report to shareholders, which may be obtained
without charge. Prior to February 28, 1996, the Focus Funds offered only a
single class of shares. Accordingly, the data presented below with respect to
Class A shares of the Focus Funds for periods prior to such date have been
obtained from the financial statements for the Focus Funds' sole class of shares
outstanding during such prior fiscal years.
51
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Realized Total from Dividends Distributions
Value Investment and Unrealized Investment from Net from Capital
Beginning Income/(Loss) Gains/(Losses) Operations Investment Gains
of Period on Securities Income
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CORE EQUITY FUND
CLASS A
Six Months Ended $21.27 $ --* $ -- $ -- $ -- ($1.61)
April 30, 2000(a)
Year Ended 16.52 (0.03)* 5.04 5.01 -- (0.26)
October 31, 1999
Year Ended 14.56 (0.00)*+ 2.88 2.88 (0.02) (0.90)
October 31, 1998
Year Ended 12.69 0.03 3.07 3.10 (0.05) (1.18)
October 31, 1997
Year Ended 11.35 0.05 2.11 2.16 (0.04) (0.78)
October 31, 1996
Year Ended 10.82 0.04 1.19 1.23 (0.01) (0.69)
October 31, 1995
Class B
Six Months Ended 20.75 --* -- -- -- (1.61)
April 30, 2000(a)
Year Ended 16.25 (0.17)* 4.93 4.76 -- (0.26)
October 31, 1999
Year Ended 14.41 (0.12)* 2.86 2.74 -- (0.90)
October 31, 1998
Year Ended 12.63 (0.03) 3.02 2.99 (0.03) (1.18)
October 31, 1997
Year Ended 11.88 (0.01) 0.76 0.75 -- --
October 31, 1996+
CLASS C
Period Ended 20.01 --* -- -- -- --
April 30, 2000(a)++++
CLASS D
Six Months Ended 21.27 --* -- -- -- (1.61)
April 30, 2000(a)
Year Ended
October 31,
1999++ 20.29 0.01* 0.97 0.98 -- --
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Realized Total from Dividends Distributions
Value Investment and Unrealized Investment from Net from Capital
Beginning Income/(Loss) Gains/(Losses) Operations Investment Gains
of Period on Securities Income
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME FUND
CLASS A
Six Months Ended $23.49 $ --* $ -- $ -- ($0.06) ($0.69)
April 30, 2000(a)
Year Ended 22.60 0.12* 2.87 2.99 (0.09) (2.01)
October 31, 1999
Year Ended 20.09 0.20* 3.51 3.71 (0.17) (1.03)
October 31, 1998
Year Ended 17.18 0.21 4.59 4.80 (0.21) (1.68)
October 31, 1997
Year Ended 14.57 0.27 2.93 3.20 (0.24) (0.35)
October 31, 1996
Year Ended 13.38 0.26 1.77 2.03 (0.27) (0.57)
October 31, 1995
CLASS B
Six Months Ended 23.37 --* -- -- -- (0.69)
April 30, 2000(a)
Year Ended 22.55 (0.04)* 2.88 2.84 (0.01) (2.01)
October 31, 1999
Year Ended 20.06 0.04* 3.50 3.54 (0.02) (1.03)
October 31, 1998
Year Ended 17.15 0.08 4.58 4.66 (0.07) (1.68)
October 31, 1997
Year Ended 16.05 0.14 1.11 1.25 (0.15) --
October 31, 1996+
CLASS C
Period Ended 20.87 --* -- -- -- --
April 30,
2000(a)++++
CLASS D
Six Months Ended 23.50 --* -- -- (0.08) (0.69)
April 30, 2000(a)
Year Ended
October 31,
1999+++ 23.73 0.10* (0.26) (0.16) (0.07) --
----------------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY VALUE FUND
CLASS A
Six Months Ended $20.52 $ --* $ -- $ -- ($0.04) ($2.05)
April 30, 2000(a)
Year Ended 19.54 0.06* 1.01 1.07 (0.07) (0.02)
October 31, 1999
Year Ended 23.34 0.07* (2.55) (2.48) (0.06) (1.26)
October 31, 1998
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Realized Total from Dividends Distributions
Value Investment and Unrealized Investment from Net from Capital
Beginning Income/(Loss) Gains/(Losses) Operations Investment Gains
of Period on Securities Income
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 18.41 0.07 5.66 5.73 (0.08) (0.72)
October 31, 1997
Year Ended 16.61 0.09 2.16 2.25 (0.04) (0.41)
October 31, 1996
Year Ended 15.65 0.04 1.62 1.66 -- (0.70)
October 31, 1995
CLASS B
Six Months Ended 20.13 --* -- -- (0.04) (2.05)
April 30, 2000(a)
Year Ended 19.23 (0.14)* 1.06 0.92 -- (0.02)
October 31,
1999
Year Ended 23.12 (0.09)* (2.55) (2.64) -- (1.25)
October 31, 1998
Year Ended 18.34 (0.02) 5.57 5.55 (0.05) (0.72)
October 31, 1997
Year Ended 17.41 (0.02) 0.95 0.93 -- --
October 31, 1996+
CLASS C
Period Ended 17.96 --* -- -- -- --
April 30, 2000
(a) ++++
----------------------------------------------------------------------------------------------------------------------------------
GROWTH FUND
CLASS R
Period Ended $10.00 $ --* $ -- $ -- $ -- $ --
April 30, 2000
(a) +++++
----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
CLASS R
Period Ended $10.00 $ --* $ -- $ -- $ -- $ --
April 30, 2000
(a) +++++
----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME FUND
CLASS A
Six Months Ended $ 9.83 $0.26 $ -- $ -- ($0.26) $ --
April 30, 2000(a)
Year Ended 10.46 0.50 (0.53) (0.03) (0.50) (0.10)
October 31, 1999
Year Ended 10.16 0.53 0.30 0.83 (0.53) --
October 31, 1998
Year Ended 10.07 0.58 0.09 0.67 (0.58) --
October 31, 1997
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Realized Total from Dividends Distributions
Value Investment and Unrealized Investment from Net from Capital
Beginning Income/(Loss) Gains/(Losses) Operations Investment Gains
of Period on Securities Income
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended 10.22 0.58 (0.15) 0.43 (0.58) --
October 31. 1996
Year Ended 9.66 0.59 0.56 1.15 (0.59) --
October 31, 1995
CLASS B
Six Months Ended 9.83 0.22 -- -- (0.22) --
April 30, 2000(a)
Year Ended 10.46 0.43 (0.53) (0.10) (0.43) (0.10)
October 31, 1999
Year Ended 10.16 0.46 0.30 0.76 (0.46) --
October 31, 1998
Year Ended 10.07 0.50 0.09 0.59 (0.50) --
October 31, 1997
Year Ended 10.22 0.34 (0.15) 0.19 (0.34) --
October 31, 1996+
Class C
Period Ended 9.69 0.06 -- -- (0.06) --
April 30, 2000
(a) ++++
CLASS D
Six Months Ended 9.83 0.27 -- -- (0.27) --
April 30, 2000(a)
Year Ended 10.09 0.26 (0.26) 0.00 (0.26) --
October 31,
1999+++
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Unadudited
+ For the period February 28, 1996 (commencement of offering of Class B
shares) to October 31, 1996.
++ For the period May 13,1999 (commencement of offering Class D shares) to
October 31, 1999.
+++ For the period April 30, 1999 (commencement of offering Class D shares)
to October 31, 1999.
++++ For the period February 28, 2000 (commencement of offering Class C
shares) to April 30, 2000.
+++++ For the period November 19, 1999 (commencement of operations) to October
31, 1999.
* Based on average shares outstanding.
** Total return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestments of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. An initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total return.
55
<PAGE>
+ Rounds to less than $0.01.
<TABLE>
<CAPTION>
Total Net Asset Total Net Assets End Ratio of Ratio of Net Portfolio
Distributions Value End Return ** of Period (000 Expenses to Investment Income Turnover
of Period omitted) Average Net (Loss) to Average Rate
Assets (2) Net Assets (2)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
($1.61) $22.41 % $158,451 1.16%(1) %(1) %
(0.26) 21.27 30.77 135,677 1.23 (0.16) 34.7
(0.92) 16.52 21.00 97,078 1.29 (0.02) 21.0
(1.23) 14.56 26.48 82,926 1.36 0.21 41.1
(0.82) 12.69 20.32 68,096 1.48 0.47 60.6
(0.70) 11.35 12.21 55,946 1.63 0.35 101.7
(1.61) 21.75 -- 43,457 1.86(1) -(1) --
(0.26) 20.75 29.73 32,783 1.93 (0.86) 34.7
(0.90) 16.25 20.20 17,438 1.99 (0.72) 21.0
(1.21) 14.41 25.66 10,378 2.06 (0.51) 41.1
-- 12.63 6.40 3,177 2.17(1) (0.34)(1) 60.6
-- 21.75 -- 230 1.86(1) (1) --
(1.61) 22.45 -- 20,541 0.86(1) (1) --
-- 21.27 4.83 4,839 1.17(1) 0.07(1) 34.7
----------------------------------------------------------------------------------------------------------------------
$- $23.47 % $166,937 1.09%(1) %(1) -%
(2.10) 23.49 14.37 174,213 1.11 0.52 24.5
(1.20) 22.60 19.14 163,936 1.13 0.92 32.7
(1.89) 20.09 30.53 145,586 1.22 1.15 19.8
(0.59) 17.18 22.60 113,803 1.36 1.68 44.0
(0.84) 14.57 16.10 87,975 1.58 1.94 31.8
-- 23.32 -- 41,388 1.79(1) (1) --
(2.02) 23.37 13.66 41,144 1.81 (0.18) 24.5
(1.05) 22.55 18.29 33,325 1.83 0.22 32.7
(1.75) 20.06 29.59 19,664 1.92 0.39 19.8
(0.15) 17.15 7.67 6,545 1.99(1) 1.06(1) 44.0
-- 23.30 -- 51 1.79(1) (1) --
-- 23.49 -- 44,670 0.79(1) (1) --
(0.07) 23.50 (0.67) 48,152 0.97(1) 0.99(1) 24.5
----------------------------------------------------------------------------------------------------------------------
($2.09) $20.47 % $179,806 1.41%(1) %(1) %
(0.09) 20.52 5.47 188,192 1.37 0.33 29.6
(1.32) 19.54 (11.20) 237,873 1.29 0.30 41.5
(0.80) 23.34 32.48 283,001 1.35 0.37 21.1
(0.45) 18.41 13.80 227,716 1.47 0.48 35.1
(0.70) 16.61 11.10 202,730 1.64 0.23 25.1
(2.09) 20.01 -- 17,304 2.11(1) (1) --
(0.02) 20.13 4.75 19,257 2.07 (0.71) 29.6
(1.25) 19.23 (11.98) 22,284 1.99 (0.40) 41.5
(0.77) 23.12 31.55 18,395 2.05 (0.32) 21.1
-- 18.34 5.28 6,305 2.15(1) (0.34)(1) 35.1
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Total Net Asset Total Net Assets End Ratio of Ratio of Net Portfolio
Distributions Value End Return ** of Period (000 Expenses to Investment Income Turnover
of Period omitted) Average Net (Loss) to Average Rate
Assets (2) Net Assets (2)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- 20.00 -- -- 2.11(1) (1)
----------------------------------------------------------------------------------------------------------------------
-- $11.28 % $7,252 1.19%(1) %(1) %
----------------------------------------------------------------------------------------------------------------------
-- $13.84 % $29,224 1.39%(1) %(1) %
----------------------------------------------------------------------------------------------------------------------
($0.26) $9.64 % $36,895 1.00%(1) %(1) %
(0.60) 9.83 (0.26) 43,060 1.00 4.91 84.3
(0.53) 10.46 8.46 47,834 1.00 5.24 114.0
(0.58) 10.16 6.84 54,755 1.00 5.74 119.3
(0.58) 10.07 4.34 56,388 1.00 5.72 90.2
(0.59) 10.22 12.23 53,885 1.00 5.90 66.1
(0.22) 9.64 -- 3,394 1.70(1) (1) --
(0.53) 9.83 (0.97) 4,471 1.70 4.21 84.3
(0.46) 10.46 7.71 5,849 1.70 4.50 114.0
(0.50) 10.16 8.10 3,375 1.70 4.99 119.3
(0.34) 10.07 2.23 1,629 1.70(1) 5.03(1) 90.2
(0.06) 9.63 -- -- 1.70(1) (1) --
(0.27) 9.64 -- 96,058 0.70(1) (1) --
(0.26) 9.83 0.04 116,424 0.70(1) 6.30(1) 84.3
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) See footnote (3) on page 51.
57
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Contribution Total Dividends Distributions Tax Return
Value Investment Realized from from from Net from of
Beginning Income/ and Sub-Advisor Investment Investment Capital Capital
of Period (Loss) Unrealized Operations Income Gains
Gains/(Losses)
on
Securities
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL TRUST FUND
CLASS A
Six Months Ended April $10.05 $0.16 $ -- $ -- $ -- ($0.16) ($0.08) $ --
30, 2000(a)
Year Ended October 31, 10.53 0.38 (0.48) -- (0.10) (0.38) -- --
1999
Year Ended October 31, 10.29 0.38 0.24 -- 0.62 (0.38) -- --
1988
Year Ended October 31, 10.01 0.45 0.28 -- 0.73 (0.45) -- --
1997
Year Ended October 31, 10.06 0.43 (0.05) -- 0.38 (0.43) -- --
1996
Year Ended October 31, 9.51 0.39 0.55 -- 0.94 (0.39) -- --
1995
CLASS B
Six Months Ended April 10.05 0.16 -- -- -- (0.16) (0.08) --
30, 2000(a)
Year Ended October 31, 10.53 0.31 (0.48) -- (0.17) (0.31) -- --
1999
Year Ended October 31, 10.29 0.32 0.24 -- 0.56 (0.32) -- --
1998
Year Ended October 31, 10.01 0.37 0.28 -- 0.65 (0.37) -- --
1997
Year Ended October 31, 10.12 0.25 (0.11) -- 0.14 (0.25) -- --
1996+
CLASS C
Period Ended April 30, 9.88 0.05 -- -- -- (0.05) -- --
2000(a) +++++
------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
CLASS A
Six Months Ended April $14.00 $ --** $ -- $ -- $ -- $ -- ($1.78) $ --
30, 2000(a)
Year Ended October 31, 12.20 (0.06)** 2.56 -- 2.50 -- (0.70) --
1999
Year Ended October 31, 11.42 (0.06)** 0.99 -- 0.93 (0.06) (0.09) --
1998
Year Ended October 31, 10.38 (0.07)** 1.11 -- 1.04 -- -- --
1997
Year Ended October 31, 9.58 (0.04)** 0.84 -- 0.80 -- -- --
1996
Year Ended October 31, 10.00 -- (0.42) (0.42) -- -- --
1995*
CLASS B
Six Months Ended April 13.63 ** -- -- -- -- (1.78) --
30, 2000(a)
Year Ended October 31, 11.98 (0.15)** 2.50 -- 2.35 -- (0.70) --
1999
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Contribution Total Dividends Distributions Tax Return
Value Investment Realized from from from Net from of
Beginning Income/ and Sub-Advisor Investment Investment Capital Capital
of Period (Loss) Unrealized Operations Income Gains
Gains/(Losses)
on
Securities
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended October 31, 11.24 (0.15)** 0.98 -- 0.83 -- (0.09) --
1998
Year Ended October 31, 10.29 (0.15)** 1.10 -- 0.95 -- -- --
1997
Year Ended October 31, 9.57 (0.13)** 0.85 -- 0.72 -- -- --
1996
Year Ended October 31, 10.00 (0.02)** (0.41) -- (0.43) -- -- --
1995*
CLASS C
Period Ended April 30, 13.35 ** -- -- -- -- -- --
2000(a)+++++
CLASS D
Six Months Ended April 14.02 ** -- -- -- -- (1.78) --
30, 2000(a)
Year Ended October 31, 12.69 (0.14)** 1.47 -- 1.33 -- -- --
1999+++
------------------------------------------------------------------------------------------------------------------------------------
DEVELOPING MARKETS FUND
CLASS A
Six Months Ended April $9.95 $ -- ** $ -- $ -- $ -- $ -- $ -- $ --
30, 2000(a)
Year Ended October 31, 7.14 0.03** 2.58 0.23 2.84 (0.01) -- (0.02)
1999
Year Ended October 31, 9.52 0.02** (2.40) -- (2.38) -- -- --
1998
Year Ended October 31, 9.96 (0.02)** (0.40) -- (0.42) -- (0.02) --
1997
Year Ended October 31, 9.53 (0.01)** 0.44 -- 0.43 -- -- --
1996
Year Ended October 31, 10.00 -- (0.47) -- (0.47) -- -- --
1995*
CLASS B
Six Months Ended April 9.66 ** -- -- -- -- -- --
30, 2000(a)
Year Ended 6.96 (0.03)** 2.50 0.23 2.70 -- -- --
October 31, 1999
Year Ended October 31, 9.36 (0.04)** (2.36) -- (2.40) -- -- --
1998
Year Ended October 31, 9.86 (0.19)** (0.29) -- (0.48) -- (0.02) --
1997
Year Ended October 31, 9.52 (0.08)** 0.42 -- 0.34 -- -- --
1996
Year Ended October 31, 10.00 (0.01)** (0.47) (0.48) -- --
1995*
CLASS C
Period Ended April 30, 12.35 ** -- -- -- -- -- --
2000(a)+++++
------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL MONEY FUND
Six Months Ended April $1.00 $0.014 $ -- $ -- $0.014 ($0.014) $ -- $ --
30, 2000(a)
Year Ended 1.00 0.023 -- -- 0.023 (0.023) -- --
October 31, 1999
Year Ended October 31, 1.00 0.027 -- -- 0.027 (0.027) -- --
1998
Year Ended October 31, 1.00 0.020 -- -- 0.020 (0.020) -- --
1997***
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Net Contribution Total Dividends Distributions Tax Return
Value Investment Realized from from from Net from of
Beginning Income/ and Sub-Advisor Investment Investment Capital Capital
of Period (Loss) Unrealized Operations Income Gains
Gains/(Losses)
on
Securities
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT MONEY FUND
Six Months Ended April $1.00 $0.024 $ -- $ -- $0.024 ($0.024) $ -- $ --
30, 2000(a)
Year Ended October 31, 1.00 0.042 -- -- 0.042 (0.042) -- --
1999
Year Ended October 31, 1.00 0.047 -- -- 0.047 (0.047) -- --
1998
Year Ended October 31, 1.00 0.032 -- -- 0.032 (0.032) -- --
1997***
------------------------------------------------------------------------------------------------------------------------------------
HIGH INCOME FUND
CLASS A
Six Months Ended April $9.66 $0.44 $ -- $ -- $ -- ($0.44) ($0.07) $ --
30, 2000(a)
Year Ended October 31, 10.00 0.56 (0.34) -- 0.22 (0.56) -- --
1999++
CLASS B
Six Months Ended April 9.66 0.41 -- -- -- (0.41) (0.07) --
30, 2000(a)
Year Ended October 31, 10.00 0.50 (0.34) -- 0.16 (0.50) -- --
1999++
CLASS C
Period Ended April 30, 9.57 0.14 -- -- -- (0.14) -- --
2000(a)+++++
CLASS D
Six Months Ended April 9.65 0.45 -- -- -- (0.45) (0.07) --
30, 2000(a)
Year Ended October 31, 10.23 0.41 (0.58) -- (0.16) (0.41) -- --
1999++++
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Unaudited
* Commencement of operations for the International Equity Fund and the
Developing Markets Fund was September 8, 1995.
** Based on average shares outstanding.
*** Commencement of operations for the Municipal Money Fund and the U.S.
Government Money Fund was February 24, 1997.
+ For the period February 28, 1996 (commencement of offering of Class B
shares) to October 31, 1996.
++ Commencement of operations for the High Income Fund was March 8, 1999.
+++ For the period May 17,1999 (commencement of offering Class D shares) to
October 31, 1999.
++++ For the period May 13, 1999 (commencement of offering Class D shares) to
October 31,1999.
+++++ For the period February 28, 2000 (commencement of offering Class C
shares) to April 30, 2000.
60
<PAGE>
<TABLE>
<CAPTION>
Total Net Asset Total Net Assets End Ratio of Ratio of Net Portfolio
Distributions Value End Return(2) of Period (000 Expenses to Investment Income Turnover
of Period omitted) Average Net (Loss) to Average Rate
Assets (3) Net Assets (3)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
($0.24) $9.89 % $24,575 1.00%(1) %(1) %
(0.38) 10.05 (1.02) 29,912 1.00 3.65 76.5
(0.38) 10.53 6.28 44,306 1.00 3.78 51.5
(0.45) 10.29 7.37 35,878 0.70 4.38 84.3
(0.43) 10.01 3.83 38,794 0.80 4.26 79.3
(0.39) 10.06 10.06 39,059 1.00 3.97 49.3
(0.16) 9.89 -- 955 1.70(1) --(1) --
(0.31) 10.05 (1.71) 1,044 1.70 2.94 76.5
(0.32) 10.53 5.54 1,430 1.70 3.04 51.5
(0.37) 10.29 6.62 546 1.40 3.66 84.3
(0.25) 10.01 1.42 489 1.23(1) 3.81(1) 79.3
(0.05) 9.87 -- -- 1.70(1) --(1) --
-------------------------------------------------------------------------------------------------------------------------
($1.78) $13.31 % $55,146 2.10% %(1) %
(0.70) 14.00 21.76 48,181 2.15 (0.44) 82.0
(0.15) 12.20 8.20 44,286 2.15 (0.49) 69.7
-- 11.42 10.02 44,316 2.15 (0.59) 73.9
-- 10.38 8.35 42,170 2.15 (0.39) 94.1
-- 9.58 (4.20) 28,819 2.15(1) (0.02)(1) --
(1.78) 12.86 -- 5,935 2.85(1) --(1) --
(0.70) 13.63 20.86 5,527 2.90 (1.18) 82.0
(0.09) 11.98 7.43 6,133 2.90 (1.24) 69.7
-- 11.24 9.23 6,821 2.90 (1.32) 73.9
-- 10.29 7.52 4,955 2.90 (1.25) 94.1
-- 9.57 (4.30) 1,803 2.90(1) (1.77)(1) --
-- 12.86 -- -- 2.85(1) --(1) --
(1.78) 13.35 -- 4,816 1.85(1) --(1) --
-- 14.02 10.48 1,586 1.90(1) (1.14)(1) 82.0
-------------------------------------------------------------------------------------------------------------------------
-- $11.10 % $17,546 2.15%(1) %(1) %
(0.03) 9.95 39.82 16,023 2.15 0.32 36.9
-- 7.14 (25.00) 16,355 2.15 0.22 43.6
(0.02) 9.52 (4.18) 29,402 2.15 (0.17) 52.8
-- 9.96 4.51 36,918 2.15 (0.14) 26.8
-- 9.53 (4.70) 14,622 2.15(1) 0.32(1) --
-- 10.74 -- 3,169 2.90(1) --(1) --
-- 9.66 38.79 2.685 2.90 (0.36) 36.9
-- 6.96 (25.64) 2,509 2.90 (0.50) 43.6
(0.02) 9.36 (4.83) 4,941 2.90 (1.74) 52.8
-- 9.86 3.57 3,641 2.90 (0.83) 26.8
-- 9.52 (4.80) 1,004 2.90(1) (1.00)(1) --
-- 10.75 -- -- 2.90(1) --(1) --
-------------------------------------------------------------------------------------------------------------------------
($0.014) $1.00 % $52,018 0.90%(1) %(1) N/A
(0.023) 1.00 2.37 44,347 0.90 2.33 N/A
(0.027) 1.00 2.72 57,778 0.90 2.68 N/A
(0.020) 1.00 2.90(1) 38,681 0.90(1) 2.87 N/A
-------------------------------------------------------------------------------------------------------------------------
($0.024) $1.00 % $59,005 0.90%(1) %(1) N/A
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Total Net Asset Total Net Assets End Ratio of Ratio of Net Portfolio
Distributions Value End Return(2) of Period (000 Expenses to Investment Income Turnover
of Period omitted) Average Net (Loss) to Average Rate
Assets (3) Net Assets (3)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(0.042) 1.00 4.26 59,877 0.90 4.19 N/A
(0.047) 1.00 4.79 $56,697 0.90 4.68 N/A
(0.032) 1.00 4.68(l) 35,174 0.90(1) 4.65(1) N/A
-------------------------------------------------------------------------------------------------------------------------
($0.44) $9.34 % $10,856 1.10%(1) %(1) %
(0.56) 9.66 2.19 10,488 1.10(1) 8.61 188.4
(0.48) 9.34 -- 1,603 1.85(1) --(1) --
(0.50) 9.66 1.60 1,447 1.85(1) 7.83(1) 188.4
(0.14) 9.34 -- -- 1.85(1) --(1) --
(0.52) 9.34 -- 1,415 0.85(1) --(1) --
(0.41) 9.65 (1.63) 926 0.85(1) 9.36(1) 188.4
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and distributions at net asset value during the period, and redemption on
the last day of the period. An initial sales charge or contingent deferred
sales charge is not reflected in the calculation of total return. Total
return calculated for a period of less than one year is not annualized
except for Money Funds. Total return for the year end October 31, 1999
excluding the effect of the contribution from the sub adviser for realized
and unrealized securities losses was 36.59% and 35.49% for the Developing
Markets Fund Class A and B shares, respectively.
(3) Net of voluntary assumption by the investment adviser of expenses,
expressed as a percentage of average net assets, as follows Growth Fund
Class R shares, 1.76% (annualized) for the period 11/19/ 99, through
4/30/00; Technology Fund Class R shares, .76%(annualized) for the period
11/ 19/99, through 4/30/00; Fixed Income Fund Class A shares, .13%
(annualized) for the six months ended 4/30/00, . 14%, .30%, .30%, .34%,
and .51%, for the years ended 10/31/99, 98, 97, 96, and 95 respectively;
Fixed Income Fund Class B shares, .13% (annualized) for the six months
ended 4/30/00, .14%, .30%, and .30% for the years ended 10/31/99, 98 and
97, and .34% (annualized) for the period 2/28/96 through 10/31/96; Fixed
Income Class C shares, .13% (annualized) for the period 2/28/00 through
4/30/00, Fixed Income Class D shares,, .13% (annualized) for the six
months ended 4/30/00,.14% (annualized) for the period 4/30/99 through
10/31/99; Municipal Trust Fund Class A shares, .49% (annualized) for the
six months ended 4/30/00, .42 %, .41%, .74%, .64%, and .58%, (annualized)
for the years ended 10/31/99, 98, 97, 96, and 95, respectively; Municipal
Trust Fund Class B shares, .42 %, .41 % and .74% for the years ended
10/31/99, 98 and 97, and .64% (annualized) for the period 2/28/96 through
10/31/96, Municipal Trust Fund Class C share, .49% (annualized) for the
period 2/28/00 through 4/30/00; Developing Markets Fund Class A and Class
B shares, .56% (annualized) for the six months ended 4/30/00, .76%, .61%,
.34%, .54% and .60% (annualized) for the years ended 10/31/99, 98, 97, 96
and 95, respectively, Developing Markets Fund Class C shares, .56%
(annualized) for the six months ended 4/30/00; International Equity Fund
Class A and Class B shares, .04%,.10%, .18%, .27% and .60% for the years
ended 10/31/99, 98, 97, 96 and 95, respectively; International Equity Fund
Class D shares, .04% (annualized) for the period 5/13/99 through 10/31/99;
Municipal Money Fund, .13% (annualized) for the six months ended 4/30/00;
.14%, .15% and .40% (annualized) for the years ended 10/31/99, 98 and 97,
respectively; U.S. Government Money Fund, .13% (annualized) for the six
months ended 4/30/00; .19%, .25% and .45% (annualized) for the years ended
10/31/99, 98, and 97, respectively; High Income Fund Class A, Class B and
Class D shares,2.23% (annualized) for the six months ended 4/30/00, and
1.43% (annualized) for the period 3/8/99 through 10/31/99and High Income
Fund Class C shares, 2.23% (annualized) for the period 2/28/00 through
4/30/00.
BACK COVER
62
<PAGE>
FOR MORE INFORMATION
General Information and Other Available Information
The Funds send out a semi-annual report and an annual report to all
shareholders. These reports include a list of your Fund's investments and
financial statements. The annual report contains a statement from the Fund's
Adviser discussing market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
The Funds have Statements of Additional Information that contain additional
information on all aspects of the Funds and are incorporated by reference into
this Prospectus. The Statements of Additional Information have been filed with
the Securities and Exchange Commission and are available for review at the SEC's
Public Reference Room in Washington, DC (1-202-942-8090) or on the SEC's web
site at http://www.sec.gov. You can also obtain copies of Fund documents filed
with the SEC by electronic request at the following e-mail address:
[email protected], or by writing:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
Payment of a duplicating fee may be required.
Shareholders may obtain any of these documents free of charge and may obtain
other information about the Funds by visiting the Funds' website
(www.dljfunds.com), calling 800-225-8011 or by writing:
DLJ Funds
PFPC, Inc.
P.O. Box 61503
King of Prussia, PA. 19406-0903
DLJ FUNDS
SEC file numbers: DLJ Focus Funds 811-04604
DLJ Opportunity Funds 811-9054
DLJ Select Funds 811-09531
63
<PAGE>
DLJ OPPORTUNITY FUNDS
277 PARK AVENUE, NEW YORK, NEW YORK 10172
Toll Free (800) 225-8011
STATEMENT OF ADDITIONAL INFORMATION
July, 2000
This Statement of Additional Information relates to the DLJ Municipal Money Fund
(the "Municipal Fund") and the DLJ U.S. Government Money Fund (the "Government
Fund" and together with the Municipal Fund, the "Money Funds"). This Statement
of Additional Information also relates to the DLJ High Income Fund (the "High
Income Fund" and together with the Money Funds, the "Funds"). Each Fund is a
series of the DLJ Opportunity Funds. Each Fund is an open-end, diversified
management investment company. This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Funds' current Prospectus,
dated July, 2000, as supplemented from time to time, which is incorporated
herein by reference. A copy of the Prospectus may be obtained by contacting the
Funds at the address or telephone number listed above.
1
<PAGE>
TABLE OF CONTENTS
FUND HISTORY .............................................................. 3
INVESTMENT POLICIES AND RESTRICTIONS ...................................... 3
SECURITIES ............................................................. 4
RULE 2A-7 UNDER THE INVESTMENT COMPANY ACT OF 1940 ..................... 9
OTHER GENERAL INFORMATION ABOUT THE MUNICIPAL FUND ..................... 10
OTHER GENERAL INFORMATION ABOUT THE HIGH INCOME FUND ................... 10
FUNDAMENTAL INVESTMENT RESTRICTIONS .................................... 12
MANAGEMENT ................................................................ 14
ADVISER ................................................................ 15
EXPENSES OF THE FUNDS ..................................................... 18
GENERAL ................................................................ 18
DISTRIBUTION AGREEMENT ................................................. 18
PURCHASES, REDEMPTIONS and EXCHANGES ...................................... 20
PURCHASES .............................................................. 20
REDEMPTIONS ............................................................ 21
EXCHANGES .............................................................. 22
RETIREMENT PLANS .......................................................... 23
INDIVIDUAL RETIREMENT ACCOUNTS ("IRA") ................................. 24
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA") ........................... 24
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES ("SIMPLE") - SIMPLE
IRA AND SIMPLE 401(K) ................................................ 24
EMPLOYER-SPONSORED RETIREMENT PLANS .................................... 25
SELF-DIRECTED RETIREMENT PLANS ......................................... 25
NET ASSET VALUE ........................................................... 25
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 28
PORTFOLIO TRANSACTIONS .................................................... 31
INVESTMENT PERFORMANCE INFORMATION ........................................ 33
YIELD .................................................................. 33
EFFECTIVE YIELD ........................................................ 34
TAX-EQUIVALENT YIELD ................................................... 34
SHARES OF BENEFICIAL INTEREST ............................................. 37
GENERAL INFORMATION ....................................................... 38
ORGANIZATION AND CAPITALIZATION ........................................ 38
COUNSEL AND INDEPENDENT AUDITORS ....................................... 39
ADDITIONAL INFORMATION ................................................. 39
CUSTODIAN AND TRANSFER AGENT ........................................... 39
FINANCIAL STATEMENTS ................................................... 39
APPENDIX A ................................................................ 40
SECURITIES RATINGS ........................................................ 40
DESCRIPTION OF MUNICIPAL SECURITIES ....................................... 44
2
<PAGE>
FUND HISTORY
DLJ Opportunity Funds was formed on May 31, 1995 as a business trust under
the laws of the state of Delaware. Its shares are currently divided into five
series, the DLJ High Income Fund, each Money Fund, the DLJ Developing Markets
Fund and the DLJ International Equity Fund. This Statement of Additional
Information is for the Money Funds and the High Income Fund. The Money Funds
commenced operations on February 24, 1997 and the High Income Fund commenced
operations March 8, 1999. The DLJ Opportunity Funds have an unlimited number of
authorized shares of beneficial interest, par value $.001 per share, which may,
without shareholder approval, be divided into an unlimited number of series and
an unlimited number of classes.
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions supplement should be
read in conjunction with the information set forth under the heading "Investment
Objectives and Policies" in the Funds' Prospectus. Except as noted in the
Prospectus and this Statement of Additional Information, the Funds' investment
policies are not fundamental and may be changed by the Trustees of the Funds
without shareholder approval; however, shareholders will be notified prior to a
significant change in such policies. The Funds' investment restrictions which
are fundamental and may not be changed without shareholder approval are
indicated under "Fundamental Investment Restrictions" in this Statement of
Additional Information.
It is the policy of the Municipal Fund to seek maximum current income,
consistent with liquidity and safety of principal, that is exempt from Federal
income taxes by investing principally in a diversified portfolio of municipal
securities; it is the policy of the Government Fund to seek maximum current
income, consistent with liquidity and safety of principal, by investing in a
portfolio of U.S. Government securities. It is the policy of both Money Funds to
declare the net investment income associated with their investments as a daily
dividend to maintain the net asset value of the Funds at $1.00. (See "Net Asset
Value" and "Daily Dividends, Distributions and Taxes.") In addition, one or both
of the Funds may invest in the securities described below.
It is the policy of the High Income Fund to seek a high level of current
income and as a secondary investment objective, of capital appreciation. The
High Income Fund seeks to achieve its objective by investing in fixed income
securities, including corporate bonds and notes, that are rated in the lower
rating categories of the established rating services (Baa or lower by Moody's
and BBB or lower by Standard & Poor's.
The Prospectus indicates what securities a particular Fund may invest in, or may
be limited in investing in, which may include the following securities.
3
<PAGE>
Securities
U.S. Government Obligations. The Funds may purchase marketable obligations
of, or guaranteed by, the United States Government, its agencies or
instrumentalities. These include issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress,
including variable rate obligations such as floating rate notes. The latter
issues include, but are not limited to, obligations of the Bank for
Cooperatives, Federal Financing Bank, Federal Home Loan Bank, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and still
others are supported only by the credit of the agency or instrumentality.
Repurchase Agreements. The Funds may enter into "repurchase agreements"
with member banks of the Federal Reserve System, "primary dealers" (as
designated by the Federal Reserve Bank of New York) in such securities, any
domestic or foreign broker/dealer which is recognized as a reporting government
securities dealer or any other counterparty allowable under Rule 2a-7 of the
Investment Company Act of 1940 (the "Act"). Repurchase agreements permit the
Funds to keep all of their assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. The Funds require
continual maintenance of collateral with an approved custodian in an amount
equal to, or in excess of, the market value of the securities which are the
subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Funds might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, the Funds might be
delayed in selling the collateral. Pursuant to 1940 Act, a repurchase agreement
is deemed to be an acquisition of the underlying securities provided that the
obligation of the seller to repurchase the securities from the Funds is
collateralized fully (as defined in such Rule). Accordingly, the vendor of a
fully collateralized repurchase agreement is deemed to be the issuer of the
underlying securities.
Reverse Repurchase Agreements. The Funds may also enter into reverse
repurchase agreements. Under a reverse repurchase agreement, the Funds would
sell securities and agree to repurchase them at a mutually agreed upon date and
price. At the time the Funds enter into a reverse repurchase agreement, they
would establish and maintain with an approved custodian a segregated account
containing liquid securities having a value not less than the repurchase price.
Reverse repurchase agreements involve the risk that the market value of the
securities subject to such agreement could decline below the repurchase price to
be paid by the Funds for such securities. In the event the buyer of securities
under a reverse repurchase agreement filed for bankruptcy or became insolvent,
such buyer or receiver would receive an extension of time to determine whether
to enforce the Funds' obligations to repurchase the securities and the Funds'
use of the proceeds of the reverse repurchase could effectively be restricted
pending such decision. Reverse repurchase agreements create leverage, a
speculative factor, but are not considered senior securities by the Funds or the
Securities and Exchange Commission to the extent liquid debt securities are
segregated in an amount at least equal to the amount of the liability.
4
<PAGE>
When-Issued and Delayed-Delivery Securities. The Funds may, to the extent
consistent with their other investment policies and restrictions, enter into
forward commitments for the purchase or sale of securities, including on a
"when-issued" or "delayed-delivery" basis, in excess of customary settlement
periods for the type of security involved. In some cases, a forward commitment
may be conditioned upon the occurrence of a subsequent event, such as approval
and consummation of a merger, corporate reorganization or debt restructuring,
i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of
the commitment, with payment and delivery taking place in the future, generally
ten days to a month, or more, after the date of the commitment. While the Funds
will only enter into a forward commitment with the intention of actually
acquiring the security, the Funds may sell the security before the settlement
date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Funds prior to the
settlement date. The Funds will segregate with their custodian cash or liquid
debt securities in an aggregate amount at least equal to the amount of their
respective outstanding forward commitments.
Standby Commitments. The Municipal Fund may purchase municipal securities
together with the right to resell them to the seller at an agreed-upon price or
yield within specified periods prior to their maturity dates. Such a right to
resell is commonly known as a "standby commitment," and the aggregate price
which the Municipal Fund pays for securities with a standby commitment may be
higher than the price which otherwise would be paid. The primary purpose of this
practice is to permit the Municipal Fund to be as fully invested as practicable
in municipal securities while preserving the necessary flexibility and liquidity
to meet unanticipated redemptions. In this regard, the Municipal Fund acquires
standby commitments solely to facilitate liquidity and does not exercise its
rights thereunder for trading purposes. Since the value of a standby commitment
is dependent on the ability of the standby commitment writer to meet its
obligation to repurchase, the Municipal Fund's policy is to enter into standby
commitment transactions only with municipal securities dealers which are
determined to present minimal credit risks.
The acquisition of a standby commitment does not affect the valuation or
maturity of the underlying municipal securities which continue to be valued in
accordance with the amortized cost method. Standby commitments acquired by the
Municipal Fund are valued at zero in determining net asset value. Where a
Municipal Fund pays directly or indirectly for a standby commitment, its cost is
reflected as unrealized depreciation for the period during which the commitment
is held. Standby commitments do not affect the average weighted maturity of the
Municipal Fund's portfolio of securities.
The Municipal Fund may only invest up to 10% of its net assets, in the
aggregate, in standby commitments, when-issued securities, delayed-delivery
securities and other illiquid securities.
5
<PAGE>
Municipal Securities. The term "municipal securities," as used in the
Prospectus and this Statement of Additional Information, means obligations
issued by or on behalf of states, territories, and possessions of the United
States or their political subdivisions, agencies and instrumentalities, the
interest from which is exempt (subject to the alternative minimum tax - as later
described) from Federal income taxes. The municipal securities in which the
Municipal Fund invests are limited to those obligations which at the time of
purchase are:
1. Backed by the full faith and credit of the United States; or
2. Municipal notes rated MIG-1 or MIG-2 and VMIG-1 or VMIG-2, by
Moody's Investors Service, Inc. ("Moody's") or SP-1 or SP-2 by
Standard and Poor's Corporation ("S&P"), or, if not rated, are of
equivalent investment quality as determined by the Municipal Fund's
adviser; or
3. Municipal bonds rated Aa or higher by Moody's, AA- or higher by S&P
or, if not rated, are of equivalent investment quality as determined
by the Municipal Funds' adviser; or
4. Other types of municipal securities, provided that such obligations
are rated Prime-1 by Moody's, A-1 or higher by S&P or, if not rated,
are of equivalent investment quality as determined by the Municipal
Fund's adviser.
See Appendix A for a description of municipal ratings and Appendix B for a
description of municipal securities.
Alternative Minimum Tax. The Municipal Fund may invest without limitation
in tax-exempt municipal securities subject to the alternative minimum tax (the
"AMT"). Under current Federal income tax law, (1) interest on tax-exempt
municipal securities issued after August 7, 1986 which are "specified private
activity bonds," and the proportionate share of any exempt-interest dividend
paid by a regulated investment company which receives interest from such
specified private activity bonds will be treated as an item of tax preference
for purposes of the AMT imposed on individuals and corporations, though for
regular Federal income tax purposes, such interest will remain fully tax-exempt,
and (2) interest on all tax-exempt obligations will be included in "adjusted
current earnings" for corporation for AMT purposes. Such private activity bonds
("AMT-Subject Bonds") have provided, and may continue to provide, somewhat
higher yields than other comparable municipal securities.
Investors should consider that, in most instances, no state, municipality
or other governmental unit with taxing power will be obligated with respect to
AMT-Subject Bonds. AMT-Subject Bonds are in most cases revenue bonds and do not
generally have the pledge of the credit or the taxing power, if any, of the
issuer of such bonds. AMT-Subject Bonds are generally limited obligations of the
issuer supported by payments from private business entities and not by the full
faith and credit of a state or any governmental subdivision. Typically the
obligation of the issuer of an AMT-Subject Bond is to make payments to bond
holders only out of, and to the extent of, payments made by the private business
entity for whose benefit the AMT-Subject Bonds were issued. Payment of the
principal and interest on such revenue bonds depends solely on the ability of
the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide specific detail on each
of these obligations in which Municipal Fund assets may be invested.
6
<PAGE>
While the Municipal Fund may invest without limitation in securities
subject to AMT, the AMT affects only a small percentage of all taxpaying
investors.
Taxable Securities for the Municipal Fund. The Municipal Fund is, and
expects to be, largely invested in municipal securities, but may elect to invest
up to 20% of its total assets in taxable money market securities when such
action is deemed to be in the best interests of shareholders. Such taxable money
market securities also are limited to remaining maturities of 397 days or less
at the time of the Municipal Fund's investment, and the Municipal Fund's
municipal and taxable securities are maintained at a dollar-weighted average of
90 days or less.
Variable Rate Obligations. The interest rate payable on certain municipal
securities in which the Municipal Fund may invest, called "variable rate"
obligations, is not fixed and may fluctuate based upon changes in market rates.
The interest rate payable on a variable rate municipal security is adjusted
either at pre-designated periodic intervals or whenever there is a change in the
market rate to which the security's interest rate is tied. Other features may
include the right of the Municipal Fund to demand prepayment of the principal
amount of the obligation prior to its stated maturity and the right of the
issuer to prepay the principal amount prior to maturity. The main benefit of a
variable rate municipal security is that the interest rate adjustment minimizes
changes in the market value of the obligation. As a result, the purchase of
variable rate municipal securities enhances the ability of the Municipal Fund to
maintain a stable net asset value per share and to sell an obligation prior to
maturity at a price approximating the full principal amount. The payment of
principal and interest by issuers of certain municipal securities purchased by
the Municipal Fund may be guaranteed by letters of credit or other credit
facilities offered by banking or other financial institutions. Such guarantees
will be considered in determining whether a municipal security meets the
Municipal Fund's investment quality requirements.
Variable rate obligations purchased by the Municipal Fund may include
participation interests in variable rate industrial development bonds. Purchase
of a participation interest gives the Municipal Fund an undivided interest in
certain such bonds. The Municipal Fund can exercise the right, on not more than
30 days' notice, to sell such an instrument back to the financial institution
from which it purchased the instrument and, if applicable, draw on the letter of
credit for all or any part of the principal amount of the Municipal Fund's
participation interest in the instrument, plus accrued interest, but will do so
only (i) as required to provide liquidity to the Municipal Fund, (ii) to
maintain a high quality investment portfolio, or (iii) upon a default under the
terms of the demand instrument. Financial institutions retain portions of the
interest paid on such variable rate industrial development bonds as their fees
for servicing such instruments and the issuance of related letters of credit and
repurchase commitments. No single financial institution will issue its letters
of credit with respect to variable rate obligations or participation interests
therein covering more than the allowable percentage of the total assets of the
Municipal Fund pursuant to Rule 2a-7 of the Act. The Municipal Fund will not
purchase participation interests in variable rate industrial development bonds
unless it receives an opinion of counsel or a ruling of the Internal Revenue
Service that interest earned by the Municipal Fund from the bonds in which it
holds participation interests is exempt from Federal income taxes. The Municipal
Fund's adviser will monitor the pricing, quality and liquidity of variable rate
demand obligations and participation interests therein held by the Municipal
Fund on the basis of published financial information, rating agency reports and
other research services to which the adviser may subscribe.
7
<PAGE>
Municipal Leases and Participations Therein. These are obligations in the
form of a lease or installment purchase which is issued by state and local
governments to acquire equipment and facilities. Income from such obligations is
exempt from local and state taxes in the state of issuance. "Participations" in
such leases are undivided interests in a portion of the total obligation.
Municipal leases frequently have special risks not normally associated with
general obligation or revenue bonds. The constitutions and statutes of all
states contain requirements that the state or a municipality must meet to incur
debt. These often include voter referenda, interest rate limits and public sale
requirements. Leases and installment purchase or conditional sale contracts
(which normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations are deemed
to be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis.
In addition to the "non-appropriation" risk, municipal leases have
additional risk aspects because they represent a relatively new type of
financing that has not yet developed in many cases the depth of marketability
and liquidity associated with conventional bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of non-appropriation or foreclosure might, in some cases,
prove difficult. In addition, in certain instances the tax-exempt status of the
obligations will not be subject to the legal opinion of a nationally recognized
"bond counsel," as is customarily required in larger issues of municipal
obligations. However, in all cases the Municipal Fund will require that a
municipal lease purchased by the Municipal Fund be covered by a legal opinion
(typically from the issuer's counsel) to the effect that, as of the effective
date of such lease, the lease is the valid and binding obligation of the
governmental issuer.
Municipal leases and participations will be purchased pursuant to analysis
and review procedures which the Municipal Fund's adviser believes will minimize
risks to shareholders. It is possible that more than 5% of the Municipal Fund's
net assets will be invested in municipal leases which have been determined by
the Municipal Fund's adviser to be liquid securities. When evaluating the
liquidity of a municipal lease, the investment adviser considers all relevant
factors including frequency of trading, availability of quotations, the number
of dealers and their willingness to make markets, the nature of trading activity
and the assurance that liquidity will be maintained. With respect to unrated
municipal leases, credit quality is also evaluated.
8
<PAGE>
General. Net income to shareholders is aided both by the Funds' ability to
make investments in large denominations and by its efficiencies of scale. Also,
the Money Funds may seek to improve its income by selling certain portfolio
securities prior to maturity in order to take advantage of yield disparities
that occur in money markets. The market value of the Funds' investments tends to
decrease during periods of rising interest rates and to increase during
intervals of falling rates.
Rule 2a-7 Under the Investment Company Act of 1940
The Money Funds will comply with Rule 2a-7 under the Act, as amended from
time to time, including the diversity, quality and maturity limitations imposed
by the Rule.
Currently, pursuant to Rule 2a-7, the Money Funds may invest only in
"eligible securities," as that term is defined in the Rule. Generally, an
eligible security is a security that (i) is denominated in U.S. Dollars and has
a remaining maturity of 397 days or less; (ii) is rated, or is issued by an
issuer with short-term debt outstanding that is rated, in one of the two highest
rating categories by two nationally recognized statistical rating organizations
("Rating Organizations") or, if only one has issued a rating, by that Rating
Organization; and (iii) has been determined by the Money Funds' adviser to
present minimal credit risks. A security that originally had a maturity of
greater than 397 days is an eligible security if its remaining maturity at the
time of purchase is 397 calendar days or less and the issuer has outstanding
short-term debt that would be an eligible security. Unrated securities may also
be eligible securities if the Money Funds' adviser determines that they are of
comparable quality to a rated eligible security pursuant to guidelines approved
by the Trustees. A description of the ratings of some Rating Organizations
appears in Appendix A attached hereto.
The Money Funds may not invest in the securities of any one issuer other
than the United States Government, its agencies or instrumentalities in
violation of Rule 2a-7. In addition, the Money Funds may not invest in a
security that has received, or is deemed comparable in quality to a security
that has received, the second highest rating by the requisite number of Rating
Organizations (a "second tier security") if immediately after the acquisition
thereof the Money Funds would have invested more than (A) the greater of one
percent of its total assets or one million dollars in securities issued by that
issuer which are second tier securities, or (B) five percent of its total assets
in second tier securities.
Securities with a settlement of more than seven days from the date of
purchase, as calculated pursuant to Rule 2a-7, are considered by the Securities
and Exchange Commission to be illiquid securities in an open-end investment
company. The Money Funds are restricted to invest no more than 10% of their net
assets in illiquid securities.
9
<PAGE>
Other General Information About the Municipal Fund
Yields on municipal securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
and municipal note market, the size of a particular offer, the maturity of the
obligation and the rating of the issue. Municipal securities with longer
maturities tend to produce higher yields and are generally subject to greater
price movements than obligations with shorter maturities. (An increase in
interest rates will generally reduce the market value of portfolio investments,
and a decline in interest rates will generally increase the value of portfolio
investments.) The achievement of the Municipal Fund's investment objectives is
dependent in part on the continuing ability of the issuers of municipal
securities in which the Municipal Fund invests to meet their obligations for the
payment of principal and interest when due. Municipal securities historically
have not been subject to registration with the Securities and Exchange
Commission, although there have been proposals which would require registration
in the future. The Municipal Fund may seek to improve income by selling certain
securities prior to maturity in order to take advantage of yield disparities
that occur in securities markets.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Code. In addition, the obligations
of such issuers may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is also
the possibility that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest on, its municipal
securities may be materially affected.
Other General Information About the High Income Fund
Lower Grade Securities. Lower grade securities are regarded as being
predominantly speculative as to the issuer's ability to make payments of
principal and interest. Investment in such securities involves substantial risk.
Lower grade securities are commonly referred to as "junk bonds." Issuers of
lower grade securities may be highly leveraged and may not have available to
them more traditional methods of financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are greater than is the case
with higher-rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, issuers of lower grade securities may
be more likely to experience financial stress, especially if such issuers are
highly leveraged. During periods of economic downturn, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be adversely affected by
specific issuer developments, the issuer's inability to meet specific projected
business forecasts or the unavailability of additional financing. Therefore,
there can be no assurance that in the future there will not exist a higher
default rate relative to the rates currently existing in the market for lower
grade securities. The risk of loss due to default by the issuer is significantly
greater for the holders of lower grade securities because such securities may be
unsecured and may be subordinate to other creditors of the issuer. Other than
with respect to distressed securities, discussed below, the lower grade
securities in which the High Income Fund may invest do not include instruments
which, at the time of investment, are in default or the issuers of which are in
bankruptcy. However, there can be no assurance that such events will not occur
after the High Income Fund purchases a particular security, in which case the
High Income Fund may experience losses and incur costs.
10
<PAGE>
Lower grade securities frequently have call or redemption features that
would permit an issuer to repurchase the security from the High Income Fund. If
a call were exercised by the issuer during a period of declining interest rates,
the High Income Fund is likely to have to replace such called security with a
lower yielding security, thus decreasing the net investment income to the High
Income Fund and dividends to shareholders.
Lower grade securities are considered to be more volatile than
higher-rated fixed-income securities, so that adverse economic events may have a
greater impact on the prices of lower grade securities than on higher-rated
fixed income securities. Factors adversely affecting the market value of such
securities are likely to affect adversely the High Income Fund's net asset
value. The difference between the yields paid by lower grade securities and
investment grade bonds (i.e., the "spread") varies over time depending on the
demand for lower grade securities. To the extent the spread increases, the value
of lower grade securities in the High Income Fund's portfolio could be adversely
affected.
Like higher-rated fixed-income securities, lower grade securities
generally are purchased and sold through dealers who make a market in such
securities for their own accounts. However, there are fewer dealers in the lower
grade securities market, which market may be less liquid than the market for
higher-rated fixed-income securities, even under normal economic conditions.
Also, there may be significant disparities in the prices quoted for lower grade
securities by various dealers. As a result, during periods of high demand in the
lower grade securities market, it may be difficult to acquire lower grade
securities appropriate for investment by the High Income Fund. Adverse economic
conditions and investor perceptions thereof (whether or not based on economic
reality) may impair liquidity in the lower grade securities market and may cause
the prices the High Income Fund receives for its lower grade securities to be
reduced. In addition, the High Income Fund may experience difficulty in
liquidating a portion of its portfolio when necessary to meet the High Income
Fund's liquidity needs or in response to a specific economic event such as
deterioration in the Credit- worthiness of the issuers. Under such conditions,
judgment may play a greater role in valuing certain of the High Income Fund's
portfolio instruments than in the case of instruments trading in a more liquid
market. In addition, the High Income Fund may incur additional expense to the
extent that it is required to seek recovery upon a default on a portfolio
holding or to participate in the restructuring of the obligation.
Distressed Securities As a component of the High Income Fund's investment
in "junk bonds," the High Income Fund may invest up to 20% of its total assets
in distressed securities. Investment in distressed securities is speculative and
involves significant risk. Distressed securities frequently do not produce
income while they are outstanding and may require the High Income Fund to bear
certain extraordinary expenses in order to protect and recover its investment.
Therefore, to the extent the High Income Fund pursues its secondary objective of
capital appreciation through investment in distressed securities, the High
Income Fund's ability to achieve current income for shareholders may be
diminished.
11
<PAGE>
Non-U.S. Securities The High Income Fund may invest up to 30% of its total
assets in securities of non-U.S. issuers or that are denominated in various
foreign currencies and multinational foreign currency units. Investing in
securities of non-U.S. issuers and securities denominated in foreign currencies
involves certain risks not involved in domestic investments, including, but not
limited to, fluctuations in foreign exchange rates, future foreign political and
economic developments, different legal and accounting systems and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. Securities prices in different countries are subject to different
economic, financial, political and social factors. In addition, with respect to
certain foreign countries, there is the possibility of expropriation of assets,
confiscatory taxation, difficulty in obtaining or enforcing a court judgment,
economic, political or social instability or diplomatic developments that could
affect investments in those countries. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rates of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Certain non-U.S. investments
also may be subject to foreign withholding taxes. These risks often are
heightened for investments in smaller, emerging capital markets.
As a result of these potential risks, the High Income Fund's adviser may
determine that, notwithstanding otherwise favorable investment criteria, it may
not be practicable or appropriate to invest in a particular country. The High
Income Fund may invest in countries in which foreign investors, including the
Adviser, have had no or limited prior experience.
See the Appendix for a further description of securities ratings.
Fundamental Investment Restrictions
The following fundamental investment restrictions are applicable to each
of the Funds and may not be changed with respect to a Fund without the approval
of a majority of the shareholders of that Fund. This means an affirmative vote
of the holders of (a) 67% or more of the shares of that Fund represented at a
meeting at which more than 50% of the outstanding shares of the Fund are
represented or (b) more than 50% of the outstanding shares of that Fund,
whichever is less. Except as set forth in the Prospectus and this Statement of
Additional Information, all other investment policies or practices are
considered by each Fund not to be fundamental and accordingly may be changed
without shareholder approval. If a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such restriction.
12
<PAGE>
Briefly, these fundamental restrictions provide that each Fund may not:
(1) Invest 25% or more of the value of its total assets in any one
industry, other than the United States Government, or any of its
agencies or instrumentalities, provided that, for purposes of this
policy, consumer finance companies, industrial finance companies and
gas, electric, water and telephone utility companies are each
considered to be separate industries;
(2) Issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) Make loans of money or property to any person, except through loans
of portfolio securities, the purchase of fixed income securities
consistent with the Funds' investment objective and policies or the
acquisition of securities subject to repurchase agreements. The High
Income Fund may lend its portfolio securities in an amount not to
exceed 33 1/3% of the value of its total assets;
(4) Underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities the
Funds may be deemed to be an underwriter;
(5) Purchase real estate or interests therein unless acquired as a
result of ownership from investing in securities or other
instruments (but this shall not prevent the Funds from investing in
securities or other interests backed by real estate or securities of
companies engaged in the real estate business);
(6) Purchase or sell commodities or commodities contracts except for
purposes, and only to the extent, permitted by applicable law
without the Funds becoming subject to registration with the
Commodity and Futures Trading Commission as a commodity pool;
(7) Make any short sale of securities except in conformity with
applicable laws, rules and regulations and unless, giving effect to
such sale, the market value of all securities sold short does not
exceed 25% of the value of the Money Fund's total assets and the
Money Fund's aggregate short sales of a particular class of
securities does not exceed 25% of then outstanding securities of
that class; and
(8) Borrow money, except that the Funds may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment)
and (ii) engage in reverse repurchase agreements for any purpose;
provided that (i) and (ii) in combination do not exceed 33 1/3% of
the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including
Saturdays, Sundays and holidays) to the extent necessary to comply
with the 33 1/3% limitation.
13
<PAGE>
MANAGEMENT
The Trustees and principal officers of the Funds, their ages and their
primary occupations during the past five years are set forth below. Unless
otherwise specified, the address of each such person is 277 Park Avenue, New
York, New York 10172. Those Trustees whose names are preceded by an asterisk are
"interested persons" of the Funds as defined by Section 2(a)(19) of the Act.
*G. Moffett Cochran, 49, Chairman of the Board of Trustees and President
of the Opportunity Funds, is President and Chairman of the adviser to the DLJ
Opportunity Funds, DLJ Asset Management Group ("DLJAM" or "Adviser") with which
he has been associated since prior to 1994. Prior to his association with the
Funds and the Adviser, Mr. Cochran was a Senior Vice President with Bessemer
Trust Companies.
Robert E. Fischer, 69, Trustee of the DLJ Opportunity Funds, has been a
Member at the law firm Wolf, Block, Schorr and Solis-Cohen LLP (or its
predecessor firm) since prior to 1994.
*Martin Jaffe, 53, Trustee, Vice President, Secretary and Treasurer of the
DLJ Opportunity Funds, is a Managing Director and Chief Operating Officer of the
Adviser with which he has been associated since prior to 1994.
Wilmot H. Kidd, III, 58, Trustee of the DLJ Opportunity Funds, has been
President of Central Securities Corporation since prior to 1994.
Michael A. Snyder, 37, Vice President of the Opportunity Funds, is a
Managing Director of the Adviser with which he has been associated since 1998.
Prior to becoming associated with the DLJ Funds and joining DLJAM, Mr. Snyder
spent two years as a Managing Director with Bear Stearns Asset Management where
he was responsible for the firm's high-yield bond management effort. Prior to
that position, Mr. Snyder spent ten years at Prudential Investments where he was
senior portfolio manager in the firm's High Yield Mutual Fund Group.
Brian A. Kammerer, 42, Vice President of the DLJ Opportunity Funds, is a
Senior Vice President of the Adviser with which he has been associated since
prior to 1994.
14
<PAGE>
The following table sets forth certain information regarding compensation of the
Funds' Trustees and officers. No executive officer or person affiliated with the
Funds will receive compensation from the Funds.
<TABLE>
<CAPTION>
Compensation Table
Total
Pension or Compensation
Retirement Estimated From Trust
Aggregate Benefits Accrued Annual and Fund
Compensation as Part of Trust Benefits Upon Complex Paid
Name and Position From Trust(1) Expenses Retirement to Trustees(2)
<S> <C> <C> <C> <C>
G. Moffett Cochran $0 None None $0 (12)
Trustee
Robert E. Fischer $14,000 None None $14,000(7)
Trustee
Martin Jaffe $0 None None $0 (7)
Trustee
Wilmot H. Kidd, III $14,000 None None $14,000(7)
Trustee
</TABLE>
The Trustees of the DLJ Opportunity Funds who are officers or employees of
the Adviser or any of its affiliates receive no remuneration from the DLJ
Opportunity Funds. Effective May 16, 2000, each of the Trustees who are not
affiliated with the Adviser will be paid a $1,500 fee for each Opportunity Fund
board meeting attended, a $500 fee for each special meeting attended and a $500
annual retainer. Messrs. Cochran and Jaffe are members of the Executive
Committee. Messrs. Fisher and Kidd are members of the Audit Committee and are
paid a $250 fee for each Audit Committee meeting attended.
Adviser
----------
(1) The DLJ Opportunity Funds anticipate paying each independent Trustee
approximately $7,500 in each calendar year.
(2) Represents the total compensation paid to such persons during the
calendar year ending December 31, 1999. The parenthetical number
represents the number of portfolios (including the Funds) for which
such person acts as a Trustee, that are considered part of the same
fund complex as the Funds.
15
<PAGE>
DLJAM, a Delaware corporation with principal offices at 277 Park Avenue,
New York, New York 10172, has been retained under an Investment Advisory
Agreement (separate agreements for each of the Funds) as the Funds' investment
adviser (see "Management" in the Prospectus). The Adviser (formerly known as
Wood, Struthers & Winthrop Management Corp.) was established in 1871 as a
private concern to manage money for the Winthrop family of Boston. From these
origins, the Adviser has grown to serve a select group of individual and
institutional investors.
The Adviser is a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ Securities" or the "Distributor"), the distributor
of the Funds' shares, which is a wholly-owned subsidiary of Donaldson, Lufkin &
Jenrette, Inc., which is in turn an independently operated, indirect subsidiary
of AXA Financial, Inc., a holding company controlled by AXA, a French insurance
holding company. The Adviser along with its affiliates are an integral part of
the DLJ Securities family, and as one of the oldest money management firms in
the country, they maintain a tradition of personalized service and performance.
The address of Donaldson, Lufkin & Jenrette, Inc. is 277 Park Avenue, New York,
New York 10172. The address of AXA Financial, Inc. is 787 Seventh Avenue, New
York, New York 10019.
As of February 1, 2000, AXA owns 60.5% of the outstanding shares of the
common stock of AXA Financial, Inc. AXA is the holding company for an
international group of insurance and related financial services companies. AXA's
insurance operations are comprised of activities in life insurance, property and
casualty insurance and reinsurance. The insurance operations are diverse
geographically with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also engaged in asset
management, investment banking and brokerage, real estate and other financial
services activities in the United States and Europe. Based on information
provided by AXA, on February 1, 2000, 20.25% of the issued ordinary shares
(representing 31.9% of the voting power) of AXA were directly or indirectly
owned by Finaxa, a French holding company ("Finaxa"). Such percentage of
interest includes the interest of Colisee Vendome, a wholly-owned subsidiary of
Finaxa, which owned 2.7% of the issued ordinary shares (representing 4.25% of
the voting power) of AXA and the interest of les Ateliers de construction du
Nord de la France- ANF ("ANF"), a 95.4% owned subsidiary of Finaxa, which owned
0.4% of the issued ordinary shares (representing 0.6% of the voting power) of
AXA. As of February 1, 2000, 60.7% of the issued ordinary shares (representing
70.7% of the voting power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") and 22.3% of the issued ordinary shares
(representing 13.3% of the voting power) of Finaxa were owned by Banque Paribas,
a French bank ("Paribas"). Including the ordinary shares owned by Finaxa and its
subsidiaries on February 1, 2000, the Mutuelles AXA directly and indirectly
owned 23.3% of the issued ordinary shares of AXA (representing 36.7% of the
voting power). Acting as a group, the Mutuelles AXA will continue to control AXA
and Finaxa.
16
<PAGE>
The Investment Advisory Agreement for the Money Funds is dated October 22,
1996. This agreement was approved by the Board of Trustees of the DLJ
Opportunity Funds on October 22, 1996 and by the shareholders of the Money Funds
on January 24, 1997 and became effective on the same date. The Investment
Advisory Agreement the Money Funds is reviewed annually by the Board of Trustees
and was most recently reapproved on July 15, 1999. The Investment Advisory
Agreement for the Money Funds continues in force for successive twelve month
periods provided that such continuation is specifically approved at least
annually by a majority vote of the Trustees who neither are interested persons
of the Money Funds nor have any direct or indirect financial interest in the
Investment Advisory Agreement for the Money Funds, cast in person at a meeting
called for the purpose of voting on such approval. Under the Investment Advisory
Agreement for the Money Funds, the Adviser is paid a management fee equal to .40
of 1% of the average daily net assets of the Money Funds which are reduced to
.35% of the average daily net assets in excess of $1 billion.
Pursuant to the terms of the Investment Advisory Agreement for the Money
Funds, the Adviser may retain, at its own expense, a subadviser to assist in the
performance of its services to the Money Funds.
For the fiscal years ending October 31, 1999, 1998 and 1997 the Municipal
Fund paid the Adviser fees of $212,914, $246,668 and $80,171, respectively, and
the Government Fund paid the Adviser fees of $234,429, $171,144 and $68,375,
respectively. During the fiscal years ending October 31, 1999, 1998 and 1997 the
Adviser reimbursed the Municipal Fund $75,849, $93,148 and $80,308,
respectively, and the Adviser reimbursed the Government Fund $110,585, $105,492
and $76,506, respectively.
The Investment Advisory Agreement for the High Income Fund is dated
January 21, 1999. This agreement was approved by the Board of Trustees of the
DLJ Opportunity Funds on January 21, 1999 and by the shareholders of the High
Income Fund on February 22, 1999 and became effective on the same date. The
Investment Advisory Agreement for the High Income Fund is reviewed annually by
the Board of Trustees and was most recently approved on July 15, 1999. The
Investment Advisory Agreement for the High Income Fund continues in force for
successive twelve month periods provided that such continuation is specifically
approved at least annually by a majority vote of the Trustees who neither are
interested persons of the High Income Fund nor have any direct or indirect
financial interest in the Investment Advisory Agreement for the High Income
Fund, cast in person at a meeting called for the purpose of voting on such
approval. Under the Investment Advisory Agreement for the High Income Fund, the
Adviser is paid a management fee equal to .70 of 1%of the average daily net
assets of the High Income Fund which are reduced to .625 of 1% of the average
daily net assets in excess of $500 million.
Pursuant to the terms of the Investment Advisory Agreement for the High
Income Fund, the Adviser may retain, at its own expense, a subadviser to assist
in the performance of its services to the High Income Funds.
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The Funds intend to enter into arrangements with certain broker-dealers
(including affiliates of the Distributor) whose customers are Fund shareholders
pursuant to which the broker-dealers may perform shareholder servicing
functions, such as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to certain inquiries regarding the
Fund's performance and the status of shareholder accounts. The Funds may pay for
the electronic communications equipment maintained at the broker-dealers'
offices that permits access to the Funds' computer files and, in addition, may
reimburse the broker-dealers at cost for personnel expenses involved in
providing the services.
For the period March 8, 1999 through October 31, 1999, the High Income
Fund paid the Adviser fees totaling $44,319. During the same period, the Adviser
reimbursed the High Income Fund $91,286.
EXPENSES OF THE FUNDS
General
In addition to the payments to the Adviser under the Investment Advisory
Agreements, each Fund pays the other expenses incurred in its organization and
operations, including the costs of printing prospectuses and other reports to
existing shareholders; all expenses and fees related to registration and filing
with the Securities and Exchange Commission and with state regulatory
authorities; custody, transfer and dividend disbursing expenses; legal and
auditing costs; clerical, accounting and other office costs; fees and expenses
of Trustees who are not affiliated with the Adviser; costs of maintenance of
existence; and interest charges, taxes, brokerage fees and commissions.
As to the obtaining of clerical and accounting services not required to be
provided to the Funds by the Adviser under the Investment Advisory Agreements,
the Funds may employ their own personnel. For such services, they also may
utilize personnel employed by the Adviser or their affiliates. In such event,
the costs associated with the management, supervision and assistance and office
facilities, in addition to administrative and nonadviser services provided by
the Adviser or their affiliates, may be reimbursed, however, the payments must
be specifically approved by the Funds' Trustees, including a majority of the
disinterested Trustees.
Distribution Agreement
Pursuant to Rule 12b-1 adopted by the Securities and Exchange Commission
under the Act, the Funds have adopted a Distribution Agreement (the
"Distribution Agreement") and a Rule 12b-1 Plan for each Money Fund and Class A,
Class B, Class C and Class R Rule 12b-1 Plans for the High Income Fund (the
"12b-1 Plans") to permit such Fund directly or indirectly to pay expenses
associated with the distribution of shares.
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Pursuant to the Distribution Agreement and the 12b-1 Plans, the Treasurer
of the Funds reports the amounts expended under the Distribution Agreement and
the purposes for which such expenditures were made to the Trustees of the Funds
on a quarterly basis. Also, the 12b-1 Plans provide that the selection and
nomination of disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office. The Distribution
Agreement and 12b-1 Plans may be continued annually if approved by a majority
vote of the Trustees, including a majority of the Trustees who neither are
interested persons of the Funds nor have any direct or indirect financial
interest in the Distribution Agreement, the 12b-1 Plans or in any other
agreements related to the 12b-1 Plans, cast in person at a meeting called for
the purpose of voting on such approval.
The Distribution Agreement for each Money Fund was initially approved by
each Money Fund's Trustees on October 22, 1996 and by the then shareholders on
January 24, 1997. The Distribution Agreement for the Class A and Class B shares
of the High Income Fund was initially approved by the High Income Fund's
Trustees on January 21, 1999 and by the then shareholders on February 22, 1999.
The Distribution Agreement for the Money Funds and Class A and Class B shares of
the High Income Fund was most recently reviewed and reapproved on July 15, 1999.
The Distribution Agreement for the Class C shares was initially approved by the
High Income Fund's Trustees on January 20, 2000 and by the then shareholders on
February 25, 2000. The Distribution Agreement for the Class R shares was
initially approved by the High Income Fund's Trustees on May 16, 2000 and by the
then shareholders on July , 2000. All material amendments to the 12b-1 Plans
must be approved by a vote of the Trustees, including a majority of the Trustees
who neither are interested persons of the Funds nor have any direct or indirect
financial interest in the 12b-1 Plans or any related agreement, cast in person
at a meeting called for the purpose of voting on such approval. Each Fund's
12b-1 Plan or Plans may be terminated without penalty at any time by a majority
vote of the disinterested Trustees, by a majority vote of the outstanding shares
of a Fund or by the Adviser. Any agreement related to the 12b-1 Plans may be
terminated at any time, without payment of any penalty, by a majority vote of
the independent Trustees or by majority vote of the outstanding shares of a Fund
on not more than 60 days notice to any other party to the agreement, and any
agreement, but not the 12b-1 Plans, will terminate automatically in the event of
assignment.
An initial concession or ongoing maintenance fee may be paid to
broker-dealers on sales of the Funds' shares. Pursuant to the Funds' 12b-1
Plans, if such fee is paid, the Distributor is then reimbursed for such payments
with amounts paid from the assets of such Fund. The payments to the
broker-dealer, although a Fund expense which is paid by all shareholders, will
only directly benefit investors who purchase their shares through a
broker-dealer rather than from the Funds. Broker-dealers who sell shares of the
Funds may provide services to their customers that are not available to
investors who purchase their shares directly from the Funds. Investors who
purchase their shares directly from a Fund will pay a pro rata share of such
Fund's expenses of encouraging broker-dealers to provide such services but not
receive any of the direct benefits of such services. The payments to the
broker-dealers will continue to be paid for as long as the related assets remain
in the Funds.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement for the Money Funds, the maximum amount payable by the Money Funds
under the 12b-1 Plans for distributing shares is .40 of 1% of the average daily
net assets during the fiscal year. Currently, each Money Fund pays a
distribution services fee each month to the Distributor, with respect to shares
of each Money Fund, at an annual rate of up to .25 of 1%of the aggregate average
daily net assets attributable to each Money Fund.
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Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, the High Income Fund pays a distribution services fee each month to
the Distributor, with respect to Class A and Class R shares of the High Income
Fund, at an annual rate of up to .25 of 1% of the aggregate average daily net
assets of both the Class A and Class R shares of the High Income Fund. With
respect to the Class B and Class C shares of the High Income Fund, the annual
rate may be up to 1% of the aggregate average daily net assets attributable to
both the Class B and Class C shares of the High Income Fund.
The table below shows distribution costs charged to each Money Fund and
each Class of the High Income Fund during the past fiscal year.
DISTRIBUTION COSTS
Municipal Fund $ 133,071
U.S. Government Fund $ 146,518
High Income Fund
Class A $ 13,858
Class B $ 5,164
Under the Agreements, the Adviser may make payments to the Distributor
from the Adviser's own resources, which may include the management fees paid by
the Funds. In addition to the concession and maintenance fee paid to dealers or
agents, the Distributor will from time to time pay additional compensation to
dealers or agents in connection with the sale of shares. Such additional amounts
may be utilized, in whole or in part, in some cases together with other revenues
of such dealers or agents, to provide additional compensation to registered
representatives of such dealers or agents who sell shares of the Funds. On some
occasions, such compensation will be conditioned on the sale of a specified
minimum dollar amount of the shares of the Funds during a specific period of
time. Such incentives may take the form of payment for meals, entertainment, or
attendance at educational seminars and associated expenses such as travel and
lodging. Such dealer or agent may elect to receive cash incentives of equivalent
amounts in lieu of such payments.
PURCHASES, REDEMPTIONS AND EXCHANGES
The following information supplements that set forth in the Funds'
Prospectus under the heading "Purchases, Redemptions and Shareholder Services."
Purchases
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Shares of the Funds are offered at the respective net asset value (less
any applicable sales charge for Class A shares of the High Income Fund) per
share next determined following receipt of a purchase order in proper form by
the Funds, the Funds' transfer agent, PFPC, Inc. (the "Transfer Agent"), by the
Distributor, or in the case of Class R shares, by an eligible institution. The
Funds calculate net asset value per share as of the close of the regular session
of the New York Stock Exchange, which is generally 4:00 p.m. New York City time
on each day that trading is conducted on the New York Stock Exchange (the
"NYSE") (see "Net Asset Value").
Orders for the purchase of shares of a Fund become effective at the next
transaction time (as stated in the Prospectus) after Federal funds or bank wire
monies become available to the Transfer Agent for a shareholder's investment.
Federal funds are a bank's deposits in a Federal Reserve Bank. These funds can
be transferred by Federal Reserve wire from the account of one member bank to
that of another member bank on the same day and are considered to be immediately
available funds. Investors should note that their banks may impose a charge for
this service. Money transmitted by a check drawn on a member of the Federal
Reserve System is converted to Federal funds in one business day following
receipt. Checks drawn on banks which are not members of the Federal Reserve
System may take longer. All payments (including checks from individual
investors) must be in United States dollars. All shares purchased are confirmed
to each shareholder and are credited to such shareholder's account at net asset
value. To avoid unnecessary expense to the Funds, share certificates
representing shares of the Fund purchased are not issued for full or fractional
shares.
In addition to Class A, Class B, and Class C shares, the Funds offer Class
R shares and the High Income Fund offers Class D shares. Class R shares are
available for purchase by eligible institutions (including Pershing division of
Donaldson, Lufkin & Jenrette Securities Corp., and certain of its affiliates) on
behalf of their clients (generally individuals who do not purchase shares
directly). Class R shares are sold primarily to financial service providers
acting on behalf of customers having an investment account(s) or relationship at
such institution, or to customers who have received and hold shares of the Fund
distributed to them by virtue of such an account or relationship. Institutions
effecting transactions in Class R shares for the accounts of clients may charge
such clients direct fees in connection with such transactions. Purchases of
Class R and Class D shares are offered without any initial sales charge or CDSC.
Class D shares are solely available to employees of Donaldson, Lufkin &
Jenrette, Inc. and its subsidiaries that are eligible to participate in the DLJ
401(k) Retirement Savings Plan. These employees should contact the DLJ 401(k)
Hotline at 1-877-401k-DLJ concerning how to purchase Class D shares of the High
Income Fund.
All shares purchased are confirmed to each shareholder and are credited to
such shareholder's account at net asset value and with respect to the Class A
shares, less any applicable initial sales charge.
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Shareholders maintaining Fund accounts through brokerage firms and other
institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are earlier
than the transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or her institution.
(For example, a brokerage firm may accept purchase orders from its customers up
to 2:15 p.m. for issuance at the 4:00 p.m. transaction time and price.) A
brokerage firm acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on it generally in
connection with transactions in securities for a customer, including the
obligation to act promptly and accurately.
Redemptions
Shares of the Funds may be redeemed at a redemption price equal to the net
asset value per share (less any applicable contingent deferred sales charge
("CDSC"), as next computed as of the closing of the regular trading session of
the NYSE following the receipt in proper form by the Fund of the shares tendered
for redemption.
Payment of the redemption price may be made either in cash or in portfolio
securities (selected in the discretion of the Trustees and taken at their value
used in determining the redemption price), or partly in cash and partly in
portfolio securities. However, payments will be made wholly in cash unless the
Trustees believe that an appropriate situation exists which would make such a
practice detrimental to the best interest of the Funds or its shareholders. If
payment for shares redeemed is made wholly or partly in portfolio securities,
brokerage costs may be incurred by the investor in converting the securities to
cash.
For Class A, Class B and Class C shares of the High Income Fund, to redeem
shares, the registered owner or owners should forward a letter to the Funds
containing a request for redemption of such shares at the next determined net
asset value per share. Alternatively, the shareholder may elect the right to
redeem shares by telephone as described in the Prospectus. The signature or
signatures in the redemption letter must be guaranteed in the manner described
below.
If the total value of the shares being redeemed exceeds $50,000 or a
redemption request directs proceeds to a party other than the registered account
owner(s), the signature or signatures on the letter or the endorsement must be
guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
A broker-dealer guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions must be
authorized to issue signature guarantees. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a signature
guarantee program. Additional documents may be required for redemption of
corporate, partnership or fiduciary accounts.
The requirement for a guaranteed signature is for the protection of the
shareholder in that it is intended to prevent an unauthorized person from
redeeming his shares and obtaining the redemption proceeds.
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Exchanges
Class A, Class B, andClass Cshares of the High Income Fund can be
exchanged for shares of the DLJ Municipal Money Fund and DLJ U.S. Government
Money Fund (the "Money Funds"), or shares of the same class of the DLJ
Developing Markets Fund and the DLJ International Equity Fund (the
"International Funds" and together with the Money Funds, the "DLJ Opportunity
Funds"), and shares of the same class of the DLJ Core EquityFund, the DLJ Fixed
Income Fund, the DLJ Small Company Value Fund, the DLJ Growth and Income Fund
and the DLJ Municipal Trust Fund (the "DLJ Focus Funds") and shares of the same
class of the DLJ Growth Fund and the DLJ Technology Fund (the "DLJ Select
Funds"). Shareholders may exchange shares by mail. Shareholders or the
shareholders' investment dealer of record may exchange shares by telephone.
Participants within DLJ's 401(k) Retirement Savings Plan for Employees
should contact the DLJ 401(k) Hotline at 1-877-401k-DLJ for information
regarding exchanging Class D shares of the High Income Fund.
Shares of each Money Fund can be exchanged for shares of the other Money
Fund. Shareholders whose initial investment was directly into a Money Fund may
exchange such shares into either class of the International Funds, High Income
Fund, Focus Funds or Select Funds. Shares of each Money Fund established
pursuant to DLJ's exchange privilege will be eligible for exchange into the
International Funds, High Income Fund, Focus Funds or Select Funds provided that
the exchange is directed into the same class of shares upon which the initial
investment was made. Shareholders may exchange shares by mail. Shareholders or
the shareholders' investment dealer of record may exchange shares by telephone.
The exchange privilege is available only in those jurisdictions where
shares of such Fund may be legally sold. In addition, the exchange privilege is
available only when payment for the shares to be redeemed has been made and the
shares exchanged are held by the Transfer Agent.
Only those shareholders who have had shares in the High Income Fund for at
least seven days may exchange all or part of those shares for shares of the
International Funds, the Money Funds, Focus Funds or Select Funds, and no
partial exchange may be made if, as a result, the shareholders' interest in the
High Income Fund would be reduced to less than $250. The minimum initial
exchange into another Fund is $ 1,000.
All exchanges into either of the Money Funds, the International Funds or
any of the Focus Funds are subject to the minimum investment requirements and
any other applicable terms set forth in the Prospectus for the relevant Money
Fund, International Fund, Focus Fund or Select Fund whose shares are being
acquired. If for these or other reasons the exchange cannot be effected, the
shareholder will be so notified.
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The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short term swings in the stock
market by engaging in frequent transactions in and out of the Funds.
Shareholders who engage in such frequent transactions may be prohibited from or
restricted in placing future exchange orders.
All exchanges of shares are subject to the other requirements of the Fund
into which exchanges are made. Annual fund operating expenses and distribution
fees for such Fund may be higher and a sales charge differential may apply. See
"Summary of Expenses" and "Additional Shareholder Services - Exchange Privilege"
in the Prospectus for a description of these expense differences.
RETIREMENT PLANS
The Funds may be a suitable investment vehicle for part or all of the
assets held in various tax sheltered retirement plans, such as those listed
below. Semper Trust Company serves as custodian under these prototype retirement
plans and charges an annual account maintenance fee of $15 per participant,
regardless of the number of Funds selected. Persons desiring information
concerning these plans should write or telephone the Funds' Transfer Agent.
While the Funds reserve the right to suspend sales of its shares in response to
conditions in the securities markets or for other reasons, it is anticipated
that any such suspension of sales would not apply to the types of plans listed
below.
Individual Retirement Accounts ("IRA")
The Adviser has available a prototype form of a Traditional IRA. Under the
Code, individuals may currently make IRA contributions of up to $2,000 annually.
Married individuals filing jointly may contribute up to $2,000 for each spouse
if the combined compensation of both spouses is at least equal to the
contributed amount. Contributions to an IRA may be wholly or partly
tax-deductible, depending upon the contributor's income level and participation
in an employer-sponsored retirement plan. The income earned on shares held in an
IRA is not subject to Federal income tax until withdrawn in accordance with the
Code. Investors may be subject to penalties or additional taxes on contributions
to or withdrawals from IRAs under certain circumstances. As with tax-deductible
contributions, taxes on the income earned from nondeductible IRA contributions
will be deferred until distributed from the IRA.
The Adviser has available a prototype form of the Roth IRA. Unlike
Traditional IRA's, contributions to a Roth IRA are not currently deductible.
However, the amounts within the Roth IRA accounts will accumulate tax-free, and
qualified distributions from the Funds will not be included in a shareholder's
taxable income. An individual may contribute a maximum of $2,000 annually to a
Roth IRA ($4,000 for joint returns). However, such limit is calculated in the
aggregate with contributions to traditional IRA's. In addition, Roth IRA's are
not available to individuals above certain income levels.
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The Adviser also has available a prototype form of the Education IRA. Like
the Roth IRA, contributions are not currently deductible. However, the
investment earnings accumulate tax-free, and qualifying distributions used for
higher education expenses are not taxable. An individual may contribute a
maximum of $500 per account annually. In addition, Educational IRA's are not
available to individuals above certain income levels.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA is available for investment and may be established on a group
basis by an employer who wishes to sponsor a tax-sheltered retirement program by
making IRA contributions on behalf of all eligible employees.
Savings Incentive Match Plan for Employees ("SIMPLE") - SIMPLE IRA and SIMPLE
401(k)
SIMPLE plans offer employers with 100 or fewer eligible employees who
earned at least $5,000 from the employer in the preceding calendar year the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans. Please
telephone DLJ's shareholder servicing representatives at (800) 225-8011 for more
information.
Employer-Sponsored Retirement Plans
The Adviser has a prototype retirement plan available which provides for
investment of plan assets in shares of any one or more Funds. The prototype
retirement plan may be used by sole proprietors and partnerships as well as
corporations to establish a tax qualified profit sharing plan or money purchase
pension plan (or both) of their own.
Under the prototype retirement plan, an employer may make annual
tax-deductible contributions for allocation to the accounts of the plan
participants to the maximum extent permitted by the federal tax law for the type
of plan implemented. The Adviser has received favorable opinion letters from the
IRS that the prototype retirement plan is acceptable by qualified employers.
Self-Directed Retirement Plans
Shares of the Funds may be suitable for self-directed IRA accounts and
prototype retirement plans such as those developed by Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of the Adviser and the Funds'
Distributor.
NET ASSET VALUE
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Shares of the Funds will be priced at the net asset value per share as
computed each Fund Business Day in accordance with the Agreement and Declaration
of Trust and By-Laws. For this purpose, a Fund Business Day is any day on which
the NYSE is open for business, typically, Monday through Friday exclusive of New
Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value of the shares of each Money Fund is determined as of
the close of the regular session on the NYSE, which is generally at 4:00 p.m.,
New York City time, on each day that trading is conducted on the NYSE. The net
asset value per share is calculated by taking the sum of the value of each
Fund's investments and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. All expenses, including the
fees payable to the Adviser, are accrued daily.
For purposes of this computation, the securities in each Money Fund's
portfolio are valued at their amortized cost, which does not take into account
unrealized securities gains or losses as measured by market valuations. The
amortized cost method involves valuing an instrument at its cost and thereafter
applying a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. During periods of declining interest rates, the daily yield on
shares of the Money Fund may be higher than that of a fund with identical
investments utilizing a method of valuation based upon market prices for its
portfolio instruments; the converse would apply in a period of rising interest
rates.
The valuation at amortized cost is in accordance with the provisions of
Rule 2a-7 under the Act. Pursuant to such rule, the Money Funds maintain a
dollar-weighted average portfolio maturity of 90 days or less and invests only
in securities of high quality (as defined by the Rule). The Money Funds also
purchase instruments which, at the time of investment, have remaining maturities
of no more than one year which maturities may extend to 397 days. The Money
Funds maintain procedures designed to stabilize, to the extent reasonably
possible, the price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Money Funds'
portfolio holdings by the Adviser at such intervals as the Adviser deems
appropriate to determine whether and to what extent the net asset value of the
Money Funds calculated by using available market quotations or market
equivalents deviates from net asset value based on amortized cost. If such
deviation exceeds 1/2 of 1%, the Adviser will promptly consider what action, if
any, should be initiated. In the event the Adviser determines that such a
deviation may result in material dilution or other unfair results to new
investors or existing shareholders, they will consider corrective action which
might include (1) selling instruments prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, (2) withholding dividends of
net income on shares, or (3) establishing a net asset value per share using
available market quotations or equivalents. There can be no assurance, however,
that the Money Funds' net asset value per share will remain constant at $1.00.
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The net asset value of the shares of the High Income Fund is determined as
of the close of the regular session on the NYSE, which is generally at 4:00
p.m., New York City time, on each day that trading is conducted on the NYSE. The
net asset value per share is calculated separately for each class by taking the
sum of the value of the Fund's investments and any cash or other assets,
subtracting liabilities, and dividing by the total number of shares outstanding
per class. All expenses, including the fees payable to the Adviser, are accrued
daily. For purposes of this computation, the securities in the Fund's portfolio
are, except as described below, valued at their current market value determined
on the basis of market quotations or, if such quotations are not readily
available, such other method as the Trustees believe would accurately reflect
their fair value.
Substantially all of the High Income Fund's investments (excluding
short-term investments) are valued by one or more independent pricing services
(the "Service") pursuant to procedures approved by the Trustees. Securities
valued by the Service for which quoted bid prices in the judgment of the Service
are readily available and are representative of the bid side of the market are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and the indications as to values from
dealers; and general market conditions. Debt securities which mature in less
than 60 days are valued at amortized cost (unless the Trustees determine that
this method does not represent fair value) if their original maturity was 60
days or less, or by amortizing the value as of the 61st day prior to maturity,
if their original term to maturity exceeded 60 days. Other investments that are
readily marketable portfolio securities listed on an exchange are valued at the
last sale price at the close of the exchange on the business day as of which
such value is being determined. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Trustees shall determine in good faith to reflect
its fair value. Readily marketable securities including certain options, not
listed on an exchange but admitted to trading on the National Association of
Securities Dealers Automated Quotations, Inc. ("NASDAQ") National List (the
"List") are valued in like manner. Portfolio securities traded on more than one
exchange are valued at the last sale price on the business day as of which such
value is being determined at the close of the exchange representing the
principal market for such securities. Readily marketable securities, including
certain options traded only in the over-the-counter market and listed securities
whose primary market is believed by the Adviser to be over-the-counter
(excluding those admitted to trading on the List) are valued at the mean of the
current bid and asked prices as reported by such sources as the Trustees deem
appropriate to reflect their fair market value.
Options, futures contracts and options thereon which are traded on
exchanges are valued at their last sale or settlement price as of the close of
the exchanges or, if no sales are reported, at the average of the quoted bid and
asked prices as of the close of the exchange. Portfolio securities underlying
listed call options will be valued at their market price and reflected in net
assets accordingly. Premiums received on call options written by the Fund will
be included in the liability section of the financial statements as a deferred
credit and subsequently adjusted (marked-to-market) to the current market value
of the option written.
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Any assets or liabilities initially expressed in terms of foreign currency
will be translated into U.S. dollars at the prevailing rates of exchange or, if
no such rate is quoted on such date, at the exchange rate utilized on the
previous business day or at such other quoted market exchange rate as may be
determined to be appropriate by the Adviser. Expenses and fees, including the
management fee, are accrued daily and taken into account for the purpose of
determining net asset value.
Securities that are not valued by the Service are valued at fair value as
determined in good faith by the Trustees utilizing such factors as the Trustees
deem appropriate. The Trustees will review the method of such valuation on a
regular basis.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends. The net investment income of the Money Funds and the High
Income Fund is declared daily as a dividend to holders of record, after giving
effect to redemptions received during the day, following the determination of
net asset value as of the close of business of regular sessions of the NYSE. Net
investment income consists of all accrued interest and dividend income on the
Funds' portfolio assets less the Funds' actual and accrued expenses applicable
to that dividend period. Realized gains and losses are reflected in net asset
value and are not included in net investment income.
Because the net investment income of each Money Fund is declared as a
dividend each time the net investment income of the Fund is determined and is
expressed by an increase in the number of shares held at a $1.00 price, the net
asset value per share of each Money Fund (i.e., the value of the net assets of
the Fund divided by the number of shares of the Money Fund outstanding) is
expected to remain at $1.00 per share immediately after each such determination
and dividend declaration, unless (i) there are unusual or extended fluctuations
in short-term interest rates or other factors, such as unfavorable changes in
the creditworthiness of issuers affecting the value of securities in the Money
Fund's portfolio, or (ii) net income is a negative amount. Normally, each Money
Fund will have a positive net investment income at the time of each
determination thereof. Net investment income may be negative if an unexpected
liability must be accrued or a loss realized. If the net investment income of a
Money Fund determined at any time is a negative amount, the net asset value per
share will be reduced below $1.00 unless one or more of the following steps are
taken: the Adviser has the authority (i) to reduce the number of shares in each
shareholder's account, (ii) to offset each shareholder's pro rata portion of
negative net investment income from the shareholder's accrued dividend account
or from future dividends, or (iii) to combine these methods in order to seek to
maintain the net asset value per share at $1.00. Each Money Fund may endeavor to
restore the net asset value per share to $1.00 by not declaring dividends from
net investment income on subsequent days until restoration, with the result that
the net asset value per share will increase to the extent of positive net
investment income which is not declared as a dividend.
28
<PAGE>
Should the Money Funds incur or anticipate any unusual or unexpected
significant expense or loss which would affect disproportionately the Money
Funds' income for a particular period, the Adviser would at that time consider
whether to adhere to the dividend policy described above or to revise it in
light of the then prevailing circumstances in order to ameliorate to the extent
possible the disproportionate effect of such expense, loss or depreciation on
then existing shareholders. Such expenses or losses may nevertheless result in a
shareholder's receiving no dividends for the period during which the shares are
held and in receiving upon redemption a price per share lower than that which
was paid.
The Money Funds do not anticipate realizing any long-term capital gains.
The Money Funds expect to follow the practice of distributing any net realized
capital gains to shareholders at least annually. However, if any realized
capital gains are retained by the Money Funds for reinvestment and Federal
income taxes are paid thereon by the Money Funds, the Money Funds will elect to
treat such capital gains as having been distributed to shareholders; as a
result, shareholders would be able to claim their share of the taxes paid by the
Funds on such gains as a credit against their individual Federal income tax
liability.
Upon a redemption or other disposition of shares of a Fund, including an
exchange of shares in one Fund for shares in another Fund, a shareholder will
generally recognize gain or loss in an amount equal to the difference between
the amount realized and the shareholder's tax basis in such shares. Generally,
such gain or loss will be capital gain or loss if the shares are held as capital
assets and will be long-term capital gain or loss if the shareholder's holding
period for such shares exceeds one year. Capital gains (short-term and
long-term), if any, realized by the Funds during their fiscal year will be
distributed to the respective shareholders shortly after the end of such fiscal
year.
Each income dividend and capital gains distribution, if any, declared by
the Funds on the outstanding shares of any Fund will, at the election of each
shareholder, be paid in cash or reinvested in additional full and fractional
shares of that Fund at the net asset value as of the close of business on the
payment date. Such distributions, to the extent they would otherwise be taxable,
will be taxable to shareholders regardless of whether paid in cash or reinvested
in additional shares. An election to receive dividends and distributions in cash
or shares is made at the time of the initial investment and may be changed by
notice received by the Fund from a shareholder at least 30 days prior to the
record date for a particular dividend or distribution on shares of the Fund.
There is no charge in connection with the reinvestment of dividends and capital
gains distributions.
There is no fixed dividend rate and there can be no assurance that a Fund
will pay any dividends or realize any gains. The amount of any dividend or
distribution paid by each Fund depends upon the realization by the Fund of
income and capital gains from that Fund's investments. All dividends and
distributions will be made to shareholders of each Fund solely from assets of
that Fund.
Taxation of Distributions. For Federal income tax purposes and except as
provided below, all distributions by the Funds out of net investment income and
net realized short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, when designated as capital
gain dividends, are treated as long-term capital gains irrespective of the
length of time the shareholder held shares in the Funds. Since the Funds derive
nearly all of their gross income in the form of interest income, and not
dividends from domestic corporations, it is expected that for corporate
shareholders, none of the Funds' distributions will be eligible for the
dividends-received deduction under current law.
29
<PAGE>
Since each Fund intends to qualify as a regulated investment company
("RIC"), as discussed below, any distributions from tax-exempt interest and
designated as such by the Fund generally will be treated as tax-exempt interest
by the shareholders, provided that at least 50% of the value of the Fund's
assets at the end of each quarter of the taxable year is invested in state,
municipal and other obligations the interest on which is exempt from tax under
Section 103(a) of the Internal Revenue Code of 1986 (the "Code"). The Municipal
Fund intends to satisfy this 50% requirement in order to permit distributions of
tax-exempt interest to be treated as such for Federal income tax purposes in the
hands of their shareholders. Distributions to shareholders of tax-exempt
interest earned by the Municipal Fund for the taxable year are therefore not
subject to regular Federal income tax, although they may be subject to the
alternative minimum taxes imposed on corporations and individuals. Discount from
certain stripped tax-exempt obligations or their coupons, however, may be
taxable.
Since the Funds are not treated as a single entity for Federal income tax
purposes, the performance of any one Fund will have no effect on the income tax
liability of shareholders of another Fund.
Shareholders will be advised annually as to the federal (and state, for
the Municipal Fund) tax status of dividends and capital gains distributions, if
any, made by each Money Fund for the preceding year.
Tax Qualification of the Funds. Each Fund intends to qualify as a RIC
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"), as
amended, so that it will not be liable for federal income taxes to the extent
that its net taxable income and net capital gains are distributed to
shareholders. Accordingly, each Fund must, among other things, (a) derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including but not limited to gains from futures and forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the Fund's assets is represented by cash,
cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect of any one issuer, to
an amount not greater than 5% of the value of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other RICs, or of two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses or related trades or businesses).
In addition, each Fund will be subject to a nondeductible 4% excise tax on
the excess, if any, of certain required distribution amounts over the amounts
actually distributed by that Fund. To the extent possible, each Fund intends to
make such distributions as may be necessary to avoid this excise tax.
In addition, gain on the disposition by a Money Fund of a tax-exempt
obligation or any other market discount bond that is acquired for a price less
than its principal amount generally will be treated as ordinary income (instead
of capital gain) to the extent of accrued market discount. Generally, a market
discount bond is a bond acquired in the secondary market at a price below its
stated redemption price at maturity.
30
<PAGE>
The High Income Fund may invest in debt-securities of non-U.S. issuers.
Any income received by the Funds from such investments may be subject to income,
withholding or other taxes imposed by foreign countries. Such taxes will not be
deductible or creditable by shareholders of the Funds (but may be deductible by
the Funds), and may be withheld at a higher rate than that which would be
applicable if the underlying securities had been held directly by a shareholder.
Tax conventions between certain countries and the United States may reduce or
eliminate those taxes.
Tax Withholding. Each Fund is required to withhold and remit to the U.S.
Treasury 31% of the dividends or the proceeds of any redemptions or exchanges of
shares with respect to any shareholder who fails to furnish the Funds with a
correct taxpayer identification number, who under-reports dividend or interest
income, or who fails to certify to the Funds that he or she is not subject to
such withholding. An individual's tax identification number is his or her social
security number.
Tax Legislation. Tax legislation in recent years has included several
provisions that may affect the supply of, and the demand for, tax-exempt bonds,
as well as the tax-exempt nature of interest paid thereon. It is not possible to
predict with certainty the effect of these recent tax law changes upon the
tax-exempt bond market, including the availability of obligations appropriate
for investment, nor is it possible to predict any additional restrictions that
may be enacted in the future. The Municipal Fund will monitor developments in
this area and consider whether changes in its objectives or policies are
desirable.
General. The foregoing is only a brief summary of some of the material
U.S. federal income tax considerations generally relating to an investment in
the Funds. It is based upon the Code, applicable Treasury regulations and
administrative rulings and pronouncements of the Internal Revenue Service, all
as in effect on the date hereof and which are subject to change, possibly with
retroactive effect. This summary is directed to investors who are U.S. persons
(as determined for U.S. federal income tax purposes) and does not purport to
discuss all of the income tax consequences applicable to the Funds or to all
categories of investors, some of whom may be subject to special rules (including
dealers in securities, insurance companies, non-U.S. persons and tax-exempt
entities). Investors are urged to consult their tax advisers regarding the
specific U.S. federal income tax consequences of an investment in the Funds, as
well as the effects of state, local and foreign tax laws and any proposed tax
law changes.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the Funds,
the Adviser is responsible for the investment decisions and the placing of
orders for portfolio transactions for the Funds. Portfolio transactions for the
Funds are normally effected by brokers.
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<PAGE>
The Funds have no obligation to enter into transactions in portfolio
securities with any broker, dealer, issuer, underwriter or other entity. In
general, the securities the Funds will purchase are in over-the-counter markets
in which purchases and sales are affected directly with a dealer acting as
principal. The dealers impose a mark-up on their cost which is usually not
disclosed to the Funds. Therefore, the Funds will generally make purchases based
exclusively on best price, although execution may be a factor in certain
circumstances. In placing orders, it is the policy of the Funds to obtain the
best price and execution for its transactions.
Neither the Funds nor the Adviser on behalf of the Funds have entered into
agreements or understandings with any broker or dealer regarding the placement
of securities transactions. Because of research or information to the Adviser
for use in rendering investment advice to the Funds, such information may be
supplied at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the Funds. While it
is impossible to place an actual dollar value on such investment information,
its receipt by the Adviser probably does not reduce the overall expenses of the
Adviser to any material extent.
The investment information provided to the Adviser is of the types
described in Section 28(e)(3) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research and statistical services furnished by brokers through
which the Funds effect securities transactions are used by the Adviser in
carrying out their investment management responsibilities with respect to all
their client accounts but not all such services may be utilized by the Adviser
in connection with the Funds.
The Funds may deal in some instances in equity securities which are not
listed on an exchange but are traded in the over-the-counter market. Where
transactions are executed in the over-the-counter market, the Funds seek to deal
with the primary market-makers, but when necessary in order to obtain the best
price and execution, it utilizes the services of others. In all cases, the Funds
will attempt to negotiate best execution.
The Funds may from time to time place orders for the purchase or sale of
securities (including listed call options) with DLJ Securities, the Funds'
Distributor or other affiliates in accordance with the provisions of Section
11(a) of the Securities Exchange Act of 1934 referred to below. With respect to
orders placed with DLJ Securities for execution on a national securities
exchange, commissions received must conform to Section 17(e)(2)(A) of the 1940
Act and Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the International Funds), or any affiliated person
of such person, to receive a brokerage commission from such registered
investment company provided that such commission is reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, DLJ
Securities and its affiliates are restricted as to the nature and extent of the
brokerage services they may perform for the Funds. The SEC has adopted rules
under Section 11(a) which permit an investment adviser to a registered
investment company, or the adviser's affiliates, to receive compensation for
effecting, on a national securities exchange, transactions in portfolio
securities of such investment company, including causing such transactions to be
transmitted, executed, cleared and settled and arranging for unaffiliated
brokers to execute such transactions.
32
<PAGE>
To the extent permitted by such rule, DLJ Securities and its affiliates
may receive compensation relating to transactions in portfolio securities of the
Funds provided that each Fund enters into a written agreement, as required by
such rules, with that firm authorizing it to retain compensation for such
services. The Trustees of the Funds have granted authorization conforming to the
requirements of Section 11(a) to the Adviser to effect transactions in portfolio
securities of the Funds through their affiliates, DLJ Securities.
The tables below show certain information regarding the payment of
commissions by the DLJ High Income Fund for the fiscal year ending October 31,
1999.
Fiscal Years ended
October 31, 1999
------------------
Total brokerage commissions incurred by the
DLJ High Income Fund ............................................ $6,563
Total dollar amount paid to DLJ ................................. $6,563
Percentage of total brokerage commissions paid to DLJ ........... 100%
Percentage of aggregate dollar amount of transactions
involving the payment of commissions to DLJ ..................... 4.7%
INVESTMENT PERFORMANCE INFORMATION
The Funds may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. From time to time
evaluations of performance are made by independent sources that may be used in
advertisements concerning each Fund. These sources include Lipper Inc.,
Weisenberger Investment Company Service, Barron's, Business Week, Kiplinger's
Personal Finance, Financial World, Forbes, Fortune, Money, Personal Investor,
Sylvia Porter's Personal Finance, Bank Rate Monitor, Morningstar and The Wall
Street Journal.
These performance figures may be calculated in the following manner:
Yield
Quotations of yield for the High Income Fund will be based on the
investment income per share earned during a particular 30 day period, less
expenses accrued during the period ("net investment income") and will be
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD=2[(A-B+1)^6-]
CD
33
<PAGE>
The "yield" calculated for the Money Funds is the net annualized yield
based on a specified 7 calendar days calculated at simple interest rates. Yield
is calculated by determining the net change exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The yield is annualized by multiplying the base period return by 365/7. The
yield figure is stated to the nearest hundredth of one percent. The yield
quotation based on the 7 days ended October 31, 1999 was 2.59% and 4.55% for the
Municipal Fund and Government Fund, respectively.
Effective Yield
Effective yield also calculated for the Money Funds is the net annualized
yield for a specified 7 calendar days assuming a reinvestment of the income or
compounding. Effective yield is calculated by the same method as yield except
the effective yield figure is compounded by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
Effective yield = [(Base Period Return + 1)^(365/7)] - 1.
The effective yield quotation based on the 7 days ended October 31, 1999
was 2.62% and 4.65% for the Municipal Fund and Government Fund, respectively.
Tax-Equivalent Yield
Tax-equivalent yield is the net annualized taxable yield needed to produce
a specified tax-exempt yield at a given tax rate based on a specified 30-day
period assuming a reinvestment of all dividends paid during such period.
Tax-equivalent yield is calculated by dividing that portion of the Municipal
Fund's yield (as computed in the yield description above) which is tax-exempt by
one minus a stated income tax rate and adding the product to that portion, if
any, of the yield of the Municipal Fund that is not tax-exempt.
34
<PAGE>
The following chart will illustrate the effects of tax-exempt income
versus taxable income.
Tax-Exempt Income vs. Taxable Income
Federal income tax rates in effect for the 1999 calendar year.
1999 Taxable Federal To Equal Hypothetical Tax-Free
Income Brackets Tax Rates Yields of 5%, 7% and 9%, a
Individual Taxable Investment Would Have To
Return Earn(3)
5% 7% 9%
0-25,750 15.0% 5.88 8.24 10.59
25,750-62,450 28.0% 6.94 9.72 12.50
62,450-130,250 31.0% 7.25 10.14 13.04
130,250-283,150 36.0% 7.81 10.95 14.06
Over 283,150 39.6% 8.28 11.59 14.90
Joint Return
0-43,050 15.0% 5.88 8.24 10.59
43,050-104,050 28.0% 6.94 9.72 12.50
104,050-158,550 31.0% 7.25 10.14 13.04
158,550-283,150 36.0% 7.81 10.95 14.06
Over 283,150 39.6% 8.28 11.59 14.90
Based on 1999 Federal tax rates, a married couple filing a joint return
with two exemptions and taxable income of $50,000 would have to earn a
tax-equivalent yield of 6.94% in order to match a tax-free yield of 5%.
There is no guarantee that a fund will achieve a specific yield. While
most of the income distributed to the shareholders of the Municipal Fund will be
exempt from Federal income taxes, distributions may be subject to state and
local taxes. Income from the Government Money Fund is exempt from most state
taxes.
----------
(3) These illustrations assume the Federal alternative minimum tax is not
applicable, that an individual is not a "head of household" and claims one
exemption and that taxpayers filing a joint return claim two exemptions.
Note also that these Federal income tax brackets and rates do not take
into account the effects of (i) a reduction in the deductibility of
itemized deductions for taxpayers whose Federal adjusted gross income
exceeds $126,600 ($63,300 in the case of a married individual filing a
separate return), or of (ii) the gradual phaseout of the personal
exemption amount for taxpayers whose federal adjusted gross income exceeds
$126,600 (for single individuals). The effective Federal tax rates and
equivalent yields for such taxpayers would be higher than those shown
above.
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<PAGE>
Quotations of total return will reflect only the performance of an
investment in any Money Fund during the particular time period shown. Each Money
Fund's total return and current yield may vary from time to time depending on
market conditions, the compositions of its portfolio and operating expenses.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing each Money Fund's current yield to yields
published for other investment companies and other investment vehicles. Total
return and yield should also be considered relative to change in the value of
each Money Fund's shares and the risks associated with each Money Fund's
investment objectives, policies and risk considerations.
In connection with communicating its yield, effective yield or
tax-equivalent yield to current or prospective shareholders, each Money Fund may
also compare these figures to the performance of other mutual funds tracked by
mutual fund rating services or to other unmanaged indices which may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
36
<PAGE>
SHARES OF BENEFICIAL INTEREST
Set forth below is certain information as to persons who owned 5% or more
of a Fund's outstanding shares as of February 2, 2000.
<TABLE>
Nature of
Municipal Money Fund Name and Address % of Class Ownership
<S> <C> <C> <C>
John S. Chalsty Beneficial
C/O Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, NY 10172-0003
U.S. Government Money Fund
James Ferrell Revocable Trust II Beneficial
C/o Ferrell Capital
750 B Street
San Diego, CA 92101-8114
Meridian Solutions LLC #2 Record(a)
PO Box 251122
West Bloomfield, MI 48325-1122
Protective Insurance Company Record(a)
1099 N. Meridian St., Ste 700
Indianapolis, IN 46204-1036
High Income Fund
Class A Donaldson, Lufkin & Jenrette Record(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Donaldson, Lufkin & Jenrette Record(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Bankers Trust Company Beneficial
FBO 2449224242
PO Box 9005
Church Street Station
New York, NY 10008
</TABLE>
37
<PAGE>
<TABLE>
Nature of
High Income Fund Name and Address % of Class Ownership
<S> <C> <C> <C>
Class B Donaldson, Lufkin & Jenrette Record(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
</TABLE>
(a) Such Recordholder disclaims beneficial ownership.
As of the date of this Statement of Additional Information, the Trustees
and Officers of the Funds as a group owned less than 1% of the outstanding
shares of either Fund.
The Adviser manages accounts over which it has discretionary power to vote
or dispose of securities held in such accounts and which accounts hold in the
aggregate, as of July, 2000, shares ( %) of the Municipal Money Fund, shares
( %) of the U.S. Government Money Fund and shares ( %) of the High Income Fund.
GENERAL INFORMATION
Organization and Capitalization
The Agreement and Declaration of Trust provides that no Trustee, officer,
employee or agent of the DLJ Opportunity Funds is liable to the Funds or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
person in connection with the affairs of the Funds, except as such liability may
arise from his or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his or her duties. It also provides that all third parties
shall look solely to the property of the appropriate DLJ Opportunity Fund for
satisfaction of claims arising in connection with the affairs of a DLJ
Opportunity Fund. With the exceptions stated, the Agreement and Declaration of
Trust permits the Trustees to provide for the indemnification of Trustees,
officers, employees or agents of the DLJ Opportunity Funds against all liability
in connection with the affairs of the DLJ Opportunity Funds.
All shares of the DLJ Opportunity Funds when duly issued will be fully
paid and non-assessable. The Trustees are authorized to re-classify and issue
any unissued shares to any number of additional series without shareholder
approval. Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional DLJ Opportunity Funds with different
investment objectives, policies, risk considerations or restrictions, may create
additional series or classes of shares. Any issuance of shares of such
additional series would be governed by the Act and the laws of the State of
Delaware.
38
<PAGE>
Counsel and Independent Auditors
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, serves as
legal counsel for the DLJ Opportunity Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed as independent auditors for the DLJ Opportunity Funds.
Additional Information
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the Funds with the
Securities and Exchange Commission under the Securities Act of 1933. Copies of
the Registration Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of the Commission
in Washington, D.C.
Custodian and Transfer Agent
Citibank, N.A., 111 Wall Street, New York, New York 10043 serves as
custodian to the DLJ Opportunity Funds.
PFPC Inc., 211 South Gulph Road, King of Prussia, PA 19406 serves as
transfer and accounting agent for the DLJ Opportunity Funds.
Financial Statements
The audited financial statements of each Fund for the fiscal year ended
October 31, 1999 and the reports of the Funds' independent auditors in
connection therewith are included in the October 31, 1999 Annual Reports to
Shareholders for the Money Funds and the High Income Fund. The Annual Reports
are incorporated by reference into this Statement of Additional Information. You
can obtain a copy of the Funds' Annual Reports by writing or calling the Funds
at the address or telephone numbers set forth on the cover of this Statement of
Additional Information.
The unaudited financial statements for the six months ended April 30, 2000
included in the Semi-Annual Report are incorporated by reference into this
Statement of Additional Information.
39
<PAGE>
APPENDIX A
SECURITIES RATINGS
The following is a description of the ratings given by S&P and Moody's to
U.S. municipal and government securities in which the Funds are permitted to
invest in accordance with Rule 2a-7 of the Act.
Ratings of Municipal Obligations
S&P:
The two highest ratings of S&P for municipal bonds are AAA (Prime) and AA
(High-grade). Bonds rated AAA have the highest rating assigned by S&P to a
municipal obligation. Capacity to pay interest and repay principal is extremely
strong. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small degree. The
rating may be modified by the addition of a plus (+) or a minus (-) to show
relative standing within the category.
S&P top ratings for municipal notes are SP-1 and SP-2. The designation
SP-1 indicates a very strong capacity to pay principal and interest. A "+" is
added for those issues determined to possess overwhelming safety
characteristics. An "SP-2" designation indicates a satisfactory capacity to pay
principal and interest.
Moody's:
The two highest ratings of Moody's for municipal bonds are Aaa and Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds rated Aa
are judged to be of high quality by all standards. Together with the Aaa group,
they comprise what are generally known as high-grade bonds. Moody's states that
Aa bonds are rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than for Aaa
municipal bonds. Moody's rates a bond in the Aa category as Aa1 if Moody's
believes the bond possesses strong attributes within the category.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and Variable Rate Demand Obligation
Moody's Investment Grade (VMIG). This distinction is in recognition of the
differences between short-term and long-term credit risk. Loans bearing the
designation MIG1/VMIG1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG2/VMIG2 are of high quality with margins of protection ample
although not as large as in the preceding group.
Commercial Paper Ratings
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<PAGE>
S&P:
Commercial paper rated A-1 or better by S&P has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; and basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's industry
is well established and the issuer has a strong position within the industry.
The reliability and quality of management are unquestioned.
Moody's:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Ratings of Corporate Bonds
S&P
AAA--Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB--Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B--Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments. Adverse
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business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC--Bonds rated CCC have a current identifiable vulnerability to default
and are dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
CC--The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C--The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D--Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
Moody's
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issuers.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and, therefore, not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issuers may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issuers are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and
issuers so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
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APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the following:
1. Project Notes, which carry a U.S. Government guarantee, are issued
by public bodies (called "local issuing agencies") created under the
laws of a state, territory, or U.S. possession. They have maturities
that range up to one year from the date of issuance. Project Notes
are backed by an agreement between the local issuing agency and the
Federal Department of Housing and Urban Development. These Notes
provide financing for a wide range of financial assistance programs
for housing, redevelopment, and related needs (such as low-income
housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working capital needs
of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenues, such as income, sales, use and
business taxes, and are payable from those specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of receipt of
other types of revenues, such as Federal revenues available under
the Federal Revenue Sharing Programs.
4. Bond Anticipation Notes are issued to provide interim financing
until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the
Notes.
5. Construction Loan Notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive
permanent financing through the Federal Housing Administration under
the Federal National Mortgage Association or the Government National
Mortgage Association.
6. Tax-Exempt Commercial Paper is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and
local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer term financing.
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Municipal Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
7. General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of
these obligations are used to fund a wide range of public projects,
including construction or improvement of schools, highways, and
roads, and water and sewer systems. The basic security behind
General Obligation bonds is the issuer's pledge of its full faith
and credit and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of
special assessments.
8. Revenue Bonds generally are accrued by the net revenues derived from
a particular facility, group of facilities, or, in some cases, the
proceeds of a special excise or other specific revenue source.
Revenue Bonds are issued to finance a wide variety of capital
projects including electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals. Many of these Bonds provide additional
security in the form of a debt service reserve fund to be used to
make principal and interest payments. Housing authorities have a
wide range of security, including partially or fully insured
mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a
state's ability (without obligation) to make up deficiencies in the
debt service reserve fund.
9. Industrial Development Bonds are considered municipal bonds if the
interest paid thereon is exempt from Federal income tax and are
issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and
manufacturing, housing, sports, and pollution control. These Bonds
are also used to finance public facilities such as airports, mass
transit systems, ports, and parking. The payment of the principal
and interest on such Bonds is dependent solely on the ability or the
facility's user to meet its financial obligations and the pledge, if
any, of real and personal property as security for such payment.
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DLJ OPPORTUNITY FUNDS
277 PARK AVENUE,
NEW YORK, NEW YORK 10172
Toll Free (800) 255-8011
STATEMENT OF ADDITIONAL INFORMATION
July , 2000
This Statement of Additional Information relates to the DLJ Developing
Markets Fund (the "Developing Markets Fund") and the DLJ International Equity
Fund (the "International Equity Fund" and together with the Developing Markets
Fund, the "International Funds"). Each Fund is a series of the DLJ Opportunity
Funds (the "Opportunity Funds"). This Statement of Additional Information is not
a prospectus and should be read in conjunction with the International Funds'
current Prospectus dated July , 2000, as supplemented from time to time, which
is incorporated herein by reference. A copy of the Prospectus may be obtained by
contacting the International Funds at the address or telephone number listed
above.
TABLE OF CONTENTS
FUND HISTORY .............................................................. 2
INVESTMENT POLICIES AND RESTRICTIONS ...................................... 2
MANAGEMENT ................................................................ 10
Adviser ................................................................... 12
Subadviser ................................................................ 13
EXPENSES OF THE INTERNATIONAL FUNDS ....................................... 14
General ................................................................... 14
Distribution Plan ......................................................... 14
PURCHASES, REDEMPTIONS, EXCHANGES AND
SYSTEMATIC WITHDRAWAL PLAN ................................................ 16
Purchases ................................................................. 16
Redemptions ............................................................... 18
Exchanges ................................................................. 19
Systematic Withdrawal Plan ................................................ 20
RETIREMENT PLANS .......................................................... 20
Individual Retirement Accounts ("IRA") .................................... 20
Simplified Employee Pension Plan ("SEP/IRA") .............................. 21
Savings Incentive Match Plan for Employees
("SIMPLE") - SIMPLE IRA and SIMPLE 401(k) ................................. 21
Employer-Sponsored Retirement Plans ....................................... 21
Self-Directed Retirement Plans ............................................ 22
NET ASSET VALUE ........................................................... 22
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 24
PORTFOLIO TRANSACTIONS .................................................... 28
PORTFOLIO TURNOVER
INVESTMENT PERFORMANCE INFORMATION ........................................ 30
SHARES OF BENEFICIAL INTEREST ............................................. 33
GENERAL INFORMATION ....................................................... 34
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Organization and Capitalization ........................................... 34
Counsel and Independent Auditors .......................................... 35
Additional Information .................................................... 35
Financial Statements ...................................................... 35
APPENDIX .................................................................. 37
FUND HISTORY
DLJ Opportunity Funds was formed on May 31, 1995 as a business trust under
the laws of the state of Delaware. Its shares are currently divided into five
series, the DLJ High Income Fund, and the DLJ U.S. Government Money Fund and the
DLJ Municipal Money Fund (the "Money Funds"), and the International Funds. This
Statement of Additional Information is for the International Funds. The
International Funds commenced operations on September 8, 1995. The DLJ
Opportunity Funds have an unlimited number of authorized shares of beneficial
interest, par value $.001 per share, which may, without shareholder approval, be
divided into an unlimited number of series and an unlimited number of classes.
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions supplement and should
be read in conjunction with the information set forth under the heading "DLJ
Funds' Investment Objectives and Policies" in the International Funds'
Prospectus. Except as noted in the Prospectus and this Statement of Additional
Information, each International Fund's investment policies are not fundamental
and may be changed by the Trustees of the Funds without shareholder approval.
Shareholders will be notified prior to a significant change in such policies.
Each International Fund's fundamental investment restrictions may not be changed
without shareholder approval as defined in "Fundamental Investment Restrictions"
in this Statement of Additional Information.
It is the investment objective of the Developing Markets Fund to seek
long-term growth of capital by investing primarily in common stocks and other
equity securities in developing countries. It is the investment objective of the
International Equity Fund to seek long-term growth of capital by investing
primarily in common stocks and other equity securities from established non-U.S.
markets. In addition, each International Fund may invest in any of the
securities described below.
Depositary Receipts. The International Funds may purchase sponsored or
unsponsored ADRs, EDRs and GDRs (collectively, "Depositary Receipts"). ADRs are
American Depositary Receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs and GDRs are Depositary Receipts typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not
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necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depositary Receipts may be issued pursuant to
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities traded in the form of Depositary Receipts.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. For purposes of each International Fund's investment
policies, an International Fund's investments in Depositary Receipts will be
deemed to be investments in the underlying securities.
Convertible Securities. A convertible security is a bond or preferred
stock which may be converted at a stated price within a specified period of time
into a certain quantity of the common stock of the same or different issuer.
Convertible securities are senior to common stocks in a corporation's capital
structure, but are usually subordinated to similar nonconvertible securities.
While providing a fixed income stream (generally higher in yield than the income
stream from common stocks but lower than that afforded by a similar
nonconvertible fixed income security), a convertible security also affords an
investor the opportunity, through its conversion feature, to participate in the
capital appreciation dependent upon a market price advance in the underlying
common stock. Each International Fund may invest up to 25% of its assets in
foreign convertible securities. DLJ Asset Management Group, Inc. (the "Adviser")
and AXA Investment Managers GS Ltd. (the "Subadviser") currently do not intend
to invest over 5% of each International Fund's assets in convertible securities
rated below investment grade.
The market value of a convertible security is at least the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., its value when converted into its underlying common
stock). As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the underlying security. The price of a
convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines. While no securities investment is without some risk, investments
in convertible securities generally entail less risk than investments in the
common stock of the same issuer.
Nonconvertible Fixed Income Securities. Each International Fund may invest
up to 35% of its total assets in investment grade fixed income securities.
Investment grade obligations are those obligations rated BBB or better by
Standard and Poor's Ratings Group ("S&P") or Baa or better by Moody's Investor
Service ("Moody's") in the case of long-term obligations and equivalently rated
obligations in the case of short-term obligations, or unrated instruments
believed by the Adviser or Subadviser to be of comparable quality to such rated
instruments. Securities rated BBB by S&P are regarded by S&P as having an
adequate capacity to pay interest and repay principal. Whereas such securities
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely, in the opinion of S&P, to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. Securities rated Baa by Moody's are considered
by Moody's to be
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medium grade obligations; they are neither highly protected nor poorly secured;
interest payments and principal security appear to be adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time; in the opinion of Moody's, they lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Fixed income securities in which the International
Funds may invest include asset and mortgage backed securities. Prepayments of
principal may be made at any time on the obligations underlying asset and
mortgage backed securities and are passed on to the holders of the asset and
mortgage backed securities. As a result, if an International Fund purchases such
a security at a premium, faster than expected prepayments will reduce and slower
than expected prepayments will increase yield to maturity. Conversely, if an
International Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. For a more complete description of Moody's and S&P's
ratings, see the Appendix to this Statement of Additional Information. The
foregoing investment grade limitation applies only at the time of initial
investment and an International Fund may determine to retain in its portfolio
securities the issuers of which have had their credit characteristics
downgraded.
Options. The International Funds may purchase and sell call and put
options. A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase the securities or currency
subject to the option at a specified price (the exercise price or strike price).
The writer, or seller, of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities or a specified amount of cash to
the purchaser upon receipt of the exercise price. When an International Fund
writes a call option, that Fund gives up the potential for gain on the
underlying securities or currency in excess of the exercise price of the option
during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right, for
a specified period of time, to sell securities or currency subject to the option
to the writer of the put at the specified exercise price. The writer of the put
option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the securities or currency underlying the option at the
exercise price. An International Fund that sells a put option might, therefore,
be obligated to purchase the underlying securities or currency for more than
their current market price.
If an International Fund desires to sell a particular security from its
portfolio on which it has written an option, the International Fund will seek to
effect a closing purchase transaction prior to or concurrently with the sale of
the security. A closing purchase transaction is a transaction in which an
investor who is obligated as a writer of an option terminates his obligation by
purchasing an option of the same series as the option previously written. (Such
a purchase does not result in the ownership of an option). An International Fund
may enter into a closing purchase transaction to realize a profit on a
previously written option or to enable the International Fund to write another
option on the underlying security with either a different exercise price or
expiration date or both. An International Fund realizes a profit or loss from a
closing purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from the writing of the option.
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The International Funds will write only fully "covered" options. An option
is fully covered if at all times during the option period, the Fund writing the
option owns either (i) the underlying securities, or securities convertible into
or carrying rights to acquire the optioned securities at no additional cost, or
(ii) an offsetting call option on the same securities at the same or a lower
price.
An International Fund may not write a call option if, as a result thereof,
the aggregate of such International Fund's portfolio securities subject to
outstanding call options (valued at the lower of the option price or market
value of such securities) would exceed 10% of its total assets. The
International Funds may also purchase and sell financial futures contracts and
options thereon for hedging and risk management purposes and to enhance gains as
permitted by the Commodity Futures Trading Commission (the "CFTC").
The International Funds may also purchase and sell securities index
options. Securities index options are similar to options on specific securities.
However, because options on securities indices do not involve the delivery of an
underlying security, the option represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying securities index on the exercise date. When an
International Fund writes an option on a securities index, it will establish a
segregated account with its custodian in which it will deposit cash or high
quality short-term obligations or a combination of both with a value equal to or
greater than the market value of the option and will maintain the account while
the option is open.
Each International Fund's successful use of options and financial futures
depends on the ability of the Adviser and Subadviser to predict the direction of
the market and is subject to various additional risks. The investment techniques
and skills required to use options and futures successfully are different from
those required to select international securities for investment. The ability of
an International Fund to close out an option or futures position depends on a
liquid secondary market. There is no assurance that liquid secondary markets
will exist for any particular option or futures contract at any particular time.
The inability to close options and futures positions also could have an adverse
impact on each International Fund's ability to effectively hedge its portfolio.
There is also the risk of loss by the International Funds of margin deposits or
collateral in the event of bankruptcy of a broker with whom the International
Funds have an open position in an option, a futures contract or related option.
To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the CFTC, each International Fund is
limited to an investment not in excess of 5% of its total assets, except that
each International Fund may purchase and sell such instruments, without
limitation, for bona fide hedging purposes.
Forward Foreign Currency Exchange Contracts. A forward contract on foreign
currency is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days agreed upon by the parties from the
date of the contract at a price set on the date of the contract.
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The International Funds will generally enter into forward contracts only
under two circumstances. First, when an International Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security in
relation to another currency by entering into a forward contract to buy or sell
the amount of foreign currency needed to settle the transaction. Second, when
the Adviser or Subadviser believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency, it
may enter into a forward contract to sell or buy the former foreign currency (or
another currency which acts as a proxy for that currency) approximating the
value of some or all of the International Fund's portfolio securities
denominated in such foreign currency. This second investment practice is
generally referred to as "cross-hedging." Although forward contracts will be
used primarily to protect the International Funds from adverse currency
movements, they also involve the risk that anticipated currency movements will
not be accurately predicted.
Futures and Options Thereon. The International Funds may purchase and sell
financial futures contracts and options thereon which are traded on a
commodities exchange or board of trade for certain hedging, return enhancement
and risk management purposes in accordance with regulations of the CFTC. These
futures contracts and related options will be on financial indices and foreign
currencies or groups of foreign currencies. A financial futures contract is an
agreement to purchase or sell an agreed amount of securities or currencies at a
set price for delivery in the future.
Equity-Linked Derivatives--WEBS and OPALS. The International Funds may
invest in World Equity Benchmark Series ("WEBS") and baskets of securities of
issuers outside the United States ("OPALS") and other similar equity-linked
derivative investments. Each of these instruments are derivative securities
whose value follows a well-known securities index or basket of securities. WEBS
are exchange traded mutual funds and are charged a management fee.
OPALS seek to provide investors with investment results through a
specified maturity date that correspond generally to those of a specified
benchmark index by indirectly investing in a baskets of shares or other OPALS
owned by Morgan Stanley Capital (Luxembourg) S. A. (the "Counterparty"). Holders
of OPALS will receive semi-annual distributions corresponding to dividends
received on shares contained in the underlying basket of stocks and certain
amounts, net of expenses. On the maturity date of the OPALS, the holders will
receive the physical securities comprising the underlying baskets. OPALS, like
many of these types of instruments, represent an unsecured obligation and
therefore carry with them the risk that the Counterparty will default and the
Fund may not be able to recover the current value of its investment.
Because the prices of WEBS and OPALS are correlated to diversified
portfolios, they are subject to the risk that the general level of stock prices
may decline, that the underlying indices decline or that financial condition of
specific issuers in the underlying indices may become impaired. However, these
securities may not fully replicate the performance of the underlying indices. In
addition, because WEBS and OPALS will continue to be traded even when trading is
halted in component stocks of the underlying indices, price quotations for these
securities may, at times, be based upon non-current price information with
respect to some of even all of the stocks in the underlying indices. Because
WEBS mirror the performance of a single country index, a economic downturn in a
single country could significantly adversely affect the price of the WEBS for
that country.
Repurchase Agreements. The International Funds may enter into "repurchase
agreements" with member banks of the Federal Reserve System, "primary dealers"
(as designated by the Federal Reserve Bank of New York) in such securities or
with any domestic or foreign broker/dealer which is recognized as a reporting
government securities dealer. Repurchase agreements permit an International Fund
to keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. The International Funds require
continual maintenance of collateral with the Custodian in an amount equal to, or
in excess of, the market value of the securities which are the subject of a
repurchase agreement. In the event a vendor defaults on its repurchase
obligation, the International Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, the International Fund
might be delayed in selling the collateral.
Reverse Repurchase Agreements. The International Funds may also enter into
reverse repurchase agreements. Under a reverse repurchase agreement an
International Fund would sell securities and agree to repurchase them at a
mutually agreed upon date and price. At the time an International Fund enters
into a reverse repurchase agreement, it would establish and maintain with an
approved custodian a segregated account containing liquid high-grade securities
having a value not less than the repurchase price. Reverse repurchase agreements
involve the risk that the market value of the securities subject to such
agreement could decline below the repurchase price to be paid by an
International Fund for such securities. In the event the buyer of securities
under a reverse repurchase agreement filed for bankruptcy or became insolvent,
such buyer or receiver would receive an extension of time to determine whether
to enforce an International Fund's obligations to repurchase the securities and
an International Fund's use of the proceeds of the reverse repurchase could
effectively be restricted pending such decision. Reverse repurchase
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agreements create leverage, a speculative factor, but are not considered senior
securities by the International Funds or the Securities and Exchange Commission
("SEC") to the extent liquid high-grade debt securities are segregated in an
amount at least equal to the amount of the liability.
Illiquid Investments. Each International Fund may invest up to 15% of its
assets in illiquid investments. Under the supervision of the Trustees, the
Adviser and Subadviser determine the liquidity of an International Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for an International Fund to sell them promptly at an acceptable
price. The staff of the SEC currently takes the position that OTC options
purchased by an International Fund, and portfolio securities "covering" the
amount of that International Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to such International Fund's limitations on
investments in illiquid securities.
Borrowing. Each International Fund may borrow up to one-third of the value
of its total assets from banks to increase its holdings of portfolio securities
or for other purposes. Under the Investment Company Act of 1940, as amended (the
"1940 Act"), each International Fund is required to maintain continuous asset
coverage of 300% with respect to such borrowings. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on an International Fund's net asset value, and money
borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received from the securities purchased with
borrowed funds. The Adviser and Subadviser do not currently intend to engage in
borrowing transactions.
Securities Lending. The International Funds may seek to receive or
increase income by lending their respective portfolio securities. Under present
regulatory policies, such loans may be made to member firms of the New York
Stock Exchange and are required to be secured continuously by collateral held by
the Custodian consisting of cash, cash equivalents or U.S. Government Securities
maintained in an amount at least equal to the market value of the securities
loaned. Accordingly, the International Funds will continuously secure the
lending of portfolio securities by collateral held by the Custodian consisting
of cash, cash equivalents or U.S. Government Securities maintained in an amount
at least equal to the market value of the securities loaned. The International
Funds have the right to call such a loan and obtain the securities loaned at any
time on five days notice. Cash collateral may be invested in fixed income
securities rated at least A or better by S&P or Moody's. As is the case with any
extension of credit, loans of portfolio securities involve special risks in the
event that the borrower should be unable to repay the loan, including delays or
inability to recover the loaned securities or foreclose against the collateral.
The aggregate value of securities loaned by an International Fund may not exceed
25% of the value of its net assets.
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When Issued, Delayed Delivery Securities and Forward Commitments. The
International Funds may, to the extent consistent with their other investment
policies and restrictions, enter into forward commitments for the purchase or
sale of securities, including on a "when issued" or "delayed delivery" basis in
excess of customary settlement periods for the type of security involved. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of
the commitment, with payment and delivery taking place in the future, generally
a month or more after the date of the commitment. While an International Fund
will only enter into a forward commitment with the intention of actually
acquiring the security, such International Fund may sell the security before the
settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to an International Fund
prior to the settlement date. Each International Fund will segregate with its
Custodian cash or liquid high-grade securities in an aggregate amount at least
equal to the amount of its respective outstanding forward commitments.
Privatization. The governments in some countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatization"). The Adviser and Subadviser believe
that privatization may offer opportunities for significant capital appreciation
and intend to invest assets of the International Funds in privatization in
appropriate circumstances. In certain countries, the ability of foreign entities
such as the International Funds to participate in privatization may be limited
by local law and/or the terms on which the International Funds may be permitted
to participate may be less advantageous than those afforded local investors.
There can be no assurance that certain governments will continue to sell
companies currently owned or controlled by them or that privatization programs
will be successful.
Investment Companies. Certain markets are closed in whole or in part to
international investments by foreigners. The International Funds may be able to
invest in such markets solely or primarily through governmentally authorized
investment vehicles or companies. Pursuant to the 1940 Act, each International
Fund generally may invest up to 10% of its total assets in the aggregate in
shares of other investment companies and up to 5% of its total assets in any one
investment company as long as each investment does not represent more than 3% of
the outstanding voting stock of the acquired investment company at the time of
investment. Investment in other investment companies may involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and is subject to limitations under the 1940 Act and market
availability. The International Funds do not intend to invest in such investment
companies unless, in the judgment of the Adviser and Subadviser, the potential
benefits of such investment justify the payment of any applicable premium or
sales charge. As a shareholder in an investment company, an International Fund
would bear its ratable share of that investment company's expenses, including
its advisory and administration fees. At the same time, an International Fund
would continue to pay its own management fees and other expenses.
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Fundamental Investment Restrictions
The following fundamental investment restrictions are applicable to each
of the International Funds and may not be changed with respect to an
International Fund without the approval of a majority of the shareholders of
that International Fund, which means the affirmative vote of the holders of (a)
67% or more of the shares of that International Fund represented at a meeting at
which more than 50% of the outstanding shares of the International Fund are
represented or (b) more than 50% of the outstanding shares of that International
Fund, whichever is less. Except as set forth in the Prospectus, all other
investment policies or practices are considered by each International Fund not
to be fundamental and accordingly may be changed without shareholder approval.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of such restriction.
Briefly, these restrictions provide that an International Fund may not:
(1) purchase the securities of any one issuer, other than the United
States Government, or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total
assets would be invested in such issuer or the International Fund would
own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of the value of the International Fund's total
assets may be invested without regard to such 5% and 10% limitations;
(2) invest 25% or more of the value of its total assets in any one
industry, provided that, for purposes of this policy, consumer finance
companies, industrial finance companies and gas, electric, water and
telephone utility companies are each considered to be separate industries;
(3) issue senior securities (including borrowing money, including on
margin if margin securities are owned and enter into reverse repurchase
agreements) in excess of 33 1/3% of its total assets (including the amount
of senior securities issued but excluding any liabilities and indebtedness
not constituting senior securities) except that the International Fund may
borrow up to an additional 5% of its total assets for temporary purposes;
or pledge its assets other than to secure such issuances or in connection
with hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies. The International Fund's
obligations under swaps are not treated as senior securities;
(4) make loans of money or property to any person, except through
loans of portfolio securities, the purchase of fixed income securities
consistent with the International Fund's investment objectives and
policies or the acquisition of securities subject to repurchase
agreements;
(5) underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities the
International Fund may be deemed to be an underwriter;
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(6) purchase real estate or interests therein;
(7) purchase or sell commodities or commodities contracts except for
purposes, and only to the extent, permitted by applicable law without the
International Fund becoming subject to registration with the CFTC as a
commodity pool;
(8) make any short sale of securities except in conformity with
applicable laws, rules and regulations and unless, giving effect to such
sale, the market value of all securities sold short does not exceed 25% of
the value of the International Fund's total assets and the International
Fund's aggregate short sales of a particular class of securities do not
exceed 25% of the then outstanding securities of that class; or
(9) invest in oil, gas or other mineral leases.
MANAGEMENT
The Trustees and principal officers of the International Funds, their ages
and their primary occupations during the past five years are set forth below.
Unless otherwise specified, the address of each such person is 277 Park Avenue,
New York, New York 10172. Those Trustees whose names are preceded by an asterisk
are "interested persons" of the International Funds as defined by the 1940 Act.
*G. Moffett Cochran, 49, Chairman of the Board of Trustees and President
of the Opportunity Funds, is President and Chief Executive Officer of the
adviser to the DLJ Opportunity Funds, DLJ Asset Management Group ("DLJAM" or
"Adviser") with which he has been associated since prior to 1994. Prior to his
association with the International Funds and the Adviser, Mr. Cochran was a
Senior Vice President with Bessemer Trust Companies.
Robert E. Fischer, 69, Trustee of the Opportunity Funds, has been Member
at the law firm Wolf, Block, Schorr and Solis-Cohen LLP (or its predecessor
firm) since prior to 1994.
*Martin Jaffe, 53, Trustee, Vice President, Secretary and Treasurer of the
Opportunity Funds, is a Managing Director and Chief Operating Officer of the
Adviser, with which he has been associated since prior to 1994.
Wilmot H. Kidd, III, 58, Trustee of the Opportunity Funds, has been
President of Central Securities Corporation since prior to 1994.
Michael A. Synder, 37, Vice President of the Opportunity Funds, is a
Managing Director of the Adviser, with which he has been associated since 1998.
Prior to becoming associated with the DLJ Funds and joining DLJAM, Mr. Snyder
spent two years as a Managing
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Director with Bear Stearns Asset Management where he was responsible for the
firm's high-yield bond management effort. Prior to that position, Mr. Snyder
spent ten years at Prudential Investments where he was a senior portfolio
manager in the firm's High Yield Mutual Fund Group.
Brian A. Kammerer, 42, Vice President of the Opportunity Funds, is a
Senior Vice President of the Adviser, with which he has been associated since
prior to 1994.
The following table sets forth certain information regarding compensation of the
International Funds' Trustees and officers. Except as disclosed below, no
executive officer or person affiliated with the International Funds received
compensation from the International Funds.
Compensation Table
Pension or Total
Retirement Compensation
Benefits Estimated From Trust
Aggregate Accrued Annual and Fund
Compensation As Part of Benefits Complex
From Trust Upon Paid to
Name and Position Trust(1) Expenses Retirement Trustees(2)
G. Moffett Cochran,
Trustee $ 0 None None $ 0 (12)
Robert E. Fischer, Trustee $14,000 None None $ 14,000 (7)
Martin Jaffe, Trustee $ 0 None None $ 0 (7)
Wilmot H. Kidd, III,
Trustee $14,000 None None $ 14,000 (7)
(1) The Opportunity Funds anticipate paying each independent Trustee
approximately $7,500 in each calendar year.
(2) Represents the total compensation paid to such persons during the calendar
year ended December 31, 1999. The parenthetical number represents the
number of portfolios (including the International Funds) for which such
person acts as Trustee that are considered part of the same fund complex
as the International Funds.
The Trustees of the Opportunity Funds who are officers or employees of the
Adviser or any of its affiliates receive no remuneration from the Opportunity
Funds. Effective May 16, 2000, each of the Trustees who are not affiliated with
the Adviser will be paid a $1,500 fee for each board meeting attended, a $500
fee for each special meeting attended and an annual retainer of $500. Messrs.
Cochran and Jaffe are members of the Executive Committee. Messrs. Fisher and
Kidd are members of the Audit Committee and are paid a $250 fee for each Audit
Committee meeting attended.
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Adviser
The Adviser, a Delaware corporation with principal offices at 277 Park
Avenue, New York, New York 10172, has been retained under an Investment Advisory
Agreement as the International Funds' investment adviser (see "Management" in
the Prospectus). The Adviser (formerly known as Wood, Struthers & Winthrop
Management Corp.) was established in 1871 as a private concern to manage money
for the Winthrop family of Boston. From these origins, the Adviser has grown to
serve a select group of individual and institutional investors.
The Adviser is (since 1977) a wholly-owned subsidiary of Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ Securities"), the distributor of the
International Fund's shares, which is a wholly-owned subsidiary of Donaldson,
Lufkin & Jenrette, Inc., which is in turn an independently operated, indirect
subsidiary of AXA Financial, Inc., a holding company controlled by AXA, a French
insurance and financial services holding company. The Adviser is an integral
part of the DLJ Securities family, and as one of the oldest money management
firms in the country, it maintains a tradition of personalized service and
performance. The address of Donaldson, Lufkin & Jenrette, Inc. is 277 Park
Avenue, New York, New York 10172. The address of AXA Financial is 787 Seventh
Avenue, New York, New York 10019.
As of February 1, 2000, AXA owns 60.5% of the outstanding shares of the
common stock of AXA Financial. AXA is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations are comprised of activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom, Canada and
other countries, principally in Europe. AXA is also engaged in asset management,
investment banking and brokerage, real estate and other financial services
activities in the United States and Europe. Based on information provided by
AXA, as of February 1, 2000, 20.25% of the issued ordinary shares (representing
31.9% of the voting power) of AXA were directly or indirectly owned by Finaxa, a
French holding company ("Finaxa"). Such percentage of interest includes the
interest of Colisee Vendome, a wholly-owned subsidiary of Finaxa, which owned
2.7% of the issued ordinary shares (representing 4.25% of the voting power) of
AXA and the interest of les Ateliers de Construction du Nord de la France-ANF
("ANF"), a 95.4% owned subsidiary of Finaxa, which owned 0.4% of the issued
ordinary shares (representing 0.6% of the voting power) of AXA. As of February
1, 2000, 60.7% of the issued ordinary shares (representing 70.7% of the voting
power) of Finaxa were owned by four French mutual insurance companies -- (the
"Mutuelles AXA") and 22.3% of the issued ordinary shares (representing 13.3% of
the voting power) of Finaxa were owned by Banque Paribas, a French bank
("Paribas"). Including the ordinary shares owned by Finaxa and its subsidiaries
on February 1, 2000, the Mutuelles AXA directly and indirectly owned 23.3% of
the issued ordinary shares of AXA (representing 36.7% of the voting power).
Acting as a group, the Mutuelles AXA will continue to control AXA and Finaxa.
The Investment Advisory Agreement was approved by the Board of Trustees of
the International Funds on July 25, 1995 and by the then shareholders, the
Adviser and Subadviser, on August 23, 1995 and became effective on the same
date. The Investment Advisory Agreement is reviewed annually by the Board of
Trustees and was most recently reapproved on July 15,
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1999. The Investment Advisory Agreement continues in force for successive twelve
month periods provided that such continuation is specifically approved at least
annually by a majority vote of the Trustees who neither are interested persons
of the International Funds nor have any direct or indirect financial interest in
the Investment Advisory Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
Pursuant to the terms of the Investment Advisory Agreement, the Adviser
may retain, at its own expense, a subadviser to assist in the performance of its
services to the International Funds.
For the fiscal years ended October 31, 1999, 1998 and 1997, the Developing
Markets Fund paid the Adviser fees of $215,235, $327,927 and $506,870,
respectively, and the International Equity Fund paid the Adviser fees of
$641,576, $678,442 and $605,376, respectively. Such amounts include fees that
were subsequently paid to the Subadviser.
During the fiscal years ended October 31, 1999, 1998 and 1997, the Adviser
and Subadviser reimbursed the Developing Markets Fund $ 130,046, $159,784 and
$139,596 181,527, respectively, and the International Equity Fund $18,842,
$53,004 and $88,653 112,542, respectively, for operating expenses.
Subadviser
The Subadviser has been retained under a subadvisory agreement by the
Adviser to assist in the performance of its services to the International Funds.
The Subadviser, a registered investment advisor, is a wholly-owned
subsidiary of AXA. The Subadviser has hired employees from AXA, a company with a
long history of providing financial services advice.
Certain other clients of the Adviser or Subadviser may have investment
objectives, policies and risk considerations similar to those of the
International Funds. The Adviser or Subadviser may, from time to time, make
recommendations which result in the purchase or sale of a particular security by
their other clients simultaneously with the International Funds. If transactions
on behalf of more than one client during the same period increase the demand for
securities being purchased or the supply of the securities being sold, there may
be an adverse effect on price. It is the policy of the Adviser and Subadviser to
allocate advisory recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser and Subadviser to the accounts involved,
including the International Funds. When two or more of the clients of the
Adviser and Subadviser (including the International Funds) are purchasing the
same security on a given day from the same broker-dealer, such transactions may
be averaged as to price.
The Fund intends to enter into arrangements with certain broker-dealers
(including affiliates of the Distributor) whose customers are Fund shareholders
pursuant to which the broker-dealers may perform shareholder servicing
functions, such as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to certain inquiries regarding the
Fund's performance and the status of shareholder accounts. The Fund may pay for
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the electronic communications equipment maintained at the broker-dealers'
offices that permits access to the Fund's computer files and, in addition, may
reimburse the broker-dealers at cost for personnel expenses involved in
providing the services.
EXPENSES OF THE INTERNATIONAL FUNDS
General
In addition to the payments to the Adviser under the investment advisory
agreement, each International Fund pays the other expenses incurred in its
organization and operations, including the costs of printing prospectuses and
other reports to existing shareholders; all expenses and fees related to
registration and filing with the SEC and with state regulatory authorities;
custody, transfer and dividend disbursing expenses; legal and auditing costs;
clerical, accounting and other office costs; fees and expenses of Trustees who
are not affiliated with the Adviser or Subadviser; costs of maintenance of
existence; and interest charges, taxes, brokerage fees and commissions.
As to the obtaining of clerical and accounting services not required to be
provided to the International Funds by the Adviser under the investment advisory
agreement or Subadviser under the investment subadvisory agreement, the
International Funds may employ their own personnel. For such services, they also
may utilize personnel employed by the Adviser, the Subadviser or their
affiliates. In such event, the costs associated with the management, supervision
and assistance and office facilities, in addition to administrative and
nonadviser services provided by the Adviser or their affiliates, may be
reimbursed. These payments must be specifically approved by the Funds' Trustees,
including a majority of the disinterested Trustees.
Distribution Plan
Pursuant to Rule 12b-1 adopted by the SEC under the 1940 Act, the
International Funds have adopted a Distribution Agreement (the "Distribution
Agreement") and a Rule 12b-1 Plan for each Class of shares of each International
Fund (the "12b-1 Plans") to permit such International Fund directly or
indirectly to pay expenses associated with the distribution of shares.
Pursuant to the Distribution Agreement and the 12b-1 Plans, the Treasurer
of the International Funds reports the amounts expended under the Distribution
Agreement and the purposes for which such expenditures were made to the Trustees
of the International Funds on a quarterly basis. Also, the 12b-1 Plans provide
that the selection and nomination of disinterested Trustees (as defined in the
1940 Act) are committed to the discretion of the disinterested Trustees then in
office. The Distribution Agreement and 12b-1 Plans may be continued annually if
approved by a majority vote of the Trustees, including a majority of the
Trustees who neither are interested persons of the International Funds nor have
any direct or indirect financial interest in the Distribution Agreement, the
12b-1 Plans or in any other agreements related to the 12b-1 Plans, cast in
person at a meeting called for the purpose of voting on such approval. The
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Distribution Agreement for Class A and Class B shares was initially approved by
each International Fund's Trustees on July 25, 1995 and by the then shareholders
on August 23, 1995. The Distribution Agreement for Class A and Class B shares
was most recently reviewed and reapproved on July 15, 1999. The Distribution
Agreement for the Class C shares was initially approved by each International
Fund's Trustees on January 20, 2000 and by the then shareholders on February 25,
2000. The Distribution Agreement for the Class R shares was initially approved
by each International Fund's Trustees on May 16, 2000 and by the then
shareholders on July , 2000.All material amendments to the 12b-1 Plans must be
approved by a vote of the Trustees, including a majority of the Trustees who
neither are interested persons of the International Funds nor have any direct or
indirect financial interest in the 12b-1 Plans or any related agreement, cast in
person at a meeting called for the purpose of voting on such approval. In
addition to such Trustee approval, the 12b-1 Plans may not be amended in order
to increase materially the costs which the International Funds may bear pursuant
to the 12b-1 Plans without the approval of a majority of the outstanding shares
of such International Funds. Each International Fund's 12b-1 Plan or Plans may
be terminated without penalty at any time by a majority vote of the
disinterested Trustees, by a majority vote of the outstanding shares of an
International Fund or by the Adviser. Any agreement related to the 12b-1 Plans
may be terminated at any time, without payment of any penalty, by a majority
vote of the independent Trustees or by majority vote of the outstanding shares
of an International Fund on not more than 60 days notice to any other party to
the agreement, and will terminate automatically in the event of assignment.
With respect to sales of an International Fund's Class B or Class C shares
through a broker-dealer, the Distributor pays the broker-dealer a concession at
the time of sale. In addition, an ongoing maintenance fee may be paid to
broker-dealers on sales of Class A, Class B and Class C shares. Pursuant to the
International Funds' 12b-1 Plans, the Distributor is then reimbursed for such
payments with amounts paid from the assets of such International Fund. The
payments to the broker-dealer, although an International Fund expense which is
paid by all shareholders, will only directly benefit investors who purchase
their shares through a broker-dealer rather than from the International Funds.
Broker-dealers who sell shares of the International Funds may provide services
to their customers that are not available to investors who purchase their shares
directly from the International Funds. Investors who purchase their shares
directly from an International Fund will pay a pro rata share of such
International Fund's expenses of encouraging broker-dealers to provide such
services but not receive any of the direct benefits of such services. The
payments to the broker-dealers will continue to be paid for as long as the
related assets remain in the International Funds.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, each International Fund pays a distribution services fee each month
to the Distributor, with respect to the aggregate average daily net assets
attributable to the Class A and Class R shares of each International Fund at an
annual rate of up to .25 of 1%, and with respect to the Class B and Class C
shares of each International Fund the annual rate may be up to 1%, of the
aggregate average daily net assets attributable to the Class B and Class C
shares of each International Fund.
The 12b-1 Plans of the International Funds permit payments to be made in
subsequent years for expenses incurred in prior years if the Funds' Trustees
specifically authorize such payment. As of the year ended October 31, 1999, the
amounts eligible for payment in
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subsequent years were $40,155 and $132,764 for the Developing Markets Fund and
the International Equity Fund, respectively, which represents 0.21% and 0.24% of
the Fund's October 31, 1999 net assets, respectively.
The table below shows distribution costs charged to each Fund during the past
fiscal year.
DISTRIBUTION COSTS
Class A Class B
International Equity Fund $112,495 $58,838
Developing Markets Fund $36,671 $25,503
Under the Agreements, the Adviser may make payments to the Distributor
from the Adviser's own resources, which may include the management fees paid by
the funds. In addition to the concession and maintenance fee paid to dealers or
agents, the Distributor will from time to time pay additional compensation to
dealers or agents in connection with the sale of shares. Such additional amounts
may be utilized, in whole or in part, in some cases together with other revenues
of such dealers or agents, to provide additional compensation to registered
representatives of such dealers or agents who sell shares of the Funds. On some
occasions, such compensation will be conditioned on the sale of a specified
minimum dollar amount of the shares of the Funds during a specific period of
time. Such incentives may take the form of payment for meals, entertainment, or
attendance at educational seminars and associated expenses such as travel and
lodging. Such dealer or agent may elect to receive cash incentives of equivalent
amounts in lieu of such payments.
PURCHASES, REDEMPTIONS, EXCHANGES AND
SYSTEMATIC WITHDRAWAL PLAN
The following information supplements that set forth in the International Funds'
Prospectus under the heading "Purchases, Redemptions and Shareholder Services."
Purchases
Shares of the International Funds are offered at the respective net asset
value (less any applicable sales charge for Class A shares) per share next
determined following receipt of a purchase order in proper form by the
International Funds, the International Funds' transfer agent, PFPC, Inc. (the
"Transfer Agent"), by the Distributor or in the case of Class R shares, by
eligible institutions. The International Funds calculate net asset value per
share as of the close of the regular session of the New York Stock Exchange,
(the "NYSE") which is generally 4:00 p.m. New York City time on each day that
trading is conducted on the NYSE.
Orders for the purchase of Class A, Class B,or Class C shares of an
International Fund become effective at the next transaction time after Federal
funds or bank wire monies become available to the Transfer Agent for a
shareholder's investment. Federal funds are a bank's deposits
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in a Federal Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another member bank on the
same day and are considered to be immediately available funds. Investors should
note that their banks may impose a charge for this service. Money transmitted by
a check drawn on a member of the Federal Reserve System is converted to Federal
Funds in one business day following receipt. Checks drawn on banks which are not
members of the Federal Reserve System may take longer. All payments (including
checks from individual investors) must be in United States dollars.
In addition to Class A, Class B, and Class C shares, the International
Equity Funds offer Class R shares and the International Equity Fund offers Class
D shares. Class R shares are available for purchase by eligible institutions
(including Pershing division of Donaldson, Lufkin & Jenrette Securities Corp.,
and certain of its affiliates) on behalf of their clients (generally individuals
who do not purchase shares directly). Class R shares are sold primarily to
financial service providers acting on behalf of customers having an investment
account(s) or relationship at such institution, or to customers who have
received and hold shares of the Fund distributed to them by virtue of such an
account or relationship. Institutions effecting transactions in Class R shares
for the accounts of clients may charge such clients direct fees in connection
with such transactions. Purchases of Class R and Class D shares are offered
without any initial sales charge or CDSC. Class D shares are solely available
for purchase by employees of Donaldson, Lufkin & Jenrette, Inc. and its
subsidiaries that are eligible to participate in the DLJ 401(k) Retirement
Savings Plan. These employees should contact the DLJ 401(k) Hotline at
1-877-401k-DLJ concerning how to purchase Class D shares.
All shares purchased are confirmed to each shareholder and are credited to
such shareholder's account at net asset value and with respect to the Class A
shares, less any applicable initial sales charge. As a convenience to the
investor and to avoid unnecessary expense to the International Funds, share
certificates representing shares of the International Fund purchased are not
issued except upon the written request of the shareholder and payment of a fee
in the amount of $50 for such share issuance. The International Funds retain the
right to waive such fee in their sole discretion. This facilitates later
redemption and relieves the shareholder of the responsibility and inconvenience
of preventing the share certificates from becoming lost or stolen. No
certificates are issued for fractional shares (although such shares remain in
the shareholder's account on the books of the International Funds).
Shareholders maintaining Fund accounts through brokerage firms and other
institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are earlier
than the transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or her institution.
(For example, a brokerage firm may accept purchase orders from its customers up
to 2:15 p.m. for issuance at the 4:00 p.m. transaction time and price.) A
brokerage firm acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on it generally in
connection with transactions in securities for a customer, including the
obligation to act promptly and accurately.
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Redemptions
Shares of the International Funds may be redeemed at a redemption price
equal to the net asset value per share, as next computed as of the regular
trading session of the NYSE following the receipt in proper form by the
International Funds of the shares tendered for redemption, less any applicable
contingent deferred sales charge in the case of Class B and Class C shares, and
certain redemptions of Class A shares.
Payment of the redemption price may be made either in cash or in portfolio
securities (selected in the discretion of the Trustees and taken at their value
used in determining the redemption price), or partly in cash and partly in
portfolio securities. However, payments will be made wholly in cash unless the
Trustees believe that economic conditions exist which would make such a practice
detrimental to the best interest of the International Funds. If payment for
shares redeemed is made wholly or partly in portfolio securities, brokerage
costs may be incurred by the investor in converting the securities to cash. See
the Prospectus for a description of the contingent deferred sales charge which
may be applicable to certain redemptions.
For Class A, Class B and Class C shares, to redeem shares, the registered
owner or owners should forward a letter to the Transfer Agent containing a
request for redemption of such shares at the next determined net asset value per
share. Alternatively, the shareholder may elect the right to redeem shares by
telephone as described in the Prospectus. If the shares are represented by share
certificates, investors should forward the appropriate share certificates,
endorsed in blank or with blank stock powers attached, to the Transfer Agent
with the request that the shares represented thereby or a portion thereof be
redeemed at the next determined net asset value per share. The share assignment
form on the reverse side of each share certificate surrendered to the Transfer
Agent for redemption must be signed by the registered owner or owners exactly as
the registered name appears on the face of the certificate or, in the
alternative, a stock power signed in the same manner may be attached to the
share certificate or certificates, or, where tender is made by mail, separately
mailed to the Transfer Agent. The signature or signatures on the assignment form
must be guaranteed in the manner described below.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after shares are tendered in
proper form for redemption, except for any period during which the NYSE is
closed (other than customary weekend and holiday closings) or during which
trading on the exchange is deemed to be restricted under rules of the SEC, or
for any period during which an emergency (as determined by the SEC) exists as a
result of which disposal by an International Fund of its portfolio securities is
not reasonably practicable, or as a result of which it is not reasonably
practicable for an International Fund to determine the value of its net assets,
or for such other period as the SEC may by order permit for the protection of
shareholders. Generally, redemptions will be made by payment in cash or by
check.
If the total value of the shares being redeemed exceeds $50,000 (before
deducting any applicable contingent deferred sales charge) or a redemption
request directs proceeds to a party other than the registered account owner(s),
the signature or signatures on the letter or the endorsement must be guaranteed
by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934. Eligible guarantor institutions include banks,
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brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. A
broker-dealer guaranteeing signatures must be a member of a clearing corporation
or maintain net capital of at least $100,000. Credit unions must be authorized
to issue signature guarantees. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature guarantee
program. Additional documents may be required for redemption of corporate,
partnership or fiduciary accounts.
The requirement for a guaranteed signature is for the protection of the
shareholder in that it is intended to prevent an unauthorized person from
redeeming his shares and obtaining the redemption proceeds.
Exchanges
Class A, Class B, Class C and Class R shares of an International Fund can
be exchanged for shares of the same class of another International Fund, shares
of the Money Funds, shares of the same class of the DLJ High Income Fund, shares
of the same class of DLJ Core Equity Fund, DLJ Fixed Income Fund, DLJ Small
Company Value Fund, DLJ Growth and Income Fund and DLJ Municipal Trust Fund (the
"DLJ Focus Funds") and shares of the same class of DLJ Growth Fund and DLJ
Technology Fund ("DLJ Select Funds"). Shareholders may exchange shares by mail.
Shareholders or the shareholders' investment dealer of record may exchange
shares by telephone.
Participants within DLJ's 401(k) Retirement Savings Plan for Employees
should contact their plan administrator for information regarding exchanging
Class D shares of the International Equity Fund.
The exchange privilege is available only in those jurisdictions where
shares of such Fund may be legally sold. In addition, the exchange privilege is
available only when payment for the shares to be redeemed has been made.
Only those shareholders who have had shares in an International Fund for
at least seven days may exchange all or part of those shares for shares of the
other International Fund, the DLJ High Income Fund, the Money Funds, Focus Funds
or Select Funds, and no partial exchange may be made if, as a result, the
shareholders' interest in an International Fund would be reduced to less than
$250. The minimum initial exchange into another Fund is $ 1,000.
Exchanges into any of the DLJ Funds are subject to the minimum investment
requirements and any other applicable terms set forth in the Prospectus for the
Fund whose shares are being acquired. If for these or other reasons the exchange
cannot be effected, the shareholder will be so notified.
The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short term swings in the stock
market by engaging in frequent transactions in and out of all the Funds.
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Shareholders who engage in such frequent transactions may be prohibited from or
restricted in placing future exchange orders.
Exchanges of shares are subject to the other requirements of the Fund into
which exchanges are made. Annual fund operating expenses for such fund may be
higher and a sales charge differential may apply. See "Summary of Fund Expenses"
and "Additional Shareholder Services - Exchange Privilege" in the Prospectus for
a description of these expense differences.
Systematic Withdrawal Plan
Shares of an International Fund owned by a participant in the
International Funds' systematic withdrawal plan will be redeemed as necessary to
meet withdrawal payments. A contingent deferred sales charge which would
otherwise be imposed will be waived in connection with redemptions made pursuant
to the International Funds' systematic withdrawal plan up to 1% monthly or 3%
quarterly of an account not to exceed 12% of total market value over any 12
month rolling period. Systematic withdrawals elected on a semi-annual or annual
basis are not eligible for the waiver. See the Prospectus for a description of
the contingent deferred sales charge. The systematic withdrawal plan may be
terminated at any time by the shareholder or the International Funds.
Redemption of shares for withdrawal purposes may reduce or even liquidate
an account. While an occasional lump sum investment may be made by a shareholder
who is maintaining a systematic withdrawal plan, such investment should normally
be an amount equivalent to three times the annual withdrawal or $5,000 whichever
is less.
RETIREMENT PLANS
Each of the International Funds may be a suitable investment vehicle for
part or all of the assets held in various tax sheltered retirement plans, such
as those listed below. Semper Trust Company serves as custodian under these
prototype retirement plans and charges an annual account maintenance fee of $15
per participant, regardless of the number of Funds selected. Persons desiring
information concerning these plans should write or telephone the International
Funds' Transfer Agent. While the International Funds reserve the right to
suspend sales of its shares in response to conditions in the securities markets
or for other reasons, it is anticipated that any such suspension of sales would
not apply to the types of plans listed below.
Individual Retirement Accounts ("IRA")
The Adviser has available a prototype form of a Traditional IRA for
investment in shares of any one or more International Funds. Under the Code,
individuals may currently make IRA contributions of up to $2,000 annually.
Married individuals filing jointly may contribute up to $2,000 for each spouse
if the combined compensation of both spouses is at least equal to the
contributed amount. Contributions to an IRA may be wholly or partly
tax-deductible, depending upon the contributor's income level and participation
in an employer-sponsored retirement plan.
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The income earned on shares held in an IRA is not subject to federal income tax
until withdrawn in accordance with the Code. Investors may be subject to
penalties or additional taxes on contributions to or withdrawals from IRAs under
certain circumstances. As with tax-deductible contributions, taxes on the income
earned from nondeductible IRA contributions will be deferred until distributed
from the IRA.
The Adviser has available a prototype form of the Roth IRA. Unlike
Traditional IRA's, contributions to a Roth IRA are not currently deductible.
However, the amounts within the Roth IRA accounts will accumulate tax-free, and
qualified distributions from the International Funds will not be included in a
shareholder's taxable income. An individual may contribute a maximum of $2,000
annually to a Roth IRA ($4,000 for joint returns). However, such limit is
calculated in the aggregate with contributions to traditional IRA's. In
addition, Roth IRA's are not available to individuals above certain income
levels.
The Adviser also has available a prototype form of the Education IRA for
investment in shares of any one or more International Funds. Like the Roth IRA,
contributions are not currently deductible. However, the investment earnings
accumulate tax-free, and qualifying distributions used for higher education
expenses are not taxable. An individual may contribute a maximum of $500 per
account annually. In addition, Education IRA's are not available to individuals
above certain income levels.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA is available for investment and may be established on a group
basis by an employer who wishes to sponsor a tax-sheltered retirement program by
making IRA contributions on behalf of all eligible employees.
Savings Incentive Match Plan for Employees ("SIMPLE") - SIMPLE IRA and SIMPLE
401(k)
SIMPLE plans offer employers with 100 or fewer eligible employees who
earned at least $5,000 from the employer in the preceding calendar year the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans. Please
telephone the Funds' transfer agent at (800) 225-8011 for more information.
Employer-Sponsored Retirement Plans
The Adviser has a prototype retirement plan available which provides for
investment of plan assets in shares of any one or more International Funds. The
prototype retirement plan may be used by sole proprietors and partnerships as
well as corporations to establish a tax qualified profit sharing plan or money
purchase pension plan (or both) of their own.
Under the prototype retirement plan, an employer may make annual
tax-deductible contributions for allocation to the accounts of the plan
participants to the maximum extent permitted by the federal tax law for the type
of plan implemented. The Adviser has received
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favorable opinion letters from the IRS that the prototype retirement plan is
acceptable by qualified employers.
Self-Directed Retirement Plans
Shares of the International Funds may be suitable for self-directed IRA
accounts and prototype retirement plans such as those developed by Donaldson,
Lufkin & Jenrette Securities Corporation, an affiliate of the Adviser and the
Distributor.
NET ASSET VALUE
Shares of each International Fund will be priced at the net asset value
per share as computed each International Fund Business Day in accordance with
the International Funds' Agreement and Declaration of Trust and By-Laws. For
this purpose, an International Fund Business Day is any day on which the NYSE is
open for business, typically, Monday through Friday exclusive of New Year's Day,
Martin Luther King Jr. Day, President's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, Christmas Day and Good Friday.
The net asset value of the shares of each International Fund is determined
as of the close of the regular session on the NYSE, which is generally at 4:00
p.m., New York City time, on each day that trading is conducted on the NYSE. The
net asset value per share is calculated separately for each class, by taking the
sum of the value of each International Fund's investments and any cash or other
assets, subtracting liabilities, and dividing by the total number of shares
outstanding per class. All expenses, including the fees payable to the Adviser,
are accrued daily. For net asset value determination purposes, securities quoted
in foreign currencies are translated into U.S. dollars at the current exchange
rates (determined at 4:00 p.m. London time) or at such rates as the Trustees may
determine. As a result, to the extent an International Fund holds securities
quoted or denominated in a foreign currency, fluctuations in the value of such
currencies in relation to the U.S. dollar will affect the net asset value of
such International Fund's shares even though there has not been any change in
the value of such securities as quoted in the foreign currency. For purposes of
this computation, the securities in each International Fund's portfolio are,
except as described below, valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other method as the Trustees believe would accurately reflect their fair
value.
Foreign securities trading may not take place on all days on which the
NYSE is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Accordingly, the determination of the net asset
value of an International Fund's shares may not take place contemporaneously
with the determination of the prices of investments held by such International
Fund. Events affecting the values of investments that occur between the time
their prices are determined and the close of regular trading on the NYSE on each
day that the NYSE is open will not be reflected in the net asset value of an
International Fund's shares unless the Adviser or Subadviser, under the
supervision of such International Fund's Board of Trustees, determines that the
particular event would materially affect net asset value. As a result, the net
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asset value of an International Fund's shares may be significantly affected by
such trading on days when a shareholder has no access to such International
Fund.
For purposes of the computation of net asset value, each of the
International Funds values securities held in its respective portfolios as
follows: readily marketable portfolio securities listed on an exchange are
valued, except as indicated below, at the last sale price at the close of the
exchange on the business day as of which such value is being determined.
However, where a foreign securities market remains open at the time that the
Fund values its portfolio securities, or closing prices of securities from that
market may not be retrieved because of local time differences or other
difficulties in obtaining such prices at that time, last sale prices in such
market at a point in time most praticable to timely valuation of the Fund may be
used. If there has been no sale on such day, the securities are valued at the
mean of the closing bid and asked prices on such day. If no bid or asked prices
are quoted on such day, then the security is valued by such method as the
Trustees of the International Funds shall determine in good faith to reflect its
fair value.
Readily marketable securities, including certain options, not listed on an
exchange but admitted to trading on the National Association of Securities
Dealers Automatic Quotations, Inc. ("NASDAQ") National List (the "List") are
valued in like manner. Portfolio securities traded on more than one exchange are
valued at the last sale price on the business day as of which such value is
being determined at the close of the exchange representing the principal market
for such securities.
Readily marketable securities, including certain options traded only in
the over-the-counter market and listed securities whose primary market is
believed by the Adviser or Subadviser to be over-the-counter (excluding those
admitted to trading on the List) are valued at the mean of the current bid and
asked prices as reported by such sources as the Trustees of the International
Funds deem appropriate to reflect their fair market value. However, fixed-income
securities (except short-term securities) may be valued on the basis of prices
provided by a pricing service when such prices are believed by the Adviser or
Subadviser to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account institutional size trading in similar groups of
securities and any developments related to specific securities. Portfolio
securities underlying listed call options will be valued at their market price
and reflected in net assets accordingly. Premiums received on call options
written by an International Fund will be included in the liability section of
the Statement of Assets and Liabilities as a deferred credit and subsequently
adjusted (marked-to-market) to the current market value of the option written.
Investments for which market quotations are not readily available are valued at
fair value as determined in good faith by the Trustees of the International
Funds.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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The International Funds intend to distribute to shareholders of the
International Funds on an annual basis, substantially all of such respective
periods' investment company taxable income, if any, for each respective
International Fund. Such distributions generally will be taxable to shareholders
as ordinary income for federal income tax purposes.
Upon a redemption or other disposition of shares of a Fund, a shareholder
will generally recognize gain or loss in an amount equal to the difference
between the amount realized and the shareholder's tax basis in such shares.
Generally, such gain or loss will be capital gain or loss, if the shares are
held as capital assets and will be long-term capital gain or loss if the
shareholder's holding period for such shares exceeds one year.
Capital gains, if any, realized by each of the International Funds during
their fiscal year will be distributed to the respective shareholders shortly
after the end of such fiscal year. Distributions of the International Funds' net
capital gain, when designated as such, will be taxable to shareholders as
long-term capital gain, regardless of how long the shareholders have held their
shares.
Each income dividend and capital gains distribution, if any, declared by
the International Funds on the outstanding shares of any International Fund
will, at the election of each shareholder, be paid in cash or reinvested in
additional full and fractional shares of that International Fund at the net
asset value as of the close of business on the payment date. Such distributions,
to the extent they would otherwise be taxable, will be taxable to shareholders
regardless of whether paid in cash or reinvested in additional shares. An
election to receive dividends and distributions in cash or shares is made at the
time of the initial investment and may be changed by notice received by the
International Funds from a shareholder at least 30 days prior to the record date
for a particular dividend or distribution on shares of each International Fund.
There is no charge in connection with the reinvestment of dividends and capital
gains distributions.
For Federal income tax purposes, dividends that are declared by an
International Fund in October, November or December of any year and payable to
shareholders of record on a specified date in such a month and actually paid in
January of the following year will be treated as if they were paid on December
31 of the year in which they were declared. Therefore, such dividends will
generally be taxable to a shareholder in the year declared rather than the year
paid.
Shareholders will be advised annually as to the Federal tax status of
dividends and capital gains distributions made by each International Fund for
the preceding year.
There is no fixed dividend rate and there can be no assurance that an
International Fund will pay any dividends or realize any gains. The amount of
any dividend or distribution paid by each International Fund depends upon the
realization by the International Fund of income and capital gains from that
International Fund's investments. All dividends and distributions will be made
to shareholders of an International Fund solely from assets of that
International Fund.
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Payment (either in cash or in portfolio securities) received by a
shareholder upon redemption of his shares, or an exchange of shares in one
International Fund for shares in another fund, assuming the shares constitute
capital assets in his hands, will result in long-term or short-term capital
gains (or losses) depending upon the shareholder's holding period and basis in
respect of shares redeemed. Any loss realized by a shareholder on the sale of
International Fund shares held for six months or less will be treated for
Federal income tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares. Note that any loss realized on the sale of shares will
be disallowed to the extent the shares disposed of are replaced within a period
of 61 days beginning 30 days before the disposition of such shares. In such
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
Each International Fund intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), as amended, so that it will not be liable for Federal income taxes to
the extent that its net taxable income and net capital gains are distributed to
shareholders. Accordingly, each International Fund must, among other things, (a)
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currencies, or other income
(including but not limited to gains from futures and forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the International Fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
RICs and other securities, with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the value of the International
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities) or of two or more
issuers which the International Fund controls and which are engaged in the same
or related trades or businesses. Foreign currency gains that are not 'directly
related' to the International Fund's principal business of investing in stock or
securities may be excluded by Treasury Regulations from income that counts
toward the 90% of gross income requirement described above. The Treasury
Department has not yet issued any such regulations.
Since the International Funds are not treated as a single entity for
Federal income tax purposes, the performance of one International Fund will have
no effect on the income tax liability of shareholders of another International
Fund. A dividend or capital gains distribution with respect to shares of any
International Fund held by a tax-deferred or qualified retirement plan, such as
an IRA, Keogh Plan or corporate pension or profit sharing plan, will not be
taxable to the plan. Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the character of the
income earned by the qualified plan.
As a regulated investment company, each International Fund will not be
subject to Federal income tax on income and gains distributed to shareholders if
it distributes at least 90% of its investment company taxable income to
shareholders each year but will be subject to tax on its income and gains to the
extent that it does not distribute to its shareholders an amount equal to such
income and gains. In addition, each International Fund will be subject to a
nondeductible 4% excise tax on the excess, if any, of certain required
distribution amounts over the amounts
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actually distributed by that International Fund. To the extent possible, each
International Fund intends to make such distributions as may be necessary to
avoid this excise tax.
Some of the investment practices of each International Fund are subject to
special provisions that, among other things, may defer the use of certain losses
of such International Funds and affect the holding period of the securities held
by the International Funds and, particularly in the case of transactions in or
with respect to foreign currencies, the character of the gains or losses
realized. These provisions may also require the International Fund to
mark-to-market some of the positions in their respective portfolios (i.e., treat
them as if they were closed out), which may cause such International Funds to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the distribution requirements for qualification as
a regulated investment company and for avoiding income and excise taxes. Each
International Fund will monitor its transactions and may make certain tax
elections in order to mitigate the effect of these rules and prevent
disqualification of the International Fund as a regulated investment company.
The International Funds may make investments denominated in a foreign
currency. Gains or losses attributable to dispositions of foreign currency or to
foreign currency contracts, or to fluctuations in exchange rates between the
time an International Fund accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time the International
Fund actually collects such income or pays such liabilities, are generally
treated as ordinary income or ordinary loss. Similarly, gains or losses on the
disposition of debt securities held by an International Fund, if any,
denominated in foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition dates, also are generally
treated as ordinary income or loss. These gains and losses increase or decrease
the amount of the International Fund's net investment income available for
distribution.
The International Funds intend to invest in, among other things, foreign
securities. If, in connection with such investments, an International Fund owns
shares of stock in certain foreign investment entities, referred to as passive
foreign investment companies ("PFICs"), such International Fund may be subject
to Federal income tax, and additional charges in the nature of interest, on a
portion of any "excess distribution" from such company or gain from the
disposition of such shares, even if the entire distribution or gain is
distributed by the International Fund to its shareholders. If an International
Fund were able and elected to treat a PFIC as a "qualified electing fund," in
lieu of the treatment described above, such International Fund would be required
each year to include in income, the International Fund's pro rata share of the
ordinary earnings and net capital gains of the company, whether or not actually
received by the International Fund. The Code and proposed Treasury Regulations
would each allow certain regulated investment companies to elect to
mark-to-market their stock in certain PFICs at the end of each taxable year,
whereby the International Funds would include in their taxable income each year
any unrealized gain on such PFIC investments. In order to distribute the income
includible in an International Fund's income under either election, maintain its
qualification as a regulated investment company, and avoid income or excise
taxes, such International Fund may be required to liquidate portfolio securities
that it might otherwise have continued to hold. In the case of the proposed
Treasury Regulations, there can be no assurance that these regulations will be
finalized in the form proposed or as to the effective date of any such final
regulations.
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If, as is expected, more than 50 % of the value of each International
Fund's total assets at the close of its taxable year consists of stock or
securities of foreign corporations, it will be eligible to file an election with
the Internal Revenue Service to "pass through" to its shareholders the amount of
foreign income taxes (including withholding taxes) paid by such International
Fund. Pursuant to this election a shareholder will: (1) include in gross income
(in addition to the taxable dividends actually received) the shareholder's pro
rata share of the foreign income taxes paid by such International Fund; (2)
treat the shareholder's pro rata share of the foreign income taxes paid by such
International Fund as paid by the shareholder; and (3) subject to certain
limitations, either deduct the pro rata share of such foreign income taxes in
computing the shareholder's taxable income or use it as a foreign tax credit
against federal income taxes. Each shareholder will be notified within 60 days
after the close of an International Fund's taxable year whether the foreign
income taxes paid by an International Fund will "pass through" for that year
and, if so, such notification will designate the shareholder's portion of the
foreign income taxes paid to each country and the portion of dividends that
represents income derived from sources derived within each country.
Generally, an International Fund may not elect to "pass through" to its
shareholders foreign tax credits for foreign taxes paid by the Fund if it fails
to meet certain holding period requirements with respect to the stock and
securities in respect of which such foreign taxes were paid. Moreover,
shareholders of the International Funds must also satisfy certain holding period
requirements with respect to their shares of the International Funds to be
entitled to claim foreign tax credits with respect to dividends received from
the International Funds.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's Federal income tax (before the credit)
attributable to the shareholder's total foreign source taxable income. For this
purpose, the portion of dividends and distributions paid by each International
Fund from its foreign source income will be treated as foreign source income.
Each International Fund's gains and losses from the sale of securities, and
certain currency gains and losses, will generally be treated as derived from
United States sources. The limitation on the foreign tax credit is applied
separately to foreign source "passive income," such as dividend income. Because
of these limitations, a shareholder may be unable to claim a credit for the full
amount of the shareholder's proportionate share of foreign income taxes paid by
such International Fund. In addition, no deduction for foreign income taxes may
be claimed by a shareholder who does not itemize deductions. Shareholders are
advised to consult their own tax advisers on the application of the foreign tax
credit rules to their own particular circumstances.
Each International Fund is required to withhold and remit to the U.S.
Treasury 31% of the dividends, capital gain distributions or the proceeds of any
redemptions or exchanges of shares with respect to any shareholder who fails to
furnish the International Funds with a correct taxpayer identification number,
who under-reports dividend or interest income or who fails to certify to the
International Funds that he or she is not subject to such withholding. An
individual's tax identification number is his or her social security number.
The foregoing is only a brief summary of some of the material U.S. federal
income tax considerations generally relating to an investment in the
International Funds. It is based upon the Code, applicable Treasury regulations
and administrative rulings and pronouncements of the Internal Revenue Service,
all as in effect on the date hereof and which are subject to change,
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possibly with retroactive effect. This summary is directed to investors who are
U.S. persons (as determined for U.S. federal income tax purposes) and does not
purport to discuss all of the income tax consequences applicable to the
International Funds or to all categories of investors, some of whom may be
subject to special rules (including dealers in securities, insurance companies,
non-U.S. persons and tax-exempt entities). Investors are urged to consult their
tax advisers regarding the specific U.S. federal income tax consequences of an
investment in the International Funds, as well as the effects of state, local
and foreign tax laws and any proposed tax law changes.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the
International Funds, the Adviser and Subadviser are responsible for the
investment decisions and the placing of the orders for portfolio transactions
for the International Funds. Portfolio transactions for the International Funds
are normally effected by brokers.
The International Funds have no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter or other
entity. In placing orders, it is the policy of the International Funds to obtain
the best price and execution for its transactions. Where best price and
execution may be obtained from more than one broker or dealer, the Adviser or
Subadviser may, in its discretion, purchase and sell securities through brokers
and dealers who provide research, statistical and other information to the
Adviser or Subadviser. Such services may be used by the Adviser or Subadviser
for all of their investment advisory accounts, and accordingly, not all such
services may be used by the Adviser or Subadviser in connection with the
International Funds. If an International Fund determines in good faith that the
amount of transaction costs charged by a broker or dealer is reasonable in
relation to the value of the brokerage and research and statistical services
provided by the executing broker or dealer, the International Fund may utilize
such broker or dealer although the transaction costs of another broker or dealer
are lower. The supplemental information received from a broker or dealer is in
addition to the services required to be performed by the Adviser under the
Investment Advisory Agreement or Subadviser under the Investment Subadvisory
Agreement, and the expenses of the Adviser or Subadviser will not necessarily be
reduced as a result of the receipt of such information
Neither the International Funds, the Adviser nor the Subadviser on behalf
of the International Funds have entered into agreements or understandings with
any broker or dealer regarding the placement of securities transactions. Because
of research or information to the Adviser or Subadviser for use in rendering
investment advice to the International Funds, such information may be supplied
at no cost to the Adviser or Subadviser and, therefore, may have the effect of
reducing the expenses of the Adviser or Subadviser in rendering advice to the
International Funds. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser and Subadviser probably
does not reduce the overall expenses of the Adviser or Subadviser to any
material extent.
The investment information provided to the Adviser and Subadviser is of
the types described in Section 28(e)(3) of the Securities Exchange Act of 1934
and is designed to augment
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the Adviser's and Subadviser's own internal research and investment strategy
capabilities. Research and statistical services furnished by brokers through
which the International Funds effect securities transactions are used by the
Adviser and Subadviser in carrying out their investment management
responsibilities with respect to all their client accounts but not all such
services may be utilized by the Adviser and Subadviser in connection with the
International Funds.
The International Funds may deal in some instances in equity securities
which are not listed on an exchange but are traded in the over-the-counter
market. Where transactions are executed in the over-the-counter market, the
International Funds seek to deal with the primary market-makers, but when
necessary in order to obtain the best price and execution, it utilizes the
services of others. In all cases, the International Funds will attempt to
negotiate best execution.
The International Funds may from time to time place orders for the
purchase or sale of securities (including listed call options) with DLJ
Securities, the International Funds' Distributor or other affiliates in
accordance with the provisions of Section 11(a) of the Securities Exchange Act
of 1934 referred to below. With respect to orders placed with DLJ Securities for
execution on a national securities exchange, commissions received must conform
to Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which permit
an affiliated person of a registered investment company (such as the
International Funds), or any affiliated person of such person, to receive a
brokerage commission from such registered investment company provided that such
commission is reasonable and fair compared to the commissions received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, DLJ
Securities and its affiliates are restricted as to the nature and extent of the
brokerage services they may perform for the International Funds. The SEC has
adopted rules under Section 11(a) which permit an investment adviser to a
registered investment company, or the adviser's affiliates, to receive
compensation for effecting, on a national securities exchange, transactions in
portfolio securities of such investment company, including causing such
transactions to be transmitted, executed, cleared and settled and arranging for
unaffiliated brokers to execute such transactions.
To the extent permitted by such rule, DLJ Securities and its affiliates
may receive compensation relating to transactions in portfolio securities of the
International Funds provided that each International Fund enters into a written
agreement, as required by such rules, with that firm authorizing it to retain
compensation for such services. The Trustees of the International Funds have
granted authorization conforming to the requirements of Section 11(a) to the
Adviser and Subadviser to effect transactions in portfolio securities of the
International Funds through their affiliates, DLJ Securities, Autranet, Inc and
Paribas.
The tables below show certain information regarding the payment of
commissions by the DLJ International Funds for the three years ending October
31, 1999.
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<TABLE>
<CAPTION>
Fiscal Years ended October 31
1999 1998 1997
<S> <C> <C> <C>
Total brokerage commissions incurred by the DLJ
Developing Markets Fund .......................... $51,719 $108,279 $232,122
Total dollar amount paid to Paribas .............. $ 0 $ 8,832 $ 8,220
Percentage of total brokerage commissions paid to
Paribas .......................................... 0% 8.16% 3.54%
Percentage of aggregate dollar amount of
transactions involving the payment of commissions
to Paribas ....................................... 0% 10.56% 5.39%
<CAPTION>
Fiscal Years ended October 31
1999 1998 1997
<S> <C> <C> <C>
Total brokerage commissions incurred by the DLJ
International Equity Fund ....................... $208,096 $198,383 $263,075
Total dollar amount paid to Paribas ............. $ 753 $ 572 $ 623
Percentage of total brokerage commissions paid to
Paribas ......................................... 0.36% 0.29% 0.24%
Percentage of aggregate dollar amount of
transactions involving the payment of commissions
to Paribas ...................................... 0.22% 0.78% 0.34%
</TABLE>
DLJ Securities and Autranet, Inc., affiliates of the Advisor and
Subadvisor, did not receive any amounts of such brokerage commissions.
PORTFOLIO TURNOVER
Each International Fund's average annual portfolio turnover rate is the
ratio of the lesser of sales or purchases to the monthly average value of such
securities owned during the year, excluding from both the numerator and the
denominator all securities with maturities at the time of acquisition of one
year or less. For the year ended October 31, 1999, the portfolio turnover rates
for the Developing Markets Fund and the International Equity Fund were 36.93%
and 81.97%, respectively. A higher rate involves greater transaction costs to an
International Fund and may result in the realization of net capital gains, which
would be taxable to shareholders when distributed.
INVESTMENT PERFORMANCE INFORMATION
30
<PAGE>
Each International Fund may furnish data about its investment performance
in advertisements, sales literature and reports to shareholders. "Total return"
represents the change in value of $1,000 invested at the maximum public offering
price for a period assuming reinvestment of all dividends and distributions.
Quotations of yield will be based on the investment income per share
earned during a particular 30 day period, less expenses accrued during the
period ("net investment income") and will be computed by dividing net investment
income by the maximum offering price per share on the last day of the period,
according to the following formula:
YIELD = 2[(A-B + 1)^6-1]
CD
where A = dividends and interest earned during the period, B = expenses accrued
for the period (net of any reimbursements), C = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and D = the maximum offering price per share on the last day of the period.
Quotations of average annual total return will reflect only the
performance of an investment in any International Fund during the particular
time period shown. Each International Fund's total return and current yield may
vary from time to time depending on market conditions, the compositions of its
portfolio and operating expenses. These factors and possible differences in the
methods used in calculating yield should be considered when comparing each
International Fund's current yield to yields published for other investment
companies and other investment vehicles. Average annual total return and yield
should also be considered relative to change in the value of each International
Fund's shares and the risks associated with each International Fund's investment
objectives, policies and risk considerations. At any time in the future, average
annual total returns and yield may be higher or lower than past total returns
and yields and there can be no assurance that any historical return or yield
will continue.
From time to time evaluations of performance are made by independent
sources that may be used in advertisements concerning each International Fund.
These sources include Lipper Inc., Weisenberger Investment Company Service,
Barron's, Business Week, Kiplinger's Personal Finance, Financial World, Forbes,
Fortune, Money, Personal Investor, Sylvia Porter's Personal Finance, Bank Rate
Monitor, Morningstar and The Wall Street Journal.
In connection with communicating its yield or average annual total return
to current or prospective shareholders, each International Fund may also compare
these figures to the performance of other mutual funds tracked by mutual fund
rating services or to other unmanaged indexes which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
Quotations of each International Fund's average annual total return will
represent the average annual compounded rate of return of a hypothetical
investment in each International Fund over periods of 1, 5, and 10 years (or up
to the life of each International Fund), and are calculated pursuant to the
following formula:
31
<PAGE>
P(1+T)^n=ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). All
average annual total return figures will reflect the deduction of International
Fund expenses (net of certain expenses reimbursed by the Adviser and Subadviser)
on an annual basis, and will assume that all dividends and distributions are
reinvested and will deduct the maximum sales charge, if any is imposed. The
International Funds may also quote total return that eliminates any applicable
initial sales charge or contingent deferred sales charge.
For the year ended October 31, 1999, the average annual total return for
the Class A and Class B shares of the Developing Markets Fund was 39.82% and
38.79%, respectively, and 21.76% and 20.86% for Class A and Class B shares,
respectively, of the International Equity Fund. Assuming deduction of the
maximum sales charge, the average annual total return for the Class A and Class
B shares of the Developing Markets Fund was 31.78% and 34.79%, respectively, and
14.76% and 16.86% for Class A and Class B shares, respectively, of the
International Equity Fund. For the period from inception of the International
Funds' investment operations on September 13, 1995 through October 31, 1999, the
average annual total return for the Class A and Class B shares of the Developing
Markets Fund was 0.02% and -0.77%, respectively, and 10.39% and 9.58% for Class
A and Class B shares, respectively, of the International Equity Fund. Assuming
deduction of the maximum sales charge, the average annual total return for the
Class A and Class B shares of the Developing Markets Fund was -1.40% and -0.77%,
respectively, and 8.82% and 9.58% for Class A and Class B shares, respectively,
of the International Equity Fund.
32
<PAGE>
SHARES OF BENEFICIAL INTEREST
Set forth below is certain information as to persons who owned 5% or more
of a Fund's outstanding shares as of July , 2000.
Nature of
Developing Markets Fund Name and Address % of Class Ownership
----------------------- ---------------- ---------- ---------
Class A Balso and Co. Record(a)
c/o Chase Manhattan Bank
PO Box 1768
New York, NY 10163-1768
Stangeland Family Ltd Record(a)
A Partnership
C/o Whittier Trust Co.
1600 Huntington Drive
South Pasadena, CA 91030
Class B None
33
<PAGE>
International Equity Fund
-------------------------
Class A Balso and Co. Record(a)
c/o Chase Manhattan Bank
PO Box 1768
New York, NY 10163-1768
Donaldson Lufkin Jenrette
Securities Corporation Inc. Record(a)
PO Box 2052
Jersey City, NJ 07303-9998
Bankers Trust Company Record(a)
FBO 244809424
PO Box 9005
Church Street Station
New York, NY 10008
Donaldson, Lufkin & Jenrette Record(a)
Securities Corporation Inc
PO Box 2052
Jersey City, NJ 07303-2052
Class B None
----------
(a) Such Recordholder disclaims beneficial ownership.
As of the date of this Statement of Additional Information the Trustees
and Officers of the Funds as a group owned less than 1% of the outstanding
shares of either Fund.
The Adviser manages accounts over which it has discretionary power to vote
or dispose of securities held in such accounts and which accounts hold in the
aggregate, as of July ______, 2000, ______ shares (______%) of the Developing
Markets Fund and ______ shares (______%) of the International Equity Fund.
GENERAL INFORMATION
Organization and Capitalization
The Trust was formed on May 31, 1995 as a 'business trust' under the laws
of the State of Delaware.
The Agreement and Declaration of Trust provides that no Trustee, officer,
employee or agent of the International Funds is liable to the International
Funds or to a shareholder, nor is any Trustee, officer, employee or agent liable
to any third persons in connection with the affairs of
34
<PAGE>
the Funds, except as such liability may arise from his or its own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties. It also provides that all third parties shall look solely to the
property of the International Funds or the property of the appropriate
International Fund for satisfaction of claims arising in connection with the
affairs of an International Fund. With the exceptions stated, the Agreement and
Declaration of Trust permits the Trustees to provide for the indemnification of
Trustees, officers, employees or agents of the International Funds against all
liability in connection with the affairs of the International Funds.
All shares of the International Funds when duly issued will be fully paid
and non-assessable. The Trustees are authorized to re-classify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the desire to
establish one or more additional International Funds with different investment
objectives, policies, risk considerations or restrictions, may create additional
series or classes of shares. Any issuance of shares of such additional series
would be governed by the 1940 Act and the laws of the State of Delaware.
Counsel and Independent Auditors
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, serves as
legal counsel for the DLJ Opportunity Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed as independent auditors for the DLJ Opportunity Funds.
Custodian and Transfer Agent
Citibank, N.A., 111 Wall Street, New York, New York 10043 serves as
custodian to the DLJ Opportunity Funds.
PFPC Inc., 211 S. Gulph Road, King of Prussia, PA 19406-3101 serves as
Transfer Agent for the DLJ Opportunity Funds.
Additional Information
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the International
Funds with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the offices of the SEC in Washington, D.C.
Financial Statements
The audited financial statements of each International Fund for the fiscal
year ended October 31, 1999 and the report of the Funds' independent auditors in
connection therewith are included in the October 31, 1999 Annual Report to
Shareholders. The Annual Report is incorporated by reference into this Statement
of Additional Information. You can obtain a copy
35
<PAGE>
of the International Funds' Annual Report by writing or calling the
International Funds at the address or telephone numbers set forth on the cover
of this Statement of Additional Information.
The unaudited financial statements for the six months ended April 30, 2000
included in the Semi-Annual Report are incorporated by reference into this
Statement of Additional Information.
36
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds.
RATINGS OF CORPORATE BONDS
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having adequate capacity
to pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB - rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B - rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC - debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are
37
<PAGE>
not made on the date due even if the applicable grace period had not expired,
unless S&P believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's:
Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds A-1 because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
38
<PAGE>
PART C
Other Information
Item 23 EXHIBITS
(a) Form of Agreement and Declaration of Trust*
(b) Form of Bylaws*
(c) Not Applicable
(d) (1) Form of Investment Advisory Agreement for the DLJ
Developing Markets Fund and DLJ International Equity
Fund*
(2) Form of Sub-Advisory Agreement for the DLJ Developing
Markets Fund and the DLJ International Equity Fund*
(3) Form of Investment Advisory Agreement for the DLJ
Municipal Money Fund and the DLJ U.S. Government
Money Fund*
(4) Form of Investment Advisory Agreement for the DLJ
High Income Fund*
(e) Form of Distribution Agreement*
(f) Not Applicable
(g) (1) Form of Services Agreement for the DLJ Developing
Markets Fund, DLJ International Equity Fund, DLJ
Municipal Money Fund and DLJ U.S. Government Money
Fund*
(2) Form of Amendment to Services Agreement for the DLJ
High Income Fund*
(h) Form of Joint Fidelity Bond for the DLJ Opportunity Funds*
(i) Legal Opinion*
(j) (1) Consent of Independent Auditors**
(2) Powers of Attorney*
(k) Not Applicable
(l) (1) Form of Subscription Agreement with initial
shareholders for the DLJ Developing Markets Fund and
the DLJ International Equity Fund*
(2) Form of Subscription Agreement with initial
shareholders for the DLJ Municipal Money Fund and the
DLJ U.S. Government Money Fund*
--------
* Previously filed.
** To be filed upon amendment.
1
<PAGE>
(3) Form of Subscription Agreement with initial
shareholders for the DLJ High Income Fund*
(m) (1) Rule 12b-1 Plans for the DLJ Developing Markets Fund
and the DLJ International Equity Fund*
(2) Rule 12b-1 Plans for the DLJ Municipal Money Fund and
the DLJ U.S. Government Money Fund*
(3) Rule 12b-1 Plans for the DLJ High Income Fund*
(4) Rule 12b-1 Plans for the Class C Shares for the DLJ
Developing Markets Fund, DLJ International Equity
Fund and DLJ High Income Fund*
(5) Rule 12b-1 Plans for the Class R Shares for the DLJ
Developing Markets Fund, DLJ International Equity
Fund and DLJ High Income Fund**
(n) (1) Rule 18f-3 Plan for the DLJ Developing Markets Fund
and the DLJ International Equity Fund*
(2) Rule 18f-3 Plan for the DLJ Municipal Money Fund and
the DLJ U.S. Government Money Fund*
(3) Rule 18f-3 Plan for the DLJ High Income Fund*
Item 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable
Item 25 INDEMNIFICATION
Registrant's Agreement and Declaration of Trust provides that
the Trust (for the appropriate Fund) shall indemnify each person who is or has
been a trustee or officer of the Trust (including persons who serve, or have
served, at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants and counsel fees, incurred in
connection with the defense or disposition of any action, suit or proceeding,
whether civil or criminal, before any court or administrative or legislative
body, in which such person may be or may have been threatened, while in office
or thereafter, by reason of being or having been such a person, except with
respect to any matter as to which it has been determined that such person (i)
did not act in good faith in the reasonable belief that such person's action was
in the best interests of the Trust or (ii) had acted with willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
The Investment Advisory Agreement between Registrant and DLJ
Asset Management Group, Inc. (formerly Wood, Struthers & Winthrop Management
Corp.) the "Adviser" and the Investment Sub-Advisory Agreement among the
Registrant, AXA Investment Managers GS Ltd (the "Sub-Adviser") and (the
"Sub-Advisory Agreement") provides that Adviser will not be liable thereunder
for any mistake of judgment or in any event whatsoever except for lack of good
faith and that nothing therein shall be deemed to protect Adviser and
Sub-Adviser against any liability to Registrant or its security holders to which
they would otherwise be subject by reason
2
<PAGE>
of willful misfeasance, bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of its duties and
obligations thereunder.
The Sub-Advisory Agreement provides that the Sub-Adviser will
indemnify DLJ Asset Management Group, Inc. (DLJAM) and its directors, officers,
employees, agents, associates and controlling persons while acting in any
capacity set forth in the Sub-Advisory Agreement except such activities arising
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties involved in the conduct of such person's office.
The Sub-Advisory Agreement provides that DLJAM will indemnify
the Sub-Adviser and its directors, officers, employees, agents, associates and
controlling persons while acting in any capacity set forth in the Sub-Advisory
Agreement except such activities arising by reason of willful misfeasance, bad
faith, gross neg1igence or reckless disregard to the duties involved in the
conduct of such person's office.
The Distribution Agreement between the Registrant and
Donaldson, Lufkin & Jenrette Securities Corporation provides that Registrant
will indemnify, defend and hold Donaldson, Lufkin & Jenrette Securities
Corporation, and any other person who controls it within the meaning of Section
15 of the Investment Company Act of 1940, free and harmless from and against any
and all claims, demands, liabilities and expenses which Donaldson, Lufkin &
Jenrette Securities Corporation or any controlling person may incur arising out
of or based upon any alleged untrue statement of a material fact contained in
Registrant's Registration Statement, Prospectus or Statement of Additional
Information or arising out of, or based upon any alleged omission to state a
material fact required to be stated in any one of the foregoing or necessary to
make the statements in any one of the foregoing not misleading.
The foregoing summaries are qualified by the entire text of
Registrant's Agreement and Declaration of Trust, the Investment Advisory
Agreements between Registrant and the Advisers and the Distribution Agreement
between Registration and Donaldson, Lufkin & Jenrette Securities Corporation.
The Registrant's Investment Advisory Agreement either have been previously filed
or will be filed by amendment, and the Agreement and Declaration of Trust and
the Distribution Agreement have been previously filed in response to Item 23.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee, officer
or the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such trustee, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The Equitable Life Assurance Society of the United States (the
parent of Advisers' parent) carries for itself and its subsidiaries Directors
and Officers Liability Insurance. Coverage under this policy has been extended
to directors and officers of the investment companies managed by the Advisers.
Under this policy, outside trustees would be covered up to the limits specified
for any claim against them for acts committed in their capacities as members of
the Board.
Item 26 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
The description of the Advisor under the caption "Fund
Management" in the Prospectus and in the Statement of Additional Information
constituting Parts A and B, respectively, of this Registration Statement as well
as the Advisor's respective current Forms ADV are incorporated by reference
herein.
Item 27 PRINCIPAL UNDERWRITERS
3
<PAGE>
(a) Donaldson, Lufkin & Jenrette Securities Corporation, the
Registrant's Distributor (Underwriter) also acts as
Distributor for the following investment companies:
DLJ Focus Funds: DLJ Small Company Value Fund, DLJ Fixed
Income Fund, DLJ Growth and Income Fund, DLJ Municipal Trust
Fund and DLJ Core Equity Fund.
DLJ Select Funds: DLJ Select Growth Fund and DLJ Select
Technology Fund.
(b) For information required with respect to the directors and
officers of the Funds' Distributor, reference is made to the
Form BD filed by the Distributor under the Securities Exchange
Act of 1934.
(c) Not Applicable
Item 28 LOCATION OF ACCOUNTS AND RECORDS
The majority of accounts, books and other documents required
to be maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder are maintained at the offices of the DLJ Opportunity Funds at
277 Park Avenue, New York, New York 10172 (see "Management" in the Prospectus).
Additional records are maintained at the offices of Citibank, N.A., the
Registrant's Custodian, 111 Wall Street, New York, New York 10043.
Item 29 MANAGEMENT SERVICES
Not applicable
Item 30 UNDERTAKINGS
Not applicable
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York and the State of New York on the 1st
day of June, 2000.
DLJ Opportunity Funds
By: /s/ G. Moffett Cochran
----------------------
Name: G. Moffett Cochran
Title: President
Pursuant to the requirements of the Securities Act of 1933,
the Registration Statement has been signed below by the following persons in the
capacities and on the date included:
Signature Title Date
--------- ----- ----
/s/ G. Moffett Cochran Trustee and President June 1, 2000
-----------------------
G. Moffett Cochran
/s/ Martin Jaffe* Trustee and Vice President, June 1, 2000
----------------------- Secretary and Treasurer
Martin Jaffe
/s/ Robert E. Fischer* Trustee June 1, 2000
-----------------------
Robert E. Fischer
/s/ Wilmot H. Kidd III* Trustee June 1, 2000
-----------------------
Wilmot H. Kidd III
o Signature by G. Moffett Cochran pursuant to a Power of Attorney filed with
the Securities and Exchange Commission.
5
<PAGE>
Exhibits
--------
N/A
6
