INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated July __, 1999, between
DLJdirect Mutual Funds and its three series, DLJdirect Technology Fund,
DLJdirect S&P 500 Fund and DLJdirect Growth Fund (individually, each a "Fund"
and collectively, the "Trust"), a Delaware business trust, and DLJ Investment
Management Corp. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act
as investment adviser to the Trust with respect to the investment of the Trust's
assets and to supervise and arrange the purchase and sale of securities and
other assets held in the investment portfolio of the Trust in accordance with
the Trust's objectives and policies. The Adviser may delegate any or all of its
responsibilities to one or more sub-advisers or administrators, subject to the
approval of the Board of Trustees of the Trust. Such delegation shall not
relieve the Adviser of its duties and responsibilities hereunder.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Trust
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Trust's assets in accordance with the Trust's
objectives and policies and in connection therewith have complete discretion in
purchasing and selling securities and other assets for the Trust and in voting,
exercising consents and exercising all other rights appertaining to such
securities and other assets on behalf of the Trust, (ii) supervise continuously
the investment program of the Trust and the composition of its investment
portfolio, (iii) arrange, subject to the provisions of Section 3 hereof, for the
purchase and sale of securities and all other assets held in the investment
portfolio of the Trust, (iv) retain, from time to time, in its sole discretion,
one or more sub-adviser(s) (each, a "Sub-Adviser") that shall act as sub-adviser
with
respect to certain assets designated by the Advisor, in its sole discretion, to
be managed by such Sub-Adviser in accordance with the terms and conditions set
forth herein and to supervise each Sub-Adviser and (v)oversee the administration
of all aspects of the Trust's business and affairs and provide, or arrange for
others whom it believes to be competent to provide, certain services as
specified in Section 9 herein in accordance with the terms and conditions
provided below. Nothing contained herein shall be construed to restrict the
Trust's right to hire its own employees or to contract for administrative
services to be performed by third parties, including but not limited to, the
calculation of the net asset value of the Trust's shares.
(b) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder, (ii) any other applicable provision of law,
(iii) the provisions of the Declaration of Trust and By-Laws of the Trust, as
such documents are amended from time to time, (iv) the investment objectives,
policies and restrictions applicable to the Trust as set forth in its
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust.
(c) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the Act) of the
Adviser except that the Board of Trustees of the Trust may approve reimbursement
to the Adviser of the pro rata portion of the salaries, bonuses, health
insurance, retirement benefits and all similar employment costs for the time
spent on Trust and Fund operations (other than the provision of investment
advice) of all personnel employed by the Adviser who devote substantial time to
Trust operations. Subject to the foregoing, the Trust shall be responsible for
the payment of all the Trust's other expenses, including (i) payment of the fees
payable to the Adviser under Section 5 hereof; (ii) organizational expenses;
(iii) brokerage fees and commissions; (iv) taxes; (v) interest charges on
borrowings; (vi) the cost of liability insurance or fidelity bond coverage for
the Trust officers and employees, and trustees' and officers' errors and
omissions insurance coverage; (vii) legal, auditing and accounting fees and
expenses; (viii) charges of the Trust's custodian, transfer
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agent and dividend disbursing agent; (ix) the Trust's pro rata portion of dues,
fees and charges of any trade association of which the Trust is a member; (x)
the expenses of printing, preparing and mailing proxies and reports, including
the Trust's prospectus and statement of additional information, and notices to
shareholders; (xi) filing fees for the registration or qualification of the
Trust and its shares under federal or state securities laws; (xii) the fees and
expenses involved in registering and maintaining registration of the Trust's
shares with the Securities and Exchange Commission; (xiii) the expenses of
holding shareholder meetings; (xiv) the compensation, including fees, of any of
the Trust's trustees, officers or employees who are not affiliated persons of
the Adviser; (xv) all expenses of computing the Trust's net asset value per
share, including any equipment or services obtained solely for the purpose of
pricing shares or valuing the Trust's investment portfolio; (xvi) expenses of
personnel performing shareholder servicing functions and all other distribution
expenses payable by the Trust; and (xvii) litigation and other extraordinary or
non-recurring expenses and other expenses properly payable by the Trust.
(d) The Adviser shall give the Trust the benefit of its
best judgment and effort in rendering services hereunder, but neither the
Adviser nor any of its officers, directors, employees, agents or controlling
persons shall not be liable for any act or omission or for any loss sustained by
the Trust in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(e) Nothing in this Agreement shall prevent the Adviser or
any director, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its directors, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided, however that the
Adviser will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations under this Agreement.
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3. Portfolio Transactions and Brokerage
(a) The Adviser is authorized, for the purchase and sale of
the Trust's portfolio securities, to employ such securities brokers and dealers
as may, in the judgment of the Adviser, implement the policy of the Trust to
obtain the best net results taking into account such factors as price, including
commission or dealer spread, the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. Consistent with this policy, the
Adviser is authorized to direct the execution of the Trust's portfolio
transactions to dealers and brokers furnishing statistical information or
research deemed by the Adviser to be useful or valuable to the performance of
its investment advisory functions for the Trust in accordance with the
requirements of Section 28(e) of the Securities Exchange Act of 1934, as
amended.
(b) In the course of the Adviser's execution of portfolio
transactions for the Trust, it is agreed that the Adviser shall employ
securities brokers and dealers which, in its judgment, will be able to satisfy
the policy of the Trust to seek the best execution of its portfolio transactions
at reasonable expenses. For purposes of this agreement, "best execution" shall
mean prompt, efficient and reliable execution at the most favorable price
obtainable. Under such conditions as may be specified by the Trust's Board of
Trustees in the interest of its shareholders and to ensure compliance with
applicable law and regulations, the Adviser may (a) place orders for the
purchase or sale of the Trust's portfolio securities with its affiliate, (b) pay
commissions to brokers other than its affiliate which are higher than might be
charged by another qualified broker to obtain brokerage and/or research services
considered by the Adviser to be useful or desirable in the performance of its
duties hereunder and for the investment management of other advisory accounts
over which it or its affiliates exercise investment discretion; and (c) consider
sales by brokers (other than its affiliate distributor) of shares of the Trust
and any other mutual fund for which it or its affiliates act as investment
adviser, as a factor in its selection of brokers and dealers for the Trust's
portfolio transactions.
4. Agency Cross Transactions. From time to time, the Adviser
or brokers or dealers affiliated with it may find themselves in a position to
buy for certain of their brokerage clients securities which the Adviser's
investment advisory clients wish to sell, and to sell for certain of their
brokerage clients securities which advisory clients wish to buy.
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Where one of the parties is an advisory client, the Adviser or the affiliated
broker or dealer cannot participate in this type of transaction (known as a
cross transaction) on behalf of an advisory client and retain commissions from
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from one or both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended which permits the Adviser or its affiliates to
participate on behalf of the Account in agency cross transactions if the
advisory client has given written consent in advance. By execution of this
Agreement, each Fund authorizes the Adviser or its affiliates to participate in
agency cross transactions involving the Account. Each Fund may revoke its
consent at any time by written notice to the Adviser.
5. Compensation of the Adviser
(a) With respect to DLJdirect Technology Fund, the Trust
agrees to pay to the Adviser out of the Trust's assets and the Adviser agrees to
accept as full compensation for all services rendered by or through the Adviser
as such, (other than any amounts payable to the Adviser pursuant to paragraph
5(b)) a fee computed and payable monthly in an amount equal to .875% of the
DLJdirect Technology Fund's first $500 million of average daily net assets, with
such amount reduced to (i) .75% of such Fund's next $500 million of average
daily net assets and (ii) .625% of such Fund's average daily net assets over $1
billion, each on an annualized basis. With respect to DLJdirect Growth Fund, the
Trust agrees to pay to the Adviser out of the Trust's assets and the Adviser
agrees to accept as full compensation for all services rendered by or through
the Adviser as such, (other than any amounts payable to the Adviser pursuant to
paragraph 5(b)) a fee computed and payable monthly in an amount equal to the
aggregate of .75% of DLJdirect Growth Fund first $500 million with such amount
reduced to .625% of such Fund's average daily net assets over $500 million on an
annualized basis. With respect to DLJdirect S&P 500 Fund, the Trust agrees to
pay to the Adviser out of the Trust's assets and the Adviser agrees to accept as
full compensation for all services rendered by or through the Adviser as such,
(other than any amounts payable to the Adviser pursuant to paragraph 5(b)) a fee
computed and payable monthly in an amount equal to the aggregate of .25% of
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DLJdirect S&P 500 Fund's first $500 million with such amount reduced to .20% of
such Fund's average daily net assets over $500 million on an annualized basis.
For any period less than a month during which this Agreement is in effect, the
fee shall be prorated according to the proportion which such period bears to a
full month of 28, 29, 30 or 31 days, as the case may be.
(b) The Trust will pay the Adviser separately for any
costs and expenses incurred by the Adviser in connection with distribution of
each of the Fund's shares in accordance with the terms (including proration or
nonpayment as a result of allocations of payments) of Plans of Distribution
(collectively, the "Plan") adopted by the Trust pursuant to Rule 12b-1 under the
Act as such Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Adviser hereunder unless and until this
Agreement shall have been approved by Board Approval and Disinterested Board
Approval (as such terms are defined in such Plan). The Trust reserves the right
to modify or terminate such Plan at any time as specified in the Plan and Rule
12b-1, and this subparagraph shall thereupon be modified or terminated to the
same extent without further action of the parties. The persons authorized to
direct the payment of the funds pursuant to this Agreement and the Plan shall
provide to the Trust's Board of Trustees, and the Trustees shall review, at
least quarterly a written report of the amount so paid and the purposes for
which such expenditures were made.
(c) For purposes of this Agreement, the net assets of
the Trust shall be calculated pursuant to the procedures adopted by resolutions
of the Trustees of the Trust for calculating the net asset value of the Trust's
shares.
6. Net Asset Value Calculation Errors
To the extent the Adviser provides inaccurate
information to the transfer agent or any other party that calculates either
Fund's daily net asset value and such information results in an error in the
calculation of such Fund's net asset value, the Adviser shall bear all costs and
expenses in connection with such error.
7. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser
and each of the Adviser's directors, officers, employees, agents (including any
sub-advisers), associates and controlling persons and the partners, directors,
officers, employees and agents thereof (including any individual who
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serves at the Adviser's request as director, officer, partner, trustee or the
like of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such Indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard
of the duties involved in the conduct of such Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes referred to herein
as "disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee
appears to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and did not involve
disabling conduct by such Indemnitee and (3) with respect to any action, suit
or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust. Notwithstanding the foregoing the Trust shall
not be obligated to provide any such indemnification to the extent such
provision would waive any right which the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the Indemnitee's
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good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Trust unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide a security for such
Indemnitee's undertaking, (B) the Trust shall be insured against losses arising
by reason of any lawful advances, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final decision on the merits by
a court or other body before whom the proceeding was brought that such
Indemnitee is not liable by reason of disabling conduct or, (2) in the absence
of such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-party Trustees of the Trust, or (ii) if such a quorum is not obtainable or
even, if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized
shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these
provisions shall not exclude any other right to which such Indemnitee may be
lawfully entitled.
8. Duration and Termination
This Agreement shall become effective on the date it is
approved by the shareholders of the Trust and shall continue in effect for a
period of two years and thereafter from year to year, but only so long as such
continuation is specifically approved at least annually in accordance with the
requirements of the Act.
This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Trust sixty days written notice (which notice
may be waived by the Trust) or may be terminated by the Trust at any time
without penalty
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upon giving the Adviser sixty days notice (which notice may be waived by the
Adviser), provided that such termination by the Trust shall be directed or
approved by the vote of a majority of the Trustees of the Trust in office at the
time or by the vote of the holders of a "majority" (as defined in the Act) of
the voting securities of the Trust at the time outstanding and entitled to vote
or with respect to paragraph 4(b), by a majority of the Trustees of the Trust
who are not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan. This Agreement shall terminate automatically in the event of its
assignment (as assignment is defined in the Act).
9. Administrative Services
(a) The administrative services to be provided or
arranged for by the Adviser for the trust include the following: (i) maintaining
each Fund's books and records, such as journals, ledger accounts and other
records in accordance with applicable laws and regulations to the extent not
maintained by each Fund's custodian, transfer agent and dividend disbursing
agent, (ii) transmitting purchase and redemption orders for each Fund's shares
to the extent not transmitted by each Fund's distributor or others who purchase
and redeem shares, (iii) initiating all money transfers to each Fund's custodian
and from each Fund's custodian for the payment of each Fund's expenses,
investments, dividends and share redemptions, (iv) reconciling account
information and balances among each Fund's custodian, transfer agent,
distributor, dividend disbursing agent and the Adviser, (v) providing the Funds,
upon request, with such office space and facilities, utilities and office
equipment as are adequate for each Fund's needs, (vi) preparing, but not paying
for, all reports by the Trust, on behalf of each Fund, to their shareholders and
all reports and filings required to maintain the registration and qualification
of each Fund's shares under federal and state law including periodic updating of
the Trust's registration statement and Prospectus (including its Statement of
Additional Information), (vii) supervising the calculation of the net asset
value of each Fund's shares, (viii) preparing notices and agendas for meetings
of each Fund's shareholders and the Trust's Board of Trustees as well as minutes
of such meetings in all matters required by applicable law to be acted upon by
the Board of Trustees and (ix) other services generally performed by
administrators of funds.
(b) In connection with such administrative services
described in paragraph (a) of this Section and in addition to the compensation
described in Section 4 herein,
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the Adviser shall be reimbursed by the Trust for all costs and expenses
(including out-of-pocket expenses) and the pro rata portion of the direct and
indirect costs of personnel including, but not limited to, the salaries,
bonuses, health insurance, retirement benefits and all similar employment costs
of such persons for the time spent providing such administrative services.
10. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
11. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
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IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly autho rized officers, all as
of the day and the year first above written.
DLJdirect MUTUAL FUNDS, on
behalf of each of its series
DLJdirect Technology Fund
DLJdirect S&P 500 Fund
DLJdirect Growth Fund
By _____________________________________
Name:
Title:
DLJ INVESTMENT MANAGEMENT CORP.
By _____________________________________
Name:
Title
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