As filed with the Securities and Exchange Commission on June 8, 1998
Registration No. 333-37491
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
-----------------------------------------
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5220
BERNADETTE N. FINN
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
------------------------
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
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)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
721722.2
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GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
Registration Statement on Form N-1A
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CROSS REFERENCE SHEET -
Pursuant to Rule 404(c)
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Part A
Item No. Prospectus Heading
1. Cover Page........................ Cover Page
2. Synopsis.......................... Introduction; Table of Fees and Expenses
3. Condensed Financial
Information....................... Financial Highlights
4. General Description of
Registrant........................ General Information; Investment Objectives, Policies and
Risks
5. Management of the Fund............ Distribution and Service Plan; Management of the Fund;
Custodian, Transfer Agent
5a. Management's Discussion of
Fund Performance.................. Not Applicable
6. Capital Stock and Other
Securities........................ Description of Common Stock; How to Purchase and
Redeem Shares; General Information; Dividends and
Distributions; Federal Income Taxes
7. Purchase of Securities Being
Offered........................... How to Purchase and Redeem Shares; Distribution and
Service Plan; Net Asset Value
8. Redemption or Repurchase.......... How to Purchase and Redeem Shares
9. Legal Proceedings................. Not Applicable
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721722.2
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Part B
Item No. Caption in Statement of Additional Information
10. Cover Page........................ Cover Page
11. Table of Contents................. Table of Contents
12. General Information and
History........................... Manager; Management of the Fund; General Information
13. Investment Objectives and
Policies.......................... Investment Objectives, Policies and Risks
14. Management of the Registrant...... Manager; Management of the Fund
15. Control Persons and
Principal Holders of
Securities........................ Management of the Fund; Description of Common Stock
16. Investment Advisory and
Other Services.................... Manager; Expense Limitation; Management of the Fund;
Distribution and Service Plan; Custodian, Transfer Agent
and Dividend Agent
17. Brokerage Allocation.............. Portfolio Transactions
18. Capital Stock and Other
Securities........................ Description of Common Stock
19. Purchase, Redemption and
Pricing of Securities
Being Offered..................... How to Purchase and Redeem Shares; Net Asset Value
20. Tax Status........................ Federal Income Taxes; Georgia Taxes
21. Underwriters...................... Distribution and Service Plan
22. Calculations of Yield
Quotations of Money Market
Funds............................. Yield Quotations
23. Financial Statements.............. Independent Auditor's Report; Statement of Assets and
Liabilities; Notes to Financial Statement
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721722.2
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GEORGIA 600 FIFTH AVENUE
DAILY MUNICIPAL NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5200
PROSPECTUS
June __, 1998
Georgia Daily Municipal Income Fund, Inc. (the "Fund") is an open-end management
investment company that is a short-term, tax-exempt, money market fund whose
investment objectives are to seek as high a level of current income exempt from
regular Federal income taxes and to the extent possible from Georgia income
taxes, as is believed to be consistent with preservation of capital, maintenance
of liquidity and stability of principal. The Fund is concentrated in the
securities issued by Georgia or entities within Georgia and the Fund may invest
a significant percentage of its assets in a single issuer. Therefore any
investment in the Fund may be riskier than an investment in other types of money
market funds. No assurance can be given that those objectives will be achieved.
The Fund offers two classes of shares to the general public. The Class A shares
of the Fund are subject to a service fee pursuant to the Fund's Rule 12b-1
Distribution and Service Plan and are sold through financial intermediaries who
provide servicing to Class A shareholders for which they receive compensation
from the Manager and/or the Distributor. The Class B shares of the Fund are not
subject to a service fee and either are sold directly to the public or are sold
through financial intermediaries that do not receive compensation from the
Manager or Distributor. In all other respects, the Class A and Class B shares
represent the same interests in the income and assets of the Fund.
This Prospectus sets forth concisely the information about the Fund a
prospective investor should know before investing in the Fund. Additional
information about the Fund has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge by
calling or writing the Fund at the above address. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference into this Prospectus in its entirety. The SEC maintains a website
(http://www.sec.gov) that contains the Statement of Additional Information and
other reports and information regarding the Fund which have been filed
electronically with the SEC.
Reich & Tang Asset Management L.P. is a registered investment adviser and acts
as Manager of the Fund. Reich & Tang Distributors, Inc. acts as distributor of
the Fund's shares and is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the United States
Government. The Fund intends to maintain a stable net asset value of $1.00 per
share although there can be no assurance that this value will be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
This Prospectus should be read and retained by investors for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
Information contained herein is subject to completion or amendment. A
registration statement relating to these Securities has been filed with the SEC.
These Securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or solicitation of an offer to buy nor shall there
be any sale of these Securities in any state in which said offer, solicitation
or sale would be unlawful prior to the registration or qualification under the
Securities Laws of any state.
720067.2
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TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
Class A shares Class B shares
-------------- --------------
Management Fees (after fee waiver) 0.04% 0.04%
12b-1 Fees 0.25% 0.00%
Other Expenses 0.41% 0.41%
Administration Fees 0.21%_________ 0.21% _________
Total Fund Operating Expenses
(after fee waiver) 0.70% 0.45%
Example 1 year 3 years
- ------- ------ -------
You would pay the following on a $1,000 investment, assuming 5% annual return
(cumulative through the end of each year):
Class A $7 $22
Class B $5 $14
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses an investor in the Fund will bear directly or
indirectly. The Manager at its discretion may voluntarily waive all or a portion
of the Management Fees and the Administration Fees with respect to both Class A
and Class B shares. The Distributor at its discretion, may voluntarily waive all
or a portion of the 12b-1 Fee. Absent the estimated waiver, the Management Fee
would have been 0.40% of the average daily net assets of the Class A and Class B
Shares. In addition, absent such estimated waiver, Total Fund Operating Expenses
would be 1.06% and 0.81% of the average daily assets of the Class A and Class B
shares, respectively. The expenses shown are at the levels anticipated for the
current year. For a further discussion of these fees see "Management of the
Fund" and "Distribution and Service Plan" herein.
The figures reflected in this example should not be considered a representation
of past or future expenses. Actual expenses may be greater or lesser than those
shown above.
720067.2
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INTRODUCTION
Georgia Daily Municipal Income Fund, Inc. (the "Fund") is an open-end,
management investment company that is a short-term, tax-exempt money market fund
whose investment objectives are to seek as high a level of current income exempt
under current law, in the opinion of bond counsel to the issuer at the date of
issuance, from regular Federal income tax, and, to the extent possible, from
Georgia income taxes, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal by investing
principally in short-term, high quality debt obligations of the State of
Georgia, its political subdivisions, and certain possessions and territories of
the United States as described under "Investment Objectives, Policies and Risks"
herein. The Fund also may invest in municipal securities of issuers located in
states other than Georgia, the interest income on which will be, in the opinion
of bond counsel to the issuer at the date of issuance, exempt from regular
Federal income tax, but will be subject to Georgia income taxes for Georgia
residents. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share,
although there can be no assurance that this value will be maintained. The Fund
intends to invest all of its assets in tax-exempt obligations; however, it
reserves the right to invest up to 20% of its net assets in taxable obligations.
This is a summary of the Fund's fundamental investment policies which are set
forth in full under "Investment Objectives, Policies and Risks" herein and in
the Statement of Additional Information and may not be changed without approval
of a majority of the Fund's outstanding shares. Of course, no assurance can be
given that these objectives will be achieved.
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"), which is a registered investment adviser and which currently acts as
investment manager or administrator to seventeen other open-end management
investment companies. The Fund's shares are distributed through Reich & Tang
Distributors, Inc. (the "Distributor"), with whom the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
the Class A shares of the Fund only) pursuant to the Fund's distribution and
service plan adopted under Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "1940 Act"). (See "Distribution and Service Plan" herein.)
On any day on which the New York Stock Exchange, Inc. and Investors Fiduciary
Trust Company, the Fund's custodian, are open for trading ("Fund Business Day"),
investors may, without charge by the Fund, purchase and redeem shares of the
Fund's common stock at their net asset value next determined after receipt of
the order. An investor's purchase order will be accepted after the payment is
converted into Federal Funds, and shares will be issued as of the Fund's next
net asset value determination which is made as of 12 noon on each Fund Business
Day. (See "How to Purchase and Redeem Shares" and "Net Asset Value" herein).
Dividends from accumulated net income are declared by the Fund on each Fund
Business Day.
The Fund generally pays interest dividends monthly. Net capital gains, if any,
will be distributed at least annually, and in no event later than 60 days after
the end of the Fund's fiscal year. All dividends and distributions of capital
gains are automatically invested in additional shares of the same Class of the
Fund unless a shareholder has elected by written
720067.2
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notice to the Fund to receive either of such distributions in cash. (See
"Dividends and Distributions" herein.)
The Fund intends that its investment portfolio will be concentrated in Georgia
Municipal Obligations and Participation Certificates as defined herein. A
summary of special risk factors affecting the State of Georgia is set forth
under "Investment Objectives, Policies and Risks" herein and "Georgia Risk
Factors" in the Statement of Additional Information. The Fund's Board of
Directors is authorized to divide the unissued shares into separate series of
stock, one for each of the Fund's separate investment portfolios that may be
created in the future. Investment in the Fund should be made with an
understanding of the risks which an investment in Georgia Municipal Obligations
may entail. Payment of interest and preservation of capital are dependent upon
the continuing ability of Georgia issuers and/or obligors of state, municipal
and public authority debt obligations to meet their obligations thereunder.
Investors should also consider the greater risk of the Portfolio's concentration
versus the safety that comes with a less concentrated investment portfolio.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and, to the
extent possible, from Georgia income taxes, as is believed to be consistent with
the preservation of capital, maintenance of liquidity and stability of
principal. There can be no assurance that the Fund will achieve its investment
objectives.
The Fund's assets will be invested primarily (i.e., at least 80%) in high
quality debt obligations issued by or on behalf of the State of Georgia, other
states, territories and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from regular Federal income taxation ("Municipal Obligations")
and in participation certificates (which, in the opinion of Battle Fowler LLP,
counsel to the Fund, cause the Fund to be treated as the owner of the underlying
Municipal Obligations for Federal income tax purposes) in Municipal Obligations
purchased from banks, insurance companies or other financial institutions
("Participation Certificates"). Dividends paid by the Fund which are
"exempt-interest dividends" by virtue of being properly designated by the Fund
as derived from Municipal Obligations and Participation Certificates will be
exempt from regular Federal income tax provided the Fund complies with Section
852(b)(5) of Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. However, "exempt-interest dividends" may be subject to the Federal
alternative minimum tax. Securities, the interest income on which may be subject
to the Federal alternative minimum tax (including participation certificates in
such securities), may be purchased by the Fund without limit. Securities, the
interest income on which is subject to regular Federal, state and local income
tax, will not exceed 20% of the value of the Fund's net assets. (See "Federal
Income Taxes" herein.)
720067.2
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<PAGE>
Exempt-interest dividends paid by the Fund correctly identified by the Fund as
derived from obligations issued by or on behalf of the State of Georgia or any
Georgia local governments, or their instrumentalities, authorities or districts
("Georgia Municipal Obligations") will be exempt from the Georgia Income Tax.
Exempt-interest dividends correctly identified by the Fund as derived from
obligations of Puerto Rico and the Virgin Islands, as well as other types of
obligations that Georgia is prohibited from taxing under the Constitution, the
laws of the United States of America or the laws of the Georgia Constitution
("Territorial Municipal Obligations") also should be exempt from the Georgia
Income Tax provided the Fund complies with Georgia law. (See "Georgia Income
Taxes" herein.) To the extent suitable Georgia Municipal Obligations are not
available for investment by the Fund, the Fund may purchase Municipal
Obligations issued by other states, their agencies and instrumentalities, the
dividends on which will be designated by the Fund as derived from interest
income which will be, in the opinion of bond counsel to the issuer at the date
of issuance, exempt from regular Federal income tax but will be subject to the
Georgia Income Tax. However, only as a temporary defensive measure during
periods of adverse market conditions as determined by the Manager, the Fund will
invest less than 65% of its total assets in Georgia Municipal Obligations,
although the exact amount of the Fund's assets invested in such securities will
vary from time to time. As a temporary defensive measure the Fund may also
invest in any security that would otherwise be permissible for inclusion in the
portfolio of the Fund without limitation. The Fund's investments may include
"when-issued" Municipal Obligations, stand-by commitments and taxable repurchase
agreements. Although the Fund will attempt to invest 100% of its assets in
Municipal Obligations and in Participation Certificates, the Fund reserves the
right to invest up to 20% of the value of its net assets in securities the
interest income on which is subject to Federal, state and local income tax. The
Fund will invest more than 25% of its assets in Participation Certificates in
Georgia Municipal Obligations and other Georgia Municipal Obligations. The
investment objectives of the Fund described in the preceding paragraphs of this
section may not be changed unless approved by the holders of a majority of the
outstanding shares of the Fund that would be affected by such a change. As used
in this Prospectus, the term "majority of the outstanding shares" of the Fund
means, respectively, the vote of the lesser of (i) 67% or more of the shares of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy or (ii) more
than 50% of the outstanding shares of the Fund.
In view of the concentration of the Fund in Participation Certificates in
Georgia Municipal Obligations, which may be secured by bank letters of credit or
guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail which include extensive governmental regulations, changes
in the availability and cost of capital funds, and general economic conditions
(see "Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information) which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
the Fund in securities that are related in such a way
720067.2
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<PAGE>
that an economic, business or political development or change affecting one of
the securities would also affect the other securities including, for example,
securities the interest upon which is paid from revenues of similar type
projects, or securities the issuers of which are located in the same state.
The Fund may only purchase securities that have been determined by the Fund's
Board of Directors to present minimal credit risks and that are Eligible
Securities at the time of acquisition. The term Eligible Securities means (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); (ii) Municipal Obligations which are subject to a Demand Feature or
Guarantee (as such terms are defined in Rule 2a-7 of the 1940 Act) and which
have received a rating from an NRSRO, or such guarantor has received a rating
from an NRSRO, with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and security to the
Guarantee (unless, the guarantor, directly or indirectly, controls, is
controlled by or is under common control with the issuer of the security subject
to the Guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee; and (iii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality. In addition, Municipal
Obligations with remaining maturities of 397 days or less but that at the time
of issuance were long-term securities (i.e. with maturities greater than 366
days) are deemed unrated and may be purchased if such had received a long-term
rating from the Requisite NRSROs in one of the three highest rating categories.
Provided, however, that such may not be purchased if it (i) does not satisfy the
rating requirements set forth in the preceding sentence and (ii) has received a
long-term rating from any NRSRO that is not within the three highest long-term
rating categories. A determination of comparability by the Board of Directors is
made on the basis of its credit evaluation of the issuer, which may include an
evaluation of a letter of credit, guarantee, insurance or other credit facility
issued in support of the Municipal Obligations or Participation Certificates.
(See "Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information.) While there are several organizations that
currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's Rating
Services, a Division of The McGraw-Hill Companies ("S&P") and Moody's Investors
Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's are "AAA"
and "AA" by S&P in the case of long-term bonds or notes and "Aaa" and "Aa" by
Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by
Moody's in the case of notes; "A-1" and "A-2" by S&P and "Prime-1" and "Prime-2"
by Moody's in the case of tax-exempt commercial paper. The highest rating in the
case of variable and floating demand notes is "SP-1 AA" by S&P and "VMIG-1" by
Moody's. Such instruments may produce a lower yield than would be available from
less highly rated instruments.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier Security or is rated below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall reassess promptly
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in
720067.2
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the best interest of the Fund and its shareholders. However, reassessment is not
required if the security is disposed of or matures within five business days of
the Manager becoming aware of the new rating and provided further that the Board
of Directors is subsequently notified of the Manager's actions. The term First
Tier Security means any Eligible Security that: (i) is a rated security that has
received a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that is, as
determined by the Fund's Board of Directors, to be of comparable quality; (iii)
is a security issued by a registered investment company that is a money market
fund; or (iv) is a government security.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security under Rule 2a-7 of the 1940 Act, or (3) is determined to no
longer present minimal credit risks, or an event of insolvency occurs with
respect to the issuer of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the SEC of such fact and of the actions
that the Fund intends to take in response to the situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
The Fund has adopted the following fundamental investment restrictions and which
may not be changed unless approved by a majority of the outstanding shares of
the Fund's shares that would be affected by such a change. The Fund is subject
to further investment restrictions that are set forth in the Statement of
Additional Information. The Fund may not:
1. Borrow Money. This restriction shall not apply to borrowings from banks
for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the
untimely disposition of securities, in an amount up to 15% of the value
of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time
the borrowing was made. While borrowings exceed 5% of the value of the
Fund's total assets, the Fund will not make any investments. Interest
paid on borrowings will reduce net income.
720067.2
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<PAGE>
2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 15% of the value of its total assets and only to
secure borrowings for temporary or emergency purposes.
3. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand
feature. The Fund will not invest in a repurchase agreement maturing in
more than seven days if any such investment together with securities
that are not readily marketable held by the Fund exceed 10% of the
Fund's net assets.
4. Invest more than 25% of its assets in the securities of "issuers" in
any single industry, provided that the Fund will invest more than 25%
of its assets in Participation Certificates and there shall be no
limitation on the purchase of those Municipal Obligations and other
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities. Immediately after the acquisition of any
securities subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the 1940 Act), with respect to 75% of the total
assets of the Fund, not more than 10% of the Fund's assets may be
invested in securities that are subject to a Guarantee or Demand
Feature from the same institution. However, the Fund may only invest
more than 10% of its assets in securities subject to a Guarantee or
Demand Feature issued by a non-controlled person.
5. Invest in securities of other investment companies, except the Fund may
purchase unit investment trust securities where such unit trusts meet
the Investment Objectives of the Fund and then only up to 5% of the
Fund's net assets, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
The concentration in Municipal Obligations and Participation Certificates may
present greater risks than in the case of a more diversified fund. The Fund
intends to qualify as a "regulated investment company" under Subchapter M of the
Code. The Fund will be restricted in that at the close of each quarter of the
taxable year, at least 50% of the value of its total assets must be represented
by cash, government securities, investment company securities and other
securities limited in respect of any one issuer to not more than 5% in value of
the total assets of the Fund and to not more than 10% of the outstanding voting
securities of such issuer. In addition, at the close of each quarter of its
taxable year, not more than 25% in value of the Fund's total assets may be
invested in securities of one issuer other than Government securities. The
limitations described in this paragraph regarding qualification as a "regulated
investment company" are not fundamental policies and may be revised to the
extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)
Because of the Fund's concentration in investments in Georgia Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Georgia and its political subdivisions. For
additional information, please refer to "Georgia Risk Factors" in the Statement
of Additional Information.
720067.2
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<PAGE>
The primary purpose of investing in a portfolio of Georgia Municipal Obligations
is the special tax treatment accorded Georgia resident individual investors.
However, payment of interest and preservation of principal are dependent upon
the continuing ability of the Georgia issuers and/or obligors of state,
municipal and public authority debt obligations to meet their obligations
thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of Georgia issues
with those of more diversified portfolios including out-of-state issues before
making an investment decision. The Fund's management believes that by
maintaining the Fund's investment portfolio in liquid, short-term, high quality
investments, including the Participation Certificates and other variable rate
demand instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is largely insulated from
the credit risks that may exist on long-term Georgia Municipal Obligations. A
more complete discussion of special risk factors affecting the State of Georgia
is set forth under "Georgia Risk Factors" in the Statement of Additional
Information.
MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed Reich & Tang Asset Management L.P.
(the "Manager") to serve as investment manager of the Fund. The Manager provides
persons satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors or officers of Reich & Tang Asset Management, Inc., the
sole general partner of the Manager or employees of the Manager or its
affiliates. Due to the services performed by the Manager, the Fund currently has
no employees and its officers are not required to devote full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each director and principal officer of the
Fund.
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. As of April 30, 1998, the Manager was
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $11.51 billion. The Manager acts as manager or administrator of
seventeen other investment companies and also advises pension trusts, profit
sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies"), due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager. These changes did not result in a change in control of the Manager and
have no impact upon the Manager's performance of its responsibilities and
obligations.
Reich & Tang Asset Management, Inc. (a wholly owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Manager. Nvest
720067.2
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Corporation, a Massachusetts Corporation (formerly known as New England
Investment Companies, Inc.), serves as the managing general partner of Nvest
Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the Manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika &
Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McConnell, L.P. and Westpeak Investment Advisors, L.P. These affiliates in the
aggregate are investment advisors or managers to 80 other registered investment
companies.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. For its services under the Investment Management Contract, the Manager
receives from the Fund a fee equal to .40% per annum of the Fund's average daily
net assets (the "Management Fee") for managing the Fund's investment portfolio
and performing related services. The Manager, at its discretion, may voluntarily
waive all or a portion of the Management Fee.
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with the personnel to (i) supervise the performance
of bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager, at its discretion, may
voluntarily waive all or a portion of the administrative services fee. For its
services under the Administrative Services Contract, the Manager receives a fee
equal to .21% per annum of the Fund's average daily net assets. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares (see "Distribution and Service
Plan" herein.)
720067.2
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<PAGE>
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .25% per annum of the average daily net assets of the
Class A shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to both Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on October 7, 1997. The authorized capital
stock of the Fund consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. The Fund currently has only one
portfolio. Except as noted below, each share when issued has equal dividend,
distribution and liquidation rights within the series for which it was issued,
and each fractional share has rights in proportion to the percentage it
represents of a whole share. Generally, all shares will be voted in the
aggregate, except if voting by Class is required by law or the matter involved
affects only one Class, in which case shares will be voted separately by class.
Shares of all series have identical voting rights, except where, by law, certain
matters must be approved by a majority of the shares of the affected series.
There are no conversion or preemptive rights in connection with any shares of
the Fund. All shares when issued in accordance with the terms offering will be
fully paid and non-assessable. Shares of the Fund are redeemable at net asset
value, at the option of the shareholders. On June 8, 1998, the Manager purchased
$100,000 of the Fund's Class A shares at an initial subscription price of $1.00
per share.
The Fund is subdivided into two classes of common stock, Class A and Class B.
Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee of .25% of the average daily net
assets of the Class A shares of the Fund pursuant to the Rule 12b-1 Distribution
and Service Plan of the Fund; (iii) only the holders of the Class A shares would
be entitled to vote on matters pertaining to the Plan and any related agreements
in accordance with provisions of Rule 12b-1; and (iv) the exchange privilege
will permit shareholders to exchange their shares only for shares of the same
class of a Fund that participates in an exchange privilege with the Fund.
Payments that are made under the Plans will be calculated and charged daily to
the appropriate class prior to determining daily net asset value per share and
dividend/distributions.
Under its Articles of Incorporation the Fund has the right to redeem, for cash,
shares of the Fund owned by any shareholder to the extent and at such times as
the Fund's Board of Directors determines to be necessary or appropriate to
prevent any concentration of share ownership which would cause the Fund to
become a "personal holding company" for Federal income tax purposes. In this
regard, the Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100%
720067.2
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<PAGE>
of the directors if the holders choose to do so, and, in that event, the holders
of the remaining shares will not be able to elect any person or persons to the
Board of Directors. The Fund's By-laws provide the holders of one-third of the
outstanding shares of the Fund present at a meeting in person or by proxy will
constitute a quorum for the transaction of business at all meetings.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and generally pays dividends monthly. There is no fixed
dividend rate. In computing these dividends, interest earned and expenses are
accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same Class immediately upon payment thereof unless
a shareholder has elected by written notice to the Fund to receive either of
such distributions in cash.
The Class A shares will bear the service fee under the Plan. As a result, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations in accordance with the procedures
established by the Participating Organizations. Certain Participating
Organizations are compensated by the Distributor from its shareholder servicing
fee and by the Manager from its management fee for the performance of these
services. An investor who purchases shares through a Participating Organization
that receives payment from the Manager or the Distributor will become a Class A
shareholder. See "Investments Through Participating Organizations" herein. All
other investors, and investors who have accounts with Participating
Organizations but who do not wish to invest in the Fund through their
Participating Organizations, may invest in the Fund directly as Class B
shareholders of the Fund and not receive the benefit of the servicing functions
performed by a Participating Organization. Class B shares may also be offered to
investors who purchase their shares through Participating Organizations who do
not receive compensation from the Distributor or the Manager because they may
not be legally permitted to receive such as fiduciaries. The Manager pays the
expenses incurred in the distribution of Class B shares. Participating
Organizations whose clients become Class B shareholders will not receive
compensation from the Manager or Distributor for the servicing they may provide
to their clients. (See "Direct Purchase and Redemption Procedures" herein.) The
minimum initial investment in the Fund by Participating Organizations is $1,000,
which may be satisfied
720067.2
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<PAGE>
by initial investments aggregating $1,000 by a Participating Organization on
behalf of customers whose initial investments are less than $1,000. The minimum
initial investment for securities brokers, financial institutions and other
industry professionals that are not Participating Organizations is $1,000. The
minimum initial investment for all other investors is $5,000. Initial
investments may be made in any amount in excess of the applicable minimums. The
minimum amount for subsequent investments is $100 unless the investor is a
client of a Participating Organization whose clients have made aggregate
subsequent investments of $100.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
In order to maximize earnings on its portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve Bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept a subscription or invest an investor's payment in portfolio
securities until the payment has been converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's order at
the net asset value next determined after receipt of the order. Shares begin
accruing income dividends on the day they are purchased. The Fund reserves the
right to reject any, purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, New York City time, on any Fund Business Day,
as defined herein, on which an order for the shares and accompanying Federal
Funds are received by the Fund's transfer agent before 12 noon. Orders
accompanied by Federal Funds and received after 12 noon, New York City time, on
a Fund Business Day will not result in share issuance until the following Fund
Business Day. Fund shares begin accruing income on the day the shares are issued
to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholder's address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as
720067.2
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a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon, New
York City time, on any Fund Business Day becomes effective on the next Fund
Business Day.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization, and the Participating
Organization will be responsible for notifying the Participant Investor of the
proposed mandatory redemption. During the notice period a shareholder or
Participating Organization who receives such a notice may avoid mandatory
redemption by purchasing sufficient additional shares to increase his total net
asset value to the minimum amount and thereby avoid such mandatory redemption.
The redemption of shares may result in the investor's receipt of more or less
than he or she paid for his or her shares and, thus, in a taxable gain or loss
to the investor.
Investments Through Participating Organizations
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Manager with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Fund shares for the customers'
accounts. Also, Participating Organizations may send their customers periodic
account statements showing the total number of Fund shares owned by each
customer as of the statement closing date, purchases and redemptions of Fund
shares by each customer during the period covered by the statement and the
income earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Participant Investors whose Participating Organizations have not undertaken to
provide such confirmations and statements will receive them from the Fund
directly.
720067.2
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<PAGE>
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Manager for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Manager, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be reregistered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day provided that the Federal Funds required in connection with the orders
are received by the Fund's transfer agent before 4:00 p.m., New York City time,
on that day. Orders for which Federal Funds are received after 4:00 p.m., New
York City time, will not result in share issuance until the following Fund
Business Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients are
processed expeditiously.
Direct Purchase and Redemption Procedures
The following purchase and redemption procedures apply to investors who wish to
invest in the Fund directly and not through Participating Organizations. These
investors may obtain a current prospectus and the subscription order form
necessary to open an account by telephoning the Fund at the following numbers:
Within New York State 212-830-5220
Outside New York State (toll free) 800-221-3079
All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchase and
redemptions of Fund shares during the month covered
720067.2
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<PAGE>
by the statement and the dividends paid on Fund shares of each shareholder
during the statement period (including dividends paid in cash or reinvested in
additional Fund shares).
Certificates for Fund shares will not be issued to an investor.
Initial Purchases of Shares
Mail
Investors may send a check made payable to "Georgia Daily Municipal Income Fund,
Inc." along with a completed subscription order form to:
Georgia Daily Municipal Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non member bank may take substantially
longer to convert into Federal Funds. An investor's subscription will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, investors should first obtain a new account number by telephoning
the Fund at 212-830-5220 (within New York State) or at 800-221-3079 (outside New
York State) and then instruct a member commercial bank to wire money immediately
to:
Investors Fiduciary Trust Company
ABA #
DDA #
For Georgia Daily Municipal Income Fund, Inc.
Account of (Investor's Name)
Fund Account #
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order form.
Investor's planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon, New York City time, on the
same day. There may be a charge by the investors bank for transmitting the money
by bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12 noon, New York City time, on a
Fund Business Day will be treated as a Federal Funds payment received on that
day.
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<PAGE>
Subsequent Purchases of Shares
Subsequent purchases can be made by personal delivery or by bank wire, as
indicated above or by mailing a check to:
Georgia Daily Municipal Income Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the Fund is
still applicable, a shareholder may reopen an account without filing a new
subscription order form at any time during the year the shareholder's account is
closed or during the following calendar year.
Redemption of Shares
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class following receipt by the Fund's transfer agent of the redemption order
(and any supporting documentation which it may require). Normally, payment for
redeemed shares is made on the same Fund Business Day after the redemption is
effected, provided the redemption request is received prior to 12 noon, New York
City time. However, redemption payments will not be effected unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, currently considered by the Fund to occur up
to 15 days after investment.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and signed and guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written request to
the Fund addressed to:
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Georgia Daily Municipal Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with the signature guaranteed. Normally the redemption
proceeds are paid by check and mailed to the shareholder of record.
Checks
By making the appropriate election on their subscription form, shareholders may
request a supply of checks which may be used to effect redemptions from the
Class of shares of the Fund in which they invest. The checks, which will be
issued in the shareholder's name, are drawn on a special account maintained by
the Fund with the Fund's agent bank. Checks may be drawn in any amount of $250
or more. When a check is presented to the Fund's agent bank, it instructs the
Fund's transfer agent to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. The use of
a check to make a withdrawal enables a shareholder in the Fund to receive
dividends on the shares to be redeemed up to the Fund Business Day on which the
check clears. Checks provided by the Fund may not be certified. Fund shares
purchased by check may not be redeemed by check, until the check has cleared,
which can take up to 15 days following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank. Checks drawn on a jointly owned
account may, at the shareholder's election, require only one signature. Checks
in amounts exceeding the value of the shareholder's account at the time the
check is presented for payment will not be honored. Since the dollar value of
the account changes daily, the total value of the account may not be determined
in advance and the account may not be entirely redeemed by check. In addition,
the Fund reserves the right to charge the shareholder's account a fee up to $20
for checks not honored as a result of an insufficient account value, a check
deemed not negotiable because it has been held longer than six months, an
unsigned check, a post-dated check and a check written for an amount below the
Fund minimum of $250. The Fund reserves the right to terminate or modify the
check redemption procedure at any time or to impose additional fees.
Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the
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authorization forms are filed in good order with the Fund's agent bank, it will
provide the shareholder with a supply of checks. This checking service may be
terminated or modified at any time.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or, if in excess
of $1,000, to their bank accounts, both as set forth in the subscription order
form or in a subsequent written authorization. The Fund may accept telephone
redemption instructions from any person with respect to accounts of shareholders
who elect this service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. The Fund will employ reasonable procedures to confirm that telephone
redemption instructions are genuine, and will require that shareholders electing
such option provide a form of personal identification. The failure by the Fund
to employ such reasonable procedures may cause the Fund to be liable for the
losses incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220, outside New York State at 800-221-3079, and state: (i) the name of
the shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address and
(v) the name of the person requesting the redemption. Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 12
noon, New York City time and on the next Fund Business Day if the redemption
request is received after 12 noon, New York City time. The Fund reserves the
right to terminate or modify the telephone redemption service in whole or in
part at any time and will notify shareholders accordingly.
Exchange Privilege
Shareholders of the Fund are entitled to exchange some or all of a Class of
shares in the Fund for shares of the same Class of certain other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
and which participate in the exchange privilege program with the Fund. If only
one Class of shares is available in a particular exchange fund, the shareholder
of the Fund is entitled to exchange their shares for the shares available in
that exchange fund. Currently the exchange privilege program has been
established between the Fund and California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc. and Short Term Income
Fund, Inc. In the future, the exchange privilege program may be extended to
other investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser, manager or administrator. An exchange of shares in the Fund
pursuant to the
720067.2
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exchange privilege is, in effect, a redemption of Fund shares (at net asset
value) followed by the purchase of shares of the investment company into which
the exchange is made (at net asset value) and may result in a shareholder
realizing a taxable gain or loss for Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency of
exchange. The minimum amount for an exchange is $1,000, except that shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Each Class of shares is exchanged at its
respective net asset value.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between the
same Class of shares of investment company accounts registered in identical
names. Before making an exchange, the investor should review the current
prospectus of the investment company into which the exchange is to be made.
Prospectuses may be obtained by contacting the Distributor at the address or
telephone number set forth on the cover page of this Prospectus.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Georgia Daily Municipal Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
212-830-5220 (within New York) or 800-221-5079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time upon written notification to the shareholder.
Specified Amount Automatic Withdrawal Plan
Shareholders may elect to withdraw shares and receive payment from the Fund of a
specified amount of $50 or more automatically on a monthly basis in an amount
approved and confirmed by the Manager. A specified amount plan payment is made
by the Fund on the 23rd day of each month. Whenever such 23rd day of a month is
not a Fund Business Day, the payment date is the Fund Business Day preceding the
23rd day of the month. In order to make a payment, a number of shares equal in
aggregate net asset value to the payment amount are redeemed at their net asset
value on the Fund Business Day immediately preceding the date of payment. To the
extent that the redemptions to make plan payments exceed the number of shares
purchased through reinvestment of dividends and distributions, the redemptions
720067.2
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<PAGE>
reduce the number of shares purchased on original investment, and may ultimately
liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder but the Fund
does not expect that there will be any realized capital gains.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a Distribution and Service Plan (the
"Plan") and, pursuant to the Plan, the Fund and Reich & Tang Distributors L.P.
(the "Distributor") have entered into a Distribution Agreement and a Shareholder
Servicing Agreement (with respect to the Class A shares of the Fund only).
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any orders will not be binding on the Fund until accepted
by the Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares a service fee equal to .25% per annum of the
Class A shares' average daily net assets (the "Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly and any portion of the fee
may be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Class A
shares and (ii) preparing, printing and delivering the Fund's prospectus to
existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing on behalf of the Class
A shares of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's prospectus to
prospective investors,
720067.2
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<PAGE>
and to defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective shareholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee with respect to Class A shares)
and past profits, for the purposes enumerated in (i) above. The Distributor will
determine the amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Fund is required to pay to
the Manager and Distributor for any fiscal year under either the Investment
Management Contract, the Shareholder Servicing Agreement or the Administrative
Services Contract in effect for that year.
FEDERAL INCOME TAXES
The Fund intends to elect to qualify under the Code as a regulated investment
company that distributes "exempt-interest dividends" as defined in the Code. The
Fund's policy is to distribute as dividends each year 100% (and in no event less
than 90%) of its tax-exempt interest income, net of certain deductions, and its
investment company taxable income (if any). If distributions are made in this
manner, dividends derived from the interest earned on Municipal Obligations are
"exempt-interest dividends" and are not subject to regular Federal income tax,
although as described below, such "exempt-interest dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares of the Fund. The Fund does not expect to realize long-term
capital gains, and thus does not contemplate distributing "capital gain
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform shareholders of the amount and nature of its income
and gains in a written notice mailed to shareholders not later than 60 days
after the close of the Fund's taxable year. For Social Security recipients,
interest on tax-exempt bonds, including tax-exempt interest dividends paid by
the Fund, is to be added to adjusted gross income for purposes of computing the
amount of Social Security benefits includible in gross income. Interest on
certain "private activity bonds" (generally, a bond issue in which more than 10%
of the proceeds are used for a non-governmental trade or business and which
meets the private security or payment test, or a bond issue which meets the
private loan financing test) issued after August 7, 1986 will constitute an item
of tax preference subject to the alternative minimum tax. Further, corporations
will be required to include in alternative minimum taxable income 75% of the
amount by which its adjusted current earnings (including generally, tax-exempt
interest) exceeds its alternative minimum taxable income (determined without
this tax item). In addition, in certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income", including tax-exempt interest. Although the
Fund intends to maintain a $1.00 per share net asset value, a shareholder may
realize taxable gain or loss upon the disposition of shares.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of the underlying Municipal Obligations will be exempt from regular
Federal income taxes to the Fund. Counsel has pointed out that
720067.2
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<PAGE>
the Internal Revenue Service has announced that it will not ordinarily issue
advance rulings on the question of the ownership of securities or participation
interests therein subject to a put and could reach a conclusion different from
that reached by counsel. (See "Federal Income Taxes" in the Statement of
Additional Information.)
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax such bonds in the future. The decision does not, however, affect the
current exemption from taxation of the interest earned on the Municipal
Obligations in accordance with Section 103 of the Code.
GEORGIA INCOME TAXES
Under Section 48-7-27(b)(1)(A) of the Official Code of Georgia Annotated,
interest on obligations of the State of Georgia and its political subdivisions,
which is not otherwise included in federal adjusted gross income, is exempt from
the State of Georgia's individual income tax. Likewise, under Section
48-7-27(b)(2) of the Official Code of Georgia Annotated interest on exempt
obligations of the U.S. government, its territories and possessions (including
Puerto Rico, Guam, and th Virgin Islands), or of any authority, commission, or
instrumentality of the U.S. government is also exempt from the State of
Georgia's individual income tax. To the extent that distributions from the Fund
attributable to interest on obligations of the State of Georgia and its
political subdivisions is excluded from federal adjusted gross income,
therefore, they will likewise be excluded from the Georgia individual income
tax.
The stated position of the Georgia Department of Revenue is that the exempt
treatment for interest derived from such exempt obligations is also extended to
distributions of regulated investment companies, such as the Fund. Tax-exempt
treatment is generally not available for distributions attributable to income
earned on indirect U.S. government obligations (GNMAs, FNMAs, etc.), for
repurchase agreements collateralized by U.S. government obligations, or for
obligations of other states and their political subdivisions. To the extent such
investments are made by the Fund, such as for temporary or defensive purposes,
such distributions will generally be taxable on a pro rata basis.
Any distributions of net short-term and net long-term capital gains earned by
the Fund are fully included in each individual shareholder's Georgia taxable
income as dividend income and long-term capital gain, respectively, and are
currently taxed at ordinary income tax rates. Ownership of Shares in the Fund
may also result in collateral Georgia tax consequences for certain taxpayers.
Prospective investors should consult their tax advisors as to the applicability
of any such collateral consequences.
720067.2
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<PAGE>
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on October 7,
1997 and it is registered with the SEC as a non-diversified, open-end,
management investment company.
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders of shares entitled to cast not less than 25% of all the
votes entitled to be cast at such meeting. Annual and other meetings may be
required with respect to such additional matters relating to the Fund as may be
required by the Act including the removal of Fund director(s) and communication
among shareholders, any registration of the Fund with the SEC or any state, or
as the Directors may consider necessary or desirable. Each Director serves until
the next meeting of the shareholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur significant
operating expenses or be required to incur materials costs to be year 2000
compliant. Although the Manager does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid adverse impact on the Fund.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's Registration Statement filed with the SEC,
including the exhibits thereto. The Registration Statement and the exhibits
thereto may be examined at the Commission and copies thereof may be obtained
upon payment of certain duplicating fees.
NET ASSET VALUE
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. With regard to the
determination of net asset value only, Fund Business Day means weekdays (Monday
through Friday) except customary business holidays and Good Friday. The net
asset value of a Class is computed by dividing the value of the Fund's net
assets for such Class (i.e., the value of its securities and other
720067.2
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<PAGE>
assets less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of shares outstanding for such
Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105
is custodian for the Fund's cash and securities. Reich & Tang Services, Inc.,
600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend agent
for the shares of the Fund. The Fund's custodian and transfer agent do not
assist in, and are not responsible for, investment decisions involving assets of
the Fund.
720067.2
-25-
<PAGE>
TABLE OF CONTENTS Georgia
DAILY
MUNICIPAL
TABLE OF FEES AND EXPENSES.......................... INCOME
FUND, INC.
INTRODUCTION........................................
INVESTMENT OBJECTIVES, POLICIES AND PROSPECTUS
RISKS........................................... June ___ , 1998
MANAGEMENT OF THE FUND..............................
DESCRIPTION OF COMMON STOCK.........................
DIVIDENDS AND DISTRIBUTIONS.........................
HOW TO PURCHASE AND REDEEM
SHARES..........................................
Investments Through Participating
Organizations.................................
Direct Purchase and Redemption Procedures.......
Initial Purchases of Shares.....................
Mail............................................
Bank Wire.......................................
Subsequent Purchases of Shares..................
Redemption of Shares............................
Written Requests................................
Checks..........................................
Telephone.......................................
Exchange Privilege..............................
Specified Amount Automatic Withdrawal
Plan..........................................
DISTRIBUTION AND SERVICE PLAN.......................
FEDERAL INCOME TAXES................................
Georgia INCOME TAXES................................
GENERAL INFORMATION.................................
NET ASSET VALUE.....................................
CUSTODIAN AND TRANSFER AGENT........................
720067.2
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<PAGE>
GEORGIA
DAILY MUNICIPAL
INCOME FUND, INC. 600 Fifth Avenue, New York, NY 10020
(212) 830-5200
STATEMENT OF ADDITIONAL INFORMATION
June __, 1998
This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of Georgia Daily Municipal Income Fund, Inc. (the "Fund"), dated June __, 1998
and should be read in conjunction with the Prospectus. The Fund's Prospectus may
be obtained, without charge, from any Participating Organization or by writing
or calling the Fund. This Statement of Additional Information is incorporated by
reference into the Prospectus in its entirety.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Investment Objectives, Policies and Risks................. Manager.................................................
Description of Municipal Obligations....................... Expense Limitation...................................
Variable Rate Demand Instruments Management of the Fund..................................
and Participation Certificates....................... Compensation Table...................................
When-Issued Securities.................................. Counsel and Auditors.................................
Stand-by Commitments.................................... Distribution and Service Plan...........................
Taxable Securities......................................... Description of Common Stock.............................
Repurchase Agreements................................... Federal Income Taxes....................................
Georgia Risk Factors....................................... Georgia Income Taxes....................................
Investment Restrictions.................................... Custodian and Transfer Agent............................
Portfolio Transactions..................................... Description of Ratings..................................
How to Purchase and Redeem Shares.......................... Tax Equivalent Yield Tables.............................
Net Asset Value............................................ Independent Auditor's Report............................
Yield Quotations........................................... Financial Statements....................................
</TABLE>
721055.2
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, the Fund is an open-end, management investment
company that is a short-term, tax-exempt money market fund. The Fund's
investment objectives are to seek as high a level of current income, exempt from
regular Federal tax and, to the extent possible, Georgia income taxes (the
"Georgia Income Tax"), as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. No assurance can
be given that these objectives will be achieved. The following discussion
expands upon the description of the Fund's investment objectives and policies in
the Prospectus.
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of Georgia, other states, territories and
possessions of the United States and their authorities, agencies,
instrumentalities and political subdivisions, the interest on which is, in the
opinion of bond counsel to the issuer at the date of issuance, currently exempt
from regular Federal income taxation ("Municipal Obligations") and in
participation certificates (which, in the opinion of Battle Fowler LLP, counsel
to the Fund, causes the Fund to be treated as the owner of the underlying
Municipal Obligations for Federal income tax purposes) in Municipal Obligations
purchased from banks, insurance companies or other financial institutions
("Participation Certificates"). Dividends paid by the Fund which are "exempt-
interest dividends" by virtue of being properly designated by the Fund as
derived from Municipal Obligations and Participation Certificates will be exempt
from Federal income tax provided the Fund complies with Section 852(b)(5) of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to regular
Federal income taxation, existing law excludes such interest from Federal income
tax. However, "exempt-interest dividends" may be subject to the Federal
alternative minimum tax. Securities, the interest income on which may be subject
to the Federal alternative minimum tax (including participation certificates in
such securities), may be purchased by the Fund without limit. Securities, the
interest income on which is subject to regular Federal, state and local income
tax, will not exceed 20% of the value of the Fund's net assets. ("See "Federal
Income Taxes" herein.) Exempt-interest dividends paid by the Fund that are
correctly identified by the Fund as derived from obligations issued by or on
behalf of the State of Georgia or any Georgia local governments, or their
instrumentalities, authorities or districts ("Georgia Municipal Obligations")
will be exempt from the Georgia Income Tax. Exempt-interest dividends correctly
identified by the Fund as derived from obligations of Puerto Rico and the Virgin
Islands, as well as any other types of obligations that Georgia is prohibited
from taxing under the Constitution, the laws of the United States of America or
the Georgia Constitution ("Territorial Municipal Obligations"), also should be
exempt from Georgia Income Tax provided the Fund complies with Georgia laws.
(See "Georgia Income Taxes" herein.) To the extent that suitable Georgia
Municipal Obligations are not available for investment by the Fund, the Fund may
purchase Municipal Obligations issued by other states, their agencies and
instrumentalities, the dividends on which will be designated by the Fund as
derived from interest income which will be, in the opinion of bond counsel to
the issuer at the date of issuance, exempt from regular Federal income tax but
will be subject to the Georgia Income Tax. Except as a temporary defensive
measure during periods of adverse market conditions as determined by the
Manager, the Fund will invest at least 65% of its assets in Georgia
721055.2
<PAGE>
Municipal Obligations, although the exact amount of the Fund's assets invested
in such securities will vary from time to time. The Fund seeks to maintain an
investment portfolio with a dollar-weighted average maturity of 90 days or less
and to value its investment portfolio at amortized cost and maintain a net asset
value at a $1.00 per share of each Class. There can be no assurance that this
value will be maintained.
The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in Municipal Obligations (excluding securities, the
interest income on which may be subject to the Federal alternative minimum tax)
and in Participation Certificates), the Fund reserves the right to invest up to
20% of the value of its net assets in securities, the interest income on which
is subject to regular Federal, state and local income tax. The Fund will invest
more than 25% of its assets in participation certificates purchased from banks
in industrial revenue bonds and other Georgia Municipal Obligations. In view of
this concentration in bank participation certificates in Georgia Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy or
(ii) more than 50% of the outstanding shares of the Fund.
The Fund may only purchase securities that have been determined by the Fund's
Board of Directors to present minimal credit risks and that are Eligible
Securities at the time of acquisition. The term Eligible Securities means (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSRO"); (ii) Municipal Obligations which are subject to a Demand Feature or
Guarantee (as such terms are defined in Rule 2a-7 of the 1940 Act) and which
have received a rating from an NRSRO, or such guarantor has received a rating
from an NRSRO, with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and security to the
Guarantee (unless, the guarantor, directly or indirectly, controls, is
controlled by or is under common control with the issuer of the security subject
to the Guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee; or (iii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality. In addition, Municipal
Obligations with remaining maturities of 397 days or less but that at the time
of issuance were long-term securities (i.e. with maturities greater than 366
days) are deemed unrated and may be purchased if such had received a long-term
rating from the Requisite NRSROs in one of the three highest rating categories.
Provided, however, that such may not be purchased if it (i)
721055.2
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<PAGE>
does not satisfy the rating requirements set forth in the preceding sentence and
(ii) has received a long-term rating from any NRSRO that is not within the three
highest long-term rating categories. A determination of comparability by the
Board of Directors is made on the basis of its credit evaluation of the issuer,
which may include an evaluation of a letter of credit, guarantee, insurance or
other credit facility issued in support of the Municipal Obligations or
participation certificates. (See "Variable Rate Demand Instruments and
Participation Certificates" herein). While there are several organizations that
currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's Rating
Services a Division of The McGraw-Hill Companies ("S&P") and Moody's Investors
Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's are "AAA"
and "AA" by S&P in the case of long-term bonds or notes and "Aaa" and "Aa" by
Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or"MIG-1" and "MIG-2" by
Moody's in the case of notes; "A-1" and "A-2" by S&P and "Prime-1" and "Prime-2"
by Moody's in the case of tax-exempt commercial paper. The highest rating in the
case of variable and floating demand notes is "SP-1 AA" by S&P and "VMIG-1" by
Moody's. Such instruments may produce a lower yield than would be available from
less highly rated instruments.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. Provided, however, the Fund shall not invest more
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer, unless Municipal Obligations are First
Tier Securities.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code. The Fund will be restricted in that at the close
of each quarter of the taxable year, at least 50% of the value of its total
assets must be represented by cash, government securities, investment company
securities and other securities limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than Government
securities. The limitations described in this paragraph regarding qualification
as a "regulated investment company" are not fundamental policies and may be
revised to the extent applicable Federal income tax requirements are revised.
(See "Federal Income Taxes" herein.)
721055.2
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<PAGE>
DESCRIPTION OF MUNICIPAL OBLIGATIONS
As used herein, "Municipal Obligations" include the following as well as
"Variable Rate Demand Instruments and Participation Certificates".
1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition.
Municipal Bonds are debt obligations of states, cities, counties,
municipalities and municipal agencies (all of which are generally
referred to as "municipalities") which generally have a maturity at the
time of issue of one year or more and which are issued to raise funds
for various public purposes such as construction of a wide range of
public facilities, to refund outstanding obligations and to obtain
funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of faith, credit and taxing power for the
payment of principal and interest. Issuers of general obligation bonds
include states, counties, cities, towns and other governmental units.
The principal of, and interest on, revenue bonds are payable from the
income of specific projects or authorities and generally are not
supported by the issuer's general power to levy taxes. In some cases,
revenues derived from specific taxes are pledged to support payments on
a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by
public authorities to provide funding for various privately operated
industrial facilities (hereinafter referred to as "industrial revenue
bonds" or "IRBs"). Interest on the IRBs is generally exempt, with
certain exceptions, from regular Federal income tax pursuant to Section
103(a) of the Code, provided the issuer and corporate obligor thereof
continue to meet certain conditions. (See "Federal Income Taxes"
herein.) IRBs are, in most cases, revenue bonds and do not generally
constitute the pledge of the credit of the issuer of such bonds. The
payment of the principal and interest on IRBs usually depends solely on
the ability of the user of the facilities financed by the bonds or
other guarantor to meet its financial obligations and, in certain
instances, the pledge of real and personal property as security for
payment. If there is no established secondary market for the IRBs, the
IRBs or the participation certificates in IRBs purchased by the Fund
will be supported by letters of credit, guarantees or insurance that
meet the definition of Eligible Securities at the time of acquisition
and provide the demand feature which may be exercised by the Fund at
any time to provide liquidity. Shareholders should note that the Fund
may invest in IRBs acquired in transactions involving a Participating
Organization. In accordance with Investment Restriction 6 herein, the
Fund is permitted to invest up to 10% of the portfolio in high quality,
short-term Municipal Obligations (including IRBs) meeting the
definition of Eligible Securities at the time of acquisition that may
not be readily marketable or have a liquidity feature.
721055.2
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2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation
notes, revenue anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale or receipt of other
revenues are usually general obligations of the issuing municipality or
agency. Project notes are issued by local agencies and are guaranteed
by the United States Department of Housing and Urban Development.
Project notes are also secured by the full faith and credit of the
United States. The Fund's investments may be concentrated in Municipal
Notes of Georgia issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time
of acquisition. Issues of Municipal Commercial Paper typically
represent very short-term, unsecured, negotiable promissory notes.
These obligations are often issued to meet seasonal working capital
needs of municipalities or to provide interim construction financing
and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases Municipal Commercial Paper is backed
by letters of credit, lending agreements, note repurchase agreements or
other credit facility agreements offered by banks or other institutions
which may be called upon in the event of default by the issuer of the
commercial paper.
4. Municipal Leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state
and local governments and authorities to acquire a wide variety of
equipment and facilities such as fire and sanitation vehicles,
telecommunications equipment and other capital assets. Municipal Leases
frequently have special risks not normally associated with general
obligation or revenue bonds. 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 of many state
constitutions and statutes 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. To reduce this risk, the Fund will only
purchase Municipal Leases subject to a non-appropriation clause where
the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, a guarantee, insurance or
other comparable undertaking of an approved financial institution.
These types of Municipal Leases may be considered illiquid and subject
to the 10% limitation of investments in illiquid securities set forth
under "Investment Restrictions" contained herein. The Board of
Directors may adopt guidelines and delegate to the Manager the daily
function of determining and monitoring the liquidity of Municipal
Leases. In making such determination, the Board and the Manager may
consider such factors as the frequency of trades for the obligation,
the number of dealers willing to purchase or sell the obligations and
the number of other potential buyers and the nature of the marketplace
for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the
721055.2
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Board determines that any Municipal Leases are illiquid, such lease
will be subject to the 10% limitation on investments in illiquid
securities. The Fund has no intention to invest in Municipal Leases in
the foreseeable future and will amend this Statement of Additional
Information in the event that such an intention should develop in the
future.
5. Any other Federal tax-exempt, and to the extent possible, Georgia
Income tax-exempt obligations issued by or on behalf of states and
municipal governments and their authorities, agencies,
instrumentalities and political subdivisions, whose inclusion in the
Fund would be consistent with the Fund's "Investment Objectives,
Policies and Risks" and permissible under Rule 2a-7 under the 1940 Act.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier Security or is rated below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall reassess promptly
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its shareholders. However, reassessment is not required if the
security is disposed of or matures within five business days of the Manager
becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions. The term First Tier
Security means any Eligible Security that: (i) is a rated security that has
received a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that is, as
determined by the fund's board of directors, to be of comparable quality; (iii)
is a security issued by a registered investment company that is a money market
fund; or (iv) is a government security.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security under Rule 2a-7 of the 1940 Act, or (3) is determined to no
longer present minimal credit risks, or an event of insolvency occurs with
respect to the issuer of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the SEC of such fact and of the actions
that the Fund intends to take in response to the situation.
Variable Rate Demand Instruments
and Participation Certificates
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations that provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days notice either from the issuer or by
721055.2
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<PAGE>
drawing on a bank letter of credit, a guarantee or insurance issued with respect
to such instrument.
The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised at any
time or at specified intervals not exceeding 397 days depending upon the terms
of the instrument. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to 397 days and the adjustments
are based upon the "prime rate"* of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. The Fund will decide
which variable rate demand instruments it will purchase in accordance with
procedures prescribed by its Board of Directors to minimize credit risks. A fund
utilizing the amortized cost method of valuation under Rule 2a-7 of the 1940 Act
may only purchase variable rate demand instruments only if (i) the instrument is
subject to an unconditional demand feature, exercisable by the Fund in the event
of a default in the payment of principal or interest on the underlying
securities, that is an Eligible Security, or (ii) the instrument is not subject
to an unconditional demand feature but does qualify as an Eligible Security and
has a long-term rating by the Requisite NRSROs in one of the two highest rating
categories, or if unrated, is determined to be of comparable quality by the
Fund's Board of Directors. The Fund's Board of Directors may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase Participation Certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A participation certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be the bank issuing the participation certificate, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
certificate of participation) or insurance policy of an insurance company that
the Board of Directors of the Fund has determined meets the
- --------
* The prime rate is generally the rate charged by a bank to its most
creditworthy customers for short-term loans. The prime rate of a
particular bank may differ from other banks and will be the rate
announced by each bank on a particular day. Changes in the prime rate
may occur with great frequency and generally become effective on the
date announced.
721055.2
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<PAGE>
prescribed quality standards for the Fund. The Fund has the right to sell the
participation certificate back to the institution and, where applicable, draw on
the letter of credit or insurance after no more than 30 days notice either at
any time or at specified intervals not exceeding 397 days (depending on the
terms of the participation), for all or any part of the full principal amount of
the Fund's participation interest in the security plus accrued interest. The
Fund intends to exercise the demand only (1) upon a default under the terms of
the bond documents, (2) as needed to provide liquidity to the Fund in order to
make redemptions of Fund shares or (3) to maintain a high quality investment
portfolio. The institutions issuing the Participation Certificates will retain a
service and letter of credit fee (where applicable) and a fee for providing the
demand repurchase feature, in an amount equal to the excess of the interest paid
on the instruments over the negotiated yield at which the participations were
purchased by the Fund. The total fees generally range from 5% to 15% of the
applicable prime rate or other interest rate index. With respect to insurance,
the Fund will attempt to have the issuer of the participation certificate bear
the cost of the insurance, although the Fund retains the option to purchase
insurance if necessary, in which case the cost of insurance will be an expense
of the Fund subject to the expense limitation (see "Expense Limitation" herein).
The Manager has been instructed by the Fund's Board of Directors to continually
monitor the pricing, quality and liquidity of the variable rate demand
instruments held by the Fund, including the Participation Certificates, on the
basis of published financial information and reports of the rating agencies and
other bank analytical services to which the Fund may subscribe. Although these
instruments may be sold by the Fund, the Fund intends to hold them until
maturity, except under the circumstances stated above. (See "Federal Income
Taxes" herein.)
In view of the concentration of the Fund in Participation Certificates in
Georgia Municipal Obligations, which may be secured by bank letters of credit or
guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail. Banks are subject to extensive governmental regulations
which may limit both the amounts and types of loans and other financial
commitments which may be made and interest rates and fees which may be charged.
The profitability of this industry is largely dependent upon the availability
and cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations under a letter of credit. The Fund may invest
25% or more of the net assets of any portfolio in securities that are related in
such a way that an economic, business or political development or change
affecting one of the securities would also affect the other securities
including, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The
721055.2
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portfolio may contain variable maximum rates set by state law, limit the degree
to which interest on such variable rate demand instruments may fluctuate; to the
extent it does, increases or decreases in value may be somewhat greater than
would be the case without such limits. Additionally, the portfolio may contain
variable rate demand Participation Certificates in fixed rate Municipal
Obligations. The fixed rate of interest on these Municipal Obligations will be a
ceiling on the variable rate of the participation certificate. In the event that
interest rates increased so that the variable rate exceeded the fixed rate on
the Municipal Obligations, the Municipal Obligations could no longer be valued
at par and may cause the Fund to take corrective action, including the
elimination of the instruments from the portfolio. Because the adjustment of
interest rates on the variable rate demand instruments is made in relation to
movements of the applicable banks' "prime rates", or other interest rate
adjustment index, the variable rate demand instruments are not comparable to
long-term fixed rate securities. Accordingly, interest rates on the variable
rate demand instruments may be higher or lower than current market rates for
fixed rate obligations of comparable quality with similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to be an
Eligible Security it will be sold in the market or through exercise of the
repurchase demand feature to the issuer.
When-Issued Securities
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on the Municipal Obligations are each fixed at the time the buyer
enters into the commitment although delivery and payment of the Municipal
Obligations normally take place within 45 days after the date of the Fund's
commitment to purchase. Although the Fund will only make commitments to purchase
when-issued Municipal Obligations with the intention of actually acquiring them,
the Fund may sell these securities before the settlement date if deemed
advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way, that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real
721055.2
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or anticipated, in the level of interest rates. Purchasing Municipal Obligations
on a when-issued basis can involve a risk that the yields available in the
market when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
income tax.
Stand-by Commitments
When the Fund purchases Municipal Obligations it may also acquire stand-by
commitments from banks and other financial institutions with respect to such
Municipal Obligations. Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Fund's option a specified Municipal Obligation at a
specified price with same day settlement. A stand-by commitment is the
equivalent of a "put" option acquired by the Fund with respect to a particular
Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio would not exceed 1/2 of 1%
721055.2
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of the value of the Fund's total assets calculated immediately after each
stand-by commitment was acquired.
The Fund would enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks and, where the issuer of the Municipal Obligation does not meet the
eligibility criteria, only where the issuer of the stand-by commitment has
received a rating which meets the eligibility criteria or, if not rated,
presents a minimal risk of default as determined by the Board of Directors. The
Fund's reliance upon the credit of these banks and broker-dealers would be
supported by the value of the underlying Municipal Obligations held by the Fund
that were subject to the commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income taxes
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment. The acquisition
of a stand-by commitment would not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund would be valued at zero in determining net asset value. In those cases in
which the Fund paid directly or indirectly for a stand-by commitment, its cost
would be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments would not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments that the Fund may enter into are subject to certain
risks, which include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation (see
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
TAXABLE SECURITIES
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its net
assets in securities of the kind described below, the interest income on which
is subject to regular Federal income tax, under any one or more of the following
circumstances: (a) pending investment of proceeds of sales of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities and (c) to maintain liquidity for the purpose of meeting anticipated
721055.2
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<PAGE>
redemptions. In addition, the Fund may temporarily invest more than 20% in such
taxable securities when, in the opinion of the Manager, it is advisable to do so
because of adverse market conditions affecting the market for Municipal
Obligations. The kinds of taxable securities in which the Fund may invest are
limited to the following short-term, fixed-income securities (maturing in 397
days or less from the time of purchase): (1) obligations of the United States
Government or its agencies, instrumentalities or authorities; (2) commercial
paper meeting the definition of Eligible Securities at the time of acquisition;
(3) certificates of deposit of domestic banks with assets of $1 billion or more;
and (4) repurchase agreements with respect to any Municipal Obligations or other
securities which the Fund is permitted to own. (See "Federal Income Taxes"
herein.)
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund would acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the Act. All repurchase agreements entered into
by the Fund shall be fully collateralized at all times during the period of the
agreement in that the value of the underlying security shall be at least equal
to the amount of the loan, including the accrued interest thereon, and the Fund
or its custodian shall have possession of the collateral, which the Fund's Board
believes will give it a valid, perfected security interest in the collateral. In
the event of default by the seller under a repurchase agreement construed to be
a collateralized loan, the underlying securities are not owned by the Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs in connection
with the disposition of the collateral. The Fund's Board believes that the
collateral underlying repurchase agreements may be more susceptible to claims of
the seller's creditors than would be the case with securities owned by the Fund.
It is expected that repurchase agreements will give rise to income which will
not qualify as tax-exempt income when distributed by the Fund. The Fund will not
invest in a repurchase agreement maturing in more than seven days if any such
investment together with illiquid securities held by the Fund exceed 10% of the
Fund's total net assets. (See Investment Restriction Number 6 herein.)
Repurchase agreements are subject to the same risks described herein for
stand-by commitments.
GEORGIA RISK FACTORS
The Georgia Constitution permits the issuance by the State of general obligation
debt and of certain guaranteed revenue debt. The State of Georgia may incur
guaranteed revenue debt by guaranteeing the payment of certain revenue
obligations issued by an instrumentality of the State. The Georgia Constitution
prohibits the incurring of any general obligation debt or guaranteed revenue
debt if the highest aggregate annual debt service requirement for the then
current year or any subsequent fiscal year for outstanding general obligation
debt and
721055.2
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guaranteed revenue debt, including the proposed debt, exceed 10 percent of the
total revenue receipts, less refunds, of the State treasury in the fiscal year
immediately preceding the year in which any such debt is to be incurred.
The State of Georgia operates on a fiscal year beginning July 1 and ending June
30. For example, "fiscal 1997" refers to the year ended June 30, 1997. As of
October 31, 1997, the total principal indebtedness of the State of Georgia
consisting of general obligation debt and guaranteed revenue debt totaled
$4,841,865,000 and the highest aggregate annual payment for such debt equaled
5.03% of fiscal 1998 State estimated treasury receipts.
The Georgia Constitution also permits the State of Georgia to incur public debt
to supply a temporary deficit in the State treasury in any fiscal year created
by a delay in collecting the taxes of that year. Such debt must not exceed, in
the aggregate, 5% of the total revenue receipts, less refunds, of the State
treasury in the fiscal year immediately preceding the year in which such debt is
incurred. The debt incurred must be repaid on or before the last day of the
fiscal year in which it is to be incurred out of the taxes levied for that
fiscal year. No such debt may be incurred in any fiscal year if there is then
outstanding unpaid debt from any previous fiscal year that was incurred to
supply a temporary deficit in the State treasury. No such short-term debt has
been incurred under this provision since the inception of the constitutional
authority referred to in this paragraph.
Virtually all of the issues of long-term obligations issued by or on behalf of
the State of Georgia, counties, municipalities, and other political
subdivisions, and public authorities thereof are required by law to be validated
and confirmed in a judicial proceeding prior to issuance. The legal effect of an
approved validation in Georgia is to render incontestable the validity of the
pertinent bond issue and the security therefor.
Currently, Moody's Investors Service, Inc., rates Georgia general obligation
bonds Aaa, and Fitch IBCA, and Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc., rate such bonds AAA. There can be no assurance
that the economic and political conditions on which these ratings are based will
continue or that particular bond issues may not be adversely affected by changes
in economic, political, or other conditions that do not affect the above
ratings.
Economic Factors
The following brief summary regarding the economy of Georgia is based upon
information drawn from the official statements of issuers located in Georgia,
other publicly available documents and oral statements from various federal and
State agencies. None of the information contained in such publicly available
documents has been independently verified.
The following discussion regarding the financial condition of the government of
the State of Georgia may not be relevant to general obligation or revenue bonds
issued by political subdivisions of and other issuers in Georgia. Such financial
information is based upon information about general financial conditions that
may or may not affect individual issuers of obligations within the State of
Georgia.
721055.2
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The financial condition of the State of Georgia is affected by various national,
economic, social, and environmental policies and conditions. Moreover,
Constitutional and statutory limitations imposed on the State of Georgia and its
local governments concerning taxes, bond indebtedness, and other matters may
constrain the revenue-generating capacity of the State and its local governments
and, therefore, the ability of the issuers of the Municipal Obligations to
satisfy their obligations.
Economic activity and employment levels have remained high in Georgia following
the end of the 1996 Olympic Games in Metropolitan Atlanta. Georgia is the site
of many military bases and defense cutbacks could have adverse effects on
statewide employment levels. Such possible effects should be weighed in light of
fiscal 1997 revenue collections of $11.9 billion, an increase of 6.62% over
collections for the previous fiscal year. According to estimates by the
Governor's chief economist, State revenue growth is expected to hold steady at
4.5% or better through fiscal 1999. The same growth rate was the basis for the
State's current budget, adopted last spring, but actual revenue collections are
up 5.9% in the first of half 1998, and the economist said he expects fiscal 1998
growth to be around 5.3%. He said Georgia's economy continues to out pace the
national economy, driven by strong performances in the services and retail
sections.
In January 1996 the Georgia General Assembly, at the urging of Governor Zell
Miller, repealed the State's 4% sales tax on groceries. The phased-in reduction
eliminated 2% of the food tax starting October 1, 1996, with another 1%
reduction starting October 1, 1997, and the elimination of the final 1% starting
the following October 1. State estimates are that this reduction schedule would
lead to $152 million less in revenues for Georgia in fiscal 1998, followed by
reductions of $129 million, and $44 million per year in the two fiscal years
following with the result that the cut in taxes would equal $500 million in
fiscal 2000. The Governor has indicated he would counter the lost revenue by
cutting excess jobs, privatizing certain state activities, and otherwise
eliminating inefficiencies in State government.
The 1998 Georgia General Assembly approved a $20 million income tax cut proposal
that was signed into law by the Governor in January. The bill will take effect
January 1, 1999, and the State plans to use some of the $715 million surplus
from fiscal 1998 to offset the tax cut.
The fortunes of the economy in general, especially the retail sector, will be
boosted by the State's continuing growth in population. Georgia's population is
expected to reach 7,630,200 in July 1998. Georgia's population continues to grow
faster than that of any state outside the Rocky Mountain region, and at about
twice the national rate.
Based on data of the Georgia Department of Revenue for fiscal 1997, income tax
receipts and sales tax receipts of the State for fiscal 1997 made up
approximately 46% and 36.4%, respectively, of the total State tax revenues.
The unemployment rate of the civilian labor force in the State of Georgia as of
September 1997 was 4.5% according to data provided by the Georgia Department of
Labor. The Metropolitan Atlanta Area, which is the largest employment center in
the area comprising Georgia and its five bordering states and which accounts for
approximately 46% of the State's
721055.2
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population, has for some time enjoyed a lower rate of unemployment than the
State of Georgia considered as a whole. In descending order, services, wholesale
and retail trade, manufacturing, government, and transportation make up the
largest sources of employment within the State of Georgia.
Revenue Collection Information Systems Internal Control Review
Pursuant to a review of the Georgia Department of Revenue's revenue collection
information systems by the State Auditor, it was determined that from April 1995
to May 1996 the Department did not maintain an adequate accounting system to
determine the accuracy of the amounts of Local Option Sales Tax, Special Purpose
Local Option Sales Tax, and MARTA Sales Tax collected by the Department on
behalf of local governments and the disbursements of those taxes to local
governments imposing the sales-based taxes. The Department of Revenue during
this period estimated collections and disbursements to local governments by
reviewing the payment pattern to the local governments for the previous 24-month
period and followed that pattern, adjusting for known growth in sales tax
collections.
The Department ceased using estimates for making payments to local governments
in May 1996, and implemented temporary computer-based and manual processing
systems to permit disbursements based on actual collections. In August 1997, the
Department completed installation of a new computer-based accounting system that
contains enhanced internal controls and balancing functions and is expected to
account accurately for the various local sales tax collections, to allocate the
disbursements thereof to local governments, and to impose adequate internal
controls. The State Department of Audits is currently accessing the adequacy and
effectiveness of the system's controls and the accuracy of the financial data
processed in the new system.
Year 2000 Compliance
Like other large organizations, the State, its agencies, and many of its
political subdivisions and authorities are subject to the costs and risks
associated with what has come to be known as "Year 2000" compliance, which
arises because many computer programs accept only two- digit entries in date
code fields used for, among other things, calculation and report generation
features. Wherever the State and its agencies use information systems, the
resulting inability of such computer programs to distinguish between the years
1900 and 2000 presents a number of risks. Such risks include, for example,
disruption of the distribution of State funds with respect to transfer payments,
taxes, State payroll, and transfer to local government, and disruption of other
information processing with respect to preparation of tax assessment notices and
calculation of prisoner release date, as well as the inefficiencies and delays
caused by system-generated errors and potential litigation as a result of any of
such disruptions or delays.
Accordingly, the State offered its agencies the opportunity to participate in a
series of planning and assessment activities aimed at Year 2000 compliance,
which utilized the services of an independent consultant. This State-sponsored
consulting contract has produced a status assessment and developed estimated
costs of implementing remediation and replacement
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strategies to reduce and eliminate Year 2000 risks for the participating
agencies. The State's approach to funding Year 2000 compliance has been to
include such costs with those related to the State's ongoing goal of
modernization and standardization of existing information systems. The State is
in the process of determining estimates of the total funding requirements
(including for non-participating State agencies submitting independently
produced Year 2000 compliance and systems modernization funding requirements);
however, actual costs may vary from the estimates and may be significantly
higher.
The State and its agencies are currently continuing these remediation and
testing efforts in order that all information systems used by the State will
function properly before, during, and after the Year 2000, subject, however, to
the General Assembly of the State appropriating the requested funds. All of the
potential risks and costs associated with the failure to remediate, however,
cannot be accurately identified and quantified at this time, and no assurance
can be given that the General Assembly will appropriate adequate funds to assure
compliance, that other possible implementation delays or problems that may arise
can be resolved on a timely basis, or that the State will not be exposed to
potential claims resulting from Year 2000 non-compliance.
Legal Proceedings
The State of Georgia from time to time is involved in certain legal proceedings
that may or may not have a material adverse impact on the financial position of
the State if decided in a manner adverse to the State's interests. Certain of
such lawsuits that could have a significant impact on the State's financial
position are summarized below.
Age International, Inc. v. State (two cases). Two suits for refund of alcohol
taxes have been filed in state court against the State of Georgia by
out-of-state producers of alcoholic beverages. The first suit for refund seeks
$96 million in refunds, plus interest, imposed under Section 3-4-60 of the
Official Code of Georgia Annotated, as amended in 1985 after the decision of the
United States Supreme Court in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263
(1984). These claims constitute 99% of all such taxes paid during the three
years preceding the claims. In addition, the claimants have filed a second suit
for refund for an additional $23 million, plus interest, for later time periods.
These two cases encompass all known or anticipated claims for refund of such
type within the apparently applicable statute of limitations for the years in
question, e.g., 1989 through January 1993. The cases are pending in the trial
court at the discovery stage.
In Buskirk and Estill v. State of Georgia, et al., plaintiffs in this case filed
a civil action in the Superior Court of Fulton County, Georgia, (No. E-31547) on
behalf of all "classified employees of the State of Georgia or its agencies and
departments during all or part of fiscal years 1992 through 1995 who were
eligible to receive within grade pay increases and who would have received same
were it not for a freeze of within grade pay increases." Currently pending
before the court is the plaintiffs' motion for class certification, which is not
opposed by the State. Discovery as to liability issues has been completed, and
once the class has been certified and various local defendants have been added,
the parties will likely file cross motions for summary judgment on liability
issues. If the plaintiffs prevail, the parties will conduct
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separate discovery on the issue of damages. Should the plaintiffs prevail in
every aspect of their claims, the liability of the State in this matter could be
as much as $295,000,000, based on best estimates currently available.
DeKalb County v. Schrenko. This suit, originally filed in Federal District Court
for the Northern District of Georgia, against the State School Superintendent
and the State of Georgia is based on a claim that the State's funding formula
for pupil transportation is unconstitutional and a local school board's claim
that the State should finance the major portion of the costs of its
desegregation program. The Plaintiffs are seeking approximately $67,500,000 in
restitution. The Federal District Court ruled that the State's funding formula
for pupil transportation is contrary to state law but ruled in the State's favor
on the school desegregation costs issue. Motions to reconsider and amend the
Court's judgment were filed by both parties. The State's motion was granted, in
part, which reduced the required state payment to approximately $28,000,000, as
of the date of decision. Notices of appeal and briefs to the Eleventh Circuit
Court of Appeals were filed by both sides, and oral arguments on appeal were
heard in October 1996. In April 1997, a three-judge panel of the Eleventh
Circuit Court of Appeals rendered a decision, affirming the trial court's
decision in the State's favor as to the school desegregation costs issue and
reversing the trial court's decision against the State as to the State's funding
formula for pupil transportation being contrary to state law, 109 F.3d 680 (11th
Cir. 1997). Thus, under the Eleventh Circuit panel's decision, the State has no
liability. On April 28, 1997, the Plaintiff's filed a motion for rehearing and
en banc consideration, and that motion is still pending. The State has stated
its intention to continue to defend the suit vigorously.
George Jackson, et al. v. Georgia Lottery Corporation. Plaintiffs seek a court
order declaring that two games sponsored by the Georgia Lottery Corporation,
"Quick Cash" and "Cash Three," are unconstitutional and enjoining the lottery
from further offering these games. Plaintiffs also seek the return of all monies
played on these games during a specified period, approximately $1,703,462,781.
As a preliminary matter, the Court has ruled that the plaintiffs would not be
legally entitled to the monies claimed. The plaintiffs have attempted to appeal.
Any judgment against the Georgia Lottery Corporation would not be satisfied from
the State's general fund. See O.C.G.A. Sec. 50-27-32(c).
Georgia Department of Administrative Services, et al. v. Abbensett, et al.,
Gwinnett Superior Court Civil Action No. 96A-0395-16. This case arises in the
context of a declaratory judgment action brought by the State of Georgia and
counterclaims filed by the defendants. A young professional woman and mother was
killed in an automobile accident when her car collided with another vehicle. The
other vehicle was a state-owned vehicle driven by an employee of a for-profit
corporation, which had contracted with Fulton County, Georgia, to provide a
transportation service. Fulton County had a contract with the Atlanta Regional
Commission concerning the transportation service program, and the Atlanta
Regional Commission, in turn, had a contract with the Georgia Department of
Human Resources. In June 1996, the Georgia Department of Human Resources and the
Georgia Department of Administrative Services brought declaratory judgment
actions against the decedent's estate and others to assert the absence of any
duty to insure the second driver. In August 1996, the estate and other parties
filed tort counter-claims for wrongful death. Under commonly-applied measures of
damages for wrongful death, a money judgment for the estate could be several
million dollars.
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However, the State has stated its belief that it has substantial defenses to
assert and its intention to defend the counterclaim actions vigorously.
W.J. Luke, an individual, v. Georgia Department of Natural Resources, et al.,
Fulton Superior Court Civil Action No. E-62384. This civil action was filed in
October 1997, on behalf of W.J. Luke and all other contributors to the Georgia
Underground Storage Tank Trust Fund, established under the Georgia Underground
Storage Tank Act, O.C.G.A. ss. 12-13-1, et seq., for refund of all monies
collected under that Act, interest, and attorney's fees. From time of its
inception in 1988 to the present, the Fund has collected approximately $82
million. The State has stated its belief that it has substantial defenses to
assert and its intention to defend the case vigorously.
The foregoing information does not purport to be a complete or exhaustive
description of all conditions to which the issuers of Georgia Municipal
Obligations are subject. Many factors including national economic, social, and
environmental policies and conditions that are not within the control of the
issuers of Municipal Obligations could affect or could have an adverse impact on
the financial condition of the State and various agencies and political
subdivisions located in the State of Georgia. Since Georgia Municipal
Obligations in the Fund (other than general obligation bonds issued by the
State) are payable from revenue derived from a specific source or authority, the
impact of a pronounced decline in the national economy or difficulties in
significant industries within the State could result in a decrease in the amount
of revenues realized from such source or by such authority and thus adversely
affect the ability of the respective issuers of the Georgia Municipal
Obligations in the Fund to pay the debt service requirements on the Georgia
Municipal Obligations. Similarly, such adverse economic developments would
result in a decrease in tax revenues realized by the State and thus could
adversely affect the ability of the State to pay the debt service requirements
of any Georgia general obligation bonds in the Fund.
The information summarized above describes some of the more significant events
relating to the Fund. Sources of such information are the official statements of
the issuers located in the State of Georgia, as well as other publicly available
documents and information. While the Manager has not independently verified such
information, it has no reason to believe it is not correct in all material
respects.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund may not:
1. Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks" or any other form of Federal tax-exempt
investment which meets the Fund's high quality criteria, as determined
by the Board of Directors and which is consistent with the Fund's
objectives and policies.
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2. Borrow Money. This restriction shall not apply to borrowings from
banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests that might otherwise require the
untimely disposition of securities, in an amount up to 15% of the value
of the Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time
the borrowing was made. While borrowings exceed 5% of the value of the
Fund's total assets, the Fund will not make any investments. Interest
paid on borrowings will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 15% of the value of its total assets and only to
secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in
the purchase and sale of put, call, straddle or spread options or in
writing such options, except to the extent that securities subject to a
demand obligation and stand-by commitments may be purchased as set
forth under "Investment Objectives, Policies and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand
feature. The Fund will not invest in a repurchase agreement maturing in
more than seven days if any such investment together with securities
that are not readily marketable held by the Fund exceed 10% of the
Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this
shall not prevent the Fund from investing in Municipal Obligations
secured by real estate or interests in real estate.
8. Make loans to others, except through the purchase of portfolio
investments, including repurchase agreements, as described under
"Investment Objectives, Policies and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers"
in any single industry, provided that the Fund may invest more than 25%
of its assets in Participation Certificates and there shall be no
limitation on the purchase of those Municipal Obligations and other
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities. When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are
separate from those of the government creating the issuing entity and a
security is backed only by the
721055.2
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assets and revenues of the entity, the entity would be deemed to be the
sole issuer of the security. Similarly, in the case of an industrial
revenue bond, if that bond is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity, such as an insurance company or other
corporate obligor, guarantees a security or a bank issues a letter of
credit, such a guarantee or letter of credit would be considered a
separate security and would be treated as an issue of such government,
other entity or bank. Immediately after the acquisition of any
securities subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the Act of 1940), with respect to 75% of the
total assets of the Fund, not more than 10% of the Fund's assets may be
invested in securities that are subject to a Guarantee or Demand
Feature from the same institution. However, the Fund may only invest
more than 10% of its assets in securities subject to a Guarantee or
Demand Feature issued by a non-controlled person.
11. Invest in securities of other investment companies, except the Fund may
purchase unit investment trust securities where such unit trusts meet
the investment objectives of the Fund and then only up to 5% of the
Fund's net assets, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
12. Issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with a permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases Participation
Certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of
721055.2
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the Fund rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. No
preference in purchasing portfolio securities will be given to banks or dealers
that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
HOW TO PURCHASE AND REDEEM SHARES
The material relating to the purchase and redemption of shares of each Class in
the Prospectus is herein incorporated by reference.
NET ASSET VALUE
The Fund does not determine net asset value per share of each Class on the
following holidays: New Year's Day, Martin Luther King Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. The net asset value of a
Class is computed by dividing the value of the Fund's net assets for such Class
(i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued but excluding capital stock and surplus)
by the total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated, as
described in the following paragraph. Although the amortized cost method
provides certainty in valuation, it may result in periods during which the value
of an instrument is higher or lower than the price an investment company would
receive if the instrument were sold.
721055.2
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The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Directors determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Investment Objectives,
Policies and Risks" herein.)
YIELD QUOTATIONS
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. Under that
method, the Fund's yield figure, which is based on a chosen seven-day period, is
computed as follows: the Fund's return for the seven-day period (which is
obtained by dividing the net change in the value of a hypothetical account
having a balance of one share at the beginning of the period by the value of
such account at the beginning of the period (expected to always be $1.00) is
multiplied by (365/7) with the resulting annualized figure carried to the
nearest hundredth of one percent). For purposes of the foregoing computation,
the determination of the net change in account value during the seven-day period
reflects (i) dividends declared on the original share and on any additional
shares, including the value of any additional shares purchased with dividends
paid on the original share and (ii) fees charged to all shareholder accounts.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Fund's portfolio securities are not included in the computation. Therefore
annualized yields may be different from effective yields quoted for the same
period.
The Fund's "effective yield" for each class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: The unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = (base period return +
1) 365/7 - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors
721055.2
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because they will not be subject to any fees or charges that may be imposed by
Participating Organizations.
The Fund may from time to time advertise its tax equivalent yield. The tax
equivalent yield for each class is computed based upon a 30-day (or one month)
period ended on the date of the most recent balance sheet included in this
Statement of Additional Information, computed by dividing that portion of the
yield of the Fund (as computed pursuant to the formulae previously discussed)
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 Fund that is not tax exempt. The
tax equivalent yield for the Fund may also fluctuate daily and does not provide
a basis for determining future yields.
The Fund may from time to time advertise a taxable equivalent yield table which
shows the yield that an investor would need to receive from a taxable investment
in order to equal a tax-free yield from the Fund. (See "Taxable Equivalent Yield
Table" herein.)
MANAGER
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020 (the "Manager"). As of April 30, 1998,
the Manager was investment manager, advisor or supervisor with respect to assets
aggregating in excess of $11.4 billion. The Manager acts as investment manager
or administrator of seventeen other investment companies and also advises
pension trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager. These changes did not result in a change in control of the Manager and
have no impact upon the Manager's performance of its responsibilities and
obligations.
Reich & Tang Asset Management, Inc. (a wholly owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Manager. Nvest Corporation, a Massachusetts Corporation (formerly known
as New England Investment Companies, Inc.), serves as the managing general
partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total
721055.2
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assets. MetLife provides a wide range of insurance and investment products and
services to individuals and groups and is the leader among United States life
insurance companies in terms of total life insurance in force, which exceeded
$1.6 trillion at December 31, 1996 for MetLife and its insurance affiliates.
MetLife and its affiliates provide insurance or other financial services to
approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the Manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, L.P., Graystone Partners, L.P., Harris Associates, L.P., Jurika &
Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McConnell, L.P., and Westpeak Investment Advisors, L.P. These affiliates in
the aggregate are investment advisors or managers to 80 other registered
investment companies.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. The Manager provides persons satisfactory to the Board of Directors of
the Fund to serve as officers of the Fund. Such officers, as well as certain
other employees and directors of the Fund, may be directors or officers of NEIC,
the sole general partner of the Manager, or employees of the Manager or its
affiliates. The Investment Management Contract was approved by the Board of
Directors, including a majority of directors who are not interested persons (as
defined in the Act) of the Fund or the Manager. The Investment Management
Contract was approved by the shareholders on June 8, 1998, and the Board of
Directors of the Fund on October 16, 1997.
The Investment Management Contract has a term which extends to May 31, 2000, and
may be continued in force thereafter for successive twelve-month periods
beginning each June1, provided that such continuance is specifically approved
annually by majority vote of the Fund's outstanding voting securities or by its
Board of Directors, and in either case by a majority of the directors who are
not parties to the Investment Management Contract or interested persons by any
such party, by votes cast in person at a meeting called for the purpose of
voting on such matter.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The Investment Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .40% per annum of the Fund's average daily net
assets (the "Management
721055.2
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Fee") for managing the Fund's investment portfolio and performing related
administrative and clerical services. The fees are accrued daily and paid
monthly. The Manager may waive its rights to any portion of the Management Fee
and may waive its rights to any portion of the Management Fee for purposes of
shareholder and administrative services and distribution of the Fund's shares.
Investment management fees and operating expenses which are attributable to both
Classes of the Fund will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, the Manager from its management fee and the Fund
itself. Expenses incurred in the distribution of Class B shares and the
servicing of Class B shares shall be paid by the Manager.
Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting, supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities and (iii) perform such other services as the
Fund may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee equal to .21% per annum of the Fund's
average daily net assets. The Manager at its discretion may waive its rights to
any portion of the management fee or the administrative services fee and may use
any portion of the management fee for purposes of shareholder and administrative
services and distribution of the Fund's shares. (See "Distribution and Service
Plan" herein).
Expense Limitation
The Manager has agreed to reimburse the Fund for its expenses (exclusive of
interest, taxes, brokerage, and extraordinary expenses) which in any year exceed
the limits on investment company expenses prescribed by any state in which the
Fund's shares are qualified for sale. For the purpose of this obligation to
reimburse expenses, the Fund's annual expenses are estimated and accrued daily,
and any appropriate estimated payments are made to it on a monthly basis.
Subject to the obligations of the Manager to reimburse the Fund for its excess
expenses as described above, the Fund has, under the Investment Management
Contract, confirmed its obligation for payment of all its other expenses,
including all operating expenses, taxes, brokerage fees and commissions,
commitment fees, certain insurance premiums, interest charges and expenses of
the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, Securities and Exchange Commission registration fees and
expenses, state securities laws registration fees and expenses, expenses of
preparing and printing the Fund's prospectus for delivery to existing
shareholders and of
721055.2
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<PAGE>
printing application forms for shareholder accounts, and the fees payable to the
Manager under the Investment Management Contract.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to the expense
limitation described above. As a result of the recent passage of the National
Securities Markets Improvement Act of 1996, all state expense limitations have
been eliminated at this time.
MANAGEMENT OF THE FUND
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with the Manager.
Steven W. Duff, 44 - President of the Fund, has been President of the Mutual
Funds Division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration at NationsBank, with which he was
associated with from June 1981 to August 1994. Mr. Duff is President and a
Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Short Term Income Fund, Inc.,
and Virginia Daily Municipal Income Fund, Inc. President and a Trustee of
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, and
Pennsylvania Daily Municipal Income Fund, President of Cortland Trust, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc., and President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc. and a Director of Pax
World Money Market Fund, Inc.
Dr. W. Giles Mellon, 67 - Director of the Fund, has been Professor of Business
Administration in the Graduate School of Management, Rutgers University, with
which he has been associated since 1966. His address is Rutgers University
Graduate School of Management, 92 New Street, Newark, New Jersey 07102. Dr.
Mellon is also a Director of Back Bay Funds, Inc., California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Delafield Fund, Inc., Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc., Pax World Money
Market Fund, Inc., Short Term Income Fund, Inc., Virginia Daily Municipal Income
Fund, Inc., and a Trustee of Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, and Pennsylvania Daily Municipal Income Fund.
721055.2
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<PAGE>
Robert Straniere, 57 - Director of the Fund, has been a member of the New York
State Assembly and a partner with the Straniere & Straniere Law Firm since 1981.
His address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is
also a Director of AEW Commercial Mortgage Securities Fund, Inc., California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Life Cycle Mutual Funds,
Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc. and Short Term
Income Fund, Inc., and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, and Pennsylvania Daily Municipal Income Fund.
Dr. Yung Wong, 59 - Director of the Fund, was director of Shaw Investment
Management (UK) Limited from October 1994 to October 1995, and formerly General
Partner of Abacus Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (provider of telecommunications equipment) since January 1989 and of
TelWatch, Inc. (provider of network management software) since August 1989. Dr.
Wong is a Director of Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund, Inc., Delafield Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc.,
Virginia Daily Municipal Income Fund, Inc., and a Trustee of Florida Daily
Municipal Income Fund, Institutional Daily Income Fund, and Pennsylvania Daily
Municipal Income Fund.
Molly Flewharty, 47 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of Back
Bay Funds, Inc.,California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc.
Lesley M. Jones, 50 - Vice President of the Fund, has been Senior Vice President
of the Reich & Tang Mutual Funds Division of the Manager since September 1993.
Ms. Jones was formerly Senior Vice President of Reich & Tang, Inc. with which
she was associated from April 1973 to September 1993. Ms. Jones is also a Vice
President of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily
721055.2
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<PAGE>
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund,
Inc., and Virginia Daily Municipal Income Fund, Inc.
Dana E. Messina, 41 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995, and
was Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated from December
1980 to September 1993. Ms. Messina is also Vice President of Back Bay Funds,
Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc.
Bernadette N. Finn, 50 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. with which she was
associated from September 1970 to September 1993. Ms. Finn is also Secretary of
Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income
Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax
World Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund and Tax
Exempt Proceeds Fund, Inc. and Vice President and Secretary of Delafield Fund,
Inc., Institutional Daily Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc.
Richard De Sanctis, 41 - Treasurer of the Fund, has been Vice President and
Treasurer of the Manager since September 1993. Mr. De Sanctis was formerly
Controller of Reich & Tang, Inc., from January 1991 to September 1993 and Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. He is also Treasurer of
Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc., and Vice President and Treasurer of Cortland Trust,
Inc.
Rosanne Holtzer, 33 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986. She is also Assistant Treasurer of Back Bay
Funds, Inc., Connecticut Daily Tax Free Income Fund,
721055.2
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<PAGE>
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily
Municipal Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily
Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund,
Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and Virginia Daily
Municipal Income Fund, Inc. and is Vice President and Assistant Treasurer of
Cortland Trust, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
(Estimated for the year ended May 31, 1999)
(1) (2) (3) (4) (5)
Aggregate Pension or Retirement
Compensation from Benefits Accrued as Estimated Annual Total Compensation from
Name of Person, Registrant for Fiscal Part of Fund Benefits upon Fund and Fund Complex
Position Year Expenses Retirement Paid to Directors*
W. Giles Mellon, $2,000 0 0 $55,550 (14 Funds)
Director
Robert Straniere, $2,000 0 0 $55,550 (14Funds)
Director
Yung Wong, $2,000 0 0 $55,550 (14 Funds)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund
Complex for the fiscal year ending May 31, 1999 (and, with respect to
certain of the funds in the Fund Complex, estimated to be paid during
the fiscal year ending May 31, 1999). The parenthetical number
represents the number of investment companies (including the Fund) from
which such person receives compensation that are considered part of the
same Fund complex as the Fund, because, among other things, they have a
common investment advisor.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Messrs. Battle Fowler LLP, 75 East 55th Street, New York, New
York 10022. Matters in connection with Georgia law are passed upon by Kilpatrick
Stockton LLP, Suite 2800, 1100 Peachtree Street, Atlanta, Georgia 30309.
McGladrey & Pullen LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 (the "Rule") under the 1940 Act, the SEC has required
that an investment company which bears any direct or indirect expense of
distributing its shares must do so only in accordance with a plan permitted by
the Rule. The Fund's Board of Directors has adopted a distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
Class A shares only) with the Reich & Tang Distributors, Inc. (the
"Distributor"), as distributor of the Fund's shares.
721055.2
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<PAGE>
The Class A shares will be offered to investors who desire certain additional
shareholder services from Participating Organizations that are compensated by
the Fund's Manager and Distributor for such services. For its services under the
Shareholder Servicing Agreement (with respect to the Class A shares only) the
Distributor receives from the Fund a fee equal to .25% per annum of the Fund's
average daily net assets of the Class A shares of the Fund (the "Shareholder
Servicing Fee"). The fee is accrued daily and paid monthly and any portion of
the fee may be deemed to be used by the Distributor for payments to
Participating Organizations with respect to servicing their clients or customers
who are Class A shareholders of the Fund. The Class B shareholders will not
receive the benefit of such services from Participating Organizations and,
therefore, will not be assessed a Shareholder Servicing Fee.
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Participating Organizations and Distributor in carrying out their
obligations under the Shareholder Servicing Agreement with respect to the Class
A shares and (ii) preparing, printing and delivering the Fund's prospectus to
existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
their own resources, which may include the Management Fee, and past profits for
the following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Fund's shares; and (iii) to pay the costs of printing and
distributing the Fund's prospectus to prospective investors, and to defray the
cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising, and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee with respect to Class A shares
and past profits for the purpose enumerated in (i) above. The Distributor will
determine the amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Fund is required to pay to
the Manager or the Distributor for any fiscal year under the Investment
Management Contract, the Administrative Services Contract or the Shareholder
Servicing Agreement in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the
721055.2
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<PAGE>
Plan requires the Fund and the Distributor to prepare, at least quarterly,
written reports setting forth all amounts expended for distribution purposes by
the Fund and the Distributor pursuant to the Plan and identifying the
distribution activities for which those expenditures were made.
The Plan provides that it may continue in effect for successive annual periods
provided it is approved by the Class A shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan or in the agreements related to the Plan. The shareholders approved the
Plan on June 8, 1998 and Board of Directors of the Fund approved the Plan on
October 16,1997 to be effective until May 31, 1999. The Plan further provides
that it may not be amended to increase materially the costs which may be spent
by the Fund for distribution pursuant to the Plan without shareholder approval,
and the other material amendments must be approved by the directors in the
manner described in the preceding sentence. The Plan may be terminated at any
time by a vote of a majority of the disinterested directors of the Fund or the
Fund's Class A shareholders.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on October 7,
1997 in Maryland, consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the shares into separate series of stock, one for each of
the portfolios that may be created. Each share of any series of shares when
issued will have equal dividend, distribution and liquidation rights within the
series for which it was issued and each fractional share has those rights in
proportion to the percentage that the fractional share represents of a whole
share. Shares of all series have identical voting rights, except where, by law,
certain matters must be approved by a majority of the shares of the unaffected
series. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering, will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholder. The Fund is subdivided into two classes of common stock, Class A
and Class B. Each share, regardless of class, will represent an interest in the
same portfolio of investments and will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .25% of the Class A shares' average
daily net assets; (iii) only the holders of the Class A shares would be entitled
to vote on matters pertaining to the Plan and any related agreements in
accordance with provisions of Rule 12b-1; and (iv) the exchange privilege will
permit stockholders to exchange their shares only for shares of the same class
of an investment company that participates on an exchange privilege program with
the Fund. Payments that are made under the Plan will be calculated and charged
daily to the appropriate class prior to determining daily net asset value per
share and dividends/distributions. On June 8, 1998, the Manager purchased
$100,000 of the Fund's shares at an initial subscription price of $1.00 per
share.
721055.2
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<PAGE>
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than twenty-five percent of
all the votes entitled to be cast at such meeting. Annual and other meetings may
be required with respect to such additional matters relating to the Fund as may
be required by the Act, including the removal of Fund director(s) and
communication among shareholders, any registration of the Fund with the SEC or
any state, or as the Directors may consider necessary or desirable. Each
Director serves until the next meeting of the shareholders called for the
purpose of considering the election or re-election of such Director or of a
successor to such Director, and until the election and qualification of his or
her successor, elected at such a meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
FEDERAL INCOME TAXES
The Fund intends to elect to qualify under the Internal Revenue Code of 1986, as
amended (the "Code"), and under Georgia law as a "regulated investment company"
that distributes "exempt-interest dividends". The Fund intends to continue to
qualify for regulated investment company status so long as such qualification is
in the best interests of its shareholders. Such qualification relieves the Fund
of liability for Federal income taxes to the extent its earnings are distributed
in accordance with the applicable provisions of the Code.
The Fund's policy is to distribute as dividends each year 100% and in no event
less than 90% of its tax -exempt interest income, net of certain deductions.
Exempt-interest dividends, as defined in the Code, are dividends or any part
thereof (other than capital gain dividends) paid by the Fund that are
attributable to interest on obligations, the interest on which is exempt from
regular Federal income tax, and designated by the Fund as exempt-interest
dividends in a written notice mailed to the Fund's shareholders not later than
60 days after the close of its taxable year. The percentage of the total
dividends paid by the Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during the year.
721055.2
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<PAGE>
Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest excludible from their gross income under Section 103(a) of the Code.
However, a shareholder is advised to consult his tax advisors with respect to
whether exempt-interest dividends retain the exclusion under Section 103 of the
Code if such shareholder would be treated as a "substantial user" or "related
person" under Section 147(a) of the Code with respect to some or all of the
"private activity" bonds, if any, held by the Fund. If a shareholder receives an
exempt-interest dividend with respect to any share and such share has been held
for six months or less, then any loss on the sale or exchange of such share will
be disallowed to the extent of the amount of such exempt-interest dividend. The
Code provides that interest on indebtedness incurred, or continued, to purchase
or carry certain tax-exempt securities such as shares of the Fund is not
deductible. Therefore, among other consequences, a certain proportion of
interest on indebtedness incurred, or continued, to purchase or carry securities
on margin may not be deductible during the period an investor holds shares of
the Fund. For Social Security recipients, interest on tax exempt bonds,
including exempt-interest dividends paid by the Fund, is to be added to adjusted
gross income for purposes of computing the amount of social security benefits
includible in gross income. The amount of such interest received will have to be
disclosed on the shareholders' Federal income tax returns. Taxpayers other than
corporations are required to include as an item of tax preference for purposes
of the Federal alternative minimum tax all tax-exempt interest on "private
activity" bonds (generally, a bond issue in which more than 10% of the proceeds
are used in a non-governmental trade or business) (other than Section 501(c)(3)
bonds) issued after August 7, 1986. Thus, this provision will apply to the
portion of the exempt-interest dividends from the Fund's assets that are
attributable to such post-August 7, 1986 private activity bonds, if any of such
bonds are acquired by the Fund. Corporations are required to increase their
alternative minimum taxable income for purposes of calculating their alternative
minimum tax liability by 75% of the amount by which the adjusted current
earnings (which will include tax-exempt interest) of the corporation exceeds the
alternative minimum taxable income (determined without this item). In addition,
in certain cases, Subchapter S corporations with accumulated earnings and
profits from Subchapter C years are subject to a minimum tax on excess "passive
investment income" which includes tax-exempt interest.
Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. The Fund
may also realize short-term or long-term capital gains upon the maturity or
disposition of securities acquired at discounts resulting from market
fluctuations. Short-term capital gains will be taxable to shareholders as
ordinary income when they are distributed. Any net capital gains (the excess of
its net realized long-term capital gain over its net realized short-term capital
loss) will be distributed annually to the Fund's shareholders. The Fund will
have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held Fund shares. However, Fund
shareholders who at the time of such a net capital gain distribution have not
held their Fund shares for more than 6 months, and who subsequently dispose of
those shares at a loss, will be required to treat such loss as a long-term
capital loss to the extent of the net capital gain distribution. Distributions
of net capital gain will be designated as a "capital gain dividend" in a written
notice mailed to the Fund's shareholders not later than 60 days after the close
of the Fund's taxable year. Capital gains realized by corporations are generally
taxed at the same rate as
721055.2
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<PAGE>
ordinary income. However, capital gains dividends are taxable at a maximum rate
of 28% to non-corporate shareholders if the Fund's holding period is more than
12 months and 20% if the Fund's holding period is more than 18 months, without
regard to the length of time shares have been held by the holder. Corresponding
maximum rate and holding period rules apply with respect to capital gains
realized by a holder on the disposition of shares.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. The Fund will be subject to Federal income tax on any
undistributed investment company taxable income. To the extent such income is
distributed it will be taxable to shareholders as ordinary income. Expenses paid
or incurred by the Fund will be allocated between tax-exempt and taxable income
in the same proportion as the amount of the Fund's tax-exempt income bears to
the total of such exempt income and its gross income (excluding from gross
income the excess of capital gains over capital losses). If the Fund does not
distribute at least 98% of its ordinary income and 98% of its capital gain net
income for a taxable year, the Fund will be subject to a nondeductible 4% excise
tax on the excess of such amounts over the amounts actually distributed.
If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund generally is required to withhold 31% of taxable
interest, dividend payments, and proceeds from the redemption of shares of the
Fund.
Dividends and distributions to shareholders will be treated in the same manner
for Federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund.
With respect to the variable rate demand instruments, including Participation
Certificates therein, the Fund has obtained and is relying on the opinion of
Battle Fowler LLP, counsel to the Fund, that it will be treated for Federal
income tax purposes as the owner of the underlying Municipal Obligations and the
interest thereon will be exempt from regular federal income taxes to the Fund to
the same extent as interest on the underlying Municipal Obligations. Counsel has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of ownership of securities or
participation interests therein subject to a put and, as a result, the Internal
Revenue Service could reach a conclusion different from that reached by counsel.
The Code provides that the interest on indebtedness incurred or continued to
purchase or carry shares of the Fund is not deductible. Therefore, among other
consequences, a certain proportion of interest on indebtedness incurred, or
continued to purchase or carry securities may not be deductible during the
period an investor holds shares of the Fund. P.L. 99-514 expands the application
of this rule as it applies to financial institutions, effective with respect to
Fund shares acquired after December 31, 1986. The Clinton Administration's
Revenue Proposals for fiscal year 1999 would extend this provision to all
federal intermediaries effective for taxable years beginning after the date of
enactment with respect to obligations acquired on or after the date of first
committee action.
721055.2
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<PAGE>
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would reevaluate its investment objective and policies and consider
changes in the structure.
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered, and that there is no constitutional prohibition against the Federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the Federal government to
regulate and control bonds such as the Municipal Obligations and to tax such
bonds in the future. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations in
accordance with Section 103 of the Code.
GEORGIA INCOME TAXES
Under Section 48-7-27(b)(1)(A) of the Official Code of Georgia Annotated,
interest on obligations of the State of Georgia and its political subdivisions,
which is not otherwise included in federal adjusted gross income, is exempt from
the State of Georgia's individual income tax. Likewise, under Section
48-7-27(b)(2) of the Official Code of Georgia Annotated interest on exempt
obligations of the U.S. government, its territories and possessions (including
Puerto Rico, Guam, and th Virgin Islands), or of any authority, commission, or
instrumentality of the U.S. government is also exempt from the State of
Georgia's individual income tax. To the extent that distributions from the Fund
attributable to interest on obligations of the State of Georgia and its
political subdivisions is excluded from federal adjusted gross income,
therefore, they will likewise be excluded from the Georgia individual income
tax.
The stated position of the Georgia Department of Revenue is that the exempt
treatment for interest derived from such exempt obligations is also extended to
distributions of regulated investment companies, such as the Fund. Tax-exempt
treatment is generally not available for distributions attributable to income
earned on indirect U.S. government obligations (GNMAs, FNMAs, etc.), for
repurchase agreements collateralized by U.S. government obligations, or for
obligations of other states and their political subdivisions. To the extent such
investments are made by the Fund, such as for temporary or defensive purposes,
such distributions will generally be taxable on a pro rata basis.
Any distributions of net short-term and net long-term capital gains earned by
the Fund are fully included in each individual shareholder's Georgia taxable
income as dividend income and long-term capital gain, respectively, and are
currently taxed at ordinary income tax rates. Ownership of Shares in the Fund
may also result in collateral Georgia tax consequences for certain taxpayers.
Prospective investors should consult their tax advisors as to the applicability
of any such collateral consequences.
721055.2
-35-
<PAGE>
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities and is the transfer agent
and dividend disbursing agent for shares of the Fund. The transfer agent and
custodian do not assist in, and are not responsible for, investment decisions
involving assets of the Fund.
DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s
Two Highest Municipal Bond Ratings
Aaa: Bonds which are 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.
Aa: 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 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.
Con. ( ): Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc's two highest ratings of state and
municipal notes and other short-term loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
- --------
* As described by the rating agencies.
721055.2
-36-
<PAGE>
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services' two highest debt ratings:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: 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.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services' two highest commercial paper
ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
721055.2
-37-
<PAGE>
Description of Moody's Investors Service, Inc.'s two highest commercial paper
ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues Prime-1, highest
quality; Prime-2, higher quality.
721055.2
-38-
<PAGE>
TAXABLE EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. If Your Taxable Income Bracket Is . . .
Single 0- 25,351 61,401- 128,101- 278,451 and
Return 25,350 61,400 128,100 278,450 over
Joint 0- 42,351- 102,301- 155,951- 278,451 and
Return 42,350 102,300 155,950 278,450 over
2. Then Your Combined Income Tax Bracket Is
. . .
Federal
Tax Bracket 15.00% 28.00% 31.00% 36.00% 39.60%
State
Tax Bracket 6.00% 6.00% 6.00% 6.00% 6.00%
Combined
Tax Bracket 20.10% 32.32% 35.14% 39.84% 43.22%
3. Now Compare Your Tax Free Income Yields
with Taxable Income Yields
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
2.0% 2.50 2.96 3.08 3.32 3.52
2.5% 3.13 3.69 3.85 4.16 4.40
3.0% 3.75 4.43 4.63 4.99 5.28
3.5% 4.38 5.17 5.40 5.82 6.16
4.0% 5.01 5.91 6.17 6.65 7.05
4.5% 5.63 6.65 6.94 7.48 7.93
5.0% 6.26 7.39 7.71 8.31 8.81
5.5% 6.88 8.13 8.48 9.14 9.69
6.0% 7.51 8.87 9.25 9.97 10.57
6.5% 8.14 9.60 10.02 10.80 11.45
7.0% 8.76 10.34 10.79 11.64 12.33
- -------------------- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
<PAGE>
MCGLADREY & PULLEN, LLP
-----------------------
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Directors and Shareholder
Georgia Daily Municipal Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Georgia
Daily Municipal Income Fund, Inc. as of June 8, 1998. This financial statement
is the responsibility of the Fund's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Georgia Daily Municipal
Income Fund, Inc. as of June 8, 1998, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
June 8, 1998
722464.1
<PAGE>
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 8, 1998
<TABLE>
<S> <C>
ASSETS
Cash $100,000
Deferred organization expense 34,000
--------
Total Assets 134,000
LIABILITIES
Payable for deferred organization expense 34,000
--------
NET ASSETS
Net assets applicable to 100,000 shares of common stock outstanding,
$.001 par value per share; 20,000,000,000
shares authorized $100,000
========
Net asset value, offering and redemption price per share $ 1.00
========
</TABLE>
See Notes to Financial Statement.
722464.1
<PAGE>
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENT
Note 1. Georgia Daily Municipal Income Fund, Inc. (the "Fund") was
incorporated under the laws of the state of Maryland on October 7,
1997 and is authorized to issue 20,000,000,000 shares of common stock,
$.001 par value. The Fund is subdivided into two classes of Shares,
Class A and Class B. The Fund is registered under the Investment
Company Act of 1940 as an open-end management investment company and
has had no operations to date other than those relating to its
organization and the sale and issuance of 100,000 shares of Class A
common stock interest to Reich & Tang Asset Management L.P., its
Manager. The Investment Management Contract, the Administrative
Services Contract and the Shareholder Servicing Agreement are
described elsewhere in the Prospectus and Statement of Additional
Information.
Note 2. Organizational expenses are being deferred and will be amortized on
a straight-line basis over a five year period. During the amortization
period the proceeds of any redemption of initial shares by any holder
thereof will be reduced by a pro rata portion of any then unamortized
organization expense, based on the ratio of the shares redeemed to the
total initial shares outstanding immediately prior to the redemption.
722464.1
<PAGE>
PART C - OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 24. Financial Statements and Exhibits.
* (A) Financial Statements
Included in Prospectus Part A:
(1) Table of Fees and Expenses
Included in Statement of Additional Information Part B:
(1) Report of McGladrey & Pullen, LLP, independent accountants, dated June 8, 1998; and
(2) Statement of Assets and Liabilities (audited).
(B) Exhibits
(1) Articles of Incorporation of the Registrant (Filed
with initial Registration Statement on Form N-1A on
October 9, 1997 and incorporated herein by
reference).
(2) By-Laws of the Registrant (Filed with initial Registration Statement on Form N-1A on October 9, 1997
and incorporated herein by reference).
(3) Not applicable.
(4) Not applicable.
* (5) Form of Investment Management Contract between the Registrant and Reich & Tang Asset
Management L.P.
(6) See Form of Distribution Agreement filed as Exhibit 15.2.
(7) Not applicable.
* (8) Form of Custody Agreement between the Registrant and Investors Fiduciary Trust Company.
(9) Not Applicable.
* (9.1) Form of Administrative Services Agreement between the Registrant and Reich & Tang Asset
Management L.P.
* (10.1) Consent Opinion of Messrs. Battle Fowler LLP
as to the use of their name under the headings
"Federal Income Taxes" in the Prospectus and "Counsel
and Auditors" in the Statement of Additional
Information.
* (10.2) Opinion of Kilpatrick Stockton LLP as to
Georgia law, including their consent to the filing
thereof and to the use of their name under the
heading "Georgia Income Taxes" in the Prospectus and
"Counsel and Auditors" in the Statement of Additional
Information.
* (11) Consent of Independent Accountants.
- --------
* Filed herewith.
</TABLE>
721722.2
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(12) Not Applicable.
* (13) Form of written assurance of Reich & Tang Asset Management L.P. that its purchase of shares of the
Registrant was for investment purposes without any present intention of redeeming or reselling.
(14) Not Applicable.
* (15.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940.
* (15.2) Form of Distribution Agreement between the Registrant and Reich & Tang Distributors, Inc.
* (15.3) Form of Shareholder Servicing Agreement between the Registrant and Reich & Tang Distributors, Inc.
* (16) Powers of Attorney.
(17) Not applicable.
* (18) 18f-3 Multi-Class Plan.
Item 25. Persons controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of June 8, 1998
--------------- ------------------------
Common Stock
(par value $.001)
Class A 1
Class B 0
Item 27. Indemnification.
Registrant incorporates herein by reference the response
to item 27 of the Registration Statement filed with the
Commission on October 9, 1997.
Item 28. Business and Other Connections of Investment Adviser.
The description of the Reich & Tang Asset Management L.P.
("RTAMLP") under the caption "Management of the Fund" in the Prospectus and
"Management and Investment Management Contract" in the Statement of Additional
Information constituting parts A and B, respectively, of the Registration
Statement are incorporated herein by reference.
Effective January 1, 1998, NEIC Operating Partnership, L.P.
("NEICOP") was the limited partner and owner of a 99.5% interest in the Manager
replacing New England Investment Companies, L.P. ("NEICLP") as the limited
partner and owner
- --------
* To be filed by Amendment
</TABLE>
721722.2
C-2
<PAGE>
of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies"), due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager. These changes did not result in a change in control of the Manager and
have no impact upon the Manager's performance of its responsibilities and
obligations.
Reich & Tang Asset Management, Inc. (a wholly owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
Nvest Companies and may be deemed a "controlling person" of the Manager. Reich &
Tang, Inc. owns, directly and indirectly, approximately 13% of the outstanding
partnership interests of Nvest Companies.
Registrant's investment adviser, RTAMLP, is a registered
investment adviser. RTAMLP's investment advisory clients include California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., Michigan Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Short Term
Income Fund, Inc., Tax Exempt Proceeds Fund, Inc., and Virginia Daily Municipal
Income Fund, Inc., registered investment companies whose addresses are 600 Fifth
Avenue, New York, New York 10020, which invest principally in money market
instruments, Delafield Fund, Inc. and Reich & Tang Equity Fund, Inc., registered
investment companies whose addresses are 600 Fifth Avenue, New York, New York
10020, which invest principally in equity securities. In addition, Reich & Tang
Asset Management L.P. is the sole general partner of Alpha Associates, August
Associates, Reich & Tang Minutus L.P., Reich & Tang Minutus II, L.P., Reich &
Tang Equity Partnerships L.P. and Tucek Partners, L.P., private investment
partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of Nvest
Corporation (formerly New England Investment Companies, Inc.) since October
1992, Chairman of the Board of NEIC since December 1992, Group Executive Vice
President, Bank of America, responsible for the global asset management private
banking businesses, from April 1992 to October 1992, Executive Vice President of
Security Pacific Bank, and Chief Executive Officer of Security Pacific Hoare
Govett Companies, a wholly owned subsidiary of Security Pacific Corporation,
from April 1988 to April 1992, Director of The New England since March 1993,
Chairman of the Board of Directors of NEIC's subsidiaries other than Loomis,
Sayles & Company, Incorporated ("Loomis") and Back Bay Advisors, Inc. ("Back
Bay"), where he serves as a Director, and Chairman of the Board of Trustees of
all of the mutual funds in the TNE Fund Group and the Zenith Funds. G. Neal
Ryland, Executive Vice President, Treasurer and Chief Financial Officer Nvest
Corporation since July 1993, Executive Vice President and Chief Financial
Officer of The Boston Company, a diversified financial services company, from
March 1989 until July 1993; from September 1985 to December 1988, Mr. Ryland was
employed by Kenner Parker Toys, Inc. as Senior Vice President and Chief
Financial Officer. Edward N. Wadsworth, Executive Vice President, General
Counsel, Clerk and Secretary of Nvest Corporation since December 1989, Senior
Vice President and Associate General Counsel of The New England from 1984 until
December 1992, and Secretary of Westpeak and Draycott and the Treasurer of Nvest
Corporation. Lorraine C. Hysler has been Secretary of RTAM since July 1994,
Assistant Secretary of Nvest Corporation since September 1993, Vice President of
the Mutual Funds Group of NEICLP from September 1993 until July 1994, and Vice
President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler joined Reich
& Tang, Inc. in May 1977 and served as Secretary from April 1987 until September
1993. Richard E. Smith, III has been a Director of Reich & Tang Asset Management
Inc. since July 1994, President and Chief Operating Officer of the Capital
Management Group of NEICLP from May 1994 until July 1994, President and Chief
Operating Officer of the Reich & Tang Capital Management Group since July 1994,
Executive Vice President and Director of Rhode Island Hospital Trust from March
1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAM since October 1994, President and Chief Executive
Officer of Reich & Tang Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994; Mr. Duff is President and a
Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pax World Money Market Fund, Inc., Short Term
Income Fund, Inc., and Virginia Daily Municipal Income Fund, Inc., President and
Trustee of Florida Daily Municipal Income
721722.2
C-3
<PAGE>
Fund, Pennsylvania Daily Municipal Income Fund, President and Chief Executive
Officer of Tax Exempt Proceeds Fund, Inc., and Executive Vice President of Reich
& Tang Equity Fund, Inc. Bernadette N. Finn has been Vice President - Compliance
of RTAM since July 1994, Vice President of Mutual Funds Division of NEICLP from
September 1993 until July 1994, Vice President of Reich & Tang Funds since July
1994. Ms. Finn joined Reich & Tang, Inc. in September 1970 and served as Vice
President from September 1982 until May 1987 and as Vice President and Assistant
Secretary from May 1987 until September 1993. Ms. Finn is also Secretary of Back
Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund,
Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Funds,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Tax Exempt
Proceeds Fund, Inc., and Virginia Daily Municipal Income Fund, Inc., a Vice
President and Secretary of Delafield Fund, Inc., Reich & Tang Equity Fund, Inc.
and Short Term Income Fund, Inc. Richard De Sanctis has been Vice President and
Treasurer of RTAM since July 1994, Assistant Treasurer of NEIC since September
1993 and Treasurer of the Mutual Funds Group of NEICLP from September 1993 until
July 1994, Treasurer of the Reich & Tang Funds since July 1994. Mr. De Sanctis
joined Reich & Tang, Inc. in December 1990 and served as Controller of Reich &
Tang, Inc., from January 1991 to September 1993. Mr. De Sanctis was Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also
Treasurer of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government Securities Trust,
Tax Exempt Proceeds Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc., and is Vice President and Treasurer of Cortland
Trust, Inc. Rosanne Holtzer, Assistant Treasurer of the Fund, has been Vice
President of the Mutual Funds division of the Manager since December 1997. Ms.
Holtzer was formerly Manager of Fund Accounting for the Manager with which she
was associated with from June 1986. She is also Assistant Treasurer of Back Bay
Funds, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc., Short Term Income Fund, Inc., and Virginia Daily Municipal Income Fund,
Inc. and is Vice President and Assistant Treasurer of Cortland Trust, Inc.
Item 29. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's Distributor
is also distributor for Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons the principal address is 600 Fifth Avenue, New York, New York 10020.
721722.2
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Positions and Offices Positions and Offices
Name With theof the Distributor With Registrant
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III President and Director Chairman
Steven W. Duff Director Executive Vice President
Bernadette N. Finn Vice President Secretary
Robert F. Hoerle Managing Director None
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
Rosanne Holtzer Vice President Assistant Treasurer
</TABLE>
(c) Not applicable
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at Reich &
Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020 the
Registrant's Manager; Reich & Tang Services, Inc., 600 Fifth Avenue, New York,
New York 10020, the Registrant's transfer agent and dividend distributing agent;
and at Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64104, the Registrant's custodian.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective
date of its Securities Act Registration Statement.
721722.2
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York, and
State of New York, on the 8th day of June, 1998.
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
By: /s/ Bernadette N. Finn
---------------------------
Bernadette N. Finn, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated below.
Signature Title Date
(1) Principal Executive Officer: President and Director June 8, 1998
Steven W. Duff
By:/s/ Steven W. Duff
------------------------------
Steven W. Duff
(2) Principal Financial and June 8, 1998
Accounting officer: Treasurer
By: /s/ Richard De Sanctis
--------------------------------
Richard De Sanctis
(3) Majority of Directors
Steven W. Duff Director June 8, 1998
W. Giles Mellon Director
Yung Wong Director
Robert Straniere Director
By: /s/ Bernadette N. Finn
---------------------------------
Bernadette N. Finn
Attorney-in-Fact*
- ----------------
*The executed copy of Power of Attorney was filed herewith.
721722.2
C-6
INVESTMENT MANAGEMENT CONTRACT
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
the "Fund"
New York, New York
June __, 1998
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
extent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the investment management services
specified below.
(b) Subject to the general control of our Board
of Directors, you will make decisions with respect to all purchases and sales of
the portfolio securities. To carry out such decisions, you are hereby
authorized, as our agent and attorney-in-fact for our account and at our risk
and in our name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in our portfolio
securities you are authorized to exercise full discretion and act for us in the
same manner and with the same force and effect as our Fund itself might or could
do with respect to such purchases, sales or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
640601.1
<PAGE>
(c) You will report to our Board of Directors at
each meeting thereof all changes in our portfolio since your prior report, and
will also keep us in touch with important developments affecting our portfolio
and, on your initiative, will furnish us from time to time with such information
as you may believe appropriate for this purpose, whether concerning the
individual entities whose securities are included in our portfolio, the
activities in which such entities engage, Federal income tax policies applicable
to our investments, or the conditions prevailing in the money market or the
economy generally. You will also furnish us with such statistical and analytical
information with respect to our portfolio securities as you may believe
appropriate or as we may reasonably request. In making such purchases and sales
of our portfolio securities, you will comply with the policies set from time to
time by our Board of Directors as well as the limitations imposed by our
Articles of Incorporation and by the provisions of the Internal Revenue Code and
the 1940 Act relating to regulated investment companies and the limitations
contained in the Registration Statement.
(d) It is understood that you will from time to
time employ, subcontract with or otherwise associate with yourself, entirely at
your expense, such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder.
(e) You or your affiliates will also furnish us,
at your own expense, such investment advisory supervision and assistance as you
may believe appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be subject. You and
your affiliates will also pay the expenses of promoting the sale of our shares
(other than the costs of preparing, printing and filing our registration
statement, printing copies of the prospectus contained therein and complying
with other applicable regulatory requirements), except to the extent that we are
permitted to bear such expenses under a plan adopted pursuant to Rule 12b-1
under the 1940 Act or a similar rule.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses, including: (a) brokerage and commission expenses, (b) Federal, state
or local taxes, including issue and transfer taxes incurred by or levied on us,
(c) commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian, (f) charges, expenses and
payments relating to the issuance, redemption, transfer and dividend disbursing
functions for us, (g) recurring and nonrecurring legal and accounting expenses,
including those of the bookkeeping agent, (h) telecommunications expenses, (i)
the costs of organizing and maintaining our
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640601.1
<PAGE>
existence as a trust, (j) compensation, including directors' fees, of any of our
directors, officers or employees who are not your officers or officers of your
affiliates, and costs of other personnel providing clerical, accounting
supervision and other office services to us as we may request, (k) costs of
shareholder's services including, charges and expenses of persons providing
confirmations of transactions in our shares, periodic statements to
shareholders, and recordkeeping and shareholders' services, (l) costs of
shareholders' reports, proxy solicitations, and Fund meetings, (m) fees and
expenses of registering our shares under the appropriate Federal securities laws
and of qualifying such shares under applicable state securities laws, including
expenses attendant upon the initial registration and qualification of such
shares and attendant upon renewals of, or amendments to, those registrations and
qualifications, (n) expenses of preparing, printing and delivering our
prospectus to existing shareholders and of printing shareholder application
forms for shareholder accounts, (o) payment of the fees and expenses provided
for herein, under the Administrative Services Agreement, and pursuant to the
Shareholder Servicing Agreement, with respect to the Class A shares only, and
Distribution Agreement, and (p) any other distribution or promotional expenses
contemplated by an effective plan adopted by us pursuant to Rule 12b-1 under the
Act. Our obligation for the foregoing expenses is limited by your agreement to
be responsible, while this Agreement is in effect, for any amount by which our
annual operating expenses (excluding taxes, brokerage, interest and
extraordinary expenses) exceed the limits on investment company expenses
prescribed by any state in which our shares are qualified for sale.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at
the annual rate of .40% of the Fund's average daily net assets. Your fee will be
accrued by us daily, and will be payable on the last day of each calendar month
for services performed hereunder during that month or on such other schedule as
you shall request of us in writing. You may use any portion of this fee for
distribution of our shares, or for making servicing payments to organizations
whose customers or clients are our shareholders. You may waive your right to any
fee to which you are entitled hereunder, provided such waiver is
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640601.1
<PAGE>
delivered to us in writing. Any reimbursement of our expenses, to which we may
become entitled pursuant to paragraph 3 hereof, will be paid to us at the same
time as we pay you.
6. This Agreement will become effective on the date hereof and
shall continue in effect until ____________ __, 2000 and thereafter for
successive twelve-month periods (computed from each ), provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities, as defined in the 1940 Act and the rules thereunder, and, in either
case, by a majority of those of our directors who are neither party to this
Agreement nor, other than by their service as directors of the trust, interested
persons, as defined in the 1940 Act and the rules thereunder, of any such person
who is party to this Agreement. Upon the effectiveness of this Agreement, it
shall supersede all previous Agreements between us covering the subject matter
hereof. This Agreement may be terminated at any time, without the payment of any
penalty, (i) by vote of a majority of our outstanding voting securities, as
defined in the 1940 Act and the rules thereunder, or (ii) by a vote of a
majority of our entire Board of Directors, on sixty days' written notice to you,
or (iii) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your employees or the officers and directors of Reich & Tang
Asset Management, Inc., your general partner, who may also be a director,
officer or employee of ours, or of a person affiliated with us, as defined in
the 1940 Act, to engage in any other business or to devote time and attention to
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
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640601.1
<PAGE>
Very truly yours,
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
By:___________________________________
Name:
Title:
ACCEPTED: June __, 1998
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., as General Partner
By: ___________________________________
Name:
Title:
-5-
640601.1
CUSTODY AGREEMENT
THIS AGREEMENT made the ___ day of _____________, 19__, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 801 Pennsylvania,
Kansas City, Missouri 64105 ("Custodian"), and Georgia Daily Municipal Income
Fund, Inc., a Maryland corporation, having its principal office and place of
business at 600 Fifth Avenue, New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to
accept such appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and
appoints Custodian as custodian of the securities and monies
at any time owned by the Fund.
721814.1
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2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to
Custodian:
1. That it is a corporation or trust (as specified
above) duly organized and existing and in good
standing under the laws of its state of organization,
and that it is registered under the Investment
Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under
applicable law, its articles of incorporation and
its bylaws to enter into this Agreement; that it
has taken all requisite action necessary to appoint
Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by
Fund; and that this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable
in accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to
Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Missouri; and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; that this
721814.1
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<PAGE>
Agreement has been duly executed and delivered by
Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian,
enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery Of Assets
Except as permitted by the 1940 Act, Fund will deliver or
cause to be delivered to Custodian on the effective date of
this Agreement, or as soon thereafter as practicable, and from
time to time thereafter, all portfolio securities acquired by
it and monies then owned by it or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies
not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to
Custodian all of the Fund's relevant accounts and
records previously maintained. Custodian shall be
entitled to rely conclusively on the completeness and
correctness of the accounts and records turned over to
it, and Fund shall indemnify and hold Custodian
harmless of and from any and all expenses, damages and
losses whatsoever arising out of or in connection with
any error, omission, inaccuracy or other deficiency of
721814.1
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<PAGE>
such accounts and records or in the failure of Fund to
provide, or to provide in a timely manner, any accounts,
records or information needed by the Custodian to perform its
functions hereunder.
C. Delivery of Assets to Third Parties
-----------------------------------
Custodian will receive delivery of and keep safely the
assets of Fund delivered to it from time to time
segregated in a separate account, and if Fund is
comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep
the assets of each Portfolio segregated in a separate
account. Custodian will not deliver, assign, pledge or
hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of
Section 3.S. of this Agreement. Upon delivery of any
such assets to a subcustodian pursuant to Section 3.S.
of this Agreement, Custodian will create and maintain
records identifying those assets which have been
delivered to the subcustodian as belonging to the Fund,
by Portfolio if applicable. The Custodian is
responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to
and received by other persons as permitted under the
terms of this Agreement, except for securities and
monies transmitted to subcustodians appointed under
721814.1
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<PAGE>
Section 3.S. of this Agreement, for which Custodian remains
responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC),
Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved
by the Fund (as such entities are defined at 17 CFR Section
270.17f-4(b)) (each a "Depository" and collectively, the
"Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of
the Fund in the name of the Custodian, the Fund, or a nominee
of either of them, unless specifically directed by
instructions to hold such registered securities in so-called
"street name," provided that, in any event, all such
securities and other assets shall be held in an account of the
Custodian containing only assets of the Fund, or only assets
held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the
Custodian at all times shall indicate the Fund or other
customer for which such securities and other assets are held
in such account and the respective interests therein. If,
however, the Fund directs the Custodian to maintain securities
in "street
721814.1
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<PAGE>
name", notwithstanding anything contained herein to the
contrary, the Custodian shall be obligated only to utilize its
best efforts to timely collect income due the Fund on such
securities and to notify the Fund of relevant corporate
actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian
hereunder, however, shall at all times be identifiable on the
records of the Custodian. The Fund agrees to hold Custodian
and its nominee harmless for any liability as a shareholder of
record of securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance
with the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange
securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par
value of the stock is changed, and,
721814.1
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<PAGE>
upon receiving payment therefor, to surrender bonds or other
securities held by it at maturity or when advised of earlier
call for redemption, except that Custodian shall receive
instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund Fund will, on each
business day on which a purchase of securities shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase:
1. If applicable, the name of the Portfolio making
such purchase;
2. The name of the issuer and description of the
security;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
7. The total amount payable upon such purchase; and 8.
The name of the person from whom or the broker or
dealer through whom the purchase was made.
9. Whether the security is to be received in
certificated form or via a specified Depository.
721814.1
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<PAGE>
In accordance with such instructions, Custodian will pay for out of monies held
for the account of Fund, but only insofar as such monies are available for such
purpose, and receive the portfolio securities so purchased by or for the account
of Fund, except that Custodian may in its sole discretion advance funds to the
Fund which may result in an overdraft because the monies held by the Custodian
on behalf of the Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall be made by
the Custodian only upon receipt of securities: (a) by the Custodian; (b) by a
clearing corporation of a national exchange of which the Custodian is a member;
or (c) by a Depository. Notwithstanding the foregoing, (i) in the case of a
repurchase agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities underlying such
repurchase agreement have been transferred by book-entry into the account
maintained with such Depository by the Custodian, on behalf of its customers,
provided that the Custodian's instructions to the Depository require that the
Depository make payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii) in the case
of time deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation evidencing
said deposit or entry into such transaction; and (iii)
721814.1
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<PAGE>
in the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make, or cause a
subcustodian appointed pursuant to Section 3.S.2. of this Agreement to make,
payment therefor in accordance with generally accepted local custom and market
practice.
G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures Fund will, on each business day on which a
sale of investment securities (other than options and futures)
of Fund has been made, deliver to Custodian instructions
specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making
such sale;
2. The name of the issuer and description of the
securities;
3. The number of shares and principal amount sold, and
accrued interest, if any;
4. The date on which the securities sold were purchased
or other information identifying the securities sold
and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage
commission, taxes or other expenses payable in
connection with such sale;
721814.1
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<PAGE>
8. The total amount to be received by Fund upon such
sale; and
9. The name and address of the broker or dealer through
whom or person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered in
accordance with "street delivery custom" to a broker or its clearing
agent; or (ii) in the case of the sale of securities, the settlement of
which occurs outside of the United States of America, the Custodian may
make, or cause a subcustodian appointed pursuant to Section 3.S.2. of
this Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
721814.1
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<PAGE>
H. Purchases or Sales of Options and Futures Fund will, on each
business day on which a purchase or sale of the following
options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such purchase or sale: 1. If applicable, the name of the
Portfolio making
such purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
721814.1
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<PAGE>
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in
addition to instructions, and if not already
in the possession of Custodian, Fund shall
deliver a substantially complete and
executed custodial safekeeping account and
procedural
721814.1
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<PAGE>
agreement which shall be incorporated by
reference into this Custody Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund,
and subject to such additional terms and conditions as
Custodian may require:
1. Upon receipt of instructions, Custodian will
release or cause to be released securities held in
custody to the pledgee designated in such
721814.1
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<PAGE>
instructions by way of pledge or hypothecation to
secure any loan incurred by Fund; provided, however,
that the securities shall be released only upon
payment to Custodian of the monies borrowed, except
that in cases where additional collateral is required
to secure a borrowing already made, further
securities may be released or caused to be released
for that purpose upon receipt of instructions. Upon
receipt of instructions, Custodian will pay, but only
from funds available for such purpose, any such loan
upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note
or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will
release securities held in custody to the borrower
designated in such instructions; provided,
however, that the securities will be released only
upon deposit with Custodian of full cash
collateral as specified in such instructions, and
that Fund will retain the right to any dividends,
interest or distribution on such loaned
securities. Upon receipt of instructions and the
loaned securities, Custodian will release the cash
collateral to the borrower.
721814.1
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<PAGE>
J. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time to
time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose
deposit accounts in the name of Custodian ("Accounts"),
subject only to draft or order by Custodian upon receipt of
instructions. All monies received by Custodian from or for the
account of Fund shall be deposited in said Accounts. Barring
events not in the control of the Custodian such as strikes,
lockouts or labor disputes, riots, war or equipment or
transmission failure or damage, fire, flood, earthquake or
other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m.,
Kansas City time, on the second business day after deposit of
any check into an Account, Custodian agrees to make Fed Funds
available to the Fund in the amount of the check. Deposits
made by Federal Reserve wire will be available to the Fund
immediately and ACH wires will be available to the Fund on the
next business day. Income earned on the
721814.1
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<PAGE>
portfolio securities will be credited to the Fund based on the
schedule attached as Exhibit A. The Custodian will be entitled
to reverse any credited amounts where credits have been made
and monies are not finally collected. If monies are collected
after such reversal, the Custodian will credit the Fund in
that amount. Custodian may open and maintain Accounts in its
own banking department, or in such other banks or trust
companies as may be designated by it or by Fund in writing,
all such Accounts, however, to be in the name of Custodian and
subject only to its draft or order. Funds received and held
for the account of different Portfolios shall be maintained in
separate Accounts established for each Portfolio.
L. Income and other Payments to the Fund Custodian will:
1. Collect, claim and receive and deposit for the
account of Fund all income and other payments
which become due and payable on or after the
effective date of this Agreement with respect to
the securities deposited under this Agreement and
credit the account of Fund in accordance with the
schedule attached hereto as Exhibit A. If, for
any reason, the Fund is credited with income that
is not subsequently collected, Custodian may
reverse that credited amount.
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<PAGE>
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with: a. the collection, receipt and
deposit of such
income and other payments, including but not
limited to the presentation for payment of:
1. all coupons and other income items
requiring presentation; and
2. all other securities which may
mature or be called, redeemed,
retired or otherwise become payable
and regarding which the Custodian
has actual knowledge, or should
reasonably be expected to have
knowledge; and
b. the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt of
instructions and upon being indemnified to its satisfaction against the
costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and
721814.1
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<PAGE>
other similar items and will deal with the same pursuant to
instructions. Unless prior instructions have been received
to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund
on the last trade date prior to the date of expiration of
such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on
the shares of capital stock of Fund ("Fund Shares") by the
Board of Directors of Fund, Fund shall deliver to Custodian
instructions with respect thereto. On the date specified in
such instructions for the payment of such dividend or other
distribution, Custodian will pay out of the monies held for
the account of Fund, insofar as the same shall be available
for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to
pay the amount per share payable in cash on Fund Shares issued
and outstanding on the record date established by such
resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice, Custodian
shall charge such aggregate
721814.1
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<PAGE>
dollar amount to the account of Fund and either deposit the
same in the account maintained for the purpose of paying for
the repurchase or redemption of Fund Shares or deliver the
same in accordance with such advice. Custodian shall not have
any duty or responsibility to determine that Fund Shares have
been removed from the proper shareholder account or accounts
or that the proper number of Fund Shares have been cancelled
and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with Custodian the amount
received for such shares. Custodian shall not have any duty or
responsibility to determine that Fund Shares purchased from
Fund have been added to the proper shareholder account or
accounts or that the proper number of such shares have been
added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or
mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to securities held by
Custodian for Fund and will, upon receipt of instructions,
execute and deliver or cause its nominee to execute and
deliver or
721814.1
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<PAGE>
mail or have delivered or mailed such proxies or other
authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power
inherent in any such securities, including any power to vote
the same, or execute any proxy, power of attorney, or other
similar instrument voting any of such securities, or give any
consent, approval or waiver with respect thereto, or take any
other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations
in connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
721814.1
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<PAGE>
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a
detailed statement of the amounts received or paid and of
securities received or delivered for the account of Fund
during each business day. Custodian will, from time to time,
upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are
necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's
independent public accountants, reasonable access to such
records or will provide reasonable confirmation of the
contents of such records, and if demanded, Custodian will
permit federal and state regulatory agencies to examine the
securities, books and records. Upon the written instructions
of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit
such persons as are authorized by Fund, including Fund's
independent public accountants, reasonable access to such
records or to provide reasonable confirmation of the contents
of such records, and to permit such agencies to examine the
books, records and securities held by such subcustodian which
relate to Fund.
721814.1
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<PAGE>
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this
Agreement, all or any of the monies or securities
of Fund may be held in Custodian's own custody or
in the custody of one or more other banks or trust
companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian
selected by the Custodian must have the
qualifications required for a custodian under the
1940 Act, as amended. It is understood that
Custodian initially intends to appoint United
Missouri Bank, N.A. (UMB) and United Missouri
Trust Company of New York (UMTCNY) as
subcustodians. Custodian shall be responsible to
the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions
or omissions of UMB, UMTCNY and any other
subcustodians selected and appointed by Custodian
(except subcustodians appointed at the request of
Fund and as provided in Subsection 2 below) to the
same extent Custodian would be responsible to the
Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon
request of the Fund, Custodian shall be willing to
contract with other subcustodians reasonably
acceptable to the Custodian for purposes of (i)
721814.1
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<PAGE>
effecting third-party repurchase transactions with
banks, brokers, dealers, or other entities through
the use of a common custodian or subcustodian, or
(ii) providing depository and clearing agency
services with respect to certain variable rate demand
note securities, or (iii) for other reasonable
purposes specified by Fund; provided, however, that
the Custodian shall be responsible to the Fund for
any loss, damage or expense suffered or incurred by
the Fund resulting from the actions or omissions of
any such subcustodian only to the same extent such
subcustodian is responsible to the Custodian. The
Fund shall be entitled to review the Custodian's
contracts with any such subcustodians appointed at
the request of Fund. Custodian shall be responsible
to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or
omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this
Agreement, Fund's foreign securities (as defined in
Rule 17f-5(c)(1) under the 1940 Act) and Fund's cash
or cash equivalents, in amounts deemed by the Fund to
be reasonably necessary to effect Fund's
721814.1
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<PAGE>
foreign securities transactions, may be held in the
custody of one or more banks or trust companies
acting as subcustodians, and thereafter, pursuant to
a written contract or contracts as approved by Fund's
Board of Directors, may be transferred to accounts
maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2).
Custodian shall be responsible to the Fund for any
loss, damage or expense suffered or incurred by the
Fund resulting from the actions or omissions of any
foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to
the same extent such domestic subcustodian is
responsible to the Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and
records maintained by Custodian pursuant to this
Agreement are the property of Fund, and will be made
available to Fund for inspection or reproduction within
a reasonable period of time, upon demand. Custodian
will assist Fund's independent auditors, or upon
approval of Fund, or upon demand, any regulatory body,
in any requested review of Fund's accounts and records
but shall be reimbursed by Fund for all expenses and
employee time invested in any such review outside of
721814.1
24
<PAGE>
routine and normal periodic reviews. Upon receipt from Fund of
the necessary information or instructions, Custodian will
supply information from the books and records it maintains for
Fund that Fund needs for tax returns, questionnaires, periodic
reports to shareholders and such other reports and information
requests as Fund and Custodian shall agree upon from time to
time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as
they agree upon, and Custodian may conclusively assume that no
procedure approved or directed by Fund or its accountants or
other advisors conflicts with or violates any requirements of
its prospectus, articles of incorporation, bylaws, any
applicable law, rule or regulation, or any order, decree or
agreement by which Fund may be bound. Fund will be responsible
to notify Custodian of any changes in statutes, regulations,
rules, requirements or policies which might necessitate
changes in Custodian's responsibilities or procedures.
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft in any
Account because the monies held therein by Custodian on behalf
of the Fund are
721814.1
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<PAGE>
insufficient to pay the total amount payable upon a purchase
of securities as specified in Fund's instructions or for some
other reason, the amount of the overdraft shall be payable by
the Fund to Custodian upon demand together with the overdraft
charge set forth on the then-current Fee Schedule from the
date advanced until the date of payment. Fund hereby grants
Custodian a lien on and security interest in the assets of the
Fund to secure the full amount of any outstanding overdraft
and related overdraft charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the
issuer or trustee thereof, or to the agent of such issuer or
trustee, for the purpose of exercise or sale, provided that
the new securities, cash or other assets, if any, are to be
delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered
to the Custodian or the tendered securities are to be returned
to the Custodian.
INSTRUCTIONS.
A. The term "instructions", as used herein, means written
(including telecopied or telexed) or oral instructions which
Custodian reasonably believes were given by a designated
721814.1
26
<PAGE>
representative of Fund. Fund shall deliver to Custodian, prior to
delivery of any assets to Custodian and thereafter from time to time as
changes therein are necessary, written instructions naming one or more
designated representatives to give instructions in the name and on
behalf of Fund, which instructions may be received and accepted by
Custodian as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect (and Custodian will be fully protected in acting in
reliance thereon) until receipt by Custodian of notice to the contrary.
Unless such written instructions delegating authority to any person to
give instructions specifically limit such authority to specific matters
or require that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions whatsoever
which Custodian may receive from such person. If Fund fails to provide
Custodian any such instructions naming designated representatives, any
instructions received by Custodian from a person reasonably believed to
be an appropriate representative of Fund shall constitute valid and
proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such oral
instruction. At Custodian's sole
721814.1
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<PAGE>
discretion, Custodian may record on tape, or otherwise, any oral
instruction whether given in person or via telephone, each such
recording identifying the parties, the date and the time of the
beginning and ending of such oral instruction.
LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due
diligence and act in good faith in performing its duties
under this Agreement. Custodian shall not be responsible
for, and the Fund shall indemnify and hold Custodian
harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred
by Custodian or for which Custodian may be held to be
liable, arising out of or attributable to:
1. All actions taken by Custodian pursuant to this
Agreement or any instructions provided to it hereunder,
provided that Custodian has acted in good faith and with due
diligence and reasonable care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to
pay or reimburse Custodian under this indemnification
provision), the Fund's negligence or willful misconduct, or
the failure of any representation or warranty of the Fund
hereunder to be
721814.1
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<PAGE>
and remain true and correct in all respects at all
times.
B. Custodian may request and obtain at the expense of Fund the
advice and opinion of counsel for Fund or of its own counsel
with respect to questions or matters of law, and it shall be
without liability to Fund for any action taken or omitted by
it in good faith, in conformity with such advice or opinion.
If Custodian reasonably believes that it could not prudently
act according to the instructions of the Fund or the Fund's
accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon which
they are consulted, and Custodian shall not be liable for any actions
taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any
action which involves the payment of money by Custodian, or
which might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be indemnified
and held harmless by Fund against any liability on account
of such action; provided, however, that nothing herein shall
obligate Custodian to take any such action except in its
sole discretion.
721814.1
29
<PAGE>
E. Custodian shall be protected in acting as custodian
hereunder upon any instructions, advice, notice, request,
consent, certificate or other instrument or paper appearing
to it to be genuine and to have been properly executed and
shall be entitled to receive upon request as conclusive
proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or
designated representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased
by or for Fund, the legality of the purchase of any securities
or foreign currency positions or evidence of ownership
required by Fund to be received by Custodian, or the propriety
of the decision to purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign
currency positions by or for Fund, or the propriety of
the amount for which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor; or
721814.1
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<PAGE>
5. The legality of the declaration of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of any
stock dividend.
G. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft,
wire transfer, clearinghouse funds, uncollected funds, or
instrument for the payment of money to be received by it on
behalf of Fund until Custodian actually receives such money;
provided, however, that it shall advise Fund promptly if it
fails to receive any such money in the ordinary course of
business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure
or delay in performance of its obligations under this
Agreement, or those of any entity for which it is
responsible hereunder, arising out of or caused, directly or
indirectly, by circumstances beyond the affected entity's
reasonable control, including, without limitations: any
interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or
communication service; inability to obtain labor, material,
equipment or transportation, or a delay in mails;
721814.1
31
<PAGE>
governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornados, acts of God or public enemy, revolutions, or
insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT
OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED
OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder,
Fund will pay to Custodian such compensation as shall be set
forth in a separate fee schedule to be agreed to by Fund and
Custodian from time to time. A copy of the initial fee
schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and
Fund agrees to pay to Custodian, on demand, reimbursement
for Custodian's cash disbursements and reasonable out-of-
pocket costs and expenses, including attorney's fees,
incurred by Custodian in connection with the performance of
services hereunder. Custodian may charge such compensation
against monies held by it for the account of Fund.
Custodian will also be entitled to charge against any monies
721814.1
32
<PAGE>
held by it for the account of Fund the amount of any loss, damage,
liability, advance, overdraft or expense for which it shall be entitled
to reimbursement from Fund, including but not limited to fees and
expenses due to Custodian for other services provided to the Fund by
Custodian. Custodian will be entitled to reimbursement by the Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement
--------------------
shall be for a period of __________. Thereafter, either
party to this Agreement may terminate the same by notice in
writing, delivered or mailed, postage prepaid, to the other
party hereto and received not less than ninety (90) days
prior to the date upon which such termination will take
effect. Upon termination of this Agreement, Fund will pay
Custodian its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or
incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the
termination date. In the event no written order designating
a successor custodian has been delivered to Custodian on or
before the date when such termination becomes effective,
721814.1
33
<PAGE>
then Custodian may, at its option, deliver the securities, funds and
properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in
the 1940 Act and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for the
appointment of a successor custodian or other proper relief, or take
any other lawful action under the circumstances; provided, however,
that Fund shall reimburse Custodian for its costs and expenses,
including reasonable attorney's fees, incurred in connection therewith.
Custodian will, upon termination of this Agreement and payment of all
sums due to Custodian from Fund hereunder or otherwise, deliver to the
successor custodian so specified or appointed, or as specified by the
court, at Custodian's office, all securities then held by Custodian
hereunder, duly endorsed and in form for transfer, and all funds and
other properties of Fund deposited with or held by Custodian hereunder,
and Custodian will co-operate in effecting changes in book-entries at
all Depositories. Upon delivery to a successor custodian or as
specified by the court, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such successor will be the
successor custodian under this Agreement and will be entitled to
reasonable compensation for its
721814.1
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<PAGE>
services. In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of termination
hereof owing to failure of the Fund to appoint a successor custodian,
the Custodian shall be entitled to compensation as provided in the
then-current fee schedule hereunder for its services during such period
as the Custodian retains possession of such securities, funds and other
properties, and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to Fund
at 600 Fifth Avenue, New York, New York 10020, or at such other address as Fund
may have designated to Custodian in writing, will be deemed to have been
properly given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 801 Pennsylvania, Kansas City,
Missouri 64105, Attention: Custody Department, or to such other address as it
may have designated to Fund in writing, will be deemed to have been properly
given to Custodian hereunder. 9. MULTIPLE PORTFOLIOS. If Fund is comprised of
more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes
hereunder as a separate party apart from each other
Portfolio. Unless the context otherwise requires,
with respect to every transaction covered by this
Agreement, every reference herein
721814.1
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<PAGE>
to the Fund shall be deemed to relate solely to the
particular Portfolio to which such transaction
relates. Under no circumstances shall the rights,
obligations or remedies with respect to a particular
Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this
single document to memorialize the separate agreement
of each Portfolio is understood to be for clerical
convenience only and shall not constitute any basis
for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement,
provided that Custodian consents to such addition.
Rates or charges for each additional Portfolio shall
be as agreed upon by Custodian and Fund in writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and
the rights and liabilities of the parties hereto
shall be governed by, the laws of the State of
Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be
binding upon, inure to the benefit of and be
enforceable by the parties hereto and their
respective successors and permitted assigns.
721814.1
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<PAGE>
C. The representations and warranties and the
indemnifications extended hereunder are intended to
and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by each party
hereto.
E. The failure of either party to insist upon the
performance of any terms or conditions of this
Agreement or to enforce any rights resulting from
any breach of any of the terms or conditions of
this Agreement, including the payment of damages,
shall not be construed as a continuing or
permanent waiver of any such terms, conditions,
rights or privileges, but the same shall continue
and remain in full force and effect as if no such
forbearance or waiver had occurred. No waiver,
release or discharge of any party's rights
hereunder shall be effective unless contained in a
written instrument signed by the party sought to
be charged.
721814.1
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<PAGE>
F. The captions in the Agreement are included for
convenience of reference only, and in no way
define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
G. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original but all of which together shall constitute
one and the same instrument.
H. If any part, term or provision of this Agreement
is determined by the courts cir any regulatory
authority to be illegal, in conflict with any law
or otherwise invalid, the remaining portion or
portions shall be considered severable and not be
affected, and the rights and obligations of the
parties shall be construed and enforced as if the
Agreement did not contain the particular part,
term or provision held to be illegal or invalid.
I. This Agreement may not be assigned by either party
hereto without the prior written consent of the other
party.
J. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or
joint venture by and between Custodian and Fund.
K. Except as specifically provided herein, this
Agreement does not in any way affect any other
721814.1
38
<PAGE>
agreements entered into among the parties hereto and
any actions taken or omitted by either party
hereunder shall not affect any rights or
obligations of the other party hereunder.
721814.1
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective duly authorized
officers.
INVESTORS FIDUCIARY TRUST COMPANY
By:____________________________
Title:_________________________
GEORGIA DAILY MUNICIPAL INCOME
FUND, INC.
By:____________________________
Title:_________________________
721814.1
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<PAGE>
EXHIBIT A
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TRANSACTION DTC PHYSICAL
----------- --- --------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ------------------------------- --------------------- --------------------- --------------------- ---------------------
Calls Put As Received C or F* As Received C or F*
Maturities As Received C or F* Mat. Date C or F*
Tender Reorgs. As Received C As Received C
Dividends Paydate C Paydate C
Floating Rate Int. Paydate C Paydate C
Floating Rate Int. N/A As Rate C
(No Rate) Received
Mtg. Backed P&I Paydate C Paydate + 1 C
Bus. Day
Fixed Rate Inc. Paydate C Paydate C
Euroclear N/A Paydate C
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FED
---
TYPE CREDIT DATE FUNDS TYPE
- ------------------------------- --------------------- ---------------------
Calls Put
Maturities Mat. Date F
Tender Reorgs. N/A
Dividends N/A
Floating Rate Int. N/A
Floating Rate Int. N/A
(No Rate)
Mtg. Backed P&I Paydate F
Fixed Rate Inc. Paydate F
Euroclear
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
721814.1
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<PAGE>
ADMINISTRATIVE SERVICES CONTRACT
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
the "Fund"
New York, New York
June __, 1998
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Declaration of Trust, By-Laws and Registration
Statement filed with the Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act") and the Securities Act of 1933, including
the Prospectus forming a part thereof (the "Registration Statement"), all as
from time to time in effect, and in such manner and to such extent as may from
time to time be authorized by our Board of Directors. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you as our administrator (the
"Administrator") to provide all management and administrative services
reasonably necessary for our operation, other than those services you provide to
us pursuant to the Investment Management Contract. The services to be provided
by you shall include but not be limited to those enumerated on Exhibit A hereto.
The personnel providing these services may be your employees or employees of
your affiliates or of other organizations. You shall make periodic reports to
the Fund's Board of Directors in the performance of your obligations under this
Agreement and the execution of your duties hereunder is subject to the general
control of the Board of Directors.
(b) It is understood that you will from time to
time employ, subcontract with or otherwise associate with yourself, entirely at
your expense, such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder. While this agreement is in
effect, you or persons affiliated with you, other than us ("your affiliates"),
640598.1
<PAGE>
will provide persons satisfactory to our Board of Directors to be elected or
appointed officers or employees of our corporation. These shall be a president,
a secretary, a treasurer, and such additional officers and employees as may
reasonably be necessary for the conduct of our business.
(c) You or your affiliates will also provide
persons, who may be our officers, to (i) supervise the performance of
bookkeeping and related services and calculation of net asset value and yield by
our bookkeeping agent and (ii) prepare reports to and the filings with
regulatory authorities, and (iii) perform such clerical, other office and
shareholder services for us as we may from time to time request of you. Such
personnel may be your employees or employees of your affiliates or of other
organizations. Notwithstanding the preceding, you shall not be required to
perform any accounting services not expressly provided for herein.
(d) You or your affiliates will also furnish us
such administrative and management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. On behalf of the Fund, we will reimburse you for all of our operating
costs incurred by you including rent, depreciation of equipment and facilities,
interest and amortization of loans financing equipment used by us and all the
expenses incurred by you to conduct our affairs. The amounts of such
reimbursements shall from time to time be agreed upon between us. You or your
affiliates will also pay the expenses of promoting the sale of our shares (other
than the costs of preparing, printing and filing our Registration Statement,
printing copies of the prospectus contained therein and complying with other
applicable regulatory requirements), except to the extent that we are permitted
to bear such expenses under a plan adopted pursuant to Rule 12b-1 under the 1940
Act or a similar rule.
3. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
4. In consideration of the foregoing, the Fund will pay you a
fee of .21% of the Fund's average daily net assets. Your fee will be accrued by
us daily, and will be payable on the last day of each calendar month for
services performed hereunder
640598.1
2
<PAGE>
during that month or on such other schedule as we may agree in writing. You may
use any portion of this fee for distribution of our shares, or for making
payments to organizations whose customers or clients are our shareholders. You
may waive your right to any fee to which you are entitled hereunder, provided
such waiver is delivered to us in writing.
5. This Agreement will become effective on the date hereof and
shall continue in effect until and thereafter for successive twelve-month
periods (computed from each ), provided that such continuation is specifically
approved at least annually by our Board of Directors and by a majority of those
of our directors who are neither party to this Agreement nor, other than by
their service as directors of the Fund, interested persons, as defined in the
1940 Act, of any such person who is party to this Agreement. This Agreement may
be terminated at any time, without the payment of any penalty, (i) by vote of a
majority of the outstanding voting securities of each respective Portfolio
voting separately, as defined in the 1940 Act, or (ii) by a vote of a majority
of our entire Board of Directors, on sixty days' written notice to you, or by
you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
8. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940 Act.
640598.1
3
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
By:________________________________________
Name:
Title:
ACCEPTED: June __, 1998
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., as General Partner
By: _____________________________________
Name:
Title:
640598.1
4
<PAGE>
Exhibit A
Administration Services To Be Performed
By Reich & Tang Asset Management L.P.
Administration Services
1. In conjunction with Fund counsel, prepare and file all
Post-Effective Amendments to the Registration Statement, all
state and federal tax returns and all other required
regulatory filings.
2. In conjunction with Fund counsel, prepare and file all Blue
Sky filings, reports and renewals.
3. Coordinate, but not pay for, required Fidelity Bond and
Directors and Officers Insurance (if any) and monitor their
compliance with Investment Company Act.
4. Coordinate the preparation and distribution of all materials
for Directors, including the agenda for meetings and all
exhibits thereto, and actual and projected quarterly
summaries.
5. Coordinate the activities of the Fund's Manager, Custodian,
Legal Counsel and Independent Accountants.
6. Prepare and file all periodic reports to shareholders and
proxies and provide support for shareholder meetings.
7. Monitor daily and periodic compliance with respect to all
requirements and restrictions of the Investment Company Act,
the Internal Revenue Code and the
Prospectus.
8. Monitor daily the Fund's bookkeeping services agent's
calculation of all income and expense accruals, sales and
redemptions of capital shares outstanding.
9. Evaluate expenses, project future expenses, and process
payments of expenses.
10. Monitor and evaluate performance of accounting and accounting
related services by Fund's bookkeeping services agent. Nothing
herein shall be construed to require you to perform any
accounting services not expressly provided for in this
Agreement.
640598.1
5
<PAGE>
CONSENT OF MESSRS. BATTLE FOWLER
We consent to the reference to our Firm in the Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of Georgia Daily
Municipal Income Fund, Inc. as filed with the Securities and Exchange Commission
on June 8, 1998.
BATTLE FOWLER LLP
New York, New York
June 8, 1998
721818.1
<PAGE>
Attorneys at Law
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Telephone: 404-815-6500
Facsimile: 404-815-6555
June 8, 1998
Georgia Daily Municipal Income Fund, Inc.
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Re: Georgia Daily Municipal Income Fund, Inc. c/o Reich & Tang Asset
Management L.P. (the "Fund")
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended, of shares for a public offering of the Fund you have requested our
opinion with respect to the treatment under Georgia law of certain
"exempt-interest dividends" to be paid by the Fund in accordance with the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). A
Registration Statement on Form N-1A dated October 9, 1997, has been filed with
the Securities and Exchange Commission (the "Registration Statement").
Capitalized terms not otherwise defined herein have the same meaning as in the
Registration Statement. In rendering our opinion, we have relied on statements
made in the Registration Statement and have not independently verified the facts
contained therein.
We have examined the law and such documents relating to the Fund as we
deemed necessary to render this opinion, including an unexecuted copy of the of
the Registration Statement. In all such examinations, we have assumed the
authenticity of all documents submitted to us as original documents and the
authenticity of originals and conformity to original documents of all documents
submitted to us as certified, conformed, or photostatic copies. We have assumed,
but not independently verified, that the signatures on all documents and
certificates that we have examined are genuine, and, as to the certificates, we
have assumed the same to be properly given and to be accurate.
Under Section 48-7-27(b)(1)(A) of the Official Code of Georgia
Annotated, interest on obligations of the State of Georgia and its political
subdivisions, which is not otherwise included in federal adjusted gross income,
is exempt from the State of Georgia's individual income tax. Likewise, under
Section 48-7-27(b)(2) of the Official Code of Georgia Annotated interest on
exempt obligations of the U.S. government, its territories and possessions
(including Puerto Rico, Guam, and the Virgin Islands), or of any authority,
commission, or instrumentality of the U.S. government is also exempt from the
State of Georgia's individual income tax. The stated position of the Georgia
Department of Revenue is that the exempt treatment for interest derived from
such exempt obligations is also extended to distributions of regulated
investment companies, such as the Fund.
721975.1
<PAGE>
Georgia Daily Municipal Income Fund, Inc.
c/o Reich & Tang Asset Management L.P.
June 8, 1998
Page 2
Based on the foregoing and in reliance thereon, including without
limitation, the assumptions set forth above and in the Registration Statement,
and an examination of such matters of fact and questions of law as we have
deemed relevant under the circumstances, we are of the opinion that, as of the
date hereof and under existing law, to the extent that distributions from the
Fund attributable to interest on obligations of the State of Georgia and its
political subdivisions are excluded from federal adjusted gross income, they
will be excluded from the Georgia individual income tax.
We do not express any opinion with respect to: (1) exempt-interest
dividends derived from Territorial Municipal Obligations; (2) the nature of or
character of any particular security that may be held by the Fund; or (3) the
taxability of the Fund under the laws of any state.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, such opinions are based solely on the documents
that we have examined, the additional information that we have obtained and the
representations that have been made to us (including, in particular, the opinion
of Battle Fowler LLP on the Federal income tax treatment of the Fund). Our
opinions cannot be relied upon if any of the facts contained in such documents
or in such additional information is, or later becomes, inaccurate or if any of
the representations made to us is or later becomes inaccurate. Finally, our
opinions are limited to the tax matters specifically covered thereby, and we
have not been asked to address, nor have we addressed, any other tax
consequences relating to the Fund or its Shares.
We are members of the State Bar of Georgia. Our opinions herein are
limited to the laws of the State of Georgia and any applicable federal laws of
the United States. This opinion is limited to the matters expressly set forth
above, and no opinion is implied or may be inferred beyond the matters so
stated. We expressly disclaim any duty to update this opinion in the future for
any changes of fact or law which may affect any of the opinions expressed
herein.
This letter is furnished by us solely for your benefit in connection
with the registration under the Securities Act of 1933, as amended, of shares
for the public offering of the Fund. This letter may not be relied upon by any
other person without written consent except that it may be included in the
Registration Statement to be filed with the Securities and Exchange Commission.
We hereby consent to the use of our name in the Registration Statement.
Very truly yours,
Kilpatrick Stockton LLP
By:________________________________
721975.1
McGLADREY & PULLEN, LLP
-----------------------
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated June 8, 1998, on the
financial statement referred to therein, in this Registration Statement on Form
N-1A of Georgia Daily Municipal Income Fund, Inc., as filed with the Securities
and Exchange Commission.
We also consent to the reference to our Firm in the Statement of
Additional Information under the caption "Counsel and Auditors."
New York, New York
June 8, 1998
722483.1
<PAGE>
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
June 8, 1998
Board of Directors of
Georgia Daily Municipal Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
I hereby subscribe for 100,000 shares of Class A Common Stock, $0.001
par value per share, of Georgia Daily Municipal Income Fund, Inc., a Maryland
Corporation (the "Fund"), at $1.00 per share for an aggregate purchase price of
$100,000. My payment in full is confirmed.
I hereby represent and agree that I am purchasing these shares of stock
for investment purposes, for my own account and risk and not with a view to any
sale, division or other distribution thereof within the meaning of the
Securities Act of 1933 as amended, nor with any present intention of
distributing or selling such shares. I further agree that if any of such shares
are redeemed during the period that the deferred organizational expenses of the
Fund are being amortized, I will reimburse the Fund the then unamortized
organizational expenses in the same ratio as the number of shares redeemed bears
to the number of such shares held at the time of redemption.
Very truly yours,
REICH & TANG ASSET MANAGEMENT L.P.
By: Reich & Tang Asset
Management, Inc.
General Partner
By:/s/Lorraine C. Hysler
------------------------------------
Confirmed and Accepted:
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
By: /s/Bernadette N. Finn
___________________________
640423.1
<PAGE>
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
Georgia Daily Municipal Income Fund, Inc. (the "Fund") in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
--------
1. The Fund and the Distributor, have entered into a
Distribution Agreement, in a form satisfactory to the Fund's Board of Directors,
under which the Distributor will act as distributor of the Fund's shares.
Pursuant to the Distribution Agreement, the Distributor, as agent of the Fund,
will solicit orders for the purchase of the Fund's shares, provided that any
subscriptions and orders for the purchase of the Fund's shares will not be
binding on the Fund until accepted by the Fund as principal.
2. The Fund and the Distributor have entered into a
Shareholder Servicing Agreement with respect to the Class A shares of the Fund,
in a form satisfactory to the Fund's Board of Directors, which provides that the
Distributor will be paid a service fee for providing or for arranging for others
to provide all personal shareholder servicing and related maintenance of
shareholder account functions not performed by us or our transfer agent.
640449.1
<PAGE>
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Class A Fund Shareholders
("Participating Organizations"), for performing personal shareholder
servicing and related maintenance of shareholder account functions on
behalf of the Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Class A Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, in connection with the distribution of the Fund's
shares.
The Distributor may also make payments from time to time from its own resources,
which may include the service fee and past profits for the purpose enumerated in
(i) above. Further, the Distributor may determine the amount of such payments
made pursuant to the Plan, provided that such payments will not
-2-
640449.1
<PAGE>
increase the amount which the Fund is required to pay to (1) the Manager for any
fiscal year under the Investment Management Contract or the Administrative
Services Agreement in effect for that year or otherwise or (2) to the
Distributor under the Shareholder Servicing Agreement in effect for that year or
otherwise. The Investment Management Contract will also require the Manager to
reimburse the Fund for any amounts by which the Fund's annual operating
expenses, including distribution expenses, exceed in the aggregate in any fiscal
year the limits prescribed by any state in which the Fund's shares are qualified
for sale.
4. The Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Distributor and Participating Organizations in carrying out its obligations
under the Shareholder Servicing Agreement with respect to the Class A shares of
the Fund and (ii) preparing, printing and delivering the Fund's prospectus to
existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to compliance by them with the
terms of written agreements in a form satisfactory to the Fund's Board of
Directors to be entered into between the Distributor and the Participating
Organizations.
-3-
640449.1
<PAGE>
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly, written reports setting forth
all amounts expended for servicing and distribution purposes by the Fund, the
Distributor and the Manager, pursuant to the Plan and identifying the servicing
and distribution activities for which such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Fund (as defined in the Act), and
(ii) a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not interested persons (as defined in the Act) of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement entered into in connection with the Plan, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
8. The Plan will remain in effect until _________ __, 1999
unless earlier terminated in accordance with its terms, and thereafter may
continue in effect for successive annual periods if approved each year in the
manner described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments of
the terms of the Plan will be effective only upon approval as provided in clause
(ii) of para graph 7 hereof, and (ii) any amendment which increases materially
-4-
640449.1
<PAGE>
the amount which may be spent by the Fund pursuant to the Plan will be effective
only upon the additional approval as provided in clause (i) of paragraph 7
hereof (with each class of the Fund voting separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
-5-
640449.1
<PAGE>
DISTRIBUTION AGREEMENT
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
the "Fund"
600 Fifth Avenue
New York, New York 10020
June __, 1998
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein contained and of the
payment by us to you of a fee of $1 per year and on the terms and conditions set
forth herein we have agreed that you shall be, for the period of this agreement,
a distributor, as our agent, for the unsold portion of such number of shares of
Common Stock, $.001 par value per share, as may be effectively registered from
time to time under the Securities Act of 1933, as amended (the "1933 Act"). This
agreement is being entered into pursuant to the Distribution and Service Plan
(the "Plan") adopted by us in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our Common Stocks as shall then be effectively
registered under the Act. All subscriptions for shares of our Common Stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our Common
Stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our Common Stock issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in shares of our Common Stock by our shareholders of dividends or
640444.1
<PAGE>
other distributions or any other offering by us of securities to
our shareholders.
3. You will use your best efforts to obtain subscriptions to
shares of our Common Stock upon the terms and conditions contained herein and in
our Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our Common Stock, such other
information with respect to us and shares of our Common Stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the Class A Shares of the Fund, you will
arrange for organizations whose customers or clients are shareholders of our
Fund ("Participating Organizations") to enter into agreements with you for the
performance of shareholder servicing and related administrative functions not
performed by you or the Transfer Agent. Pursuant to our Shareholder Servicing
Agreement with you with respect to the Class A Shares, you may make payments to
Participating Organizations for performing shareholder servicing and related
administrative functions with respect to the Class A Shares. Such payments will
be made only pursuant to written agreements approved in form and substance by
our Board of Directors to be entered into by you and the Participating
Organizations. It is recognized that we shall have no obligation or liability to
you or any Participating Organization for any such payments under the agreements
with Participating Organizations. Our obligation is solely to make payments to
you under the Shareholder Servicing Agreement (with respect to the Class A
Shares) and to the Manager under the Investment Management Contract and the
Administrative Services Contract. All sales of our shares effected through you
will be made in compliance with all applicable federal securities laws and
regulations and the Constitution, rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
4. We reserve the right to suspend the offering of shares of
our Common Stock at any time, in the absolute
-2-
640444.1
<PAGE>
discretion of our Board of Directors, and upon notice of such suspension you
shall cease to offer shares of our Common Stocks hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify shares of our Common Stock for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our Common Stock under the Act
and of qualification of shares of our Common Stocks, and to the extent
necessary, our qualification under applicable state securities laws. You will
pay all expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our Common Stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our Common Stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you that any amendment
to our Registration Statement or Prospectus hereafter
-3-
640444.1
<PAGE>
filed by us will be carefully prepared in conformity within the requirements of
the 1933 Act and the 1940 Act and the SEC's rules and regulations thereunder and
will, when it becomes effective, contain all statements required to be stated
therein in accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
7. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action is brought other than on account of our
indemnity agreement contained in this paragraph 7. We will be entitled to assume
the defense of any suit brought to enforce any such claim, and to retain counsel
of good standing chosen by us and approved by you. In the event we do elect to
assume the defense of any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case we do
not elect to assume the defense of any such suit, or in case you, in good faith,
do not approve of counsel chosen by us, we will
-4-
640444.1
<PAGE>
reimburse you or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
you or them. Our indemnification agreement contained in this paragraph 7 and our
representations and warranties in this agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any shares of our Common Stock
made pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any shares of our Common Stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers
-5-
640444.1
<PAGE>
or directors, or to such controlling person other than on account of your
indemnity agreement contained in this paragraph 8.
9. We agree to advise you immediately:
a. of any request by the SEC for amendments to
our Registration Statement or Prospectus or for additional
information,
b. of the issuance by the SEC of any stop order
suspending the effectiveness of our Registration Statement or
Prospectus or the initiation of any proceedings for that purpose,
c. of the happening of any material event which
makes untrue any statement made in our Registration Statement or Prospectus or
which requires the making of a change in either of them in order to make the
statements therein not misleading, and
d. of all action of the SEC with respect to any
amendments to our Registration Statement or Prospectus.
10. This agreement will become effective on the date hereof
and will remain in effect thereafter for successive twelve-month periods
(computed from each ____________), provided that such continuation is
specifically approved at least annually by vote of our Board of Directors and of
a majority of those of our directors who are not interested persons (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on this agreement. This agreement
may be terminated at any time, without the payment of any penalty, (i) by vote
of a majority of our entire Board of Directors, and by a vote of a majority of
our Directors who are not interested persons (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement related to the Plan, or (ii) by vote of a majority of our
outstanding voting securities, as defined in the Act, on sixty days' written
notice to you, or (iii) by you on sixty days' written notice to us.
11. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
para graph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees or the
-6-
640444.1
<PAGE>
right of any officers or directors of Reich & Tang Asset Management Inc., your
general partner, who may also be a director, officer or employee of ours, or of
a person affiliated with us, as defined in the 1940 Act, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to another corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
By:________________________________________
Accepted: June __, 1998
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________________
-7-
640444.1
<PAGE>
SHAREHOLDER SERVICING
AGREEMENT
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
CLASS A SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
June __, 1998
Reich & Tang Distributors, Inc.("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Class A Shares. You will
perform, or arrange for others including organizations whose customers or
clients are shareholders of our corporation (the "Participating Organizations")
to perform, all personal shareholder servicing and related maintenance of
shareholder account functions ("Shareholder Services") not performed by us or
our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Class A Shareholders, and (ii) preparing,
printing and delivering our prospectus to existing shareholders and preparing
and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fee payable hereunder and past profits to compensate
Participating Organizations, for providing Shareholder Services to the Class A
Shareholders of the Fund. Payments to Participating Organizations to compensate
them for providing Shareholder Services are subject to compliance by them
640441.1
<PAGE>
with the terms of written agreements satisfactory to our Board of Directors to
be entered into between the Distributor and the Participating Organizations. The
Distributor will in its sole discretion determine the amount of any payments
made by the Distributor pursuant to this Agreement, provided, however, that no
such payment will increase the amount which we are required to pay either to the
Distributor under this Agreement or to the Manager under the Investment
Management Contract, the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, we will pay you a
service fee as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of one quarter of one percent (0.25%) of the Fund's Class A
Share's average daily net assets. Your fee will be accrued by us daily, and will
be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of us
in writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and
thereafter for successive twelve-month periods (computed from each ___________),
provided that such continuation is specifically approved at least annually by
vote of our Board of Directors and of a majority of those of our directors who
are not interested persons (as defined in the Act) and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the purpose of
voting on this Agreement. This Agreement may be terminated at any time, without
the payment of any penalty, (i) by vote of a majority of our entire Board of
Directors, and by a vote of a majority of our Directors who are not interested
persons (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by vote of a majority of the outstanding voting securities of the Fund's
Class A Shares, as defined in the Act, on sixty days' written notice to you, or
(iii) by you on sixty days' written notice to us.
640441.1
2
<PAGE>
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees or the right of any officers or directors of
Reich & Tang Asset Management, Inc., your general partner, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your under standing,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
GEORGIA DAILY MUNICIPAL INCOME FUND, INC.
CLASS A SHARES
By:_____________________________________
ACCEPTED: June __, 1998
REICH & TANG DISTRIBUTORS, INC.
By: _____________________________________
640441.1
3
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Georgia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Robert Straniere
----------------------------
Robert Straniere
721467.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Bernadette N. Finn, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
in any and all capacities, the Registration Statement on Form N-1A, and any and
all amendments thereto (including pre-effective amendments) filed by Georgia
Daily Municipal Income Fund, Inc. (the "Fund") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and under the
Investment Company Act of 1940, as amended, and any and all other instruments
which such attorney and agent deems necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, the rules, regulations and requirements of the Securities
and Exchange Commission, and the securities or Blue Sky laws of any state or
other jurisdiction; and the undersigned hereby ratifies and confirms as his own
act and deed any and all that such attorney and agent shall do or cause to be
done by virtue hereof.
/s/ Steven W. Duff
----------------------------
Steven W. Duff
721467.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Georgia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ W. Giles Mellon
-----------------------------
Dr. W. Giles Mellon
721467.1
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Georgia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Yung Wong
--------------------------
Dr. Yung Wong
721467.1
<PAGE>
REICH & TANG ASSET MANAGEMENT, L.P.
AMENDMENT NO. 2
TO
RULE 18f-3 MULTI-CLASS PLAN
October 16, 1997
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of the underlying
investment funds sponsored by Reich & Tang Asset Management, L.P. as set forth
in Exhibit A (each Fund referred to herein as the "Company") that issues
multiple classes of shares (the "Multi-Class Funds"). In addition, this Rule
18f-3 Multi-Class Plan (the "Plan") sets forth the shareholder servicing
arrangements, distribution arrangements, conversion features, exchange
privileges and other shareholder services of each class of shares in the
Multi-Class Funds.
The Company is an open-end series investment company
registered under the 1940 Act and the shares of which are registered on Form
N-1A under the Securities Act of 1933 (see Exhibit A for each Company's
registration number). Upon the effective date of this Plan, the Company hereby
elects to offer multiple classes of shares in the Multi-Class Funds pursuant to
the provisions of Rule 18f-3 and this Plan. This Plan does not make any material
changes to the class arrangements and expense allocations previously approved by
the Board of Directors of the Company pursuant to the exemptive order issued by
the Securities and Exchange Commission to California Daily Tax Free Income Fund,
et al. under Section 6(c) of the 1940 Act on November 18, 1992 (1940 Act Release
No. 812-7852).
The Company currently consists of the following sixteen
separate Funds:
California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund,
Inc., Florida Daily Municipal Income Fund, Georgia Daily Municipal Income Fund,
Inc., Institutional Daily Income Fund, Kentucky Daily Municipal Income Fund,
Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fun, Short Term Income Fund, Inc., Tennessee
Daily Municipal Income Fund, Inc., Texas Daily Municipal Income Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc.
642263.2
<PAGE>
This Amendment No. 2 serves to include the following Funds in
the definition of Multi-Class Funds: Georgia Daily Municipal Income Fund, Inc.,
Kentucky Daily Municipal Income Fund, Inc., Tennessee Daily Municipal Income
Fund, Inc. and Texas Daily Municipal Income Fund, Inc. Formerly, Amendment No. 1
served to create a Class C of shares of the Multi-Class Funds for the purpose of
accommodating clients and customers of Schroeder & Co. ("Schroeder"). All
investors in Class C shares will be clients of Schroeder maintained in omnibus
account on the books of each Multi-Class Fund with all sub-accounting performed
by Schroeder.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares in a Multi-Class Fund (i) any fees and expenses
incurred by the Company in connection with the distribution of such class of
shares under a distribution and service plan adopted for such class of shares
pursuant to Rule 12b-1, and (ii) any fees and expenses incurred by the Company
under a shareholder servicing plan in connection with the provision of
shareholder services to the holders of such class of shares. In addition,
pursuant to Rule 18f-3, the Company may allocate the following fees and expenses
to a particular class of shares in a single Multi-Class Fund:
(i) transfer agent fees and related expenses
identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports, prospectuses, reports,
and proxies to current shareholder of such
class of shares or to regulatory agencies
with respect to such class of shares;
(iii) blue sky registration or qualification fees
incurred by such class of shares;
(iv) Securities and Exchange Commission
registration fees incurred by such class of
shares;
(v) the expense of administrative personnel and
services (including, but not limited to,
those of a fund accountant, [custodian]1 or
divided paying agent charged with
calculating net asset values or determining
or paying dividends) as required to support
the shareholders of such class of shares;
- --------
1. Rule 18f-3 requires that services related to the management of the
portfolio's assets, such as custodial fees, be borne by the fund and not
by class.
642263.2
<PAGE>
(vi) litigation or other legal expenses relating
solely to such class of shares;
(vii) fees of the Company's Directors incurred as
a result of issues relating to such class of
shares; and
(viii) independent accountants' fees relating
solely to such class of shares.
The initial determination of the class expenses that will be
allocated by the Company to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Directors and approved by a
vote of the Directors of the Company, including a majority of the Directors who
are not interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Multi-Class Funds not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset of
the Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution fees,
shareholder servicing fees, exchange privileges and other shareholder services
applicable to each class of shares of the Multi-Class Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. Class A Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25% per annum of average daily net assets.
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in the
Prospectus, Class A Shares may be exchanged
for Class A shares of any other Fund.
642263.2
<PAGE>
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
B. Class B Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class B shares may be exchanged for Class B
shares of other Multi-Class Funds.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
C. Class C (created for all funds which are purchased by
Schroeder & Co. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: .25%
per annum of the average daily net assets.
6. Sub-Accounting/Transfer Agent Fee: .20%
per annum of the average daily net assets.
7. Conversion Features: None.
642263.2
<PAGE>
8. Exchange Privileges: Subject to
restrictions and conditions set forth in the
Prospectus, Class C Shares may be exchanged
for Class C shares of any other Fund.
9. Other Incidental Shareholder Services: As
provided in the Prospectus.
IV. Board Review.
The Board of Directors of the Company shall review this Plan
as frequently as it deems necessary. Prior to any material amendments to this
Plan, the Company's Board of Directors, including a majority of the Directors
that are not interested persons of the Company, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses, is in the best interest of each class of
shares of a Multi-Class Fund individually and the Fund as a whole. In
considering whether to approve any proposed amendments(s) to the Plan, the
Directors of the Company shall request and evaluate such information as they
consider reasonably necessary to evaluate the proposed amendments(s) to the
Plan.
In making its initial determination to approve this Plan, the
Board focused on, among other things, the relationship between or among the
classes and examined potential conflicts of interest between classes regarding
the allocation of fees, services, waivers and reimbursement of expenses, and
voting rights. The Board evaluated the level of services provided to each class
and the cost of those services to ensure that the services are appropriate and
the allocation of expenses is reasonable. In approving any subsequent amendments
to this Plan, the Board shall focus on and evaluate such factors as well as any
others deemed necessary by the Board.
642263.2
<PAGE>
EXHIBIT A
California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Daily Tax Free Income Fund, Inc.
Florida Daily Municipal Income Fund
Georgia Daily Municipal Income Fund, Inc.
Institutional Daily Income Fund
Kentucky Daily Municipal Income Fund, Inc.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Short Term Income Fund, Inc.
Tennessee Daily Municipal Income Fund, Inc.
Texas Daily Municipal Income Fund, Inc.
Virginia Daily Municipal Income Fund, Inc.
642263.2
<PAGE>
