SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
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PRE-EFFECTIVE AMENDMENT NO. __
POST-EFFECTIVE AMENDMENT NO. 1 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
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PRE-EFFECTIVE AMENDMENT NO. __
POST-EFFECTIVE AMENDMENT NO. 1 X
MILLENIUM MUNICIPAL INCOME FUND, INC.
(formerly Millenium Tax-Free Income Fund, Inc.)
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
45 ESSEX STREET, MILLBURN, NEW JERSEY 07041
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) s(ZIP CODE)
973-379-0300
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
LAWRENCE T. MCDERMOTT
C/O RICKEL SECURITIES, INC.
45 ESSEX STREET
MILLBURN, NEW JERSEY 07041
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(NAME AND ADDRESS OF AGENT FOR SERVICE)
APRIL 30, 1999
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(APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING)
Title of Securities Being Registered .................Class A and C Common Stock
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FORM N-1A
MILLENIUM MUNICIPAL INCOME FUND, INC.-
CLASS A AND CLASS C SHARES
POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 AND
UNDER THE INVESTMENT COMPANY ACT OF 1940.
CROSS REFERENCE SHEET
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N-1A
ITEM
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NO. PROSPECTUS CAPTION OR PLACEMENT
- -- -------------------------------
1 Front Cover
2 Summary (includes expense table)
3 (Not Applicable)
4 Summary; Investment Objective and Policies
5 Special Considerations; Adviser and Distributor; Distribution Plans;
Purchase of Shares; Summary
5A (Not Applicable)
6 Summary; Shareholder Inquiries; Dividends and Distributions; Federal
Income Taxes; Fund Shares
7 Purchase of Shares; Determining the Price of Shares
8 Redemption of Shares
9 (Not Applicable)
PART B CAPTION OR PLACEMENT
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Fundamental Investment Restrictions; Municipal Obligations; Temporary
Investments; Portfolio Transactions
14 Directors and Officers; Directors Compensation Schedule.
15 (Not Applicable)
16 Investment Advisory Services; Custodian; Auditors; Determining the
Price of Shares; Distribution of Fund Shares
17 Portfolio Transactions
18 *
19 Determining the Price of Shares; Reduction of Class A Sales Charge
20 *
21 *
22 Performance Data
23 (Not Applicable)
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* INCLUDED IN PROSPECTUS
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PROSPECTUS April 30, 1999
CLASS A AND CLASS C
MILLENIUM MUNICIPAL INCOME FUND, INC.
P.O. BOX 844
CONSHOHOCKEN, PA 19428-0844
MINIMUM INVESTMENT PLANS AVAILABLE
- ----------------- ---------------
Initial Purchase $5,000 (Class A) Automatic Investment Plan
Initial Purchase $25,000 (Class C) Automatic Withdrawals Plan
Subsequent Investment $250
Millenium Municipal Income Fund, Inc. (the "Fund") seeks to provide
current income free from federal income tax by investing in debt obligations
issued by state and local governments or their agencies or instrumentalities
("municipal obligations"). See "Investment Objectives and Policies."
The Fund offers two classes of shares, Class A and C, each having
different expense levels and sales charges. These alternatives permit you to
choose the method of purchasing shares that is most beneficial to you, depending
on the amount of the purchase, the length of time you expect to hold the shares
and other circumstances.
This Prospectus concisely sets forth information about the Class A and
Class C shares for the Fund that prospective investors should know before
investing. It should be read carefully and retained for future reference. A
Statement of Additional Information dated April 30, 1999, has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
A copy of this Statement and other information about the Fund may be obtained
without charge by writing to or calling the Fund at the above address or
telephone number.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
Summary....................................................................
Special Considerations.....................................................
Investment Objective and Policies..........................................
Adviser and Distributor....................................................
Distribution Plans.........................................................
Purchase of Shares.........................................................
Redemption of Shares.......................................................
Additional Information About Redemptions...................................
Determining the Price of Shares............................................
Dividends and Distributions................................................
Federal Income Taxes.......................................................
Fund Shares................................................................
Performance Data...........................................................
Shareholder Inquiries......................................................
Appendix -- Quality Ratings of Debt Securities.............................
Terms and Conditions for a Statement of Intention (Class A Shares Only) ...
Expedited Redemption Privilege.............................................
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SUMMARY
FUND EXPENSES. The following table is intended to assist you in
understanding the various costs and expenses that an investor in the Class A and
Class C shares of the Fund will bear directly or indirectly. You can refer to
"Adviser and Distributor" and "Purchase of Shares" for more information on
transaction and operating expenses of the Fund.
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS C
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Maximum sales load (as a percentage of
offering price) imposed on purchases 4.75% None
Maximum sales load imposed on reinvested
dividends None None
Deferred sales load (a declining percentage
of the lesser of the net asset value of the
shares redeemed or the total cost of such
shares)
Redeemed during first year. 0.75%* 1.00%
Redeemed during second year None None
Redeemed during third year None None
Redeemed during fourth year None None
Redeemed during fifth year None None
Redeemed after fifth year None None
Redemption Fee** None None
Exchange Fee None None
*On certain Class A Shares purchased without a sales load and redeemed during
the first year after purchase, there is a 0.75% deferred sales charge.
**In addition to the foregoing fees, the Transfer Agent charges a $10 fee for
redemptions made by wire transfer. See "REDEMPTIONS OF SHARES."
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management fees (after waiver) * 0.00% 0.00%
12b-1 fees** 0.20% 1.00%
Other expenses** * 0.60% 0.60%
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Total Fund operating expenses 0.80% 1.60%
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* The Adviser may waive the receipt of management fees from the Fund with
respect to any fiscal quarter if the Adviser determines, in its sole discretion,
that such waiver would be desirable for competitive purposes. If the Adviser's
0.65% management fee were to be added to the table above, then the Total Fund
Operating expenses would be 1.45% for the Class A Shares and 2.25% for the Class
C Shares, respectively.
** The Effect of a Rule 12b-1 plan is that long-term shareholders may pay more
than the maximum front-end sales charge permitted under applicable rules of the
National Association of Securities Dealers, Inc.
*** Because the Fund has no historical financial data, "Other expenses", as
shown in this table and as used in the Example which immediately follows this
table, are based on estimated amounts for the fiscal year ending April 30, 2000
1999. Actual Fund expenses may be greater than or less than these amounts.
Example:
You would pay the following expenses on a $5,000 investment, assuming a
5% annual return and (except as noted below) redemption at the end of each time
period, and assuming that the Adviser has waived its management fees throughout
the time period in question:
1 YEAR 3 YEARS
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Class A $281 $414
Class C* $137 $266
Class C* (assuming no redemption at
end of period) $86 $266
Using the same assumptions, if the Adviser had charged its full 0.65%
management fee throughout the time period in question, you would pay the
following expenses:
1 YEAR 3 YEARS
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Class A $312 $509
Class C* $170 $365
Class C* (assuming no redemption at
end of period) $119 $365
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* Initial purchases of Class C Shares are subject to a $25,000 minimum purchase
requirement.
THE 5% RATE USED IN THE EXAMPLE IS ONLY FOR ILLUSTRATION AND IS NOT
INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE OF THE FUND, WHICH MAY BE
MORE OR LESS THAN THE ASSUMED RATE. FUTURE EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS. As a newly formed company, the Fund does not have
historical financial data.
THE FUND. Millenium Municipal Income Fund, Inc. is an open-end,
diversified management investment company incorporated in Maryland in 1998 and
is registered under the Investment Company Act of 1940.
The Fund offers two classes of shares, Class A and C. Class A shares
may be purchased at a price equal to their net asset value per share plus a
front-end sales charge imposed at the time of purchase. Purchases of $1 million
or more of Class A shares may be purchased at net asset value, but are subject
to a 0.75% contingent deferred sales charge ("CDSC") on redemptions made within
one year of purchase. Class C shares may also be purchased at net asset value
but a minimum of $25,000 must be purchased initially, and Class C Shares are
subject to a CDSC of 1% on redemptions made within one year after purchase.
These alternatives permit an investor to choose the method of purchasing shares
that is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares, and other circumstances. Each class of
shares pays a Rule 12b-1 distribution fee at an annual rate not to exceed (i)
for Class A shares, 0.20% of the Fund's aggregate average daily net assets
attributable to the Class A shares and (ii) for Class C shares, 1% of the
Fund's aggregate average daily net assets attributable to such class. The
purpose and function of the deferred sales charge and distribution services fee
with respect to the Class C shares is the same as those of the front-end sales
charge and distribution services fee with respect to the Class A shares.
Each share of the Fund represents an identical interest in the
investment portfolio of the Fund. However, shares differ by class in important
respects. For example, Class C shares incur higher distribution services fees
and bear certain other expenses and will thus have a higher expense ratio and
pay correspondingly lower dividends than Class A shares. Class C shares do not
have a conversion feature and therefore will always be subject to higher
distribution fees and other expenses than Class A shares. The per share net
asset value of the Class C shares generally will be lower than the per share net
asset value of the Class A shares, reflecting the daily expense accruals
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of additional distribution fees and certain other expenses applicable to Class C
shares. The Board of Directors may offer additional classes of shares in the
future and may at any time discontinue the offering of any class of shares. See
"Purchase of Shares- Alternative Purchase Arrangements".
INVESTMENT OBJECTIVE. The Fund's investment objective is to provide
current income free from federal income tax by investing in municipal
obligations. The Fund seeks to invest between 30% and 40% of its net assets in
municipal fixed income securities rated Aaa by Moody's Investor Service, Inc.
("Moody's") or AAA by Standard & Poor's Corporation ("S&P"), and between 10% and
20% of its net assets in investment grade securities rated Aa to Baa by Moody's
or AA to BBB by S&P. The Fund may invest up to 50% of its net assets in bonds
rated below investment grade or unrated bonds deemed by the Adviser to be of
equivalent quality to such lower rated bonds. Such securities are speculative
and subject to greater market fluctuations and risk of loss of income and
principal than higher rated bonds. There is no assurance that the investment
objective of the Fund will be achieved. See "Investment Objectives and
Policies".
INVESTMENT ADVISER AND DISTRIBUTOR. Millenium Advisers, Inc., (the
"Adviser") is the investment adviser for the Fund. Rickel Securities, Inc. (the
"Distributor") serves as the principal underwriter for the Fund. For more
information, see "Adviser and Distributor".
PURCHASES, EXCHANGES AND REDEMPTIONS. Initial and subsequent minimum
investments in the Class A shares may be made in amounts equal to $5,000 and
$250, respectively. Initial and subsequent minimum investments in the Class C
shares may be made in amounts equal TO $25,000 AND $250, respectively. Accounts
with a market value of less than $250 caused by shareholder redemptions are
redeemable by the Fund. See "Purchase of Shares" and "Redemption of Shares".
SHAREHOLDER SERVICES. Declaration Service company, P.O. Box 844,
Conshohocken, PA 19428-0844 ("DSC"), acts as transfer, shareholder servicing,
and dividend paying agent for all Fund accounts. Simply write or call the DSC
Investor Information Department at 1-877-375-1205 for prompt service on any
questions about your account. During drastic market conditions, DSC may
experience difficulty accepting telephone redemptions. In any such case,
shareholders may choose to make a written redemption request containing the
information set forth herein under the caption "Redemption of Shares" and send
it to DSC via telecopy (610-832-1067) and/or overnight courier at 555 North
Lane, Suite 6160, Conshohocken, PA 19248.
Confirming Statements. Shareholders normally will receive a
confirmation statement after each transaction showing the activity in the
account, and an annual statement showing all transactions for the calendar year
just completed.
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Other Services. The Fund has available a number of plans and services
to meet the special needs of certain investors. Plans available include, but are
not limited to:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) a flexible, systematic withdrawal plan; and
(4) various retirement plans such as IRA, 403(b)(7), and
employer-adopted, 401(k) defined benefit and defined contribution
plans.
There is an annual charge for each retirement plan fund account with
respect to which a service provider acts as custodian. If this charge is not
paid separately prior to the last business day of a calendar year or prior to a
total redemption, it will be deducted from the shareholder's account.
Application forms and brochures describing these plans and services can
be obtained from the Fund by calling 1-877-375-1205.
SPECIAL CONSIDERATIONS
The Fund has only recently been formed, and has no history of
operations. The Fund's investment adviser has also recently been formed, and has
no prior experience in advising a mutual fund. There can be no assurance that
the Fund will achieve its investment objectives. In addition, the Fund may
invest up to 50% of its net assets in high yield, high risk obligations. See
"High Yield, High Risk Debt Securities" below.
The net asset value of the Fund will change in response to fluctuations
in prevailing interest rates and changes in the value of the securities held by
the Fund. When interest rates decline, the value of securities already held by
the Fund can be expected to rise. Conversely, when interest rates rise, the
value of existing Fund security holdings can be expected to decline. Because the
secondary market for high yield, high risk municipal obligations in which the
Fund may invest is less liquid than that for other more widely traded municipal
obligations, the Fund may be unable to dispose of some of these municipal
obligations at times when it would otherwise wish to do to at the prices at
which they are valued.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL. The Fund's investment objective is to provide current income
free from federal income tax by investing in municipal obligations. In seeking
to achieve this investment objective, the Fund has adopted a fundamental policy
to have at least 80% of its net assets invested in municipal obligations,
including municipal obligations subject to the alternative minimum tax (except
for temporary defensive purposes). 30% TO 40%
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of its net assets will normally be invested in municipal fixed income securities
rated Aaa by Moody's or AAA by S&P, and between 10% and 20% of its net assets
will normally be invested in investment grade securities with ratings of Aa to
Baa by Moody's or AA to BBB by S&P. The Fund may invest up to 50% of its net
assets in high yield, high risk obligations. See "High Yield, High Risk Debt
Securities" below. The average maturity of the Fund's portfolio will vary;
however, it is anticipated that a significant portion of the portfolio will be
invested in long-term obligations of 20 years or more since such securities
generally produce higher yields than shorter-term obligations. A more complete
description of bond ratings is contained in the Appendix. The Fund may invest in
shares of investment companies primarily investing in short-term municipal
obligations, but will not do so if it would cause more than 10% of its total
assets to be invested in such shares. Such other investment companies usually
have their own management costs or fees and the Fund's Adviser earns its regular
fee on such assets.
If you are subject to the Federal alternative minimum tax, you should
note that the Fund may invest up to 100% of its total assets in municipal
obligations issued to finance private activities. The interest from these
investments is a tax preference item for purposes of the alternative minimum
tax.
MUNICIPAL OBLIGATIONS. Municipal obligations are bonds or notes issued
by a state or local governmental entity to obtain funds for various public
purposes or facilities such as airports, bridges, highways, housing, hospitals,
schools, streets, water and sewer systems, mass transit and utility and power
facilities. They are also used to refund outstanding obligations or for general
operating expenses. In addition, they may be used for the construction or
purchase of privately operated facilities deemed to be of public purpose and
benefit.
The two general classifications of municipal bonds are "general
obligation" bonds and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. They are usually paid from general revenues of the
issuing governmental entity. Revenue bonds are usually payable only out of a
specific revenue source rather than from general revenues and ordinarily are not
backed by the faith, credit or general taxing power of the issuing governmental
entity.
The Fund may invest in municipal bonds and certificates of
participation that constitute involvement in lease obligations or installment
purchase contract obligations (hereafter collectively called "lease
obligations") of municipal authorities or entities. Although lease obligations
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily backed
by the municipality's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property, the
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks by not investing more than 10% of its
investment assets in lease obligations that contain "non-appropriation" clauses.
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Yields on municipal obligations are dependent on many factors,
including interest rate conditions, general conditions of the municipal bond
market, size of a particular offering, maturity of the obligation and rating of
the issue, if any. The value of outstanding obligations will vary as a result of
changing evaluations of the ability of their issuers (or other revenue source)
to meet the interest and principal payments, which can also result in rating
changes. Such values will also change in response to changes in the interest
rates payable on new issues. As discussed below, portfolio values will also
change in response to changes in the level of interest rates.
Municipal obligations, like other marketable obligations, fluctuate in
price. Payments of interest and principal are dependent upon the ability of the
issuers (or other revenue source) to meet their obligations. Payments on general
obligation bonds are dependent on the tax base of the issuing governmental
entity. Payments on revenue bonds, unless guaranteed by a taxing authority, are
dependent upon the revenues from a specific project or facility or payments from
a private company which operates the facility.
The principal and interest on revenue bonds for private facilities are
typically paid out of rents or other specified payments made to the issuing
governmental entity by the company using or operating the facilities. The most
common type of these obligations are industrial revenue bonds and pollution
control revenue bonds. Industrial revenue bonds are issued by governmental
entities to provide financing aid to communities to locate privately operated
industrial plants or community facilities such as hospitals, hotels, business or
residential complexes, convention halls or sport complexes. Pollution control
revenue bonds are issued to provide funding for air, water and solids pollution
control systems for privately operated industrial or commercial facilities.
Sometimes, the funds for payment of such obligations come solely from revenue
generated by operation of the facility. Absent a guarantee by the issuing
governmental entity, revenue bonds for private facilities do not represent a
pledge of credit, general revenues or taxing powers of the issuing governmental
entity and the private company operating the facility is the sole source of
payment of the obligation. This type of revenue bond frequently provides a
higher rate of return than other municipal obligations but may entail greater
risk than an obligation which is guaranteed by a governmental unit with taxing
power. Federal income tax laws place substantial limitations on industrial
revenue bonds, and particularly those "specified private activity bonds" issued
after August 7, 1986. See "Federal Income Taxes." However, the Fund's management
does not believe that these limitations will impair the Fund's ability to
purchase or sell bonds in accordance with the Fund's objectives and policies.
Subject to the restrictions described below, the Fund's portfolio may
be invested in new issue bonds and in bonds whose interest payments are from
revenues of similar projects (such as utilities or hospitals) or whose issuers
share the same geographic location. As a result, the Fund's portfolio may be
more susceptible to similar economic, political or regulatory developments than
would a portfolio of bonds with a greater variety of issuers. This may result in
greater market fluctuations in the Fund's share price. The Fund may purchase up
to 50% of the outstanding debt obligations of an issuer. Some of the securities
which the Fund may hold may not have an established market and such lack of
liquidity could cause the Fund difficulty at times in selling these securities
at favorable prices.
The market value of fixed income securities will generally be affected
by changes in the level of interest rates. Increases in interest rates tend to
reduce the market value of fixed income
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investments and declines in interest rates tend to increase their value.
Moreover, debt issues with longer maturities, which tend to produce higher
yields, are subject to potentially greater capital appreciation or depreciation
than securities with shorter maturities. Fluctuations in the market value of the
Fund's portfolio securities subsequent to their acquisition will not affect cash
income from such securities but will be reflected in the Fund's net asset value.
In addition, the future earning power of an obligor and its ability to service
debt may affect the market price of higher yielding debt. The average maturity
and the mix of investments of the Fund will vary as the Adviser seeks to provide
a high level of income considering the available alternatives in the market.
Since interest rates vary with changes in economic, market, political and other
conditions, there can be no assurance that historic interest rates are
indicative of rates which may prevail in the future. Since the values of
securities in the Fund fluctuate depending upon market factors, the credit of
the obligor and inversely with current interest rate levels, the net asset value
of its shares will fluctuate. Consequently, there can be no assurance that the
Fund's objectives can be achieved or that its shareholders will be protected
from the risk of loss inherent in security ownership. The Adviser attempts to
adjust investments as considered advisable in view of prevailing or anticipated
market conditions as perceived by the Adviser. Portfolio securities may be
purchased or sold in anticipation of a rise or a decline in interest rates or a
change in credit quality.
There are market and investment risks with any security and the value
of an investment in the Fund will fluctuate over time. Investments in lower
rated or non-rated securities, while generally providing greater income and
opportunity for gain than investments in higher rated securities, entail greater
risk of loss of income and principal. See "High Yield, High Risk Debt
Securities" below for a discussion of various risk factors related to high
yield, high risk fixed income securities.
HIGH YIELD, HIGH RISK DEBT SECURITIES. As discussed above, the Fund may
invest up to 50% of its net assets in low rated or unrated securities offering
high current income. Such securities will ordinarily be in the lower rating
categories of recognized rating agencies, including securities rated BB or lower
by S&P or Ba or lower by Moody's or, if unrated, deemed by the Adviser to be of
an equivalent rating. These lower-rated securities are considered speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories. Securities rated BB or lower by S&P
or Ba or lower by Moody's are below investment grade. A description of the bond
ratings of these two services is contained in the Appendix. The Fund has not
adopted any minimal rating criteria for the debt securities which it may
purchase.
With respect to that portion of its portfolio which will be invested in
lower-rated securities, the Fund seeks to achieve a high yield while reducing
relative risk through (a) diversification, (b) credit analysis of the obligors
by the Adviser, and (c) monitoring and seeking to anticipate changes and trends
in the economy and financial markets that might affect the prices of portfolio
securities. The Adviser, while seeking to maximize current yield, will monitor
current developments with respect to portfolio securities, potential investments
and broad trends in the economy. In some circumstances, defensive strategies may
be implemented to preserve or enhance capital at the sacrifice of current yield.
There is, however, no assurance that the Fund's objectives will be achieved or
that the Fund's approach to risk management will protect the shareholders
against loss.
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The market values of high yield, high risk municipal securities tend to
reflect individual developments of the guaranteeing entity underlying the issue
to a greater extent than do higher rated securities, which react to a greater
extent to fluctuations in the general level of interest rates. Such securities
also tend to be more sensitive to economic and industry conditions than are
higher rated securities. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis regarding individual lower rated bonds or the
high yield market, may depress the prices for such securities. Factors such as
the aforementioned may adversely impact the market value of high yield, high
risk securities and could adversely impact the Fund's net asset value.
An economic downturn or significant increase in interest rates is
likely to have a negative affect on the high yield, high risk bond market and
consequently on the value of these bonds. In an economic downturn, issuers may
not have sufficient revenues to meet their principal and interest payment
obligations.
The risk of loss due to default is significantly greater for the
holders of high yield, high risk bonds. The costs associated with recovering
principal and interest once a security has defaulted may impact the return to
holders of the security. If the Fund experiences unexpectedly large net
redemptions, it may be forced to sell such bonds without regard to the
investment merits of such sales. This could decrease the Fund's rate of return.
The Fund may have difficulty disposing of certain high yield, high risk
bonds because there may be a thin trading market for such bonds. Because not all
dealers maintain markets in all high yield, high risk bonds, the Fund
anticipates that such bonds could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may have an
adverse impact on market price and the Fund's ability to dispose of particular
issues and may also make it more difficult for the Fund to obtain accurate
market quotations or valuations for purposes of valuing the Fund's assets. The
Fund has a policy of utilizing a professional pricing service which has
experience in pricing such securities which are difficult to price so as to
obtain prices reflecting the market as accurately as possible. To the extent
that the Fund purchases illiquid or restricted bonds, it may incur special
securities registration responsibilities, liabilities and costs, and liquidity
and valuation difficulties relating to such bonds.
Bonds may be subject to redemption or call provisions. If an issuer
exercises these provisions when interest rates are declining, the Fund would be
likely to replace the bond with a lower yielding bond, resulting in a decreased
return. Zero coupon and pay-in-kind bonds involve special considerations. The
market prices of these securities are generally more volatile than the market
prices of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do securities paying interest
currently that have similar maturities and credit quality. There is the
additional risk that, unlike bonds which pay interest in cash throughout the
period to maturity, the Fund will realize no cash until the cash payment date
unless a portion of such securities are sold. If the issuer defaults, the Fund
may obtain no return at all on its investment. Zero coupon bonds generate
interest income before receipt of actual cash payments. In order to distribute
such income, the Fund may have to sell portfolio securities under
disadvantageous circumstances.
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RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities, i.e., securities which, if sold, would cause the Fund to be deemed
an "underwriter" under the Securities Act of 1933 (the "1933 Act") or which are
subject to contractual restrictions on resale. The Fund's policy is to not
purchase or hold illiquid securities (which may include restricted securities)
if more than 15% of the Fund's net assets would then be illiquid. If at any time
more than 15% of the Fund's net assets are illiquid, steps will be taken as soon
as practicable to reduce the percentage of illiquid assets to 15% or less.
The restricted securities which the Fund may purchase include
securities which have not been registered under the 1933 Act but are eligible
for purchase and sale pursuant to Rule 144A ("Rule 144A Securities"). This Rule
permits certain qualified institutional buyers to trade in privately placed
securities even though such securities are not registered under the 1933 Act. If
and when the Fund is able to qualify as such under the Rule, the Adviser, under
criteria established by the Fund's Board of Directors, will consider whether
Rule 144A Securities being purchased or held by the Fund are illiquid and thus
subject to the Fund's policy that it will not make an investment causing more
than 15% of its net assets to be invested in illiquid securities. In making this
determination, the Adviser will consider the frequency of trades and quotes, the
number of dealers and potential purchasers, dealer undertakings to make a
market, and the nature of the security and the market place trades (for example,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer). The liquidity of Rule 144A Securities will also be
monitored by the Adviser and if, as a result of changed conditions, it is
determined that a Rule 144A Security is no longer liquid, the Fund's holding of
illiquid securities will be reviewed to determine what, if any, action is
required in light of the policy limiting investments in such securities.
Investing in Rule 144A Securities could have the effect of increasing the amount
of the Fund's investments in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
TEMPORARY INVESTMENTS. At various times the Fund may hold cash or
invest in securities other than municipal obligations. Temporary investments
will be made exclusively in: (1) shares of investment companies primarily
investing in short-term instruments the income of which is exempt from federal
income tax (subject to certain fundamental limitations as to the Fund's
investments in other investment companies); (2) U.S. Government Securities; (3)
commercial paper rated within the highest grade by either Moody's or S&P
(Prime-1 or A-1, respectively); (4) other short-term debt securities issued or
guaranteed by corporations having outstanding debt rated within the two highest
grades by Moody's (AAA or AA) or S&P (AAA or AA); (5) certificates of deposit of
domestic commercial banks subject to regulation by the U.S. government, or any
of its agencies or instrumentalities, with assets of $1 billion or more based on
the most recent published reports; or (6) repurchase agreements with domestic
banks or securities dealers involving any of the securities which the Fund is
permitted to hold.
Such temporary investments may be made in any of the following
circumstances, provided that such an investment does not cause over 20% of the
value of the Fund's total assets to be so invested: (1) when assets are
allocated for settlement of purchases; (2) when net cash inflow from sales of
the Fund's shares or sales of portfolio securities is of a size which does not
allow for prompt investment in attractively priced municipal obligations; or (3)
when highly liquid assets are needed to meet anticipated redemptions, dividends
or other cash needs. In
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addition, during periods of adverse markets when it is deemed advisable
and practicable to take a temporary defensive position to protect capital, the
Fund may have more than 20% of its assets invested in the temporary investments
described above and cash. When the Fund is pursuing a temporary defensive
posture, it may not achieve its investment objective.
PORTFOLIO TRANSACTIONS. The Adviser is responsible for the placement of
portfolio transactions, subject to the supervision of the Board of Directors.
The Fund may trade to some degree in securities for the short-term and may sell
securities to buy others with greater income or profit potential or when it has
realized a profit and the proceeds can be more advantageously utilized. The Fund
may also sell a security when the Adviser believes such security will no longer
continue to provide a relatively high current yield or involves undue risk, or
when the Adviser deems it advisable to take a more defensive position or return
to a more aggressive stance. Because of the Fund's policies, the Fund's
portfolio turnover rate will vary. A higher portfolio turnover rate could
require the payment of larger amounts in brokerage commissions. However, it is
anticipated that most securities transactions will be principal transactions, in
which no brokerage commissions are incurred. Research services and placement of
orders by securities firms for shares of the Fund may be taken into account as a
factor in placing portfolio transactions. The Fund estimates that its portfolio
turnover rate will generally not exceed 50%, although turnover rates may be
higher in the early years of the Fund.
"WHEN ISSUED" SECURITIES. Municipal obligations may at times be
purchased or sold on a delayed delivery basis or on a when-issued basis. These
transactions arise when securities are purchased or sold by the Fund with
payment and delivery taking place in the future. No payment is made until
delivery is made which may be up to 60 days after purchase. If delivery of the
obligation does not take place, no purchase will result and the transaction will
be terminated. Such transactions are considered to involve more risk than
immediate cash transactions. As a matter of non-fundamental policy, any
investment on a when issued or delayed delivery basis will not be made if such
investment would cause more than 5% of the value of the Fund's total assets to
be invested in this type of investment.
BORROWING. The Fund may borrow money from banks for temporary or
emergency purposes in an amount not exceeding 10% of the value of its total
assets (excluding the amount borrowed) and may pledge an amount not exceeding
15% of its total assets (excluding the amount borrowed) to secure such
borrowing.
FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES. The Fund has adopted certain
investment restrictions which are described in the Statement of Additional
Information. These restrictions and the Fund's investment objectives may not be
changed unless authorized by a vote of the shareholders. All other investment
policies are non-fundamental and may be changed without shareholder approval.
ADVISER AND DISTRIBUTOR
Millenium Advisers, Inc. (the "Adviser") whose principal office is at
45 Essex Street, Millburn, New Jersey 07041, serves as the investment adviser of
the Fund. The Adviser has been recently formed for the specific purpose of
serving as the investment adviser of the Fund, and has not previously served as
an investment adviser. Subject to the direction and supervision of the Board of
Directors, the Adviser manages the business operations of the Fund. Rickel
Securities, Inc. ("the
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<PAGE>
Distributor"), the parent corporation of the Adviser, is a registered
broker-dealer specializing in municipal securities which serves as the
distributor or principal underwriter of the Fund's shares. John C. Sabo is the
Chairman, Chief Executive Officer and majority stockholder of the Distributor.
The Fund pays the Adviser a fee at the annual rate of 0.65% on the
first $250 million of average net assets, 0.60% on the next $250 million of
average net assets and 0.55% on average net assets over $500 million. This fee
is higher than that of most municipal bond funds. The Fund also reimburses the
Adviser for its costs of providing certain accounting and financial reporting,
shareholder services and compliance with state securities laws. The Adviser may
waive the receipt of management fees from the Fund with respect to any fiscal
quarter if the Adviser determines, in its sole discretion, that such waiver
would be desirable for competitive purposes.
ADMINISTRATOR. Declaration Service Company, P.O. Box 844, Conshohocken,
PA 19428-0844 ("DSC," or the "Transfer Agent") serves as the Fund's
Administrator in addition to serving as the Fund's transfer agent, shareholder
servicing agent, and dividend disbursing agent.
DSC is responsible for determining the daily net asset value per share
and maintaining the general accounting records of the Fund .
The Fund's expenses are accrued daily and are deducted from its total
income before dividends are paid. These expenses include, but are not limited
to: fees paid to the Adviser and the Administrator; taxes; legal fees; custodian
and auditing fees; reimbursement of the costs incurred by the Administrator in
providing pricing and accounting services to the Fund; and printing and other
miscellaneous expenses paid by the Fund.
PORTFOLIO MANAGEMENT. Lawrence T. McDermott will be the primary
portfolio manager of the Fund. Until February, 1999, he served as a Managing
Director and Senior Portfolio Manager (1981-1999) at Salomon Smith Barney,
creating and maintaining fifteen mutual funds, including money market,
intermediate and long term fixed income portfolios. Until September, 1981, he
served as Assistant Vice President (1979-1981) in the Trust Department of
Citibank, N.A., co-managing the bank's common trust fund and state-specific,
national and high yield funds. Mr. McDermott has over twenty years of experience
in the field of fixed income securities as a director and manager.
The Distributor is reimbursed by the Fund for some of its distribution
expenses through Distribution Plans which have been adopted with respect to
Class A and Class C shares and approved by the Fund's Board of Directors in
accordance with Rule 12b-1 under the Investment Company Act of 1940. See
"Distribution Plans" below for more detail.
DISTRIBUTION PLANS
The Fund bears some of the costs of selling its shares under
Distribution Plans adopted with respect to its Class A and Class C shares
pursuant to Rule 12b-1 under the
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Investment Company Act of 1940. Rule 12b-1 regulates the manner in which a
mutual fund may assume costs of distributing and promoting the sale of its
shares.
Payments under the Class A Distribution Plan are limited to an annual
rate of 0.20% of the average daily net asset value of the Class A shares. Such
payments are made to reimburse the Distributor for the fees it pays to its
salespersons and other firms for selling Fund shares, servicing shareholders and
maintaining shareholder accounts. Where a commission is paid for purchases of $1
million or more of Class A shares and as long as the limits of the distribution
plan have not been reached, such payment is also made from 12b-1 distribution
fees received from the Fund. Normally, such fees are at the annual rate of 0.20%
of the average net asset value of the accounts serviced and maintained on the
books of the Fund. Payments under the Class A Distribution Plan may also be used
to reimburse the Distributor for other distribution costs (excluding overhead)
not covered in any year by any portion of the sales charges the Distributor
retains. See "Purchase of Shares."
Payments under the Class C Distribution Plan are limited to an annual
rate of 1% of the average daily net asset value of the Class C shares. In
accordance with current applicable rules, such payments are also limited to
6.25% of gross sales of Class C shares plus interest at 1% over the prime rate
on any unpaid amounts. The Distributor pays broker/dealers up to 4% in
commissions on new sales of Class C shares. Up to an annual rate of 1.125% of
the average daily net assets is used to reimburse the Distributor for these
commission payments. Most or all of such commissions are reallowed to
salespersons and to firms responsible for such sales. No commissions are paid by
the Fund with respect to sales by the Distributor to officers, directors and
full-time employees of the Fund, the Distributor or the Adviser. Up to 0.375% of
average net assets is used to reimburse the Distributor for the payment of
service and maintenance fees to its salespersons and other firms for shareholder
servicing and maintenance of shareholder accounts.
If, due to the foregoing payment limitations, the Fund is unable to pay
the Distributor the commission on new sales of Class C shares, the Distributor
intends, but is not obligated, to accept new orders for shares and pay
commissions in excess of the payments it receives from the Fund. The Distributor
intends to seek full payment from the Fund of any excess amounts with interest
at 1% over the prime rate at such future date when and to the extent such
payments on new sales would not be in excess of the limitations. The Fund is not
obligated to make such payments; the amount (if any), timing and condition of
any such payments are solely within the discretion of the directors of the Fund
who are not interested persons of the Distributor or the Fund and have no direct
or indirect financial interest in the Class C Distribution Plan (the
"Independent Directors"). If the Class C Distribution Plan is terminated, the
Distributor will ask the Independent Directors to take whatever action they deem
appropriate with regard to the payment of any excess amounts.
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<PAGE>
In addition, to the extent that any investment advisory fees paid by
the Fund may be deemed to be indirectly financing any activity which is
primarily intended to result in the sale of Fund shares within the meaning of
Rule 12b-1, the Plans authorize the payment of such fees.
Each of the Distribution Plans may be terminated at any time by vote of
the Independent Directors or by vote of a majority of the outstanding voting
shares of the respective class. Payments pursuant to a Distribution Plan are
included in the operating expenses of the class.
As described above, dealers or others may receive different levels of
compensation depending on which class of shares they sell. The Distributor may
make expense reimbursements for special training of a dealer's registered
representatives, advertising or equipment, or to defray the expenses of dealer
meetings. Any such amounts may be paid by the Distributor from the fees it
receives under the Class A and Class C Distribution Plans.
In addition, the Distributor may, from time to time, pay additional
cash compensation or other promotional incentives to authorized dealers or
agents that sell shares of the Fund. In some instances such cash compensation or
other incentives may be offered only to certain dealers or agents who employ
registered representatives who have sold or may sell significant amounts of
shares of the Fund during a specified period of time.
Shares of the Fund may also be sold through banks or bank-affiliated
dealers. Any determination that such banks or bank-affiliated dealers are
prohibited from selling shares of the Fund under the Glass-Steagall Act would
have no material adverse effects on the Fund. State securities laws may require
such firms to be licensed as securities dealers in order to sell shares of the
Fund.
PURCHASE OF SHARES
GENERAL. Shares of the Fund are sold on a continuous basis, and you may
invest any amount you choose, as often as you wish, subject to minimum initial
investment of $5,000 (in the case of Class A Shares) or $25,000 (in the case of
Class C Shares), and subsequent minimum investments of $250. Shares of the Fund
are purchased at their net asset value per share (plus sales load, if any) next
determined after the order is received by the Fund's Transfer Agent. When
opening an account, it is important that you provide the Transfer Agent With
your correct taxpayer identification number (social security or employer
identification number).
If you are investing in the Fund for the first time, you will need to
set up an account. You may make a direct initial investment by completing and
signing the investment application which
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<PAGE>
accompanies this prospectus and mailing it, together with a check or money order
made payable to:
The Millenium Municipal Income Fund, Inc.
Declaration Service Company
P.O. Box 844
Conshohocken, PA 19428-0844
BY MAIL. When making subsequent investments by mail, enclose your check
with the return remittance portion of the confirmation of your previous
investment or indicate on your check or a separate piece of paper your name,
address and account number and mail to the address set forth above. Third party
checks will not be accepted, and the Fund reserves the right to refuse to accept
second party checks.
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<PAGE>
BY WIRE. You may make your initial or subsequent investments in the
Fund by wiring funds. To do so, call the Investor Services Department at
1-877-375-1205 for wiring instructions.
BY AUTOMATIC INVESTMENT PLAN. Once your account is open, you may make
investments automatically by completing the automatic investment plan form
authorizing the Fund to draw on your bank account regularly by check for as
little as $250 per month beginning within thirty (30) days after the account is
opened. You should inquire at your bank whether it will honor debits through the
Automated Clearing House ("ACH"). You may change the date or amount of your
investment any time by written instruction received by the Fund at least five
business days before the change is to become effective.
To assure proper receipt, please be sure your bank includes the Fund
name and the account number that has been assigned to you. If you are opening a
new account, please complete the Account Registration Form and mail it to the
"New Account" address above after completing your wire arrangement. Note:
Federal Funds wire purchase orders will be accepted only when the Fund and
Custodian Bank are open for business.
FUNDS CREDITED TO THE FUND'S ACCOUNT BY 4:00 PM (EASTERN TIME) WILL BE
APPLIED TO PURCHASE SHARES ON THAT DAY. There are no wire fees by the Fund for
purchases of $1,000 or more. A $10 wire fee will be charged by the Fund on wire
purchases of less than $1,000. Your bank may also charge wire fees for this
service.
ADDITIONAL INFORMATION ABOUT PURCHASES
PURCHASE POLICIES:
o Investments must be received in good order in the Transfer Agent's office on
a business day before 4:00 PM Eastern Time to be credited to your account
that day and to receive that day's share price. Otherwise, your investment
will be credited to your account on the next business day and you will
receive that day's share price.
o The Transfer Agent and the Fund are not responsible for any delays that occur
in wiring funds, including delays in processing by the investor's bank.
o The Fund reserves the right to reject an investment for any reason.
ALTERNATIVE PURCHASE ARRANGEMENTS. The Fund offers two classes of
shares. With certain exceptions described below, Class A shares are sold with a
front-end sales charge at the time of purchase and are not subject to a sales
charge when they are redeemed. Class C shares are purchased at their net asset
value
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<PAGE>
per share without the imposition of a front-end sales charge but are subject to
a 1% deferred sales charge if redeemed within one year after purchase and do not
have a conversion feature.
Depending on the amount of the purchase and the anticipated length of
time of investment, investors may choose to purchase one class of shares rather
than another. Investors who would rather pay the entire cost of distribution at
the time of investment, rather than spreading such cost over time, might
consider Class A shares. Other investors might consider Class C shares, in which
case 100% of the purchase price is invested immediately. Class C shares may be
more appropriate for the short-term investor. The Fund will not accept any
purchase of Class C shares when Class A shares may be purchased at net asset
value. See also "Distribution Plans" for more information.
CLASS A SHARES. Class A shares are sold at their net asset value plus a
sales charge. The amounts of the sales charges are shown in the following table.
CUSTOMARY
CHARGE AS CONCESSION TO
SALES CHARGE APPROXIMATE YOUR DEALER AS
AS PERCENTAGE PERCENTAGE PERCENTAGE
OF OFFERING OF AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ----------------- ----- -------- -----
$99,999 or less 4 3/4% 5.0% 4%
$100,000 to $249,999 3 1/2% 3.6% 3%
$250,000 to $499,999 2 1/2% 2.6% 2%
$500,000 to $749,999 2% 2.0% 1 3/4%
$750,000 to $999,999 1% 1.0% 3/4 of 1%
$1,000,000 or more 0% 0.0% 0%
* On purchase of $1 million or more, the investor pays no front-end sales
charge but a contingent deferred sales charge of 0.75% may be imposed if
shares are redeemed within the first year after purchase. The Distributor may
pay the financial service firm a commission during the first year after
purchase at an annual rate as follows:
PURCHASE AMOUNT COMMISSION
- --------------- ----------
First $3,000,000 .75%
Next $2,000,000 .50%
Over $5,000,000 .25%
Where a commission is paid for purchases of $1 million or more, such payment
will be made from 12b-1 distribution fees received from the Fund and, in cases
where the limits of the distribution plan in any year have been reached, from
the Distributor's own resources.
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<PAGE>
There are a number of ways to reduce the sales charge on the purchase
of Class A shares, as set forth below.
(i) Family Purchases: Purchases made by an individual, such
individual's spouse and children under 21 are combined and treated as a purchase
of a single person.
(ii) Group Purchases: The purchases of an organized group, whether or
not incorporated, are combined and treated as the purchase of a single person.
The organization must have been organized for a purpose other than to purchase
shares of mutual funds.
(iii) Purchases under a Statement of Intention: By executing the
"Statement of Intention" included in the Application Form at the back of the
Prospectus, purchases of Class A shares of $100,000 or more made over a 13-month
period may be made at the applicable price for the aggregate shares actually
purchased during the period. Please see "Terms and Conditions" at back of this
prospectus.
(iv) Rights of Accumulation: If you notify your dealer or the
Distributor, you may include the Class A shares you already own (valued at
maximum offering price) in calculating the price applicable to your current
purchase.
(v) Sales at Net Asset Value: The sales charge will not apply to: (1)
Class A shares purchased through the automatic reinvestment of dividends and
distributions (see "Dividends and Distributions"); (2) Class A shares purchased
by directors, officers and employees of any fund for which the Adviser acts as
investment adviser or officers and employees of the Adviser or Distributor,
including former directors and officers and any spouse, child, parent,
grandparent, brother or sister ("immediate family members") of all of the
foregoing, and any employee benefit or payroll deduction plan established by or
for such persons; (3) Class A shares purchased by any registered
representatives, principals and employees (and any immediate family member) of
securities dealers having a sales agreement with the Distributor; (4) initial
purchases of Class A shares totaling at least $250,000 but less than $5,000,000,
made at any one time by banks, trust companies and other financial institutions
on behalf of one or more clients for which such institution acts in a fiduciary
capacity; (5) Class A shares purchased by any single account covering a minimum
of 250 participants (this 250 participant minimum may be waived for certain fee
based mutual fund marketplace programs) and representing a defined benefit plan,
defined contribution plan, cash or deferred plan qualified under 401(a) or
401(k) of the Internal Revenue Code or a plan established under section 403(b),
457 or 501(c)(9) of such Code or "rabbi trusts"; (6) Class A shares purchased by
persons participating in a "wrap account" or similar fee-based program sponsored
and maintained by a registered broker-dealer approved by the Fund's Distributor
or by investment advisers of financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of such investment
advisers or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such adviser or financial planner
on the books of the broker or agent; and (7) Class A shares amounting to less
than $5,000,000 purchased by any state, county, city, department, authority or
similar agency. The Fund may also issue Class A shares at net asset value
incident to a merger with or acquisition of assets of an investment company.
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<PAGE>
CLASS C SHARES. Class C Shares are offered at net asset value without a
sales charge at the time of purchase. Class C shares redeemed within one year of
purchase will be subject to a 1% charge upon redemption. Class C shares do not
have a conversion feature. The Fund will not accept any purchases of Class C
shares when Class A shares may be purchased at net asset value. The Distributor
will pay a commission to the firm responsible for the sale of Class C shares. No
other fees will be paid by the Distributor during the one-year period following
purchase. The Distributor will be reimbursed for the commission paid from 12b-1
fees paid by the Fund during the one-year period. If Class C shares are redeemed
within the one-year period after purchase, the 1% redemption charge will be paid
to the Distributor. After Class C shares have been outstanding for more than one
year, the Distributor will make quarterly payments to the firm responsible for
the sale of the shares in amounts equal to 1.125% of the annual average daily
net asset value of such shares for sales fees and 0.375% of the annual average
daily net asset value of such shares for service and maintenance fees.
CONTINGENT DEFERRED SALES CHARGES. Any contingent deferred sales charge
imposed upon the redemption of Class A or Class C shares is a percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares. No contingent deferred sales charge is imposed when you
redeem amounts derived from (a) increases in the value of shares above the net
cost of such shares or (b) certain shares with respect to which the Fund did not
pay a commission on issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions. Upon request for redemption,
shares not subject to the contingent deferred sales charge will be redeemed
first. Thereafter, shares held the longest will be the first to be redeemed.
The contingent deferred sales charge (CDSC) on Class A and C Shares
that are subject to CDSC will be waived if the redemption relates to the
following; (a) in the event of the total disability (as evidenced by a
determination by the federal Social Security Administration) of the shareholder
(including registered joint owner) occurring after the purchase of the shares
being
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<PAGE>
redeemed; (b) in the event of the death of the shareholder (including a
registered joint owner); (c) for redemptions made pursuant to an automatic
withdrawal plan in an amount, on an annual basis, up to 12% of the value of the
account at the time the shareholder elects to participate in the automatic
withdrawal plan; (d) for redemptions from a qualified retirement plan or IRA
that constitute a tax-free return of contributions to avoid tax penalty; (e) on
redemptions of shares sold to directors, officers and employees of any fund for
which the Adviser acts as investment adviser or officers and employees of the
Adviser or Distributor including former directors and officers and immediate
family members of all of the foregoing, and any employee benefit or payroll
deduction plan established by or for such persons; and (f) on redemptions
pursuant to the right of the Fund to liquidate a shareholder's account if the
aggregate net asset value of the shares held in such account falls below an
established minimum amount.
REDEMPTION OF SHARES
GENERAL. You
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<PAGE>
may redeem any or all of your shares at will. The Fund redeems shares at the net
asset value thereof next determined after it has received a redemption request;
however the redemption proceeds will not be paid until such time as the
redemption request is received in proper order. Redemption requests must be
received prior to the time that the net asset value per share is next determined
(generally 4:00 PM Eastern Time of each day that the New York Stock Exchange is
open for trading) to obtain the date of receipt net asset value.
BY MAIL. A written request for redemption in proper order must be sent
to Declaration Service Company, P.O. BOX 844, Conshohocken, Pennsylvania
19428-0844. For express or registered mail, your request should be addressed to
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken,
Pennsylvania 19428. "Proper order" requires delivery to the Transfer Agent of:
(1) a written redemption request signed by each registered owner in the
exact names in which the account is registered, the account number and the
number of shares or the dollar amount to be redeemed;
(2) a signature guarantee when required (see "Signature Guarantee" page
__); and
(3) such additional documents required to evidence the authority of the
persons requesting redemption on behalf of corporations, or whether as
executors, trustees and other fiduciaries. Redemption proceeds will not be paid
until all documents, in satisfactory form, have been received by the Transfer
Agent. (see "Additional Information About Redemptions" below on page __.)
BY TELEPHONE. Redemptions may be made by telephone, provided you have
completed the Telephone Redemption Authorization section of the purchase
application. Upon proper authority and instruction, redemption proceeds will be
wired to the bank account set forth on the account registration or, for amounts
$5,000 or less, redemptions will be mailed to the address on the account
registration. There will be a charge for the bank wire. Neither the Fund nor the
Transfer Agent will be responsible for acting upon instructions reasonably
believed by them to be genuine. The Fund and/or its Transfer Agent will,
however, employ reasonable procedures to confirm that instructions communicated
by telephone are genuine (such as requiring some form of personal
identification, providing written confirmations, and the tape recording of
conversations). If the Fund or its Transfer Agent do not employ reasonable
procedures, they may be liable for losses due to unauthorized or fraudulent
transactions.
27
<PAGE>
SPECIAL REDEMPTION ARRANGEMENTS. Special arrangements may be made by
institutional investors, or on behalf of accounts established by brokers,
advisors, banks or similar institutions, to have redemption proceeds transferred
by wire to pre-established accounts upon telephone instructions. For further
information call the Fund at 1-877-375-1205.
SIGNATURE GUARANTEE. A signature guarantee is required for all
redemptions greater than $5,000 or where the redemption proceeds are to be paid
to another person or sent to an address other than the one of record. A
signature guarantee verifies the authenticity of your signature. The guarantor
must be an eligible guarantor. In order to be eligible, the guarantor must be a
participant in a STAMP program (A Securities Transfer Agents Medallion Program).
You may call the Transfer Agent at 1-877-375-1205 to determine whether the
entity that will guarantee the signature is an eligible guarantor.
REDEMPTION PROCEEDS. Redemption proceeds may be sent to you by mail. If
your redemption check is to be mailed, it will usually be mailed to you within
48 hours of receipt of the redemption request. The Fund reserves the right to
hold redemption proceeds for up to seven days. If the shares to be redeemed were
purchased by check, the redemption proceeds will not be mailed to you until the
check has cleared, which may take up to seven days. You may avoid this
inconvenience by investing by bank wire. Redemption checks may also be delayed
if you have changed your address within the last 30 days. Please notify the
Fund, promptly in writing, of any change of address.
Redemption proceeds may be sent to you by wire. You may authorize the
Fund to transmit redemption proceeds by wire provided you send written
instructions with a signature guarantee at the time of redemption or have
completed the banking information portion of the Telephone Redemption
Authorization on the purchase application. Your redemption proceeds will usually
be sent on the first business day following redemption. However, the Fund
reserves the right to hold redemption proceeds for up to seven days. If the
shares to be redeemed were purchased by check, the redemption proceeds will not
be wired until the check has cleared, which may take up to seven days. There is
a $10 charge to cover the wire, which is deducted from redemption proceeds.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS:
(1) The share redemption price may be more or less than your cost of
the shares being redeemed, depending on the per share net asset value next
determined after your request is received.
(2) A request to redeem shares in an IRA or similar retirement account
must be accompanied by an IRS W4-P and must state a reason for withdrawal, as
specified by the IRS. Proceeds from the redemption of shares from a retirement
account may be subject to withholding tax.
(3) Excessive purchases and redemptions of Fund shares has an adverse
impact on effective portfolio management as well as upon Fund expenses. The Fund
has reserved the right to refuse investments from shareholders who engage in
such transactions.
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<PAGE>
ACCOUNT CLOSING FEE. In order to reduce Fund expenses, an account
closing fee of $10 will be assessed against those shareholders who redeem all of
the shares in their Fund account and direct that redemption proceeds be directed
to them by mail or wire. This charge is payable directly to the Fund's Transfer
Agent which, in turn, will reduce its charges to the Fund by an equal amount.
The purpose of the charge is to allocate to redeeming shareholders a
more equitable portion of the Transfer Agent's fee, including the cost of tax
reporting, which is based upon the number of shareholder accounts. When a
shareholder closes an account, the Fund must continue to carry the account on
its books, maintain the account records and complete year-end tax reporting.
With no assets, the account cannot pay its own expenses and imposes an unfair
burden on remaining shareholders.
DETERMINING THE PRICE OF SHARES.
The net asset value per share of each class is determined daily by
dividing the total value of investments and other assets, less any liabilities,
by the number of total outstanding shares. Fixed income securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. (Pricing services
generally take into account institutional size trading in similar groups of
securities). Securities not priced in this manner will be priced at the last
published sales price if traded on that day and, if not traded, at the mean
between the most recent quoted bid and asked prices provided by investment
dealers. The pricing service and valuation procedures are reviewed and subject
to approval by the Board of Directors. Short-term securities maturing in 60 days
or less will be valued at amortized cost (unless the Board of Directors
determines that amortized cost would not represent a fair value). If there is a
material difference in the market value and amortized cost value of short-term
securities, market value will be used. Assets for which there are no quotations
available will be valued at a fair value as determined by or at the direction of
the Board of Directors.
The net asset value per share is determined as of the earlier of the
close of the exchange or 4:00 p.m. Eastern Time on each day the New York Stock
Exchange is open. The price per share for purchases or redemptions made directly
through Declaration Service Company normally is such value next computed after
Declaration Service Company receives the purchase order or redemption request.
If the purchase order or redemption request is placed with your dealer, then the
applicable price is normally computed as of 4:00 p.m. Eastern Time on the day
the dealer receives the order, provided that the dealer receives the order
before 4:00 p.m. Eastern Time. Otherwise, the applicable price is the next
determined net asset value. It is the responsibility of your dealer to promptly
forward purchase and redemption orders to the Distributor. Note that in the case
of redemptions and repurchases of shares owned by corporations, trusts or
estates, Declaration Service Company may require additional documents to effect
the redemption and the applicable price will be determined as of the close of
the next computation following the receipt of the required documentation or
outstanding certificates. See "Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS.
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Income dividends are declared and distributed monthly and distributions
of net realized capital gains, if any, will normally be paid annually. To
provide stable distributions for its shareholders, the Fund at times may
continue to pay distributions based on expectations of future investment results
even though, as a result of temporary market conditions or other factors, the
Fund may have failed to achieve projected investment results for a given period.
In such cases, the Fund's distributions may include a return of capital to
shareholders. Shareholders who reinvest their distributions are largely
unaffected by such returns of capital. In the case of shareholders who do not
reinvest, a return of capital is equivalent to a partial redemption of the
shareholder's investment. Because Class C shares incur higher distribution
services fees and bear certain other expenses, such shares will have a higher
expense ratio and will pay correspondingly lower dividends than Class A shares.
You will receive quarterly confirmation statements for dividends
declared and shares purchased through reinvestment of dividends. Dividends
declared in December to shareholders of record in December, and paid by the end
of January of the subsequent year will be treated as received by the shareholder
in the earlier year. You will receive confirmations after each purchase other
than through dividend reinvestment, and after each redemption. Information
concerning distributions will be mailed to shareholders annually. Distributions
will be classified in terms of non-taxable return of capital, federal tax-exempt
income and taxable income. Since some states may not tax their residents on the
portion of the Fund's distributions representing income from governmental
entities in such states, information about state sources of tax-exempt
distributions will also be reported annually.
Shareholders have the option to receive all dividends and distributions
in cash, to have all dividends and distributions reinvested, or to have income
dividends and short-term capital gain distributions paid in cash and long-term
capital gain distributions reinvested. Reinvestment of all dividends and
distributions is automatic for accounts utilizing the Automatic Withdrawal Plan.
The reinvestment of dividends and distributions is made at net asset value
(without any initial or contingent deferred sales charge) on the dividend
payment date. Upon receipt of the second dividend check which has been returned
as undeliverable, undelivered dividends will be invested in additional shares at
the current net asset value and the account designated as a dividend
reinvestment account.
FEDERAL INCOME TAXES
This section is not intended to be a full discussion of all the aspects
of the federal income tax law and its effects on the Fund and its shareholders.
Shareholders may be subject to state and local taxes on distributions. Each
investor should consult his or her own tax adviser regarding the effects of
federal, state and local tax laws on an investment in the Fund.
The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code (the "Code") and, if so qualified, will not be liable for
federal income tax to the extent its earnings are distributed. If, for any
calendar year, the required distribution of the Fund exceeds the amount
distributed, an excise tax equal to 4% of the excess will be imposed on the
Fund. The Fund intends to make distributions during each calendar year
sufficient to prevent imposition of the excise tax.
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<PAGE>
Dividends paid to shareholders from interest earned by the Fund from
municipal obligations and from exempt interest dividends received by the Fund
from investment companies investing in tax-exempt securities are not includible
in a shareholder's gross income for federal income tax purposes, although a
portion of such dividends may be subject to the alternative minimum tax as
discussed below. Distributions of net interest income derived from other
sources, if any, and of net short-term capital gains realized by the Fund will
be taxable to shareholders as ordinary income. Net long-term capital gain
distributions, if any, will be taxable to shareholders as long-term capital gain
regardless of how long the shares of the Fund have been held. Distributions will
be treated the same for tax purposes whether received in cash or in additional
shares of the Fund.
Interest paid on "specified private activity bonds" issued after August
7, 1986, as defined in the Code, although exempt from federal income tax, will
constitute a tax preference item for purposes of both the individual and the
corporate alternative minimum tax. If the Fund were to own any such bonds, it is
expected that a portion of the exempt income distributed by the Fund would be
treated as a preference item for shareholders based upon the proportionate share
of the interest from the specified private activity bonds received by the Fund.
In the case of a corporate shareholder, the alternative minimum tax base may
also include a portion of all the other tax-exempt income. Corporate
shareholders are advised to consult their own tax advisers with respect to the
corporate alternative minimum tax.
A gain or loss for tax purposes may be realized on the redemption of
shares. If a shareholder realizes a loss on the sale of any shares held for six
months or less and during such period the shareholder received any
exempt-interest dividends, then such loss is disallowed to the extent of the
amount of the exempt-interest dividends. If a shareholder realizes a loss on the
sale of any shares held for six months or less and during such period the
shareholder received any capital gains dividends, then such loss (to the extent
it is allowed) is treated as a long-term capital loss to the extent of such
capital gain dividends. Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes. Dividends declared in the last calendar month to shareholders of
record in such month and paid by the end of the following January are treated as
received by the shareholder in the year in which they are declared.
The Fund may not be an appropriate investment vehicle for entities
which are "substantial users" (or "related persons" thereto) of facilities
financed by "industrial development bonds" as such terms are defined in the
Internal Revenue Code. Such entities (or persons) should consult their own tax
advisers before investing.
FUND SHARES
Shares issued by the Fund are currently divided into two classes: Class
A and Class C shares. The Board of Directors may offer additional classes in the
future and may at any time discontinue the offering of any class of shares. Each
share, when issued and paid for in accordance with the terms of the offering, is
fully paid and non-assessable. Shares have no preemptive or subscription rights
and are freely transferable. Each share of the Fund represents an interest in
the assets of the Fund and has identical voting, dividend, liquidation and other
rights and the same terms and conditions as any other shares except that (i)
each dollar of net asset value per share is entitled to one vote irrespective of
the class or subclass thereof, (ii) the expenses related to a
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<PAGE>
particular class, such as those related to the distribution of each class and
the transfer agency expenses of each class, are borne solely by each such class
and (iii) each class of shares votes separately with respect to provisions of
the Rule 12b-1 Distribution Plan which pertains to a particular class and other
matters for which separate class voting is appropriate under applicable law.
Each fractional share has the same rights, in proportion, as a full share.
Shares do not have cumulative voting rights; therefore, the holders of more than
50% of the voting power of the Fund can elect all of the directors of the Fund.
Due to the differing expenses of the classes, dividends of Class C shares are
likely to be lower than for Class A shares.
In accordance with Maryland law and the Fund's By-laws, the Fund does
not hold regular annual shareholder meetings. Shareholder meetings are held when
they are required under the Investment Company Act of 1940 or when otherwise
called for special purposes. Special shareholder meetings may be called upon the
written request of shareholders holding at least 10% of the outstanding shares
of the Fund.
PERFORMANCE DATA
From time to time, the Fund may advertise information regarding its
performance. Such information may consist of "yield," "total return," "taxable
equivalent yield," "distribution rate," "annualized current distribution rate"
and "tax equivalent distribution rate." Each of these performance figures will
be based upon historical results and will not be intended to indicate future
performance, and, except for "distribution rate," "annualized current
distribution rate" and "tax equivalent distribution rate" is standardized in
accordance with regulations of the Securities and Exchange Commission ("SEC").
All such performance will be calculated separately for each class of shares.
"Yield" is computed by dividing the net investment income per share (as
defined in applicable SEC regulations) during a specified 30-day period by the
maximum offering price per share on the last day of such period. Yield is an
annualized figure, in that it assumes that the same level of net investment
income is generated over a one-year period. The yield formula annualizes net
investment income by providing for semi-annual compounding.
"Taxable Equivalent Yield". The yield necessary from a taxable
investment, which on an after-tax basis is equal to the yield of a tax free
investment, based on the maximum federal income tax bracket for a given period.
"Distribution rate" is determined by dividing the income dividends per
share for a stated period by the net asset value per share on the last day of
such period. "Tax equivalent distribution rate" is computed by dividing the
portion of the Fund's distribution rate (determined as described above) which is
tax-exempt, by one minus the stated federal income tax rate, and adding to the
resulting amount that portion, if any, of the distribution rate which is not
tax-exempt. All distribution rates published are measures of the level of income
dividends distributed during a specified period. Thus, such rates differ from
yield (which measures income actually earned by the Fund) and total return
(which measures actual income, plus realized and unrealized gains or losses of
the Fund's investments). Consequently, distribution rates alone should not be
considered complete measures of performance.
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<PAGE>
"Average annual total return" refers to the Fund's average annual
compounded rate of return over a stated period that would equate an initial
amount invested at the beginning of the period to the ending redeemable value of
the investment. In the event the Fund advertises its total return, the stated
periods will generally be one year, five years and ten years, but the Fund may
also advertise total return for longer or shorter periods, including the life of
the Fund. The computation of total return assumes reinvestment of all dividends
and distributions, and deduction of all charges and expenses.
The Fund may also quote average annual total return and total return on
net asset value. Such data will be calculated substantially as described above
except that sales charges will not be deducted.
The Fund may quote information from publications such as The Wall
Street Journal, Money Magazine, Forbes, Barron's, Newsweek, Chicago Tribune, The
New York Times, U.S. News and World Report, USA Today, Fortune, Investors
Business Daily, Financial World, Smart Money, No-Load Fund Investor and
Kiplinger's and may cite information from Morningstar, Value Line or the
Investment Company Institute. The Fund may compare its performance to the
performance of mutual fund indexes as reported by Lipper Analytical Services,
Inc. ("Lipper") or CDA Investment Technologies, Inc., two widely recognized
independent mutual fund reporting services.
Please remember that performance information is based upon historical
results and is not necessarily indicative of future performance.
The Fund's Annual Reports will contain additional performance
information and will be made available upon request and without charge.
SHAREHOLDER INQUIRIES
Declaration Service Company, P.O. Box 844, Conshohocken, Pennsylvania
19428-0844, acts as transfer, shareholder servicing, and dividend paying agent
for all Fund accounts. Simply write or call the Investor Information Department
at 1-877-375-1205 for prompt service on any questions about your account.
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<PAGE>
APPENDIX
QUALITY RATINGS OF DEBT SECURITIES
MOODY'S MUNICIPAL AND CORPORATE 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 edged." 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
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 Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade-obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e. they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any longer period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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<PAGE>
C -- Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA -- Debt rated 'AAA' has the highest rating assigned by Standard and
Poor's. 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.
A -- Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Debt rated 'BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB -- Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB' rating.
B -- Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The 'B' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied `BB' or `BB' rating.
CCC -- Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied 'B' or 'B' rating.
CC -- The rating 'CC' is typically applied to debt subordinated to
senior debt that is assigned an actual or implied 'CCC' rating.
C -- The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
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<PAGE>
CI -- The rating 'CI' is reserved for income bonds on which no interest
is being paid.
D -- Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S MUNICIPAL NOTE RATINGS
MIG 1 -- The best quality, with strong protection provided by
established cash flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG 2 -- High quality, with margins of protection ample although not so
large as in the preceding group.
MIG 3 -- Favorable quality, with all security elements accounted for
but lacking the undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is likely to be
less well established.
STANDARD & POOR'S MUNICIPAL NOTE RATINGS
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics are given
a (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1 (superior capacity), Prime-2 (strong capacity) and
Prime-3 (acceptable capacity). In assigning ratings to an issuer which
represents that its commercial paper obligations are supported by the credit of
another entity or entities, Moody's evaluates the financial strength of the
indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment.
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
The S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from 'A' for the
highest quality to 'D' for the lowest. Issues assigned an 'A' rating
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<PAGE>
are regarded as having the greatest capacity for timely payment. Within the 'A'
category, the numbers 1, 2 and 3 indicate relative degrees of safety. The
addition of a plus sign to the category A-1 denotes that the issue is determined
to possess overwhelming safety characteristics.
TERMS AND CONDITIONS FOR A STATEMENT OF INTENTION (CLASS A SHARES ONLY)
TERMS OF ESCROW:
1 Out of my initial purchase (or subsequent purchases if necessary) 5%
of the dollar amount specified in this Statement will be held in escrow by
Declaration Service Company in the form of shares (computed to the nearest full
share at the public offering price applicable to the initial purchase hereunder)
registered in my name. For example, if the minimum amount specified under this
statement is $100,000 and the public offering price applicable to transactions
of $100,000 is $10 a share, 500 shares (with a value of $5,000) would be held in
escrow.
2 If my total purchases are at least equal to the intended purchases,
the shares in escrow will be delivered to me or to my order.
3 If my total purchases are less than the intended purchases, I will
remit to Rickel Securities, Inc. the difference in the dollar amount of sales
charge actually paid by me and the sales charge which I would have paid if the
total purchase had been made at a single time. If remittance is not made within
20 days after written request by Rickel Securities, Inc., or my dealer,
Declaration Service Company, will redeem an appropriate number of the escrowed
shares in order to realize such difference.
4 I hereby irrevocably constitute and appoint Declaration Service
Company my attorney to surrender for redemption any or all escrowed shares with
full power of substitution in the premises.
5 Shares remaining after the redemption referred to in Paragraph No. 3
will be credited to my account.
6 The duties of Declaration Service Company are only such as are herein
provided being purely ministerial in nature, and it shall incur no liability
whatever except for willful misconduct or gross negligence so long as it has
acted in good faith. It shall be under no responsibility other than faithfully
to follow the instructions herein. It may consult with legal counsel and shall
be fully protected in any action taken in good faith in accordance with advice
from such counsel. It shall not be required to defend any legal proceedings
which may be instituted against it in respect of the subject matter of this
Agreement unless requested to do so and indemnified to its satisfaction against
the cost and expense of such defense.
7 If my total purchases are more than the intended purchases and such
total is sufficient to qualify for an additional quantity discount, a
retroactive price adjustment shall be made for all
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purchases made under such Statement to reflect the quantity discount applicable
to the aggregate amount of such purchases during the thirteen-month period.
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<PAGE>
TELEPHONE REDEMPTION AUTHORIZATION
[ ] If you wish to authorize redemption by telephone please check the box to the
left and complete the following information.
I (we) hereby authorize Declaration Service Company, Millenium
Advisers, Inc., Rickel Securities, Inc., and/or Millenium Municipal Income Fund,
Inc. to act upon instructions received by telephone or telegraph, believed by
them to be genuine, and to redeem shares in my (our) account in the Fund and to
wire the proceeds of such redemption to the predesignated bank listed below. I
(we) hereby agree that neither Declaration Service Company, nor Millenium
Advisers, Inc., Rickel Securities, Inc., and/or Millenium Municipal Income Fund,
Inc nor any of their officers or employees, will be liable for any loss,
liability, cost or expense for acting upon such instructions.
- --------------------------------- --------------------------------
Signature of Shareholder Signature of Co-Shareholder
- --------------------------------- --------------------------------
Name of Commercial Bank (Title of Account at Bank)
- --------------------------------- --------------------------------
(Street) (Account Number at Bank)
- --------------------------------- --------------------------------
(City) (State) (Zip) (ABA/Transit Routing Number)
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<PAGE>
ACCOUNT APPLICATION
Mail to : Millenium Municipal Income Fund, Inc. c/o Declaration Service Company,
P.O. Box 844, Conshohocken, PA 19428-0844. Use this application for all
accounts. For assistance call 1-877-375-1205.
1. ACCOUNT REGISTRATION [ ] Individual Account
Please check only one box [ ] Joint Tenant
[ ] Tenants in Common
[ ] Uniform Transfers to Minors Act (UM) or
Uniform Gifts to Minors Act (UGMA) - use
the name of the adult custodian on the
shareholder line and the name of the
child on the co-shareholder line. Use
the child's Social Security Number.
[ ] Trust Account - please indicate the
name(s) of the trustee(s) authorized to
act on behalf of the trust on the
shareholder line and the name of the
trust and date of the trust on the
co-shareholder line.
[ ] Retirement Plan - please indicate the
name(s) of the trustee(s) on the
shareholder line and the name of the
retirement plan on the co-shareholder
line.
[ ] I am a Dealer Firm registered
representative or employee entitled to
NAV purchases of Class A Shares.
[ ] Other form of ownership (please specify
____________________________________)
PLEASE PRINT CLEARLY. Name of shareholder ________________________
Social Security number or taxpayer
ID number (required by law) ________________
Name of co-shareholder (if any) ____________
Address ____________________________________
City ______________ State ________ Zip _____
Telephone Number ___________________________
Citizenship ________________________________
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2. CLASS SELECTION
[ ] Check enclosed for $___________ (Minimum
$5,000 for Class A Shares, $25,000 for
Class (C Shares,) payable to "Millenium
Municipal Income Fund, Inc."), for
investment in the following Class(es)
of Shares:
[ ] $_______ in Class A Shares.
[ ] $_______ in Class C Shares.
[ ] My investment dealer, named below,
ordered my initial purchase of shares,
under wire order # ______________.
Please consider the following account options on the reverse side:
* Dividend and Capital Gain * Rights of Accumulation * Payments to Others
Instructions
* Statement of Intention * Telephone Privileges * Automatic Withdrawals
* Automatic Investment Plan * Electronic Wire Privileges
3. DEALER INFORMATION
When opening your ______________________________________________________
account through a Dealer name (as it appears on Selling Group Agreement)
dealer, have them
complete this section. ______________________________________________________
Address of home office
______________________________________________________
City State Zip
______________________________________________________
Authorized signature of dealer
______________________________________________________
Address of office servicing account
______________________________________________________
City State Zip
______________________________________________________
Registered representative's name and no. appearing on
firm's registration
______________________________________________________
Registered representative's telephone number
4. YOUR SIGNATURE
All registered shareholders
must sign.
I am of legal age and have read the current
prospectus and this application. I agree to the
terms thereof including any amendments thereto. I
hold harmless and indemnify Millenium Municipal
Income Fund, Inc., Rickel Securities, Inc. and
each of their respective partners, affiliates,
directors, officers, employees and agents from any
losses, expenses, costs or liability (including
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<PAGE>
attorney fees) which I many incur in connection
with my instructions in this application and any
other instructions given in writing, by telephone
or electronically and reasonably believed to be
genuine. UNDER THE PENALTY OF PERJURY, I CERTIFY
THAT (1) THE SOCIAL SECURITY NUMBER OR TAXPAYER
IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY
CORRECT TAXPAYER IDENTIFICATION NUMBER, AND (2) I
AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL
REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL
INTEREST AND DIVIDENDS, OR THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING.
THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING. If I am affiliated with, or work for,
a NASD member firm, I will attach information
concerning my employment.
__________________________________________________
Signature of shareholder Date
__________________________________________________
Signature of co-shareholder (if any) Date
For more information and prospectus(es) call 1-877-375-1205.
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<PAGE>
ACCOUNT OPTIONS
5 DIVIDEND AND CAPITAL All dividend and capital gain distributions will be
GAIN INSTRUCTIONS paid in cash unless otherwise indicated here:
DIVIDENDS:
[ ] Reinvest Into The Fund. (May not select if using
Automatic Withdrawal Plan.)
CAPITAL GAIN DISTRIBUTIONS:
[ ] Reinvest into the Fund.
6 STATEMENT OF
INTENTION I understand that through accumulated investments I
can reduce my sales charges of the Class A Shares. I
intend to invest over a 13-month period beginning
(date) ___________________ in shares of the Fund for
an aggregate amount of at least:
[ ] $100,000 [ ] $250,000 [ ] $500,000
[ ] $750,000 [ ] $1,000,000
7 RIGHTS OF [ ] I own Class A shares in more than one account, which
ACCUMULATION may entitle me to a reduced sales charge. Please
link my account numbers to qualify (Attach an
additional sheet if necessary):
___________ ___________ ___________
8 TELEPHONE AUTOMATICALLY APPLIES UNLESS BOX IS CHECKED. I elect
PRIVILEGE the telephone privileges as described in the
prospectus. (Calls may be recorded or monitored for
verification and quality assurance purposes.)
[ ] No, I do not want telephone privileges.
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<PAGE>
9. ELECTRONIC WIRE [ ] I authorize the Fund to wire redemption proceeds
PRIVILEGE when requested by either Automated Clearing House
Please attach a (ACH) or by Wire (a fee is charged) as specified
Check or by my redemption instructions.
Encoded Deposit _________________________________________________
Slip Name and Address of Depository Institution
_________________________________________________
Account Number with Depository Institution
Type of account: [ ] Checking [ ] Savings
AUTOMATIC WITHDRAWAL [ ] I want to withdraw from the Fund
PLAN account number (if known) ___________________
This plan requires a
$10,000 minimum [ ] $__________ (exact dollars-$25 minimum) OR
balance and the [ ] ___________ % (per year-calculated each withdrawal)
reinvestment of OR
dividends. [ ] __________ (number of withdrawals until the account
is closed)
I want to receive checks: [ ] Monthly [ ] Quarterly
[ ] Annually
11. PAYMENT TO OTHERS Make checks payable and send to:
Complete if dividend
or withdrawal checks Name ________________________________________________
are to be payable to
someone other than Address ______________________________________________
the registered
shareholder(s). City ____________________State______________Zip ________
12 AUTOMATIC INVESTMENT
PLAN
Important: Attach an
unsigned voided check.
The account balance Please transfer $____________ ($25 minimum) from my bank
must meet the minimum account and invest into the Fund
investment account number (if known) ______________________________
requirements as on the ___________ day of each month.
detailed in the
prospectus within 12 Name of your bank ______________________________________
months of initial ABA number _____________________________________________
investment. Print your name(s) _____________________________________
Bank Account Number_____________________________________
Street address of your bank ____________________________
City _________________ State ______________ Zip ________
44
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1999
MILLENIUM MUNICIPAL INCOME FUND, INC.
P.O. BOX 844
CONSHOHOCKEN, PA 19428-0844
TABLE OF CONTENTS
TOPIC PAGE
General Information and History.........................................
Fundamental Investment Restrictions.....................................
Municipal Obligations...................................................
Temporary Investments...................................................
Portfolio Transactions..................................................
Directors and Officers..................................................
Directors' Compensation Schedule........................................
Investment Advisory Services............................................
Custodian...............................................................
Auditors................................................................
Determining the Price of Shares.........................................
Reduction of Class A Sales Charge.......................................
Distribution of Fund Shares.............................................
Performance Data........................................................
Non-Standard Distribution Rates.........................................
<PAGE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE CLASS A AND CLASS C PROSPECTUS DATED April 30, 1999.
THE PROSPECTUS MAY BE OBTAINED FROM THE FUND.
GENERAL INFORMATION AND HISTORY
The Fund has been recently organized for the purposes set forth in the
Prospectus. It has had no prior history of operations.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions set forth below and the Fund's investment
objective set forth in the Prospectus may not be changed without the approval of
the holders of more than 50% of the eligible votes. All percentage limitations
set forth in these restrictions apply as of the time of an investment without
regard to later increases or decreases in the value of securities or total or
net assets.
1. The Fund may not invest in securities other than municipal obligations
and temporary investments, and may not make loans to others except through such
investments.
2. The Fund may not purchase or sell real estate (but this will not
prevent the Fund from investing in municipal obligations secured by real estate
or interests therein) or commodities or commodity contracts.
3. The Fund may not purchase more than 50% of the outstanding debt
obligations of any one issuer. For this purpose, all debt obligations of an
issuer are treated as a single class of securities. This restriction does not
apply to debt obligations issued, guaranteed or insured by the U.S. Government,
its agencies or instrumentalities ("U.S. Government Securities").
4. The Fund may not make an investment that would cause more than 5% of
the value of its total assets to be invested in the securities (other than U.S.
Government Securities) of any one issuer. For this purpose, each state or local
governmental entity shall be deemed a separate "issuer," except that where the
entity issuing a municipal obligation differs from the entity whose revenues are
the primary source of the payment of the obligation, the entity whose revenues
are the primary source of payment shall be deemed the sole issuer with regard to
that obligation.
5. The Fund may not make an investment that would cause 25% or more of the
value of its total assets to be invested in municipal obligations the issuers of
which are located in the same state. For this purpose, the location of an issuer
shall be deemed to be the location of the governmental entity issuing the
obligation, regardless of the location of the entity whose revenues are the
primary source of payment or the location of the project or facility which may
be the subject of the obligation.
6. The Fund may not write or purchase put or call options.
-2-
<PAGE>
7. The Fund may not make an investment that would cause 25% or more of the
value of its total assets to be invested in revenue bonds or notes the payment
for which comes from revenues from any one type of activity. For this purpose,
the term "type of activity" shall include, for example, the following: (a)
sewage treatment and disposal; (b) gas provision; (c) electric power provision;
(d) water provision; (e) mass transportation systems; (f) housing; (g)
hospitals; (h) street development and repair; (i) toll roads; (j) airport
facilities; and (k) educational facilities. This restriction does not apply to
general obligation bonds or notes or to pollution control revenue bonds.
8. The Fund may not purchase securities of other registered investment
companies (as defined in the Investment Company Act of 1940), except (i) shares
of open-end investment companies investing primarily in municipal obligations
with remaining maturities of 13 months or less, provided that such purchase does
not cause the Fund to (a) have more than 5% of its total assets invested in any
one such company, (b) have more than 10% of its total assets invested in the
aggregate of such companies or (c) own more than 3% of the total outstanding
voting stock of any such company; or (ii) as part of a merger, consolidation,
reorganization or acquisition of assets.
9. The Fund may not sell securities short or purchase securities on
margin, except for such short-term credits as are necessary for the clearance of
transactions.
10. The Fund may not, except for temporary defensive purposes, make an
investment in other than municipal obligations if such investment would cause
more than 20% of the value of the Fund's total assets to be invested in
securities other than municipal obligations.
11. The Fund may not issue senior securities, or borrow money except from
banks as a temporary measure for extraordinary or emergency purposes in amounts
not exceeding 10% of the value of the Fund's total assets (excluding the amount
borrowed) at the time of such borrowing. The Fund may not pledge or hypothecate
any of its assets except in connection with permitted borrowing in amounts not
exceeding 15% of the value of its total assets (excluding the amount borrowed)
at the time of such borrowing.
12. The Fund may not buy or continue to hold securities if the directors
and officers of the Fund or the Adviser own too many of the same securities.
This would happen if any of these individuals own 1/2 of 1% or more of the
securities and the people who own that much or more own 5% of such securities.
13. The Fund does not engage in the underwriting of securities; however,
if the Fund sells "restricted" securities it may technically be considered an
"underwriter."
NON-FUNDAMENTAL POLICIES. In addition to the foregoing restrictions,
the Fund may from time to time voluntarily undertake certain non-fundamental
policies which may be changed without shareholder approval.
MUNICIPAL OBLIGATIONS
-3-
<PAGE>
Occasionally, an issuing state or local governmental entity may
guarantee the payment of a revenue bond obligation, backing payment with its
taxing power. Normally, revenue bonds are paid solely from a particular revenue
source. The revenue source may be earnings from a public project such as tolls
from roads or bridges, airport revenues, earnings of publicly owned utilities or
special excises such as special improvement levies. The revenue source may also
be a private company which is utilizing a facility constructed through monies
obtained through a governmental agency or fund. There are two principal types of
revenue bonds for private facilities, industrial development bonds and pollution
control bonds. Occasionally, such bonds are also issued by governmental entities
to obtain funds for a privately operated general community facility such as a
hospital, convention hall or sports stadium.
Industrial development bonds are issued by a governmental entity to
obtain funds to finance a facility, typically an industrial plant or factory,
which is leased to or operated by a private (non-governmental) company. State
and local governments have the power in most states to permit the issuance of
industrial development bonds to provide financing aid to such companies in order
to encourage them to locate facilities within their communities. The Fund may at
times invest more than 25% of its assets in industrial development bonds.
Pollution control bonds are issued to provide funding for air or water
pollution control systems for privately operated industrial or commercial
facilities.
As described under "Investment Objectives and Policies" in the
Prospectus, the Fund may invest in municipal bonds and/or certificates of
participation that constitute investments in lease obligations or installment
purchase contract obligations (hereafter collectively called "lease
obligations") of municipal authorities or entities. As further described in the
Prospectus, certain of the lease obligations contain "non-appropriation"
clauses. The Fund will seek to minimize the special risks associated with such
securities by not investing more than 10% of its assets in lease obligations
that contain such clauses.
Municipal notes include tax, revenue and bond anticipation obligations
or general or revenue obligations of shorter maturities than municipal bonds,
generally five years or less, which are issued to obtain funds for various
public purposes.
There are, in addition, a variety of hybrid and special types of
municipal obligations as well as numerous differences in security, quality and
risk both within and among the classifications described above. Obligations of a
special governmental authority may, for instance, constitute a pledge of the
full credit and taxing power of the authority, and yet have somewhat less
security than a general state or city obligation in view of the limitations on
the authority's taxing power compared to the broader taxing power of a state or
a city.
Due to the increasing needs of state and local governments and their
widening view of public purpose, a variety of types of federal tax-exempt
financing obligations have been developed over the years and new types of
obligations may be expected in the future.
-4-
<PAGE>
The ratings of Moody's Investors Services Inc. ("Moody's") and Standard
and Poor's Corporation ("S&P") represent their opinions as to the quality of the
municipal obligations which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may have
different yields while bonds of the same maturity and coupon with different
ratings may have the same yield.
From time to time, proposals have been introduced in Congress for the
purposes of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. Similar proposals may be introduced in the
future. If such a proposal were to be enacted, the availability of municipal
obligations for investment by the Fund and the value of the Fund's portfolio
would be affected. In such event, the Fund would re-evaluate its investment
objective and policies in view of such developments.
TEMPORARY INVESTMENTS
At various times the Fund may hold cash or invest in securities other
than municipal obligations. Income from such securities may be taxable as
ordinary income. Such temporary investments may be made in any of the following
circumstances, provided that such an investment does not cause over 20% of the
value of the Fund's total assets to be so invested: (1) when assets are
allocated for settlement of purchases; (2) when net cash inflow from sales of
the Fund's shares or sales of portfolio securities is of a size which does not
allow for prompt investment in attractively priced municipal obligations; or (3)
when highly liquid assets are needed to meet anticipated redemptions, dividends
or other cash needs.
In addition, during periods of adverse markets when it is deemed
advisable and practicable to take a temporary defensive position to protect
capital, the Fund may have more than 20% of its assets invested in temporary
investments and cash. While reserving this freedom to act for defensive
purposes, the Fund intends to limit its holdings of temporary taxable
investments and cash to meet the requirements for federal income tax exemption
on the dividends which the Fund pays from its municipal obligation or other
income exempt from federal income tax.
Although on occasion the Fund may purchase temporary investments, it is
the Fund's intention to be invested primarily in municipal obligations.
Temporary investments will be made only under the conditions specified herein.
Temporary investments will be made exclusively in: (1) shares of
investment companies primarily investing in short-term instruments the income of
which is exempt from federal income tax (subject to certain limitations as to
the Fund's investments in other investment companies set forth under
"Fundamental Investment Restrictions"); (2) U.S. Government Securities; (3)
commercial paper rated within the highest grade by either Moody's or S&P
(Prime-1 or A-1, respectively); (4) other short-term debt securities issued or
guaranteed by corporations having outstanding debt rated within the two highest
grades by Moody's (Aaa or Aa) or S&P (AAA or AA); (5) certificates of deposit of
domestic commercial banks subject to regulation by the U.S. Government, or any
of its agencies or instrumentalities, with assets of $1 billion or more based on
the most recent published reports; or (6) repurchase agreements with domestic
banks or securities dealers involving any of the securities
-5-
<PAGE>
which the Fund is permitted to hold. (Such agreements will involve the purchase
of securities subject to resale to the seller on a specified date within 7 days
of purchase at a specified price based on an agreed interest rate.) Rating
requirements apply as of the time of purchase.
PORTFOLIO TRANSACTIONS
Millenium Advisers, Inc. (the "Adviser") makes investment decisions and
arranges for the placement of portfolio transactions for the Fund, subject to
review by the Board of Directors and its Committee on Brokerage. In this regard,
the Adviser will seek to obtain the most favorable price and execution for the
transaction given the size and risk involved. In placing executions and paying
any brokerage commissions, the Adviser considers the dealer's financial
responsibility and reputation, range and quality of the services made available
to the Fund and the professional services rendered, including execution,
clearance procedures, wire service quotations and ability to provide
supplemental performance, statistical and other research information for
consideration, analysis and evaluation by the Adviser's staff. In accordance
with this policy, brokerage transactions, if any, are not executed solely on the
basis of the lowest commission rate available. Research services provided to the
Adviser by or through dealers who effect portfolio transactions for the Fund may
be used in servicing other accounts managed by the Adviser and, likewise,
services provided by dealers used for transactions of other accounts may be
utilized by the Adviser in performing services for the Fund. Subject to the
requirements of best execution, the placement of orders by securities firms for
shares of the Fund may be taken into account as a factor in the placement of
portfolio transactions.
The Adviser believes that research from dealers is desirable, although
not essential, in carrying out its functions, in that such outside research
supplements the efforts of the Adviser by corroborating data and enabling the
Adviser to consider the views, information and analyses of other research
staffs. Such views, information and analyses include such matters as
communicating with persons having special expertise on certain issuers,
industries, areas of the economy and/or securities prices, obtaining written
materials on these or other areas which might affect the economy and/or
securities prices, obtaining quotations on securities prices and obtaining
information on the activities of other institutional investors. The Adviser
researches, at its own expense, each security included in, or being considered
for inclusion in, the Fund's portfolio.
DIRECTORS AND OFFICERS
The names and addresses of the directors and officers of the Fund are
set forth below, together with their principal business affiliations and
occupations for the last five years. The asterisk following the names of
Lawrence T. McDermott and Susan P. Bowen indicates that they are each considered
to be an "interested person" of the Fund, as defined in the Investment Company
Act.
LAWRENCE T. MCDERMOTT* (6/7/48), c/o Rickel Securities, Inc., 45 Essex Street,
Millburn, New Jersey 07041. Director, President and Chief Executive Officer of
the Fund; formerly, a Managing Director and Senior Portfolio Manager (1981-1999)
of Salomon Smith Barney (a registered broker dealer).
-6-
<PAGE>
MARK BLAUSTEIN (5/5/33), c/o Rickel Securities, Inc., 45 Essex Street, Millburn,
New Jersey 07041. Director of the Fund. Retired; formerly, President (until
1993) of the Essex County Personnel and Guidance Association.
PAUL A. HARPER, JR. (12/22/41), c/o Rickel Securities, Inc., 45 Essex Street,
Millburn, New Jersey 07041. Director of the Fund. Principal, Deep South Capital,
L.L.C. (provider of investment advisory services to various commercial
institutional borrowers); Owner, Pinkert Insurance Agency, commercial insurance
brokerage.
SUSAN P. BOWEN* (12/31/62), c/o Rickel Securities, Inc., 45 Essex Street,
Millburn, New Jersey 07041. Treasurer, Chief Financial Officer and Secretary of
the Fund. Vice President and Senior Analyst, Rickel Securities, Inc. (a
registered broker-dealer); formerly, Vice President and Senior Analyst of Rickel
& Associates, Inc. (a registered broker-dealer).
The Company does not pay salaries to any of its officers. The Adviser
performs certain services on behalf of the Company and is reimbursed by the
Company for the costs of providing these services. See "Investment Advisory
Services."
COMPENSATION SCHEDULE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
- -----------------------------------------------------------------------------------------------------------
Pension Or Fund Total Compensation
Aggregate Retirement Benefits Estimated Annual From Registrant
Name of Person, Compensation From Accrued As Part Of Benefits Upon and Fund Complex
Position Registrant Fund Expenses Retirement Paid to Directors
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lawrence T. McDermott, -0- -0- -0- -0-
President and CEO
Susan P. Bowen, -0- -0- -0- -0-
Treasurer, CFO
And Secretary
Mark Blaustein, -0- -0- -0- -0-
Director
Paul A. Harper, Jr., -0- -0- -0- -0-
Director
</TABLE>
The Fund does not plan on paying its directors or officers compensation
out of the Fund; however, the Fund does reserve the right to begin paying such
compensation in the future.
INVESTMENT ADVISORY SERVICES
-7-
<PAGE>
Millenium Advisers, Inc. (the "Adviser") serves as investment
adviser for the Fund pursuant to an Advisory Agreement adopted in accordance
with the requirements of the Investment Company Act of 1940. Pursuant to the
Advisory Agreement, the Adviser, subject to the general supervision of the
Fund's Board of Directors, manages the day to day investment operations of the
Fund, provides management advice, and furnishes statistical, executive and
clerical personnel, bookkeeping, office space, and equipment necessary to carry
out its management functions and such corporate managerial duties as are
requested by the Board of Directors of the Fund. The Fund bears all expenses
other than those specifically assumed by the Adviser under the Agreement,
including preparation of its tax returns, financial reports to regulatory
authorities, dividend determinations and transaction and accounting matters
related to its custodian bank, transfer agency, custodial and shareholder
services, and qualification of its shares under federal and state laws.
The Adviser is a wholly-owned subsidiary of the Distributor, Rickel
Securities, Inc. The Chairman, Chief Executive Officer and majority stockholder
of the Distributor is John C. Sabo. The President and Chief Executive Officer of
the Adviser is Lawrence T. McDermott. The Distributor is a registered
broker-dealer specializing in municipal securities. It was formed in August,
1997 by certain former principals of Rickel & Associates, Inc., another
broker-dealer which specializes in municipal securities.
For the Adviser's services, the Fund pays the Adviser a monthly fee at
the annual rate as follows: 0.65% on average net assets up to $250 million,
0.60% on the next $250 million of average net assets and 0.55% on average net
assets over $500 million. The Adviser may waive the receipt of management fees
from the Fund with respect to any fiscal quarter if the Adviser determines, in
its sole discretion, that such waiver would be desirable for competitive
purposes.
The Advisory Agreement also makes provisions for portfolio transactions
and brokerage policies of the Fund which are discussed above under "Portfolio
Transactions."
In accordance with the provisions of the Investment Company Act, the
Advisory Agreement will terminate automatically upon assignment and is subject
to cancellation upon 60 days' written notice by the Fund's Board of Directors,
the vote of the holders of a majority of the Fund's outstanding shares or the
Adviser. The continuance of each Agreement must be approved at least annually by
the Fund's Board of Directors or by the vote of holders of a majority of the
outstanding shares of the Fund. In addition, any new agreement or the
continuation of the existing agreement must be approved by a majority of
directors who are not parties to the agreement or interested persons of any such
party.
The Advisory Agreement provides that the Adviser, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties, will not be liable for any act or omission in the cause of, or connected
with rendering service under the Agreement or for any losses that may be
sustained in the purchase, holding or sale of any security.
The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of their investment personnel and other employees and
affiliates with access to information regarding securities transactions of the
Fund. Such Code of Ethics requires investment
-8-
<PAGE>
personnel to disclose personal securities holdings upon commencement of
employment and all subsequent trading activity to the firm's Compliance Officer.
Investment personnel are prohibited from engaging in any securities
transactions, including the purchase of securities in a private offering,
without the prior consent of the Compliance Officer. Additionally, such
personnel are prohibited from purchasing securities in an initial public
offering and are prohibited from trading in any securities (i) for which the
Fund has a pending buy or sell order, (ii) which the Fund is considering buying
or selling, or (iii) which the Fund purchased or sold within seven calendar
days.
YEAR 2000 COMPLIANCE
The Fund's operations depend upon the seamless functioning of computer
systems in the financial services industry, including those of the Adviser, the
Custodian and the Transfer Agent. The failure of computer systems to properly
process date-related information after December 31, 1999 because of the method
by which dates are encoded could adversely affect the handling of securities
trades, pricing and account servicing for the Fund. The Adviser has made Year
2000 compliance a priority and is taking steps that it believes are reasonably
designed to address Year 2000 issues with respect to its computer systems. The
Adviser also has been informed that comparable steps are being taken by the
Fund's other major service providers. The Adviser does not currently anticipate
that the Year 2000 issues will have a material impact on its ability to fulfill
its duties as investment adviser to the Fund. In addition, Year 2000 issues may
adversely affect the issuers in which the Fund invests. For example, issuers may
incur substantial costs to address the problem. They may also suffer losses
caused by corporate and governmental data processing errors.
CUSTODIAN
The Custodian of the Fund's assets is UMB Bank, N.A., 928 Grand Blvd.,
Kansas City, Missouri 64106. The Custodian maintains all of the instruments
representing the investments of the Fund and all cash. The Custodian delivers
securities against payment upon sale and pays for securities against delivery
upon purchase. The Custodian also remits Fund assets in payment of Fund
expenses, pursuant to instructions of officers or resolutions of the Board of
Directors.
AUDITORS
The Fund's auditors are Tait, Weller and Baker, CPAs. The audit will
include examination of annual financial statements furnished to shareholders and
filed with the Securities and Exchange Commission, consultation on financial
accounting and reporting matters, and meeting with the Audit Committee of the
Board of Directors. In addition, the auditors will review federal and state
income tax returns and related forms.
DETERMINING THE PRICE OF SHARES
The Fund will not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such days
currently include New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
-9-
<PAGE>
REDUCTION OF CLASS A SALES CHARGES
There are a number of ways to reduce the sales charge imposed on the
purchase of the Fund's Class A shares, as described below. These reductions are
based upon the fact that there is less sales effort and expense involved in
respect to purchases by affiliated persons and purchases made in large
quantities.
FAMILY OR GROUP PURCHASES. Certain purchases made by or for more than
one person may be considered to constitute a single purchase, including (i)
purchases for family members, including spouses and children under 21 and (ii)
purchases made by an organized group of persons, whether incorporated or not, if
the group has a purpose other than buying shares of mutual funds. For further
information on group purchase reductions, contact the Distributor or your
dealer.
STATEMENTS OF INTENTION. Another way to reduce the sales charge is by
signing a Statement of Intention. A Statement is included in the Application
Form included in the Prospectus. Please read it carefully before completing it.
If you enter into a Statement of Intention you (or any "single
purchaser") may state that you intend to invest at least $100,000 in the Fund's
Class A shares over a 13-month period. The amount you say you intend to invest
may include Class A shares which you already own, valued at the offering price,
at the end of the period covered by the Statement. A Statement may be backdated
up to 90 days to include purchases made during that period, but the total period
covered by the Statement may not exceed 13 months.
Shares having a value of 5% of the amount you state you intend to
invest will be held "in escrow" to make sure that any additional sales charges
are paid.
No additional sales charge will be payable if you invest the amount you
have indicated. Each purchase under a Statement will be made as if you were
buying at one time the total amount indicated. For example, if you indicate that
you intend to invest $100,000, you will pay a sales charge of 3-1/2% on each
purchase.
If you buy additional amounts during the period to qualify for an even
lower sales charge, you will be charged such lower charge. For example, if you
indicate that you intend to invest $100,000 and actually invest $250,000, you
will, by retroactive adjustment, pay a sales charge of 2-1/2%.
If during the 13-month period you invest less than the amount you have
indicated, you will pay an additional sales charge. For example, if you state
that you intend to invest $250,000 and actually invest only $100,000, you will,
by retroactive adjustment, pay a sales charge of 3- 1/2%. The sales charge you
actually pay will be the same as if you had purchased the shares in a single
purchase.
A Statement does not bind you to buy, nor does it bind the Distributor
to sell, the shares covered by the Statement.
-10-
<PAGE>
RIGHTS OF ACCUMULATION. Another way to reduce the sales charge is under
a right of accumulation. This means that the larger purchase entitled to a lower
sales charge need not be in dollars invested at one time. The larger purchases
that you (or any "single purchaser") make at any one time can be determined by
adding to the amount of a current purchase the value of Fund shares (at offering
price) already owned by you.
For example, if you owned $100,000 worth (at offering price) of the
Fund's Class A shares and invest $5,000 in additional shares, the sales charge
on that $5,000 investment would be 3-1/2%, not 4-3/4%.
If you claim this right of accumulation, you or your dealer must so
notify the Distributor (or Declaration Service Company if the investment is
mailed to Declaration Service Company) when the purchase is made. Enough
information must be given to verify that you are entitled to such right.
ISSUANCE OF SHARES AT NET ASSET VALUE. There are many situations where
the sales charge will not apply to the purchase of Class A shares, as discussed
in the Prospectus. In addition, the Fund occasionally may be provided with an
opportunity to purchase substantially all the assets of a public or private
investment company or to merge another such company into the Fund. This offers
the Fund the opportunity to obtain significant assets. No dealer concession is
involved. It is industry practice to effect such transactions at net asset value
as it would adversely affect the Fund's ability to do such transactions if the
Fund had to impose a sales charge.
DISTRIBUTION OF FUND SHARES
Rickel Securities, Inc. ("the Distributor") acts as principal
underwriter of the Fund's shares on a continuing basis pursuant to a
Distributing Agreement. Pursuant to such Distributing Agreement, the Distributor
pays for all expenses in connection with the preparation, printing and
distribution of advertising and sales literature for use in offering the Fund's
shares to the public, including reports to shareholders to the extent they are
used as sales literature. The Distributor also pays for prospectuses in excess
of those which the Fund must file with the Securities and Exchange Commission
and other regulatory authorities or those forwarded to existing shareholders.
The continuation and assignment provisions of the Distributing Agreement are the
same as those of the Advisory Agreement.
In addition, the Fund has adopted distribution plans with respect to
each class of its shares pursuant to Rule 12b-1 under the Investment Company Act
(the "Distribution Plans"). Payments under the Class A Distribution Plan are
limited to an annual rate of 0.20% of the average daily net asset value of the
Class A shares. Payments under the Class C Distribution Plan are limited to an
annual rate of 1% of the average daily net asset value of such shares.
-11-
<PAGE>
To the extent that any investment advisory fees paid by the Company may
be deemed to be indirectly financing any activity which is primarily intended to
result in the sale of shares of the Company within the meaning of Rule 12b-1,
the payments of such fees are authorized under the Plans.
The Distribution Plans continue annually so long as they are approved
in the manner provided by Rule 12b-1 or unless earlier terminated by vote of the
majority of the Fund's Independent Directors or a majority of the outstanding
shares. The Adviser is required to furnish quarterly written reports to the
Board of Directors detailing the amounts expended under the Distribution Plans.
The Distribution Plans may be amended provided that all such amendments comply
with the applicable requirements then in effect under Rule 12b-1. Presently,
Rule 12b-1 requires, among other procedures, that it be continued only if a
majority of the Independent Directors approve continuation at least annually and
that amendments materially increasing the amount to be spent for distribution be
approved by the Independent Directors and the shareholders. As long as the
Distribution Plans are in effect, the Fund must commit the selection and
nomination of candidates for new Independent Directors to the sole discretion of
the existing Independent Directors.
PERFORMANCE DATA
YIELD. Yield is computed in accordance with a standardized method
prescribed by the rules of the Securities and Exchange Commission and is
calculated separately for each class. Yield is a measure of the net investment
income per share (as defined) earned over a specified 30-day period expressed as
a percentage of the maximum offering price of the Fund's shares at the end of
the period. The Fund's yield figures will be determined by dividing the net
investment income per share earned during the a specified 30-day period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2 [(a - b + 1) 6 -1]
----------------------------
cd
a = dividends and interest earned during the period.
b = expenses accrued for the period.
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last
day of the period.
TAX EQUIVALENT YIELD. Tax equivalent yield is the yield that a taxable
investment must generate in order to equal the Fund's yield for an investor in a
stated federal income tax bracket. The Fund's tax equivalent yield will be
computed separately for each class in accordance with the standardized method
prescribed by the Securities and Exchange Commission, by dividing that portion
of such Fund's yield (computed as described above) that is tax exempt by one
minus the stated federal
-12-
<PAGE>
income tax rate, and adding the resulting number to that portion, if any, of the
Fund's yield that is not tax exempt.
TOTAL RETURN. Total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Fund's portfolio. The Fund's
total return figures will be computed separately for each class in accordance
with the standardized method prescribed by the Securities and Exchange
Commission by determining the average annual compounded rates of return over the
periods indicated in the advertisement that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectus, and (ii) deducts (a) the maximum front-end or applicable contingent
deferred sales charge from the hypothetical initial $1,000 investment for the
one year calculation, and (b) all recurring fees, such as advisory fees, charged
as expenses to all shareholder accounts.
NON-STANDARD DISTRIBUTION RATES
DISTRIBUTION RATES. Distribution rates are computed by dividing the
income dividends for a stated period by the maximum offering price on the last
day of such period.
ANNUALIZED CURRENT DISTRIBUTION RATES. Annualized current distribution
rates are computed by multiplying income dividends for a specified month by
twelve and dividing the resulting figure by the maximum offering price on the
last day of the specified period.
TAX EQUIVALENT DISTRIBUTION RATE. Tax equivalent distribution rate is
computed by dividing that portion of the annualized current distribution rate
(computed as described above) which is tax-exempt by one minus the stated
federal income tax rate (at present, the maximum federal income tax rate of
39.6%), and adding the resulting figure to that portion, if any, of the
annualized current distribution rate which is not tax-exempt.
-13-
<PAGE>
FORM N-1A
MILLENIUM MUNICIPAL INCOME FUND, INC.
PART C
OTHER INFORMATION
-----------------
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements: Certified Statement of Assets
and Liabilities
(b) Exhibits:
(1) Amended Articles of Incorporation.*
(2) Bylaws.*
(3) Not applicable.
(4) Not applicable.
(5) Advisory Agreement.*
(6) Distributor's Agreement.*
(7) Not applicable.
(8) Custody Agreement and Fee Schedule*
(9) Investment Company Services Agreement.*
(10) Opinion and Consent of Counsel (McCarter & English).*
(11) Consent of Tait, Weller and Baker, CPAs.
(12) Not applicable.
(13) Subscription Agreement between Rickel Securities, Inc.
as initial shareholder and the Fund.*
(14) Not applicable.
-14-
<PAGE>
(15)(a) Distribution Plan for Class A shares.*
(15)(b) INTENTIONALLY DELETED
(15)(c) Distribution Plan for Class C Shares.*
(16) Not Applicable.
(17) Powers of Attorney.*
(18) Plan pursuant to Rule 18f-3.*
*Previously filed.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
John C. Sabo is the majority stockholder of Rickel Securities, Inc.,
a New Jersey corporation, owning 75% of the issued and outstanding shares of
capital stock of that corporation.
Rickel Securities, Inc. owns 100% of the issued and outstanding
shares of capital stock of the following corporations:
Millenium Advisers, Inc., a New Jersey corporation.
American Corporate Receipts, Inc., a New Jersey corporation.
Millenium Municipal Income Fund, Inc., a Maryland corporation.*
* Rickel Securities, Inc. has provided the $100,000 initial capital of the Fund
required by the Investment Company Act of 1940. See Exhibit 13.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
--------------------------------
Not applicable.
Item 27. INDEMNIFICATION.
----------------
The indemnification provisions of the Maryland General Corporation
Law (the "Law") permit, among other things, corporations to indemnify directors
and officers UNLESS it is proved that the individual (1) acted in bad faith or
with active and deliberate dishonesty, (2) actually received an improper
personal benefit in money, property or services, or (3) in the case of a
criminal proceeding, had reasonable cause to believe that his act or omission
was unlawful. The Law also permits
-15-
<PAGE>
corporations to indemnify directors and officers for amounts paid in settlement
of stockholders' derivative suits.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers & controlling person of the
registrant, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
The Investment Adviser of the Registrant, Millenium Advisers, Inc.,
also may be engaged as an investment adviser for accounts other than mutual
funds, although this is not presently business of a substantial nature.
Lawrence T. McDermott is the President and Chief Executive Officer of
Millenium Advisers, Inc. He also serves as the President and Chief Executive
Officer of the Fund.
John C. Sabo is the Chairman and Chief Executive Officer of the
Distributor, Rickel Securities, Inc.
Susan P. Bowen is the Chief Financial Officer, Vice President and
Senior Analyst of Millenium Advisers, Inc. She also serves as the Vice President
and Senior Analyst of the Distributor, Rickel Securities, Inc.
Item 29. PRINCIPAL UNDERWRITERS
----------------------
(a) Rickel Securities, Inc., located at 45 Essex Street, Millburn,
New Jersey 07041, the principal underwriter for the Registrant, does not
currently act as principal underwriter for any other investment company.
(b) Management of the Principal Underwriter.
-16-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(1) (2) (3)
Name and Principal
BUSINESS Positions and Offices with Positions and Offices with
_____ADDRESS*_____ _____UNDERWRITER_____ ______REGISTRANT_____
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John C. Sabo Chairman and Chief None
Executive Officer
- -----------------------------------------------------------------------------------------------------------------------------
Susan P. Bowen Vice President and Senior Chief Financial Officer,
Analyst Treasurer and Secretary
- -----------------------------------------------------------------------------------------------------------------------------
Arnold I. Cohen President None
- -----------------------------------------------------------------------------------------------------------------------------
Steven Nadler Executive Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
David Netkin Executive Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
Michael Belsky Senior Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
Paul Petrello Senior Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
Coleman Carven Senior Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
James Friar Senior Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
Maxwell Smith Senior Vice President None
- -----------------------------------------------------------------------------------------------------------------------------
Anthony Branca Compliance Officer None
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Unless otherwise noted, the principal business address of each person is c/o
Rickel Securities, Inc., 45 Essex Street, Millburn, New Jersey 07041.
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
Declaration Service Company, P.O. Box 844, Conshohocken,
Pennsylvania, 19428-0844.
Item 31. MANAGEMENT SERVICES
-------------------
Not applicable
Item 32. UNDERTAKINGS
------------
The Registrant will file an amendment to the Registration Statement
with certified financial statements showing the initial capital received before
accepting subscriptions from any persons in excess of 25 pursuant to Registrant
raising its initial capital under section 14(a)(3) of the Investment Company Act
of 1940.
-17-
<PAGE>
MILLENIUM MUNICIPAL INCOME FUND, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-effective Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Millburn
and State of New Jersey on the 29th day of April, 1999.
MILLENIUM MUNICIPAL INCOME FUND, INC.
By: /s/ LAWRENCE T. MCDERMOTT
------------------------------
Lawrence T. McDermott
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chief Executive Officer, April 29, 1999
/s/ LAWRENCE T. MCDERMOTT President & Interested Director
- -----------------------------
Lawrence T. McDermott
Principal Financial April 29, 1999
/s/ SUSAN P. BOWEN and Accounting Officer
- -----------------------------
Susan P. Bowen
* Independent Director April 29, 1999
- -----------------------------
Mark Blaustein
* Independent Director April 29, 1999
- -----------------------------
Paul A. Harper, Jr.
*By /s/ Susan P. Bowen
- -----------------------------
Susan P. Bowen
(attorney-in-fact)
-18-
NWK3: 217403.03]
EXHIBIT 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to the
Registration Statement on Form N-1A of the Millenium Municipal Income Fund, Inc.
and to the use of our report dated April 27, 1999 on the statement of assets and
liabilities of the Millenium Municipal Income Fund, Inc. Such statement of
assets and liabilities appears in the Fund's Statement of Additional
Information.
/s/ Tait, Weller & Baker
-------------------------
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
APRIL 27, 1999
<PAGE>
ITEM 24(a)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Millenium Municipal Income Fund, Inc.
Millburn, New Jersey
We have audited the accompanying statement of assets and liabilities of the
Millenium Municipal Income Fund, Inc.. 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 statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. 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 of the statement of
assets and liabilities provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Millenium Municipal Income Fund, Inc. as of April 27, 1999, in conformity with
generally accepted accounting principles.
/s/ Tait, Weller & Baker
---------------------------
Tait, Weller & Baker
Philadelphia, Pennsylvania
April 27, 1999
<PAGE>
MILLENIUM MUNICIPAL INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
April 27, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 100,000
---------
LIABILITIES --
--------
NET ASSETS $100,000
========
Class A Shares:
Net assets ( 350,000,000 shares of .01 par value shares authorized, 5,000 shares
outstanding) $ 50,000
========
Net asset value, offering and redemption price per share $ 10.00
========
Class C Shares:
Net assets ( 100,000,000 share of .01 par value shares authorized, 5,000 shares
outstanding) $ 50,000
========
Net asset value, offering and redemption price per share $ 10.00
========
At April 27, 1999 the components of net assets were as follows:
Paid-in capital $100,000
========
</TABLE>
- --------------------------------------------------------------------------------
SEES NOTES TO STATEMENT OF ASSETS AND LIABILITIES
<PAGE>
MILLENIUM MUNICIPAL INCOME FUND, INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
April 27, 1999
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Millenium Municipal Income Fund, Inc. ( the "FUND"), is registered
under the Investment Company Act of 1940, as amended (the "1940 ACT"), as
an open-end management investment company and is authorized to issue
shares of capital stock. The Fund currently offers two classes of shares
of capital stock.
The Fund was incorporated in Maryland on January 8, 1998. The Fund had no
operations from that date to April 27, 1999 other than those relating to
organizational matters and the registration of its shares under applicable
securities laws. The investment adviser purchased the initial 5,000 shares
of Class A and the initial 5,000 shares of Class C of the Fund at $10 a
share on April 27, 1999.
(2) START-UP COST
The investment adviser has assumed all start-up cost associated with the
organization of the Fund.
