IMPORTANT NOTICE TO SHAREHOLDERS
Dear Shareholder:
As you are aware, each Fund is managed and advised by Reich & Tang
Asset Management L.P. (the "Manager"). The parent company of the Manager, New
England Investment Companies, Inc., is majority-owned by New England Mutual
Life Insurance Company, which proposes to merge with Metropolitan Life
Insurance Company sometime after the end of the 1995 year.
As a shareholder, you are invited to vote on a proposal in
connection with this merger. Specifically, you are being asked to approve or
disapprove a new management/investment advisory agreement with the Manager
since the above transaction, in accordance with applicable regulations, would
automatically terminate the existing management/investment advisory agreement
between the Manager and each Fund.
What does this mean to you as a shareholder?
It is important to note that the management fee and the management
and investment advisory services to be performed under the new agreement are
the same as those under the current agreement. The other terms of the
agreement are the same in all material respects to the existing agreement.
There are not changes contemplated in the objectives or policies of the Fund,
the management or operation so the Manager relating to the Funds, the
personnel managing the Funds or the shareholder or other business activities
of the Funds.
The Board of Directors has determined that the new agreement
would be in the best interest of the Funds and their shareholders.
Accordingly, the Board of Directors of the Funds approved the new agreement
and voted to recommend it to shareholders for approval.
We encourage you to vote promptly no matter how many shares you
own. Timely votes save money and avoid follow-up mailings. Your cooperation as
we go through the process of the transition is greatly appreciated. We are
confident that the combining of these firms will result in a structure that
will better service your needs.
Thanking you, in advance, for your patience and support.
Very truly yours,
325282.1
<PAGE>
- -------------------------------------------------------------------------------
Preliminary Proxy Material For The Information of the Securities and
Exchange Commission Only
SHORT TERM INCOME FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 1, 1996
- -------------------------------------------------------------------------------
600 Fifth Avenue
New York, New York 10020
(212) 830-5220
A Special Meeting of Shareholders of Short Term Income Fund, Inc. (the
"Corporation") will be held at 9:00 a.m. on March 1, 1996 at the offices of
the Corporation at 600 Fifth Avenue, New York, New York for the following
purposes, all of which are more fully described in the accompanying Proxy
Statement dated December 18, 1995.
1. To approve or disapprove a new Investment Management Contract to be
effective upon the merger of New England Mutual Life Insurance Company
into Metropolitan Life Insurance Company, such Contract to be identical
to the Investment Management Contract in effect for the Corporation
immediately prior to such merger (see page 4 of the attached Proxy
Statement);
2. To elect four directors of the Corporation, each to hold office until
his successor is duly elected and qualified;
3. To ratify or reject the selection of Messrs. McGladrey & Pullen LLP as
independent accountants of the Corporation for its fiscal year ending
August 31, 1996;
4. To approve or disapprove a change in the Corporation's fundamental
investment restrictions to permit the Money Market Portfolio (as
hereinafter defined) to purchase certain private placements; and
5. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on December 11, 1995 are
entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
BERNADETTE N. FINN, Secretary
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY BALLOT, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR
YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER
TO AVOID THE ADDITIONAL EXPENSE TO THE CORPORATION OF FURTHER SOLICITATION, WE
ASK FOR YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
- -------------------------------------------------------------------------------
317728.5
<PAGE>
PROXY STATEMENT
- -------------------------------------------------------------------------------
INTRODUCTION ..............................................................1
PROPOSAL 1 APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT
MANAGEMENT CONTRACT TO BE EFFECTIVE AT THE TIME
OF THE MERGER .................................................4
PROPOSAL 2 ELECTION OF DIRECTORS .........................................6
PROPOSAL 3 RATIFICATION OR REJECTION OF SELECTION OF
INDEPENDENT ACCOUNTANTS ......................................12
PROPOSAL 4 APPROVAL OR DISAPPROVAL OF A CHANGE TO THE
CORPORATION'S FUNDAMENTAL INVESTMENT RESTRICTIONS
TO PERMIT THE PURCHASE OF CERTAIN PRIVATE
PLACEMENTS ...................................................12
INFORMATION REGARDING THE MANAGER ........................................13
ALLOCATION OF PORTFOLIO BROKERAGE ........................................18
OTHER MATTERS ............................................................18
EXHIBIT A (INVESTMENT MANAGEMENT CONTRACT BETWEEN THE
CORPORATION AND REICH & TANG ASSET MANAGEMENT, L.P.) .................20
EXHIBIT B (TABLE OF FEES FOR ALL FUNDS ADVISED BY THE MANAGER) ...........21
317728.5
<PAGE>
SHORT TERM INCOME FUND, INC.
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020
PROXY STATEMENT
INTRODUCTION
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Short Term Income Fund, Inc. (the
"Corporation") for use at a Special Meeting of Shareholders to be held at the
offices of the Corporation at 600 Fifth Avenue, New York, New York on March 1,
1996 at 9 A.M. Such solicitation will be made primarily by the mailing of this
statement and the materials accompanying it. Supplemental solicitations may be
made by mail, telephone, or personal interviews by officers and
representatives of the Corporation. The expenses in connection with preparing
and mailing this statement and the material accompanying it, and of such
supplemental solicitations, will be borne by The New England and Metropolitan
Life (each as hereinafter defined). This Proxy Statement and the accompanying
Proxy are first being sent to shareholders on or about December 20, 1995. The
Corporation's most recent annual and semi-annual reports are available upon
request.
The outstanding voting stock of the Corporation as of the close of
business on December 8, 1995 consisted of __________ shares of Common Stock of
the Money Market Portfolio and ____ shares of Common Stock of the U.S.
Government Portfolio (the Money Market Portfolio and the U.S. Government
Portfolio are together referred to herein as the "Portfolios"), each whole
share being entitled to one vote and each fraction of a share being entitled
to a proportionate fraction of a vote. Only shareholders of record at the
close of business on December 8, 1995 are entitled to vote at the meeting. Any
shareholder may revoke his proxy at any time prior to its exercise by a
written notification of such revocation, which must be signed, include the
shareholder's name and account number, be addressed to the Secretary of the
Corporation at its principal executive office, 600 Fifth Avenue, New York, New
York 10020, and be received prior to the meeting to be effective, or by
signing another proxy of a later date, or by personally casting his vote at
the meeting of shareholders.
Among the purposes of this Special Meeting of the Shareholders of the
Corporation is the approval of the Merger (the "Merger") of New England Mutual
Life Insurance Company ("The New England") into Metropolitan Life Insurance
Company ("Metropolitan Life"). The Merger is being treated, for purposes of
the Investment Company Act of 1940, as amended (the "1940 Act"), as a change
of control of New England Investment Companies, L.P. ("NEIC"), the limited
partner and owner of the 99.5% limited partnership interest in Reich & Tang
Asset Management L.P. (the Corporation's "Manager"). Reich & Tang Asset
Management, Inc. (a wholly-owned subsidiary of NEIC) is the general partner
and owner of the remaining 0.5% interest of the Manager. Under the 1940 Act,
such a change of control constitutes an "assignment" (as defined in the 1940
Act) of the Investment Management Contract between the Manager and the
Corporation, as well as various other investment advisory agreements under
which NEIC and its subsidiary firms serve as advisers or sub- advisers to
certain other mutual funds, and results in the automatic termination of each
of those agreements including the Investment Management Contract between the
Corporation and the Manager, effective at the time of the Merger. The
Directors have approved, and recommend that the
1
317728.5
<PAGE>
shareholders of the Corporation approve, a new investment management contract.
This proposed new contract will be in substance identical to the contract in
effect immediately prior to the Merger, and will take effect at the time of
the Merger. As a result, the Manager will continue to perform investment
management services for the Corporation after the Merger, on the same terms as
are in effect immediately before the Merger.
In addition to the above, the other purposes for this Special Meeting of
Shareholders include: (i) the election of directors; (ii) the ratification of
the selection of independent accountants; and (iii) the approval of a change
in the Corporation's fundamental investment restrictions to permit the Money
Market Portfolio to purchase certain private placements.
One third of the outstanding shares of the Corporation, represented in
person or by proxy, shall be required to constitute a quorum at the meeting
although more than one third of the outstanding shares may be required to be
present to approve a particular issue.
Any signed proxy will be voted in favor of the proposals unless a choice
is indicated to vote against or to abstain from voting on that proposal. An
abstention on any proposal will have the same legal effect as a vote against
such proposal.
If a quorum is not present at the meeting, or if a quorum is present but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies. In determining whether to adjourn the
meeting, the following factors may be considered: the nature of the proposals
that are the subject of the meeting, the percentage of votes actually cast,
the percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect
to the reasons for the solicitation. Any adjournment will require the
affirmative vote of a majority of those shares represented at the meeting in
person or by proxy. A shareholder vote may be taken on one or more of the
proposals in this proxy statement prior to any adjournment if sufficient votes
have been received for approval. The proposals are considered
"non-discretionary" and brokers that are record or nominee holders of shares
of the Corporation who have received no instructions from their clients do not
have discretion to vote on these matters. Absent voting by the particular
beneficial owners of such shares, such "broker non-voters" will not be
considered as votes cast in determining the outcome of the proposals.
As of November 30, 1995, the following persons or entities owned as much
as 5% of the indicated Portfolio's outstanding shares:
Nature of
Name & Address % of Class Ownership
- -------------- ---------- ---------
Money Market Portfolio -
Class A
Fundtech Services L.P. Record
as Agent for Various
Beneficial Owners
Three University Plaza
Hackensack, NJ 07601
2
317728.5
<PAGE>
Nature of
Name & Address % of Class Ownership
- -------------- ---------- ---------
Money Market Portfolio -
Class B
Fundtech Services L.P. Record
as Agent for Various
Beneficial Owners
Three University Plaza
Hackensack, NJ 07601
State Street Bank & Trust Co. Record
Custody for the Acorn IRA
Plan
2 Heritage Drive
Quincy, MA 02171
U.S. Government Portfolio -
Class A
Fundtech Services L.P. Record
as Agent for Various
Beneficial Owners
Three University Plaza
Hackensack, NJ 07601
U.S. Government Portfolio -
Class B
Fundtech Services L.P. Record
as Agent for Various
Beneficial Owners
Three University Plaza
Hackensack, NJ 07601
As of November 30, 1995, the officers or directors of the Corporation,
collectively, beneficially owned, directly or indirectly (including the power
to vote or to dispose of any shares), less than 1% of the shares of the
Corporation's total outstanding shares of either the Money Market Portfolio or
the U.S. Government Portfolio.
3
317728.5
<PAGE>
PROPOSAL 1. APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT
MANAGEMENT CONTRACT TO BE EFFECTIVE AT THE TIME OF
THE MERGER
The Directors of the Corporation unanimously recommend that the
shareholders of each Portfolio vote to approve a new investment management
contract for the Corporation, on behalf of each of the Portfolios, to be
effective at the time of the Merger. The new investment management contract
will be substantially identical to the existing investment management contract
in effect for the Corporation immediately prior to the time of the Merger. As
explained above, the Merger is being treated, for purposes of the 1940 Act, as
a change in control of NEIC and its subsidiary firms including the Manager,
Reich & Tang Asset Management L.P., that serve as advisers or sub-advisers to
various mutual funds including the Corporation. The 1940 Act provides that
such a change in control constitutes an "assignment" of these advisory and
sub-advisory agreements under which NEIC, the Manager and these related
subsidiary firms provide advisory services to the various mutual funds
including the Corporation. The 1940 Act further provides that such an
"assignment" will result in the automatic termination of each of those
agreements, at the time of the Merger.
The Merger. In August of 1995, The New England and Metropolitan Life
entered into an agreement providing for the Merger of the two companies (the
"Merger Agreement"). Metropolitan Life will be the surviving company following
the Merger. Both The New England and Metropolitan Life are mutual insurance
companies. The Merger will result in the insurance policyholders of The New
England becoming policyholders of Metropolitan Life. The policyholders of The
New England will not receive any other payment, property or consideration in
connection with the Merger. The Merger will not be effected unless it is
approved by the requisite vote of the policyholders of both The New England
and Metropolitan Life. The Merger also requires approval by various government
regulatory agencies. In addition, consummation of the Merger is subject to
fulfillment of a number of other conditions, although the parties may waive
some or all of these conditions. There is no assurance that the Merger will in
fact be consummated. In addition, because it is impossible to predict with
certainty when the necessary regulatory approvals will be obtained and the
other conditions to the Merger be fulfilled, it is not known, as of the date
of this Proxy Statement, when the Merger will occur. The parties currently
expect, however, that the Merger will not occur until after the end of 1995.
NEIC is organized as a limited partnership. NEIC's sole general partner,
New England Investment Companies, Inc. ("NEIC Inc."), is a wholly-owned
subsidiary of The New England. As a result of the Merger, NEIC Inc. would
become a direct or indirect wholly-owned subsidiary of Metropolitan Life. The
New England also owns a majority of the outstanding limited partnership
interests of NEIC. The Merger would result in Metropolitan Life becoming the
owner (directly or through a wholly-owned subsidiary) of these limited
partnership interests. The Merger Agreement provides that, following the
consummation of the Merger, Metropolitan Life shall have the right to
designate a majority of the board of directors of NEIC Inc.
Under the Merger Agreement, The New England and Metropolitan Life agree
that they will use their best efforts to satisfy the conditions of Section
15(f) of the 1940 Act. Section 15(f) provides that an investment adviser to a
registered investment company (such as the Corporation), and affiliated
persons of such investment adviser, may receive any amount or benefit in
connection with the sale of securities of, or a sale of any other interest in,
such investment adviser which results in an assignment of an investment
advisory contract with such investment company, if
4
317728.5
<PAGE>
(1) for a period of 3 years after the time of such action, at
least 75% of the board of such investment company are not interested
persons of such company's investment adviser or predecessor investment
adviser, and
(2) there is not imposed an unfair burden on such investment
company as a result of such transaction or any express or implied terms,
conditions, or understandings applicable thereto.
Satisfaction of condition (1) above is not expected to require any changes in
the current composition of the Corporation's Board of Directors.
Information About Metropolitan Life. Metropolitan Life was incorporated
under the laws of New York in 1866 and since 1868 has been engaged in the life
insurance business under its present name. By the early 1900s, it had become
the largest life insurance company in the United States and is currently the
second largest life insurance company in the United States in terms of total
assets. Metropolitan Life's assets as of June 30, 1995 were over $130 billion,
and its adjusted capital as of that date exceeded $8 billion. Subsidiaries of
Metropolitan Life manage over $25 billion of assets for mutual funds,
institutional and other investment advisory clients.
Directors' Recommendation. The Directors unanimously recommend that
shareholders approve the new investment management contract between the
Manager and the Corporation, on behalf of each of the Portfolios, to be
effective at the time of the Merger. The new investment management contract
will be substantially identical to the investment management contract in
effect immediately before the Merger which is described on page 14 of this
Proxy Statement. (The only difference will be that the new investment
management contract will be dated the date of the Merger and will be in effect
initially for a period of two years and from year to year thereafter provided
that its continuance is approved in accordance with the terms of the contract
and the applicable provisions of the 1940 Act.)
In coming to the recommendation set forth above, the Directors reviewed
extensive information about the Corporation, the Manager, NEIC and
Metropolitan Life. The Directors noted that, for purposes of the 1940 Act, the
Merger constitutes a change in control of NEIC and the Manager as well as
NEIC's other subsidiaries that act as advisers or sub-advisers for various
other mutual funds. Although the Merger is being treated as a change in
control of NEIC and of the various advisers and sub-advisers that are
affiliated with NEIC, including the Manager, the Merger is not expected to
result in any change in the personnel, operations or financial condition of
NEIC or of such advisers or sub- advisers, including the Manager. NEIC has
indicated that each adviser and sub-adviser affiliated with NEIC, including
the Manager, will continue to be independently managed, as has historically
been the case. Thus, the Merger is not expected to result in any changes in
the investment approaches or styles of the advisers and sub-advisers,
including the Manger.
The Directors accordingly concluded that it is appropriate and desirable
for the Corporation to continue, after the Merger, the same investment
management arrangements as is in effect immediately before the Merger. Under
the 1940 Act, such continuation requires, in the case of the Corporation, the
approval of each Portfolio's shareholders, by vote of the lesser of (1) 67% of
the shares of that Portfolio represented at the Meeting, if more than 50% of
the shares of that Portfolio are represented at the Meeting, or (2) more than
50% of the outstanding shares of the Portfolio.
5
317728.5
<PAGE>
In order that each Portfolio may continue to receive investment
management services following the Merger, on the same basis as before the
Merger, the Directors unanimously recommend that shareholders of each
Portfolio vote in favor of Proposal 1.
If the shareholders of either Portfolio do not approve Proposal 1, the
investment management contract relating to that Portfolio will terminate at
the time of the Merger although the Manager will continue to manage the
Portfolios, and the Portfolio will consider such alternative actions as are in
the best interest of that Portfolio.
PROPOSAL 2 ELECTION OF DIRECTORS
At the meeting, four directors are to be elected, each to hold office
until his successor has been elected and has qualified. Drs. Mellon and Wong
and Mr. Straniere were elected to the Board and the Audit and Nominating
Committees and have served as such since 1980 and 1984, respectively. Mr. Duff
was elected by the Board of Directors to serve as President and Director of
the Corporation in October, 1994. All such persons have consented to be named
in this Proxy Statement and to serve as directors of the Corporation if
elected. The Board of Directors, which met four times during the Corporation's
fiscal year ended August 31, 1995, has no compensation committee. Each
director attended at least 75% of the board meetings held. The Corporation has
an Audit Committee of the Board of Directors, comprised of Drs. Mellon and
Wong and Mr. Straniere who are not "interested persons" of the Corporation
within the meaning of Section 2(a)(19) of the 1940 Act. The Audit Committee
meets annually to review the Corporation's financial statements with the
independent accountants and to report on its findings to the Board of
Directors. In addition, pursuant to a Distribution and Service Plan adopted by
the Corporation in accordance with the provisions of Rule 12b-1 under the
Investment Company Act of 1940, the Corporation has a Nominating Committee of
the Board of Directors comprised of Drs. Mellon and Wong and Mr. Straniere, to
whose discretion the selection and nomination of directors who are not
"interested persons" of the Corporation is committed. The Nominating Committee
met once with regard to the fiscal year ended August 31, 1995 regarding the
nomination of Mr. Duff. The Nominating Committee currently does not consider
nominees recommended by shareholders. The election of each director requires
the approval of a majority present at the meeting in person or by proxy.
The following is a list of the members of the Board of Directors, any other
positions each may now hold with the Corporation, the principal occupation of
each Director during the past five years and the nature, amount and percentage
of shares held by each in the Corporation.
6
317728.5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature
of Beneficial
Principal Occupation Ownership at
Name and Age During Preceding Five Years 11/30/95 % of Shares
- ------------ --------------------------- -------------- -----------
<S> <C> <C> <C>
Steven W. President and Director of the [-0-] [-0-]
Duff* Corporation and President of the
Mutual Funds Division of the 42
Manager since September 1994. Mr.
Duff was formerly Director of
Mutual Fund Administration of
NationsBanc, with which he was
associated from 1981 to August
1994. Mr. Duff is also President
and a Director of California
Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income
Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New
Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax
Free Income Fund, Inc. and North
Carolina Daily Municipal Income
Fund, Inc.; President and Trustee
of Florida Daily Municipal Income
Fund, Institutional Daily Income
Fund, and Pennsylvania Daily
Municipal Income Fund; President
of Cortland Trust, Inc., Reich &
Tang Government Securities Trust
and Tax Exempt Proceeds Fund,
Inc.; and Executive Vice
President of Reich & Tang Equity
Fund, Inc.
</TABLE>
- --------
* Such person is an "interested person" of the Corporation within the
meaning of Section 2(a) (19) of the 1940 Act.
7
317728.5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature
of Beneficial
Principal Occupation Ownership at
Name and Age During Preceding Five Years 11/30/95 % of Shares
- ------------ --------------------------- -------------- -----------
<S> <C> <C> <C>
W. Giles Director of the Corporation since its [-0-] [-0-]
Mellon formation in 1979; Professor of
Business Administration and Area
64 Chairman of Economics and Finance
in the Graduate School of
Management, Rutgers University,
with which he has been associated
since 1966. Dr. Mellon is also a
Director of California Daily Tax Free
Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan Daily
Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund,
Inc., North Carolina Daily Municipal
Income Fund, Inc., and Reich &
Tang Equity Fund, Inc.; and a
Trustee of Florida Daily Municipal
Income Fund, Institutional Daily
Income Fund, Pennsylvania Daily
Municipal Income Fund and Reich &
Tang Government Securities Trust.
</TABLE>
8
317728.5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature
of Beneficial
Principal Occupation Ownership at
Name and Age During Preceding Five Years 11/30/95 % of Shares
- ------------ --------------------------- -------------- -----------
<S> <C> <C> <C>
Robert Director of the Corporation since [-0-] [-0-]
Straniere 1984; Member of New York State
Assembly; Partner, The Straniere
53 Law Firm since 1981; Director of
California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield
Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New
Jersey Daily Municipal Income
Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc. and
Reich & Tang Equity Fund, Inc.;
Trustee of Florida Daily
Municipal Income Fund,
Institutional Daily Income Fund,
Pennsylvania Daily Municipal
Income Fund and Reich & Tang
Government Securities Trust; and
Director of Life Cycle Mutual
Funds, Inc.
</TABLE>
9
317728.5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature
of Beneficial
Principal Occupation Ownership at
Name and Age During Preceding Five Years 11/30/95 % of Shares
- ------------ --------------------------- -------------- -----------
<S> <C> <C> <C>
Dr. Yung Director of the Corporation since its [-0-] [-0-]
Wong formation in 1979; Director of Shaw
Investment Management (UK)
56 Limited from 1994 to October, 1995;
formerly General Partner of
Abacus Partners Limited
Partnership (a general partner of
a venture capital investment
firm) from 1984 to 1994; Director
of California Daily Tax Free
Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income
Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc. and
Reich & Tang Equity Fund, Inc.;
and Trustee of Florida Daily
Municipal Income Fund,
Institutional Daily Income Fund,
Pennsylvania Daily Municipal
Income Fund, Reich & Tang
Government Securities Trust and
Eclipse Financial Asset Trust.
</TABLE>
The address of each director and officer of the Corporation is 600 Fifth
Avenue, New York, New York 10020.
In addition to Mr. Duff, who has served as President of the Corporation since
September, 1994, the officers of the Corporation are:
Dana E. Messina, 38, Vice President of the Corporation. Ms. Messina is an
Executive Vice President of the Manager since January, 1995 and has been
associated with the Manager and its predecessors in various capacities since
December, 1980. She is also an officer of other investment companies advised
by the Manager.
Lesley M. Jones, 47, Vice President of the Corporation. Ms. Jones is a Senior
Vice President of the Manager since September, 1993 and has been associated
with the Manager and its predecessors in various capacities since April, 1973.
She is also an officer of other investment companies advised by the Manager.
10
317728.5
<PAGE>
Bernadette N. Finn, 47, Vice President and Secretary of the Corporation. Ms.
Finn is a Vice President of the Manager since September, 1993 and has been
associated with the Manager and its predecessors in various capacities since
September, 1970. She is also an officer of other investment companies advised
by the Manager.
Molly Flewharty, 44, Vice President of the Corporation. Ms. Flewharty is Vice
President of the Manager since September, 1993 and has been associated with
the Manager and its predecessors in various capacities since December, 1977.
She is also an officer of other investment companies advised by the Manager.
Richard De Sanctis, 39, Treasurer of the Corporation since October 1992. Mr.
De Sanctis is Treasurer of the Manager and its predecessors since December,
1990 and is an officer of other investment companies advised by the Manager.
The Corporation paid an aggregate remuneration of $ to its directors and to
certain employees of the Manager with respect to its fiscal year ended August
31, 1995, consisting of $27,000 in aggregate directors' fees to the three
disinterested directors, and salaries and benefits aggregating $ paid to
certain employees of the Manager pursuant to the terms of the Investment
Management Contract.
<TABLE>
<CAPTION>
============================================================================================
(1) (2) (3) (4) (5)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total
Pension or Compensation
Aggregate Retirement From Corporation
Name of Compensation Benefits Accrued Estimated and Corporation
Person, From As Part of Fund Annual Benefits Complex Paid to
Position Corporation Expenses Upon Retirement Directors*
- --------------------------------------------------------------------------------------------
Steven W. Duff, 0 0 0 0
Director
- --------------------------------------------------------------------------------------------
W. Giles $9,000 0 0 $51,500
Mellon, Director (14 Funds)
- --------------------------------------------------------------------------------------------
Robert $9,000 0 0 $51,500
Straniere, (14 Funds)
Director
- --------------------------------------------------------------------------------------------
Yung Wong, $9,000 0 0 $51,500
Director (14 Funds)
============================================================================================
</TABLE>
* The total compensation paid to such persons by the Corporation and
Corporation Complex for the fiscal year ending August 31, 1995 (and,
with respect to certain of the funds in the Corporation Complex,
estimated to be paid during the fiscal year ending August 31, 1995). The
parenthetical number represents the number of investment companies
(including the Corporation ) from which such person receives
compensation that are considered part of the same Corporation Complex as
the Corporation, because, among other things, they have a common
investment advisor.
11
317728.5
<PAGE>
PROPOSAL 3 RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
The Board of Directors recommends that the shareholders ratify the selection
of Messrs. McGladrey & Pullen LLP, independent public accountants, to audit
the accounts of the Corporation for the fiscal year ending August 31, 1996.
Messrs. McGladrey & Pullen LLP have audited the accounts of the Corporation
since its inception and do not have any direct financial interest or any
material indirect financial interest in the Corporation.
A representative of Messrs. McGladrey & Pullen LLP is not expected to be
present at the shareholders' meeting. If the shareholders do not ratify the
Board's recommendation, the Board will submit another proposal to the
shareholders with a recommendation for independent public accountants. The
ratification of selection of Independent Accountants requires the approval of
a majority present at the meeting in person or by proxy.
PROPOSAL 4 APPROVAL OR DISAPPROVAL OF A CHANGE TO THE
CORPORATION'S FUNDAMENTAL INVESTMENT RESTRICTIONS TO
PERMIT THE PURCHASE OF CERTAIN PRIVATE PLACEMENTS
The Corporation currently operates under an investment restriction that
prohibits the Manager from purchasing any "restricted securities" for either
the Money Market Portfolio or the U.S. Government Portfolio. This restriction
is "fundamental" and therefore may only be changed by a vote of the
shareholders of each of the Portfolios. The Manager has recommended to the
Directors that this investment restriction be modified to permit the Money
Market Portfolio to purchase certain privately placed short-term securities
that are utilized by corporate issuers in a manner similar to commercial paper
but, unlike commercial paper are exempt from registration under Section 4(2)
of the Securities Act of 1933 (hereinafter referred to as "4(2) paper"). This
4(2) paper is "technically restricted" but, in the Manager's opinion is not
illiquid. The Directors have determined that the Manager's recommendation is
in the best interest of the Corporation and its shareholders and are
recommending that the shareholders of each Portfolio vote to approve this
proposed change.
Historically, the Securities and Exchange Commission (the "SEC") has
taken the position that restricted, privately placed securities are illiquid,
and therefore 4(2) paper has been considered to be illiquid. The SEC has
recently reconsidered this issue and has stated that a fund's board of
directors may determine that 4(2) paper is liquid as long as certain
conditions are met. These conditions are: (i) the paper must not be in
default; (ii) it must be rated by at least two nationally recognized
statistical rating organizations in one of the two highest rating categories
or if unrated the board must determine that it is of acceptable credit
quality; and (iii) the board must consider the trading market of the specific
security. Generally, the risks of investing in illiquid securities include the
exposure to greater risks or costs. A fund may not be able to sell less
marketable or illiquid instruments when the adviser considers it desirable to
do so or may have to sell them at a price lower than could be obtained if they
were more marketable. These factors may have an adverse impact on net asset
value. Less marketable and illiquid securities may be more difficult to value
due to the unavailability of reliable market quotations. Also, the sale of
less marketable securities may require more time and result in higher
brokerage charges or dealer discounts and other selling expenses than does the
sale of more marketable securities.
12
317728.5
<PAGE>
The Board of Directors, in making its determination, considered certain
factors, including that this 4(2) paper has become increasingly used by
corporate issuers and currently comprises approximately 50% of the commercial
paper market and that the expansion of the money market fund industry has
helped to create a large, actively traded market for 4(2) paper that performs
substantially the same in the commercial paper market. The Board of Directors
of the Corporation has determined that this 4(2) paper satisfying all of the
conditions set forth above will be liquid and, subject to shareholder approval
of this proposal, may be purchased by the Manager for the Money Market
Portfolio. Currently, each Portfolio may not invest in illiquid securities of
more than 10% of the value of its net assets.
Accordingly, if shareholders approve this proposal 4, the Corporation
will modify investment restriction (c) (5) in the current statement of
additional information to exclude 4(2) paper from this restriction. The
proposed restriction will read as follows: "...the Fund may not...(5) purchase
restricted securities or purchase securities on margin provided, however, with
respect to the Money Market Portfolio restricted securities shall not include
privately placed securities that are exempt from registration under Section
4(2) of the Securities Act of 1933 that the Directors have determined to be
liquid."
INFORMATION REGARDING THE MANAGER
The Manager for the Corporation is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was at August 31, 1995 manager, adviser or
supervisor with respect to assets aggregating approximately $7.9 billion. The
Manager acts as manager of fifteen other investment companies and also advises
pension trusts, profit sharing trusts and endowments. In addition to the
Corporation, the Manager's advisory clients include, among others, California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund,
Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund,
Inc., Florida Daily Municipal Income Fund, Institutional Daily Income Fund,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund, Inc., Reich & Tang Government Securities Trust and Tax
Exempt Proceeds Fund, Inc. Attached as Exhibit B is a Table of Fees for all
funds advised by the Manager. The Manager also advises pension trusts,
profit-sharing trusts and endowments.
Peter S. Voss (49), G. Neal Ryland (54), Steven W. Duff (42) and
Richard E. Smith, III (45) are directors of Reich & Tang Asset Management,
Inc. the general partner of the Manager. Mr. Voss is President of Reich & Tang
Asset Management, Inc. The address of Messrs. Voss and Ryland is 399 Boylston
Street, Boston Massachusetts 02116. Mr. Duff is President of the Mutual Fund
Group of the Manager. Mr. Smith is President of the Capital Management Group
of the Manager. Their address is 600 Fifth Avenue, New York, New York 10020.
NEIC Inc. is a holding company offering a broad array of investment
styles across a wide range of asset categories through ten investment
advisory/management affiliates and two distribution subsidiaries which
include, in addition to the Manager, Loomis, Sayles & Company, L.P., Copley
Real Estate Advisors, Inc., Back Bay Advisors, L.P., Marlborough Capital
Advisors, L.P., Westpeak Investment Advisors, L.P., Draycott Partners, Ltd.,
TNE Investment Services, L.P., New England
13
317728.5
<PAGE>
Investment Associates, Inc., an affiliate, Capital Growth Management Limited
Partnership, and Harris Associates. These affiliates in the aggregate are
investment advisors or managers to over 42 other registered investment
companies.
Pursuant to the Investment Management Contract for each Portfolio, the
Manager manages each Portfolio's portfolio of securities and makes decisions
with respect to the purchase and sale of investments, subject to the general
control of the Board of Directors of the Corporation.
The Manager provides persons satisfactory to the Board of Directors of
the Corporation to serve as officers of the Corporation. Such officers, as
well as certain other employees and directors of the Corporation, may be
directors or officers of Reich & Tang Asset Management, Inc., the sole general
partner of the Manager, or employees of the Manager or its affiliates.
The Investment Management Contract with the Manager's predecessor was
approved by the Board of Directors, including a majority of the Directors who
are not interested persons (as defined in the Act) of the Corporation or the
Manager and by the shareholders of each Portfolio at a special meeting of
shareholders, effective September 15, 1993. The re-execution of the Investment
Management Contract with the Manager was approved by the Board of Directors,
including a majority of the directors who are not interested persons of the
Corporation or Manager, effective October 1, 1994. The Investment Management
Contract for each Portfolio has a term which extends to April 30, 1996 and may
be continued in force thereafter for successive twelve-month periods beginning
each May 1, provided that such continuance is specifically approved annually
by majority vote of the Corporation's outstanding voting securities or by its
Board of Directors, and in either case by a majority of the Directors who are
not parties to the Investment Management Contract or interested persons of any
such party, by votes cast in person at a meeting called for the purpose of
voting on such matter.
The Investment Management Contract is terminable without penalty by each
Portfolio on sixty days' written notice when authorized either (1) by majority
vote of its outstanding voting shares or (2) by a vote of a majority of its
Board of Directors or (3) by the Manager on sixty days' written notice, and
will automatically terminate in the event of its assignment. The Investment
Management Contract provides that in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or of reckless disregard
of its obligations thereunder, the Manager shall not be liable for any action
or failure to act in accordance with its duties thereunder.
Under the Investment Management Contract, (i) the Money Market Portfolio
will pay an annual management fee of .30% of the Portfolio's average daily net
assets not in excess of $750 million, plus .29% of such assets in excess of
$750 million but not in excess of $1 billion, plus .28% of such assets in
excess of $1 billion but not in excess $1.5 billion, plus .27% of such assets
in excess of $1.5 billion and (ii) the U.S. Government Portfolio will pay an
annual management fee of .275% of the Portfolio's average daily net assets not
in excess of $250 million, plus .25% of such assets in excess of $250 million.
The Manager, at its discretion, may voluntarily waive all or a portion of the
management fee. The fees are accrued daily and paid monthly. Any portion of
the total fees received by the Manager may be used by the Manager to provide
shareholder services and for distribution of the Corporation's shares.
Pursuant to an Administrative Services Contract with the Corporation,
the Manager also performs clerical, accounting supervision, office service and
related functions for the Corporation and
14
317728.5
<PAGE>
provides the Corporation with personnel to (i) supervise the performance of
bookkeeping related services by Investors Fiduciary Trust Company, the
Corporation's bookkeeping agent, (ii) prepare reports to and filings with
regulatory authorities, and (iii) perform such other services as the
Corporation may from time to time request of the Manager. The personnel
rendering such services may be employees of the Manager, of its affiliates or
of other organizations. The Board of Directors has approved a change in the
Administration Services Contract that ceases all reimbursements to the Manager
and increases the Administration Fee payable to the Manager by 0.01% of the
Corporation's average daily net assets. For its services under the
Administrative Services Contract, the Manager will receive (after such
increase) from the Corporation an annual fee equal to .21% of each Portfolio's
average daily net assets not in excess of $1.25 billion, plus .20% of such
assets in excess of $1.25 billion but not in excess of $1.5 billion, plus .19%
of such assets in excess of $1.5 billion. Prior to such change, the
Corporation paid the Manager for such personnel and for rendering such
services at rates which were agreed upon by the Corporation and the Manager,
provided that the Corporation did not pay for services performed by any such
persons who were also officers of the general partner of the Manager. It was
intended that such rates would be the actual costs of the Manager. Under the
Administrative Services Contract, the Corporation may reimburse the Manager
for all of the Corporation's operating costs (in addition to the personnel
reimbursement), including rent, depreciation of equipment and facilities,
interest and amortization of loans financing equipment used by the Corporation
and all the expenses incurred to conduct the Corporation's affairs. The
amounts of such reimbursements are to be agreed upon between the Corporation
and the Manager. No such reimbursements were made.
The Manager at its discretion may waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of
the management fee and the administrative services fee for purposes of
shareholder and administrative services and distribution of the Corporation's
shares. There can be no assurance that such fees will be waived in the future.
Investment management fees and operating expenses which are attributable
to both Classes of a Portfolio will be allocated daily to each Class share
based on the percentage of outstanding shares at the end of the day.
Additional shareholder services provided by Participating Organizations to
Class A shareholders pursuant to the Plan shall be compensated by the
Distributor from its shareholder servicing fee, and the Manager from its
management fee. Expenses incurred in the distribution of Class B shares shall
be paid by the Manager.
Expense Limitation. The Manager has agreed, pursuant to the Investment
Management Contract, to reimburse the Corporation for its expenses (exclusive
of interest, taxes, brokerage and extraordinary expenses) which in any year
exceed the limits on investment company expenses prescribed by any state in
which the Corporation's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Corporation's annual expenses are
estimated and accrued daily, and any appropriate estimated payments are made
to it on a monthly basis. Subject to the obligations of the Manager to
reimburse the Corporation for its excess expenses as described above, the
Corporation has, under the Investment Management Contract, confirmed its
obligation for payment of all its other expenses, including all operating
expenses, taxes, brokerage fees and commissions, commitment fees, certain
insurance premiums, interest charges and expenses of the custodian, transfer
agent and dividend disbursing agent's fees, telecommunications expenses,
auditing and legal expenses, bookkeeping agent fees, costs of forming the
corporation and maintaining corporate existence, compensation of Directors,
officers and employees of the Corporation and costs of other personnel
performing services for the Corporation who are not officers of the Manager or
its affiliates, costs of
15
317728.5
<PAGE>
investor services, shareholders' reports and corporate meetings, Securities
and Exchange Commission registration fees and expenses, state securities laws
registration fees and expenses, expenses of preparing and printing the
Corporation's prospectus for delivery to existing shareholders and of printing
application forms for shareholder accounts, and the fees and reimbursements
payable to the Manager under the Investment Management Contract and the
Administrative Services Contract and the Distributor under the Shareholder
Servicing Agreement.
The Corporation may from time to time hire its own employees or contract
to have management services performed by third parties (including
Participating Organizations) as discussed herein, and the management of the
Corporation intends to do so whenever it appears advantageous to the
Corporation. The Corporation's expenses for employees and for such services
are among the expenses subject to the expense limitation described above.
The following fees were paid to the predecessor investment managers
under the previous Investment Management Contracts or the Manager under the
current Investment Management Contract. For the Corporation's fiscal year
ended August 31, 1993, Reich & Tang L.P. received investment management fees
of $2,796,430 and $1,728,354 from the Money Market Portfolio and the U.S.
Government Portfolio, respectively. For the Corporation's fiscal year ended
August 31, 1994, Reich & Tang L.P. and its successor, NEIC, received
investment management fees totaling $3,479,792 and $1,383,715 from the Money
Market Portfolio and the U.S. Government Portfolio, respectively. For the
Corporation's fiscal year ended August 31, 1994, Reich & Tang L.P. and its
successor, NEICLP, received administration fees in the aggregate of $2,360,565
and $1,056,972 from the Money Market Portfolio and the U.S. Government
Portfolio, respectively. For the Fund's fiscal year ended August 31, 1995,
NEIC and the Manager received investment management fees totaling $_________
and $__________ from the Money Market Portfolio and the U.S. Government
Portfolio, respectively. For the fiscal year ended August 31, 1995, the
Manager received administration fees in the aggregate of $_________ and
$__________ from the Money Market Portfolio and the U. S. Government
Portfolio, respectively. No reimbursements were payable to the Corporation by
the predecessor managers pursuant to the 1% expense limitation described above
with respect to the fiscal years ended August 31, 1993, August 31, 1994 and
August 31, 1995.
The Manager now acts as investment manager or adviser for other persons
and entities and may under the Investment Management Contract act as
investment manager or adviser to other registered investment companies. At
present, the Manager is investment manager to fifteen other registered
investment companies.
Distribution and Service Plan. Pursuant to Rule 12b-1 under the Act, the
Securities and Exchange Commission has required that an investment company
which bears any direct or indirect expense of distributing its shares must do
so only in accordance with a plan permitted by the Rule. The Corporation's
Board of Directors has adopted a distribution and service plan (the "Plan")
and, pursuant to the Plan, the Corporation and the Manager have entered into a
Distribution Agreement and a Shareholder Servicing Agreement with Reich & Tang
Distributors L.P. (the "Distributor") as distributor of the Corporation's
shares. Because the Merger will be considered to result in the assignment of
the Corporation's Distribution Agreement with the Distributor, causing those
agreements to terminate upon the Merger, the Board of Directors of the
Corporation approved a new Distribution Agreement with Reich & Tang
Distributors L.P. for the Corporation to take effect if a new Investment
Management Agreement is approved by shareholders of the Corporation and upon
consummation of
16
317728.5
<PAGE>
the Merger. The new Distribution Agreement would replace the current
Distribution Agreement with the Distributor and would be identical to those
agreements, except for the dates of execution and effectiveness.
Reich & Tang Asset Management, Inc. serves as the sole general partner
for both Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P.
Reich & Tang Asset Management L.P. serves as the sole limited partner of the
Distributor. The Distributor's address is 600 Fifth Avenue, New York, New York
10020. Under the Distribution Agreement, the Distributor, for nominal
consideration and as agent for the Corporation, will solicit orders for the
purchase of the Corporation's shares, provided that any subscriptions and
orders will not be binding on the Corporation until accepted by the
Corporation as principal.
Under each Plan, the Portfolios and the Distributor will enter a
Shareholder Servicing Agreement with respect to the Class A shares. Under the
Shareholder Servicing Agreement, the Distributor receives from each Portfolio
a service fee equal to .25% per annum of each Portfolio's Class A shares
average daily net assets (the "Service Fee") for providing, with respect only
to the Class A shares, personal shareholder services and for the maintenance
of shareholder accounts. The Service Fee is accrued daily and paid monthly and
any portion of the Service Fee may be deemed to be used by the Distributor for
payments to Participating Organizations with respect to servicing their
clients or customers who are shareholders of the Corporation.
The Plan provides, with respect to Class A shares, that the Manager may
make payments from time to time from its own resources, which may include the
management fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Distributor has entered into written agreements for performing
shareholder servicing and related administrative functions on behalf of the
Corporation; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Corporation's shares; and (iii) to
pay the costs of printing and distributing the Corporation's prospectus to
prospective investors, and to defray the cost of the preparation and printing
of brochures and other promotional materials, mailings to prospective
stockholders, advertising, and other promotional activities, including the
salaries and/or commissions of sales personnel in connection with the
distribution of the Corporation's shares. The Distributor may also make
payments from time to time from its own resources, which may include the
Service Fee with respect to Class A shares and past profits for the purpose
enumerated in (i) above. The Distributor will determine the amount of such
payments made pursuant to the Plan, provided that such payments will not
increase the amount which each Portfolio is required to pay to the Manager and
the Distributor for any fiscal year under either the Investment Management
Contract in effect for that year, the Administrative Services Contract in
effect for that year or under the Shareholder Servicing Agreement in effect
for that year.
The following information applies only to the Class A shares of the
Portfolios. For the fiscal year ended August 31, 1995, the Corporation paid a
Service Fee for expenditures pursuant to the Plan in amounts aggregating $
with respect to the Money Market Portfolio and $ with respect to the U.S.
Government Portfolio. During such period, the Manager and Distributor made
payments pursuant to the Plan to or on behalf of Participating Organizations
of $ with respect to the Money Market Portfolio and $ with respect to the U.S.
Government Portfolio. The excess of such payments over the total payments the
predecessor managers and Distributor received from the Corporation represents
distribution and servicing expenses funded by the Manager's predecessors and
Distributor from their own resources including the management fee.
17
317728.5
<PAGE>
ALLOCATION OF PORTFOLIO BROKERAGE
The Corporation's purchases and sales of securities usually are
principal transactions. Portfolio securities are generally purchased directly
from the issuer or from an underwriter or market maker for the securities.
There usually are no brokerage commissions paid for such purchases and the
Corporation at present does not anticipate paying brokerage commissions.
Should the Corporation pay a brokerage commission on a particular transaction,
the Corporation would seek to effect the transaction at the most favorable
available combination of best execution and lowest commission. Purchases from
underwriters of portfolio securities include a commission or concession paid
by the issuer to the underwriter, and purchases from dealers serving as market
makers include the spread between the bid and asked price.
No portfolio transactions are executed with the Manager, or with an
affiliate of the Manager, acting either as principal or as paid broker.
The frequency of transactions and their allocation to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Corporation. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Investment decisions for the Corporation will be made independently from
those for any other accounts or investment companies that may be or become
advised or managed by the Manager or its affiliates. If, however, the
Corporation and other investment companies or accounts advised or managed by
the Manager are contemporaneously engaged in the purchase or sale of the same
security, the transactions may be averaged as to price and allocated equitably
to each account. In some cases, this policy might adversely affect the price
paid or received by the Corporation or the size of the position obtainable for
the Corporation. In addition, when purchases or sales of the same security for
the Corporation and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in
order to obtain any price advantages available to large denomination
purchasers or sellers.
OTHER MATTERS
As a Maryland corporation, the Corporation is not required, and does not
intend, to hold regular annual meetings. Shareholders who wish to present
proposals at any future shareholder meeting must present such proposals to the
Board at a reasonable time prior to the solicitation of any shareholder proxy.
18
317728.5
<PAGE>
The management does not know of any matters to be present at this Special
Meeting of Shareholders other than those mentioned in this Proxy Statement. If
any of the persons listed above is unavailable for election as a director, an
event not now anticipated, or if any other matters properly come before the
meeting, the shares represented by proxies will be voted with respect thereto
in accordance with the best judgment of the person or persons voting the
proxies.
By Order of the Board of Directors
BERNADETTE N. FINN, Secretary
December ____, 1995
19
317728.5
<PAGE>
EXHIBIT A (INVESTMENT MANAGEMENT CONTRACT BETWEEN THE CORPORATION AND REICH &
TANG ASSET MANAGEMENT, L.P.)
20
317728.5
<PAGE>
EXHIBIT A
INVESTMENT MANAGEMENT CONTRACT
SHORT TERM INCOME FUND, INC.
the "Fund"
Money Market Portfolio
U.S. Government Portfolio
the "Portfolios"
New York, New York
__________ 1994
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and reinvesting
our assets in securities of the type, and in accordance with the limitations,
specified in our Articles of Incorporation, By-Laws and Registration Statement
filed with the Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933, including the
Prospectus forming a part thereof (the "Registration Statement"), all as from
time to time in effect, and in such manner and to such extent as may from time
to time be authorized by our Board of Directors. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets of our Portfolios as above specified, and, without
limiting the generality of the foregoing, to provide the investment management
services specified below.
(b) Subject to the general control of our Board of Directors,
you will make decisions with respect to all purchases and sales of the
portfolio securities of the Portfolios. To carry out such decisions, you are
hereby authorized, as our agent and attorney-in-fact for our account and at
our risk and in our name, to place orders for the investment and reinvestment
of our assets. In all purchases, sales and other transactions in our portfolio
securities you are authorized to exercise full discretion and act for us in
the same manner and with the same force and effect as our corporation itself
might or
323476.1
<PAGE>
could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.
(c) You will report to our Board of Directors at each meeting
thereof all changes in our portfolios since your prior report, and will also
keep us in touch with important developments affecting our portfolios and, on
your initiative, will furnish us from time to time with such information as
you may believe appropriate for this purpose, whether concerning the
individual entities whose securities are included in our portfolios, the
activities in which such entities engage, Federal income tax policies
applicable to our investments, or the conditions prevailing in the money
market or the economy generally. You will also furnish us with such
statistical and analytical information with respect to our portfolio
securities as you may believe appropriate or as we may reasonably request. In
making such purchases and sales of our portfolio securities, you will comply
with the policies set from time to time by our Board of Directors as well as
the limitations imposed by our Articles of Incorporation and by the provisions
of the Internal Revenue Code and the 1940 Act relating to regulated investment
companies and the limitations contained in the Registration Statement.
(d) It is understood that you will from time to time employ,
subcontract with or otherwise associate with yourself, entirely at your
expense, such persons as you believe to be particularly fitted to assist you
in the execution of your duties hereunder.
(e) You or your affiliates will also furnish us, at your own
expense, such investment advisory supervision and assistance as you may
believe appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be subject. You and
your affiliates will also pay the expenses of promoting the sale of our shares
(other than the costs of preparing, printing and filing our registration
statement, printing copies of the prospectus contained therein and complying
with other applicable regulatory requirements), except to the extent that we
are permitted to bear such expenses under a plan adopted pursuant to Rule
12b-1 under the 1940 Act or a similar rule.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses, including: (a) brokerage and commission expenses, (b) Federal, state
or local taxes, including issue and transfer taxes incurred by or levied on
us, (c) commitment fees and certain insurance premiums, (d) interest charges
on borrowings, (e) charges and expenses of our custodian,
-2-
323476.1
<PAGE>
(f) charges, expenses and payments relating to the issuance, redemption,
transfer and dividend disbursing functions for us, (g) recurring and
nonrecurring legal and accounting expenses, including those of the bookkeeping
agent, (h) telecommunications expenses, (i) the costs of organizing and
maintaining our existence as a corporation, (j) compensation, including
directors' fees, of any of our directors, officers or employees who are not
your officers or officers of your affiliates, and costs of other personnel
providing clerical, accounting supervision and other office services to us as
we may request, (k) costs of stockholder services including, charges and
expenses of persons providing confirmations of transactions in our shares,
periodic statements to stockholders, and recordkeeping and stockholders'
services, (l) costs of stockholders' reports, proxy solicitations, and
corporate meetings, (m) fees and expenses of registering our shares under the
appropriate Federal securities laws and of qualifying such shares under
applicable state securities laws, including expenses attendant upon the
initial registration and qualification of such shares and attendant upon
renewals of, or amendments to, those registrations and qualifications, (n)
expenses of preparing, printing and delivering our prospectus to existing
shareholders and of printing shareholder application forms for shareholder
accounts, (o) payment of the fees and expenses provided for herein, under the
Administrative Services Agreement and, with respect to the Class A Shares of
each Portfolio only, pursuant to the Shareholder Servicing Agreement and
Distribution Agreement, and (p) any other distribution or promotional expenses
contemplated by an effective plan adopted by us pursuant to Rule 12b-1 under
the Act. Our obligation for the foregoing expenses is limited by your
agreement to be responsible, while this Agreement is in effect, for any amount
by which the annual operating expenses for each Portfolio (excluding taxes,
brokerage, interest and extraordinary expenses) exceed the limits on
investment company expenses prescribed by any state in which the shares for
such Portfolio are qualified for sale.
4. We will expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree as
an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing the Portfolios will pay you a
fee at the annual rate of (i) .30% of the Money Market Portfolio's average
daily net assets not in excess of $750 million, plus .29% of such assets in
excess of $750 million
-3-
323476.1
<PAGE>
but not in excess of $1 billion, plus .28% of such assets in ..excess of $1
billion but not in excess of $1.5 billion, plus .27% of such assets in excess
of $1.5 billion and (ii) .275% of the U.S. Government Portfolio's average
daily net assets not in excess of $250 million, plus .25% of such assets in
excess of $250 million. Your fee will be accrued by us daily, and will be
payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of
us in writing. You may use any portion of this fee for distribution of our
shares, or for making servicing payments to organizations whose customers or
clients are our shareholders. You may waive your right to any fee to which you
are entitled hereunder, provided such waiver is delivered to us in writing.
Any reimbursement of our expenses, to which we may become entitled pursuant to
paragraph 3 hereof, will be paid to us at the same time as we pay you.
6. This Agreement will become effective on the date hereof and shall
continue in effect until ___, 199_ and thereafter for successive twelve-month
periods (computed from each ____________), provided that such continuation is
specifically approved at least annually by our Board of Directors or by a
majority vote of the holders of the outstanding voting securities of each
respective Portfolio voting separately, as defined in the 1940 Act and the
rules thereunder, and, in either case, by a majority of those of our directors
who are neither party to this Agreement nor, other than by their service as
directors of the corporation, interested persons, as defined in the 1940 Act,
of any such person who is party to this Agreement. Upon the effectiveness of
this Agreement, it shall supersede all previous Agreements between us covering
the subject matter hereof. With respect to each Portfolio, this Agreement may
be terminated at any time, without the payment of any penalty, (i) by vote of
a majority of the outstanding voting securities of each respective Portfolio
voting separately, as defined in the 1940 Act and the rules thereunder, or
(ii) by a vote of a majority of our entire Board of Directors, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by
governing law and in applicable rules or regulations of the Securities and
Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your employees or the officers and directors of Reich &
Tang Asset Management, Inc.,
-4-
323476.1
<PAGE>
your general partner, who may also be a director, officer or employee of ours,
or of a person affiliated with us, as defined in the 1940 Act, to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or
to render services of any kind to any other corporation, firm, individual or
association.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
SHORT TERM INCOME FUND, INC.
Money Market Portfolio
U.S. Government Portfolio
By:
ACCEPTED: , 1996
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT,
INC., General Partner
By: ___________________________
-5-
323476.1
<PAGE>
EXHIBIT B (TABLE OF FEES FOR ALL FUNDS ADVISED BY THE MANAGER)
21
317728.5
<PAGE>
<TABLE>
EXHIBIT B
<CAPTION>
===================================================================================================================================
NET ASSETS (IN
MILLIONS) AT
FUND NAME FEES 11-30-95
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fee
.30% of average daily net assets up to $750 million
Money Market Portfolio .29% of average daily net assets in excess of $750 million up to
$ 1 billion
.28% of average daily net assets in excess of $1 billion up to
$1.5 billion
.27% of average daily net assets in excess of $1.5 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fee
U.S. Government Portfolio .275% of average daily net assets up to $250 million
.25% of average daily net assets in excess of $250 million
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative Services Fee
.21% of average daily net assets up to $1.25 billion
Each Portfolio .20% of average daily net assets in excess of $1.25 billion up to
$1.5 billion
.19% of average daily net assets in excess of $1.5 billion
-----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee (Class A only)
.25% of average daily net assets
====================================================================================================================================
Management Fee
.325% of average daily net assets up to $750 million
.30% of average daily net assets in excess of $750 million
-----------------------------------------------------------------------------------------------
DAILY TAX FEE INCOME FUND, INC. Administrative Services Fee
.21% of average daily net assets up to $1.25 million
.20% of average daily net assets in excess of $1.25 million up to
$1.5 billion
.19% in excess of $1.5 billion
-----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee (Class A Only)
.25% of average daily net assets
===================================================================================================================================
</TABLE>
-1-
322069.1
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
NET ASSETS (IN
MILLIONS) AT
FUND NAME FEES 11-30-95
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Fee
REICH & TANG EQUITY FUND, INC. .80% of average daily net assets
------------------------------------------------------------------------------------------------
Administrative Services Fee
.21% of average daily net assets
====================================================================================================================================
Management Fee
.80% of average daily net assets
------------------------------------------------------------------------------------------------
DELAFIELD FUND, INC. Administrative Services Fee
.21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
====================================================================================================================================
Management Fee
CONNECTICUT DAILY TAX FREE .30% of average daily net assets
INCOME FUND, INC. ------------------------------------------------------------------------------------------------
Administrative Services Fee
.21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
====================================================================================================================================
Management Fee
.30% of average daily net assets
NEW YORK DAILY TAX FEE INCOME ------------------------------------------------------------------------------------------------
FUND, INC. Administrative Services Fee
.21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
====================================================================================================================================
</TABLE>
-2-
322069.1
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
NET ASSETS (IN
MILLIONS) AT
FUND NAME FEES 11-30-95
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Fee
.35% of average daily net assets
-----------------------------------------------------------------------------------------------
REICH & TANG GOVERNMENT Administrative Services Fee
SECURITIES TRUST .21% of average daily net assets
-----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
====================================================================================================================================
Management Fee
.30% of average daily net assets
-----------------------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FEE INCOME Administrative Services Fee
FUND, INC. .21% of average daily net assets
-----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
====================================================================================================================================
Management Fee
.30% of average daily net assets
-----------------------------------------------------------------------------------------------
MICHIGAN DAILY TAX FREE INCOME Administrative Services Fee
FUND, INC. .21% of average daily net assets
-----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
====================================================================================================================================
All Inclusive Management Fee*
.40% of average daily net assets up to $250 million
TAX EXEMPT PROCEEDS FUND, INC. .35% of average daily net assets in excess of $250 million up to
$500 million
.30% of average daily net assets in excess of $500 million
</TABLE>
- -----------------
* Management Contract requires the Manager, not the Fund to bear all other fund
expenses; therefore, the fee payable under the Management Contract is the only
expense of the Fund.
-3-
322069.1
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
NET ASSETS (IN
MILLIONS) AT
FUND NAME FEES 11-30-95
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Fee
.30% of average daily net assets
-----------------------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME Administrative Services Fee
FUND, INC. .21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
===================================================================================================================================
All Inclusive Management Fee
.80% of the first $500 million
CORTLAND TRUST, INC. .775% of the next $500 million
.75% of the next $500 million
All Portfolios .735% in excess of $1.5 billion
------------------------------------------------------------------------------------------------
Distribution Fee
.25% of average daily net assets
===================================================================================================================================
Management Fee
.40% of average daily net assets
------------------------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL Administrative Services Fee
INCOME FUND, INC. .21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
====================================================================================================================================
</TABLE>
-4-
322069.1
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
NET ASSETS (IN
MILLIONS) AT
FUND NAME FEES 11-30-95
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Fee
.40% of average daily net assets
------------------------------------------------------------------------------------------------
Administrative Services Fee
PENNSYLVANIA DAILY MUNICIPAL .21% of average daily net assets up to $1.25 billion
INCOME FUND .20% of average daily net assets in excess of $1.25 billion up to
$1.5 billion
.19% of average daily net assets in excess of $1.5 billion
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
===================================================================================================================================
Management Fee
.40% of average daily net assets
------------------------------------------------------------------------------------------------
FLORIDA DAILY MUNICIPAL FUND Administrative Services Fee
.21% of average daily net assets
------------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution Plan Fee (Class A Only)
.25% of average daily net assets
===================================================================================================================================
Investment Management Fee
.08% of average daily net assets
INSTITUTIONAL DAILY INCOME FUND -----------------------------------------------------------------------------------------------
Administrative Services Fee
.05% of average daily net assets
All Portfolios -----------------------------------------------------------------------------------------------
Shareholder Servicing and Distribution
Plan Fee (Class A Only) .25% of average
daily net assets
===================================================================================================================================
</TABLE>
-5-
322069.1
<PAGE>
BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE PROXIES
TO VOTE EACH PROPOSAL AS MARKED, OR, IF NOT MARKED TO VOTE, "FOR" EACH PROPOSAL
AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY COME BEFORE
THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE MEETING, PLEASE
COMPLETE, DETACH AND MAIL THE LOWER PORTION OF THIS CARD AT ONCE IN THE ENCLOSED
ENVELOPE.
SHORT TERM INCOME FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS - MARCH 1, 1996
THE UNDERSIGNED SHAREHOLDER OF SHORT TERM INCOME FUND, INC., (THE
"CORPORATION") HEREBY APPOINTS BERNADETTE N. FINN AND DANA E. MESSINA, AND EACH
OF THEM, AS ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH POWER OF
SUBSTITUTION, TO VOTE ALL OF THE SHARES OF COMMON STOCK OF THE CORPORATION
STANDING IN THE NAME OF THE UNDERSIGNED AT THE CLOSE OF BUSINESS ON DECEMBER 8,
1995 AT THE SPECIAL MEETING OF SHAREHOLDERS OF THE CORPORATION TO BE HELD AT THE
OFFICES OF THE CORPORATION AT 600 FIFTH AVENUE, NEW YORK, NY 10020 AT 9:00 A.M.
ON MARCH 1, 1996 AND AT ALL ADJOURNMENTS THEREOF, WITH ALL OF THE POWERS THE
UNDERSIGNED WOULD POSSESS IF THEN AND THERE PERSONALLY PRESENT AND ESPECIALLY
(BUT WITHOUT LIMITING THE GENERAL AUTHORIZATION AND POWER THEREBY GIVEN) TO VOTE
AS INDICATED ON THE PROPOSAL. AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT FOR
THE MEETING, AND VOTE AND ACT ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE MEETING. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED
"FOR" THE PROPOSALS LISTED BELOW UNLESS OTHERWISE INDICATED.
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
SHORT TERM INCOME FUND, INC.
VOTE ON PROPOSALS
FOR AGAINST ABSTAIN
I. TO APPROVE OR DISAPPROVE A NEW
INVESTMENT CONTRACT
II. ELECT THE FOLLOWING NOMINEES FOR
DIRECTORS
1. STEVEN W. DUFF
2. W. GILES MELLON
3. ROBERT STRANIERE
4. YUNG WONG
III. TO RATIFY OR REJECT THE
SELECTION OF MCGLADREY & PULLEN
LLP AS INDEPENDENT ACCOUNTANTS
OF THE CORPORATION FOR ITS
FISCAL YEAR ENDING 8/31/96
IV. (FOR MONEY MARKET PORTFOLIO
SHAREHOLDERS ONLY) TO APPROVE OR
DISAPPROVE A CHANGE IN THE
CORPORATION'S FUNDAMENTAL
INVESTMENT RESTRICTIONS TO
PERMIT THE MONEY MARKET
PORTFOLIO TO PURCHASE CERTAIN
PRIVATE PLACEMENTS
_______________________________ _____________________________________
SIGNATURE SIGNATURE (JOINT OWNERS DATE
PLEASE SIGN NAME OR NAMES AS PRINTED ABOVE TO AUTHORIZE THE VOTING OF
YOUR SHARES AS INDICATED ABOVE, WHERE SHARES ARE REGISTERED WITH JOINT OWNERS,
ALL JOINT OWNERS SHOULD SIGN. PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC.
SHOULD SO INDICATE.
10506.0002 317728.5
