As filed with the Securities and Exchange Commission on August 30, 1995
Registration No. 2-89264
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 17 [X]
(Check appropriate box or boxes)
NEW YORK DAILY TAX FREE INCOME FUND, INC.
(formerly Empire Tax Free Money Market, Inc.)
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 830-5220
BERNADETTE N. FINN
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
It is proposed that this filing will become effective: (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 1, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on [date] pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of securities under
the Securities Act of 1933 pursuant to section 24(f) under the Investment
Company Act of 1940, as amended, and Rule 24f-2 thereunder, and the Registrant
filed a Rule 24f-2 Notice for its fiscal year ended April 30, 1995 on or about
June 26, 1995.
<PAGE>
NEW YORK DAILY TAX FREE INCOME FUND, INC.
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c)
Part A
Item No. Prospectus Heading
1. Cover Page. . . . . . . . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . . . . . . . Introduction; Table of Fees
and Expenses
3. Condensed Financial Selected Financial
Information . . . . . . . . . . . . . Information
4. General Description General Information; Investment
of Registrant and Policies. . . . . . . . Objectives, Policies and Risks;
Risk Factors and Additional
Investment Information;
Investment Restrictions
5. Management of the Fund . . . . . . . . . . Management of the Fund;
Custodian,
Transfer Agent and Dividend
Agent; Distribution and
Service Plan
5A. Management Discussion of
Fund Performance . . . . . . . . . . . . Not Applicable
6. Capital Stock and Description of Common Stock;
Other Securities. . . . . . . . . . . . . How to Purchase and Redeem
Shares; General Information;
Dividends and Distributions;
Federal Income Taxes
7. Purchase of Securities How to Purchase and Redeem
Being Offered . . . . . . . . . . . . . Shares; Net Asset Value;
Distribution and Service Plan
8. Redemption or Repurchase. . . . . . . . . How to Purchase and Redeem
Shares
9. Legal Proceedings . . . . . . . . . . . . Not Applicable
<PAGE>
Part B Caption in Statement of
Item No. Additional Information
10. Cover Page. . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . Not Applicable
13. Investment Objectives Investment Objectives, Policies
and Policies. . . . . . . . . . . . . . and Risks
14. Management of the Registrant. . . . . . . Management of the Fund
15. Control Persons and Principal
Holders of Securities . . . . . . . . . Management of the Fund
16. Investment Advisory Management of the Fund; and
Other Services . . . . . . . . . . . . . Distribution and Service Plan;
Custodian, Transfer Agent and
Dividend Agent; Expense
Limitation
17. Brokerage Allocation Investment Objectives,
and Other Practices . . . . . . . . . . . Policies and Risks
18. Capital Stock and
Other Securities. . . . . . . . . . . . Description of Common Stock
19. Purchase, Redemption and Pricing How to Purchase and Redeem
of Securities Being Offered . . . . . Shares; Net Asset Value
20. Tax Status. . . . . . . . . . . . . . . . Federal Income Taxes;
21. Underwriters. . . . . . . . . . . . . . . Not Applicable
22. Calculations of Yield
Quotations of Money
Market Funds. . . . . . . . . . . . . . Yield Quotations
23. Financial Statements. . . . . . . . . . Statement of Net Assets as of
April 30, 1995; Statement of
Operations for the year ended
April 30, 1995; Statement of
Changes in Net Assets Years
ended April 30, 1995 and 1994;
Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE 600 FIFTH AVENUE
INCOME FUND, INC. NEW YORK, NY 10020
(212) 830-5220
- -------------------------------------------------------------------------------
PROSPECTUS
September 1, 1995
New York Daily Tax Free Income Fund, Inc. (the "Fund") is designed to be a money
market fund for investors who desire interest income exempt from regular
Federal, and to the extent possible, New York State and New York City income
taxes and preservation of capital, liquidity and stability of principal by
investing in a professionally managed, non-diversified portfolio of high
quality, short-term municipal obligations. No assurance can be given that these
objectives will be achieved.
This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions. A
Statement of Additional Information about the Fund has been filed with the
Securities and Exchange Commission and is available upon request and without
charge by calling or writing the Fund. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety.
Reich & Tang Asset Management L.P. acts as the investment manager of the Fund
and Reich & Tang Distributors L.P. acts as distributor of the Fund's shares.
Reich & Tang Asset Management L.P. is a registered investment adviser. Reich &
Tang Distributors L.P. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND INTENDS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE ALTHOUGH THERE CAN BE NO ASSURANCE THAT THIS VALUE WILL BE MAINTAINED.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THIS PROSPECTUS SHOULD BE READ AND RETAINED BY INVESTORS FOR
FUTURE REFERENCE.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE 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.
________________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
_______________________________________________________________________________
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
<S> <C>
Management Fees .30%
12b-1 Fees .20%
Other Expenses .37%
Administrative Services Fee .20%
Total Fund Operating Expenses .87%
</TABLE>
Example 1 year 3 years 5 years 10 years You would pay the following expenses on
a $1,000 investment, assuming 5% annual return (cumulative through the end of
each year): $9 $28 $48 $107 The purpose of the above table is to assist an
investor in understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. For a further discussion of these fees
see "Management of the Fund" and "Distribution and Service Plan" herein. THE
FIQURES REFLECTED IN THIS EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN ABOVE.
_______________________________________________________________________________
SELECTED FINANCIAL INFORMATION
The following selected financial information of New York Daily Tax Free Income
Fund, Inc. has been audited by McGladrey & Pullen, LLP, Independent Certified
Public Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended April 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period
$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income from investment operations:
Net investment income.......... 0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040 0.036 0.046
Less distributions:
Dividends from net investment income
0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040 0.036 0.046
------ ------ ------ ------ ------ ------ ------ ------ -----
Net asset value, end of year... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ======= ======= ===== ====== ======= ======= ======= ====== ======
Total Return.................. 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86% 4.01% 3.63% 4.67%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)
$254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060 $226,115 $215,703 $121,856
Ratios to average net assets:
Expenses................... 0.87% 0.89% 0.89% 0.87% 0.82%+ .77%+ .80%+ .79%+ .82%+ .73%+
Net investment income...... 2.71% 1.82% 2.25% 3.63% 4.82%+ 5.32%+ 4.73%+ 3.96%+ 3.61%+ 4.51%+
</TABLE>
+ Net of management and shareholder servicing fees waived equivalent to
.07%, .10%, .02%, .02%, .02% and .28% of average net assets.
2
<PAGE>
INTRODUCTION
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load,
non-diversified, open-end, management investment company that seeks to provide
its investors with a liquid money market portfolio from which the interest
income is, under current law, exempt from regular Federal, and to the extent
possible, New York State and New York City personal income taxes, preservation
of capital, liquidity and stability of principal by investing principally in
short-term, high quality debt obligations of the State of New York and its
political subdivisions and of Puerto Rico or other U.S. territories, and their
political subdivisions, the interest on which is exempt from regular Federal
income tax under section 103 of the Internal Revenue Code (the "Code") and
cannot be taxed by any state under Federal law as described under "Investment
Objectives, Policies and Risks" herein. The Fund also will invest in municipal
securities of issuers located in states other than New York, the interest income
on which will be exempt from regular Federal income tax, but will be subject to
New York State and New York City personal income tax for New York residents.
Although the Fund does not intend to do so, it reserves the right to invest up
to 20% of the value of its net assets in taxable obligations. This is a summary
of the Fund's fundamental investment policies which are set forth in full under
"Investment Objectives, Policies and Risks" herein and in the Statement of
Additional Information and may not be changed without approval of a majority of
the Fund's outstanding shares. No assurance can be given that these objectives
will be achieved.
The Fund's investment manager is Reich & Tang Asset Management L.P.. (the
"Manager") which is a registered investment adviser and which currently acts as
manager or administrator to eighteen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors
L.P. (the "Distributor"), and the Fund has entered into a Distribution Agreement
and a Shareholder Servicing Agreement pursuant to the Fund's distribution and
service plan adopted under Rule 12b-1 under the Investment Company Act of 1940,
as amended, (the "1940 Act"). (See "Distribution and Service Plan".)
The Fund intends that its investment portfolio will be concentrated in New York
Municipal Obligations and bank participation certificates therein. A summary of
recent financial and credit developments and special risk factors affecting New
York State and New York City is set forth under "Special Factors Affecting New
York" in the Statement of Additional Information. Investment in the Fund should
be made with an understanding of the risks which an investment in New York
Municipal Obligations may entail. Payment of interest and preservation of
capital are dependent upon the continuing ability of New York issuers and/or
obligors of state, municipal and public authority debt obligations to meet their
obligations hereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated portfolio
and should compare yields available on portfolios of New York issues with those
of more diversified portfolios including out-of-state issues before making an
investment decision. The Fund's Board of Directors is authorized to divide the
unissued shares into separate series of stock, one for each of the Fund's
separate investment portfolios that may be created in the future.
MANAGEMENT OF THE FUND
The Fund's Board of Directors which is responsible for the overall management
and supervision of the Fund, has employed Reich & Tang Asset Management L.P.
(the "Manager") to serve as investment manager of the Fund. The Manager provides
persons satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors or officers of Reich & Tang Asset Management, Inc., the
sole general partner of the Manager, or employees of the Manager or its
affiliates. Due to the services performed by the Manager, the Fund currently has
no employees and its officers are not required to devote full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each Director and principal officer of the
Fund.
3
<PAGE>
The Manager is a Delaware limited partnership with its principal offices at 600
Fifth Avenue, New York, New York 10020. The Manager was at June 30, 1995
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $7.5 billion. The Manager acts as manager or administrator of eighteen
other investment companies and also advises pension trusts, profit-sharing
trusts and endowments.
Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and Administrative Services
Contract with the Manager. The Manager's predecessor, New England Investment
Companies, L.P. ("NEICLP") is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.,
the Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager. Reich & Tang Asset Management L.P. has succeeded NEICLP as the Manager
of the Fund. The re-execution of the Investment Management Contract did not
result in "assignment" of the Investment Management Contract with NEICLP under
the 1940 Act, since there is no change in actual control or management of the
Manager caused by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. New England Mutual Life Insurance
Company ("The New England") wholly owns NEIC and approximately 67.3%, of the
total partnership units outstanding of NEICLP, and Reich & Tang, Inc. owns
approximately 22.6% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England, which may be deemed a
"controlling person" of the Manager.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through eight investment advisory/management
affiliates and three distribution subsidiaries. These include 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 Investment
Associates, Inc.; and an affiliate, Capital Growth Management Limited
Partnership. These affiliates in the aggregate are investment advisors or
managers to 57 other registered investment companies.
The re-executed Investment Management Contract contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with NEICLP except for (i) the
dates of execution and termination and (ii) the identity of the Manager.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
Pursuant to the Investment Management Contract, the Manager receives from the
Fund a fee equal to .30% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services. In
addition to its fees under the Investment Management Contract, Reich & Tang
Distributors L.P., the Distributor, receives a service fee equal to .20% per
annum of the Fund's average daily net assets under the Shareholder Servicing
Agreement. The fees are accrued daily and paid monthly. Any portion of the total
fees received by the Manager and the Distributor may be used to provide
shareholder and administrative services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)
4
<PAGE>
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Fund pays the Manager the costs
of such personnel at rates which must be agreed upon between the Fund and the
Manager and provided that no payments shall be made for any services performed
by any officer of the general partner of the Manager or its affiliates. The
Manager at its discretion may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .20% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the unissued shares into separate
series of stock, each series representing a separate, additional investment
portfolio. Shares of all series will have identical voting rights, except where,
by law, certain matters must be approved by a majority of the shares of the
affected series. Each share of any series of shares when issued has equal
dividend, distribution, liquidation and voting rights within the series for
which it was issued, and each fractional share has those rights in proportion to
the percentage that the fractional share represents of a whole share. Shares
will be voted in the aggregate. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued in accordance
with the terms of the offering will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the shareholder.
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor who is a shareholder of record, the Fund does not issue certificates
evidencing Fund shares.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund is a no-load, open-end, non-diversified, management investment company
whose investment objectives are to provide investors with a money market
portfolio from which the interest income is exempt from regular Federal, and to
the extent possible, New York State and New York City income taxes, preservation
of capital, maintenance of liquidity and relative stability of principal. There
can be, of course, no assurance that the Fund will achieve its investment
objectives.
5
<PAGE>
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New York, other states, territories and
possessions of the U.S., and their authorities, agencies, instrumentalities and
political subdivisions ("Municipal Obligations") and in participation
certificates in such obligations purchased from banks, insurance companies or
other financial institutions. Dividends paid by the Fund which are attributable
to interest income on tax-exempt obligations of the State of New York and its
political subdivisions, or by or on behalf of Puerto Rico or other U.S.
possessions or territories or their political subdivisions, the interest on
which is exempt from regular Federal income tax under section 103 of the Code
and cannot be taxed by any state under Federal law, ("New York Municipal
Obligations"), will be exempt under current law from regular Federal, New York
State and New York City personal income taxes.
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. However, "exempt-interest" dividends may be subject to the Federal
alternative minimum tax. To the extent suitable New York Municipal Obligations
are not available for investment by the Fund, the Fund may purchase Municipal
Obligations issued by other states, their agencies and instrumentalities, the
interest income on which will be exempt from Federal income tax but will be
subject to New York State and New York City personal income taxes. Except when
acceptable securities are unavailable for investment by the Fund as determined
by the Manager, the Fund will invest at least 65% of its total assets New York
Municipal Obligations, although the exact amount of the Fund's assets invested
in such securities will vary from time to time. The Fund may hold uninvested
cash reserves pending investment and reserves the right to borrow up to 15% of
the Fund's total assets for temporary purposes from banks. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in tax-exempt Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its net assets in securities, the
interest income on which is subject to Federal, state and local income tax,
including securities the interest of which is subject to the federal alternative
minimum tax. The Fund expects to invest more than 25% of its assets in
participation certificates purchased from banks in New York Municipal
Obligations, including industrial revenue bonds. In view of this "concentration"
in bank participation certificates in New York Municipal Obligations, an
investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Fund.
6
<PAGE>
The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories and (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. Where
the issuer of a long-term security with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have rated short-term
debt outstanding, the long-term security is treated as unrated but may not be
purchased if it has a long-term rating from any NRSRO that is below the two
highest long-term categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds or notes, and "Aaa" and "Aa" by Moody's in
the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in
the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's
in the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "SP-1AA" by S&P and "VMIG-1" by Moody's.
Such instruments may produce a lower yield than would be available from less
highly rated instruments. The Fund's Board of Directors has determined that
Municipal Obligations which are backed by the credit of the Federal government
(the interest on which is not exempt from Federal income taxation) will be
considered to have a rating equivalent to Moody's "Aaa."
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
promptly whether the security presents minimal credit risks and shall cause the
Fund to take such action as the Board of Directors determines is in the best
interest of the Fund and its shareholders. However, reassessment is not required
if the security is disposed of or matures within five business days of the
Manager becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (1) is in default, (2) ceases to be an
eligible investment under Rule 2a-7 or (3) is determined to no longer present
minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.
7
<PAGE>
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
In view of the "concentration" of the Fund in bank participation certificates in
New York Municipal Obligations, which may be secured by bank letters of credit
or guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail which include extensive governmental regulations, changes
in the availability and cost of capital funds, and general economic conditions
(See "Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information) which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
any portfolio in securities that are related in such a way that an economic,
business or political development or change affecting one of the securities
would also affect the other securities including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.
As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of each such issuer. In addition, at the close of each quarter of its taxable
year, not more than 25% in value of the Fund's total assets may be invested in
securities of one issuer other than government securities. The limitations
described in this paragraph are not fundamental policies and may be revised to
the extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)
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The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident individual
investors. However, payment of interest and preservation of principal is
dependent upon the continuing ability of the New York issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Over the long term, New York State and New York City face serious
potential economic problems. The State has long been one of the wealthiest
states in the nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. For additional information, please refer to "Special
Factors Affecting New York" in the Statement of Additional Information.
Investors should consider the greater risk of the Fund's concentration versus
the safety that comes with a less concentrated investment portfolio and should
compare yields available on portfolios of New York issues with those of more
diversified portfolios including out-of-state issues before making an investment
decision. The Fund's management believes that by maintaining the Fund's
investment portfolio in liquid, short-term, high quality investments, including
the participation certificates and other variable rate demand instruments that
have high quality credit support from banks, insurance companies or other
financial institutions, the Fund is largely insulated from the credit risks that
may exist on long-term New York Municipal Obligations. For additional
information, please refer to the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and generally pays dividends monthly. There is no fixed
dividend rate. In computing these dividends, interest earned and expenses are
accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares immediately upon payment thereof unless a shareholder has elected by
written notice to the Fund to receive either of such distributions in cash.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations. (See "Investment Through
Participating Organizations" herein.) All other investors, and investors who
have accounts with Participating Organizations but who do not wish to invest in
the Fund through their Participating Organizations, may invest in the Fund
directly. (See "Other Purchase and Redemption Procedures" herein.) The minimum
initial investment in the Fund by Participating Organizations is $1,000 which
may be satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of customers whose initial investments are less than
$1,000. The minimum initial investment for all other investors is $5,000.
Initial investments may be made in any amount in excess of the applicable
minimums. The minimum amount for subsequent investments is $100 unless the
investor is a client of a Participating Organization whose clients have made
aggregate subsequent investments of $100.
The Fund sells and redeems its shares on a continuing basis at net asset value
and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
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In order to maximize earnings on its Portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept a subscription or invest an investor's payment in portfolio
securities until the payment is converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share made after receipt of the investor's purchase order. The Fund
reserves the right to reject any purchase order for its shares. Certificates for
Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, New York City time, on any Fund Business Day on
which an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon on a Fund Business Day will not result in share issuance
until the following Fund Business Day. Fund shares begin accruing income on the
day on which shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for redemption and no restriction on frequency of withdrawals. Proceeds
of redemptions are paid by check. If a shareholder elects to redeem all the
shares of the Fund he owns, all dividends accrued to the date of such redemption
will be paid to the shareholder along with the proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days, after shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the Securities and Exchange Commission determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
Securities and Exchange Commission) exists as a result of which disposal by the
Fund of its securities is not reasonably practicable or as a result of which it
is not reasonably practicable for the Fund fairly to determine the value of its
net assets, or for such other period as the Securities and Exchange Commission
may by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any day on which the New York Stock Exchange, Inc. is open
for trading become effective at the net asset value per share determined at 12
noon that day. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective. Redemption requests received
after 12 noon will result in a share redemption on the following Fund Business
Day.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization, and the Participating
Organization will be responsible for notifying the Participant Investor of the
proposed mandatory redemption. During the notice period a shareholder or
Participating Organization who receives such a notice may avoid mandatory
redemption by purchasing sufficient additional shares to increase the total net
asset value to the minimum amount and thereby avoid such mandatory redemption.
10
<PAGE>
The redemption of shares may result in the investor's receipt of more or less
than he paid for his shares and, thus, in a taxable gain or loss to the
investor.
INVESTMENT THROUGH
PARTICIPATING ORGANIZATIONS
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Manager with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Fund shares for the customers'
accounts. Also, Participating Organizations may send their customers periodic
account statements showing the total number of Fund shares owned by each
customer as of the statement closing date, purchases and redemptions of Fund
shares by each customer during the period covered by the statement and the
income earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Participant Investors whose Participating Organizations have not undertaken to
provide such confirmations and statements, will receive them from the Fund
directly.
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Manager for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Manager, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be re-registered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
Orders received by the Fund's transfer agent before 12 noon, New York City time,
on a Fund Business Day, with accompanying Federal Funds will result in the
issuance of shares on that day. Orders received by the Fund's transfer agent
after 12 noon with accompanying Federal Funds will result in the issuance of
shares on the following Fund Business Day. Participating Organizations are
responsible for instituting procedures to insure that purchase orders by their
respective clients are processed expeditiously.
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<PAGE>
DIRECT PURCHASE AND
REDEMPTION PROCEDURES
The following purchase and redemption procedures apply to investors who wish to
invest in the Fund directly and not through Participating Organizations. These
investors may obtain a current Prospectus and the subscription order form
necessary to open an account by telephoning the Fund at the following numbers:
Within New York State 212-830-5220
Outside New York State (TOLL FREE) 800-221-3079
All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchase and
redemptions of Fund shares during the month covered by the statement and the
dividends paid on Fund shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
INITIAL PURCHASES OF SHARES
Mail
Investors may send a check made payable to "New York Daily Tax Free Income Fund,
Inc." along with a completed subscription order form to:
New York Daily Tax Free Income Fund, Inc.
Reich & Tang Mutual Funds
600 Fifth Avenue
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's subscription will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, investors should first obtain a new account number by telephoning
the Fund at 212-830-5220 (within New York State) or 800-221-3079 (outside New
York State) and then instruct a member commercial bank to wire their money
immediately to:
Investors Fiduciary Trust Company
ABA # 101003621
DDA # 890752-953-8
For New York Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)
Fund Account #0948
SS #/Tax ID #
The investor should then promptly complete and mail the subscription order form.
12
<PAGE>
Investors planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon, New York City time, on
that same day. There may be a charge by the investor's bank for transmitting the
money by bank wire, and there also may be a charge for use of Federal Funds. The
Fund does not charge investors in the Fund for its receipt of wire transfers.
Payment in the form of a "bank wire" received prior to 12 noon, New York City
time, on a Fund Business Day will be treated as a Federal Funds payment received
on that day.
Personal Delivery
Deliver a check made payable to "New York Daily Tax Free Income Fund, Inc."
along with a completed subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 9th Floor
New York, New York 10020
SUBSEQUENT PURCHASES OF SHARES
Subsequent purchases can be made by bank wire or personal delivery, as indicated
above, or by mailing a check to:
Mutual Funds Group
Post Office Box 16815
Newark, New Jersey 07101-6815
There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription order form on file with the Fund is still applicable, a
shareholder may reopen an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
REDEMPTION OF SHARES
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share following
receipt by the Fund's transfer agent of the redemption order. Normally, payment
for redeemed shares is made on the same Fund Business Day after the redemption
is effected, provided the redemption request is received prior to 12 noon, New
York City time. However, redemption payments will not be made unless the check
(including a certified or cashier's check) used to purchase the shares has been
cleared for payment by the investor's bank and converted into Federal Funds. A
bank check is currently considered by the Fund to have cleared within 15 days
after it is deposited by the Fund.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and signed and guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
system or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written request to
the Fund, accompanied by any certificate that may have been previously issued to
the shareholder, addressed to:
New York Daily Tax Free Income Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed. Normally the redemption
proceeds are paid by check mailed to the shareholder of record.
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<PAGE>
Checks
By making the appropriate election on their subscription form, shareholders may
request a supply of checks which may be used to effect redemptions. The checks
which will be issued in the shareholder's name, are drawn on a special account
maintained by the Fund with the agent bank. Checks may be drawn in any amount of
$250 or more. When a check is presented to the Fund's agent bank, it instructs
the Fund's transfer agent to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. The use of
a check to make a withdrawal enables a shareholder in the Fund to receive
dividends on the shares to be redeemed up to the Fund Business Day on which the
check clears. Checks provided by the Fund may not be certified. Fund shares
purchased by check may not be redeemed by check for up to 15 days following the
date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank governing checking accounts. Checks
drawn on a jointly owned account may, at the shareholder's election, require
only one signature. Checks in amounts exceeding the value of the shareholder's
account at the time the check is presented for payment will not be honored. In
addition, the Fund reserves the right to charge the shareholder's account a fee
up to $20 for checks not honored as a result of an insufficient account value, a
check deemed not negotiable because it has been held longer than six months, an
unsigned check, a postdated check and a check written for an amount below the
Fund minimum of $250. Since the dollar value of the account changes daily, the
total value of the account may not be determined in advance and the account may
not be entirely redeemed by check. The Fund reserves the right to terminate or
modify the check redemption procedure at any time or to impose additional fees.
Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the authorization forms are filed in good order with the Fund's agent
bank, it will provide the shareholder with a supply of checks. This checking
service may be terminated or modified at any time.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption may be sent to the
shareholders at their addresses or, if in excess of $1,000, to their bank
accounts, both as set forth in the subscription order form or in a subsequent
written authorization. The Fund may accept telephone redemption requests from
any person with respect to accounts of shareholders who elect this service and
thus such shareholders risk possible loss of principal and interest in the event
of a telephone redemption not authorized by them. The Fund will employ
reasonable procedures to confirm that telephone redemption instructions are
genuine, and will require that shareholders electing such option provide a form
of personal identification. The failure by the Fund to employ such procedures
may cause the Fund to be liable for any losses incurred by investors due to
telephone redemptions based upon unauthorized or fraudulent instructions.
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<PAGE>
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York State at 800-221-3079, and state (i) the name of
the shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address, and
(v) the name of the person requesting the redemption. Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 12
noon, New York City time and on the next Fund Business Day if the redemption
request is received after 12 noon, New York City time. The Fund reserves the
right to terminate or modify the telephone redemption service in whole or in
part at any time and will notify shareholders accordingly.
Exchange Privilege
Shareholders of the Fund are entitled to exchange some or all of their shares in
the Fund for shares of certain other investment companies which retain Reich &
Tang Asset Management L.P. as investment adviser and which participate in the
exchange privilege program with the Fund. Currently the exchange privilege
program has been established between the Fund and California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund,
Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc. In the future,
the exchange privilege program may be extended to other investment companies
which retain Reich & Tang Asset Management L.P. as investment adviser, manager
or administrator.
There is no charge for the exchange privilege or limitation as to frequency of
exchange. The minimum amount for an exchange is $1,000, except that shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Shares are exchanged at their respective net
asset values.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between
investment company accounts registered in identical names. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is to be made. Prospectuses may be obtained by
contacting Reich & Tang Mutual Funds at the address or telephone number set
forth on the cover page of this Prospectus.
An exchange pursuant to the exchange privilege is treated for Federal income tax
purposes as a sale on which a shareholder may realize a taxable gain or loss.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
New York Daily Tax Free Income Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue
New York, New York 10020
15
<PAGE>
or, for shareholders who have elected that option, by telephone. The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time upon notice to shareholders.
SPECIFIED AMOUNT AUTOMATIC WITHDRAWAL PLAN
Shareholders may elect to withdraw shares and receive payment from the Fund of a
specified amount of $50 or more automatically on a monthly, quarterly,
semi-annual, or annual basis in an amount approved and confirmed by the Manager.
The monthly withdrawal payments of the specified amount are made on the 23rd day
of each month and the quarterly payments are made on the 23rd day of March,
June, September and December. Whenever such 23rd day of a month is not a
business day, the payment date is the business day preceding the 23rd day of the
month. In order to make a payment, a number of shares equal in aggregate net
asset value to the payment amount are redeemed at their net asset value on the
Fund Business Day immediately preceding the date of payment. To the extent that
the redemptions to make plan payments exceed the number of shares purchased
through reinvestment of dividends and distributions, the redemptions reduce the
number of shares purchased on original investment, and may ultimately liquidate
a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder but the Fund
does not expect that there will be any realizable capital gains.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 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 Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement with Reich & Tang Distributors L.P.
(the "Distributor") and a Shareholder Servicing Agreement with the Distributor
and the Manager.
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., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Under the Distribution Agreement, the Distributor for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a service fee equal to .20% per annum of the Fund's
average daily net assets (the "Shareholder Servicing Fee"). The fee is accrued
daily and paid monthly and any portion of the fee may be deemed to be used by
the Distributor for purposes of distribution of Fund shares and for payments to
Participating Organizations with respect to servicing their clients or customers
who are shareholders of the Fund.
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<PAGE>
The Plan and the Shareholder Servicing Agreement provides that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses not to exceed in the aggregate .05% per annum of the Fund's average
daily net assets, including the cost of dedicated lines and CRT terminals,
incurred by the Manager, Distributor and Participating Organizations in carrying
out their respective obligations under the Shareholder Servicing Agreement, and
(ii) preparing, printing and delivering the Fund's Prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
The Plan and the Shareholder Servicing Agreement provides that the Manager may
make payments from time to time from its own resources, which may include the
Management Fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Distributor has entered into written agreements, for performing
shareholder servicing and related administrative functions on behalf of the
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Fund's shares; (iii) to pay the costs of printing
and distributing the Fund's prospectus to prospective investors; and to defray
the cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee and past profits, for the
purposes enumerated in (i) above. The Manager and the Distributor may make
payments to Participating Organizations for providing certain of such services.
However, the Distributor, in its sole discretion, will determine the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and
Distributor for any fiscal year under the Investment Management Contract, the
Shareholder Servicing Agreement or the Administrative Services Contract in
effect for that year.
For the fiscal year ended April 30, 1995, the total amount spent pursuant to the
Plan was .30% of the average daily net assets of the Fund, of which .20% of the
average daily net assets was paid by the Fund to the Manager, pursuant to the
Shareholder Servicing Agreement and an amount representing .10% of the average
daily net assets was paid by the Manager (which may be deemed an indirect
payment by the Fund).
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FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code and under New York law as a
regulated investment company that distributes "exempt-interest dividends" as
defined in the Code. The Fund's policy is to distribute as dividends each year
100% (and in no event less than 90%) of its tax-exempt interest income, net of
certain deductions, and its investment company taxable income (if any). If
distributions are made in this manner dividends derived from the interest earned
on Municipal Obligations are "exempt-interest dividends" and are not subject to
regular Federal income tax, although as described below, such "exempt-interest
dividends" may be subject to the Federal alternative minimum tax. (See "Federal
Income Taxes" in the Statement of Additional Information.) Dividends paid from
taxable income, if any, and distributions of any realized short-term capital
gains (whether from tax-exempt or taxable obligations) are taxable to
shareholders as ordinary income, for Federal income tax purposes, whether
received in cash or reinvested in additional shares of the Fund. The Fund does
not expect to realize long-term capital gains and thus does not contemplate
distributing "capital gains dividends" or have undistributed capital gain income
within the meaning of the Code. The Fund will inform shareholders of the amount
and nature of its income and gains in a written notice mailed to shareholders
not later than 60 days after the close of the Fund's taxable year. For Social
Security recipients, interest on tax-exempt bonds, including tax-exempt interest
dividends paid by the Fund, is to be added to adjusted gross income for purposes
of computing the amount of Social Security benefits includible in gross income.
The Revenue Reconciliation Act of 1993 (P.L. 103-66) and other recent tax
legislation affects many of the Federal tax aspects of Municipal Obligations and
makes many important changes to the Federal income tax system, including an
increase in marginal tax rates. In addition to these changes, the Tax Reform Act
of 1986 (P.L. 99-514) limited the annual amount of many types of tax-exempt
bonds that a state may issue and revised current arbitrage restrictions. P.L.
99-514 also provided that interest on certain "private activity bonds"
(generally, a bond issue in which more than 10% of the proceeds are used for a
non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax and P.L. 103-66 increases the alternative
minimum tax rate for taxpayers other than corporations to up to 28%. Further,
corporations will be required to include in alternative minimum taxable income,
75% of the amount by which its adjusted current earnings (including generally,
tax-exempt interest) exceeds its alternative minimum taxable income (determined
without this tax item). Certain tax-exempt interest is also included in the tax
base for the additional corporate minimum tax imposed by the Superfund
Amendments and Reauthorization Act of 1986 for taxable years beginning before
January 1, 1996. In addition, in certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income," including tax-exempt interest.
With respect to the variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be exempt from regular Federal income taxes to the Fund. Counsel has pointed out
that the Internal Revenue Service has announced that it will not ordinarily
issue advance rulings on the question of ownership of securities or
participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel.
18
<PAGE>
The exemption of interest income for Federal income tax purposes does not
necessarily result in an exemption under the income or other tax laws of any
state or local taxing authority. However, to the extent that dividends are
derived from interest on New York Municipal Obligations, the dividends will also
be excluded from a New York resident shareholder's gross income for New York
State and New York City personal income tax purposes. This exclusion does not
result in a corporate shareholder being exempt for New York State and New York
City franchise tax purposes. Shareholders should consult their own tax advisors
about the status of distributions from the Fund in their own states and
localities.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on January 31,
1984 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end, management investment company.
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders or shares entitled to cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. Each Director serves until the next meeting
of the shareholders called for the purpose of considering the election or
reelection of such Director or of a successor to such Director, and until the
election and qualification of his or her successor, elected at such a meeting,
or until such Director sooner dies, resigns, retires or is removed by the vote
of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's registration statement filed with the Securities
and Exchange Commission, including the exhibits thereto. The registration
statement and the exhibits thereto may be examined at the Securities and
Exchange Commission and copies thereof may be obtained upon payment of certain
duplicating fees.
NET ASSET VALUE
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. Fund Business Day means weekdays (Monday
through Friday) except customary business holidays and Good Friday. It is
computed by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of shares
outstanding.
19
<PAGE>
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities and, is transfer agent
and dividend agent for the shares of the Fund. The Fund's transfer agent and the
Fund's custodian do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.
20
<PAGE>
NEW YORK
DAILY
TAX
FREE
INCOME
FUND, INC.
PROSPECTUS
September 1, 1995
TABLE OF CONTENTS
Table of Fees and Expenses.......................
Selected Financial Information...................
Introduction
Management of the Fund...........................
Description of Common Stock......................
Investment Objectives, Policies and Risks.........
Dividends and Distributions......................
How to Purchase and Redeem Shares
Investment through
Participating Organizations...............
Direct Purchase and
Redemption Procedures.....................
Initial Purchases of Shares..................
Subsequent Purchases of Shares...............
Redemption of Shares.........................
Exchange Privilege...........................
Specified Amount Automatic
Withdrawal Plan.............................
Destribution and Service Plan.....................
Federal Income Taxes..............................
Net Asset Value...................................
General Information ..............................
Custodian,Transfer Agent
and Diividend Agent.........................
<PAGE>
- -------------------------------------------------------------------------------
VICTORY SHARES OF For current yield, purchase, and
NEW YORK DAILY TAX FREE redemption Information call
INCOME FUND, INC.800-539-FUND (800-539-3863)
_______________________________________________________________________________
PROSPECTUS
September 1, 1995
New York Daily Tax Free Income Fund, Inc. (the "Fund") is designed to be a money
market fund for investors who desire interest income exempt from regular
Federal, and to the extent possible, New York State and New York City income
taxes and preservation of capital, liquidity and stability of principal by
investing in a professionally managed, non-diversified portfolio of high
quality, short-term municipal obligations. No assurance can be given that these
objectives will be achieved.
This Prospectus relates exclusively to the Victory Shares class of the Fund
("Victory Shares"). This Prospectus sets forth concisely the information about
the Fund that prospective investors will find helpful in making their investment
decisions. A Statement of Additional Information about the Fund has been filed
with the Securities and Exchange Commission and is available upon request and
without charge by calling or writing the Fund. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference into this Prospectus in its entirety.
Reich & Tang Asset Management L.P. acts as the investment manager of the Fund
and Reich & Tang Distributors L.P. acts as distributor of the Fund's shares.
Reich & Tang Asset Management L.P. is a registered investment adviser. Reich &
Tang Distributors L.P. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc.
Investors should be aware that the Victory Shares may not be purchased other
than through certain securities dealers with whom Key Trust Company ("Key
Trust"), or its affiliates, have entered into agreements for this purpose,
directly from Key Trust, or its affiliates, or through "Participating
Organizations" (see "Investments through Participating Organizations") with whom
they have accounts. Victory Shares have been created for the primary purpose of
providing a New York tax-free money market fund product for shareholders of The
Victory Portfolios ("The Victory Fund's") and clients of KeyCorp., and its
affiliates. Shares of the Fund other than the Victory Shares are offered
pursuant to a separate prospectus.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND INTENDS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE ALTHOUGH THERE CAN BE NO ASSURANCE THAT THIS VALUE WILL BE MAINTAINED.
SHARES OF THE FUND ARE:
- -NOT INSURED BY THE FDIC;
- -NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,ANY KEYCORP BANK, ANY OF
ITS AFFILIATES, OR ANY OTHER BANK;
- -SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED BY INVESTORS FOR
FUTURE REFERENCE.
_______________________________________________________________________________
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.
<TABLE>
<CAPTION>
Table of Contents
<C> <C>
Table of Fees and Expenses............ Subsequent Purchases of Shares....
Selected Financial Information........ Redemption of Shares............
Introduction.......................... Exchange Privilege..............
Management of The Fund................ Distribution and Service Plan.....
Description fo Common Stock........... Federal Income Taxes..............
Investment Objectives, Policies and Risks General Information...............
Dividends and Distributions........... Net Asset Value...................
How to Purchase and Redeem Shares..... Custodian, Transfer Agent
Investment Through Participating and Dividend Agent...............
Organizations...................
Initial Purchases of Victory Shares...
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
<S> <C>
Management Fees .30%
12b-1 Fees .20%
Other Expenses .37%
Administrative Services Fee .20%
Total Fund Operating Expenses .87%
Example 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
5% annual return (cumulative through the end of each year):
$9 $28 $48 $107
</TABLE>
The purpose of the above table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein. THE FIQURES REFLECTED IN THIS
EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN ABOVE.
_______________________________________________________________________________
SELECTED FINANCIAL INFORMATION
The following selected financial information of New York Daily Tax Free Income
Fund, Inc. has been audited by McGladrey & Pullen, LLP, Independent Certified
Public Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended April 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period
$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ---- ----- ----- ----- -----
Income from investment operations:
Net investment income.......... 0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040 0.036 0.046
Less distributions:
Dividends from net investment income
0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040 0.036 0.046
Net asset value, end of year... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ---- ----- ----- ----- -----
Total Return.................. 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86% 4.01% 3.63% 4.67%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)
$254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060 $226,115 $215,703 $121,856
Ratios to average net assets:
Expenses................... 0.87% 0.89% 0.89% 0.87% 0.82%+ .77%+ .80%+ .79%+ .82%+ .73%+
Net investment income...... 2.71% 1.82% 2.25% 3.63% 4.82%+ 5.32%+ 4.73%+ 3.96%+ 3.61+ 4.51%+
</TABLE>
+ Net of management and shareholder servicing fees waived equivalent to
.07%, .10%, .02%, .02%, .02% and.28%of average net assets.
2
<PAGE>
INTRODUCTION
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load,
non-diversified, open-end, management investment company that seeks to provide
its investors with a liquid money market portfolio from which the interest
income is, under current law, exempt from regular Federal, and to the extent
possible, New York State and New York City personal income taxes, preservation
of capital, liquidity and stability of principal by investing principally in
short-term, high quality debt obligations of the State of New York and its
political subdivisions and of Puerto Rico or other U.S. territories, and their
political subdivisions, the interest on which is exempt from regular Federal
income tax under section 103 of the Internal Revenue Code (the "Code") and
cannot be taxed by any state under Federal law as described under "Investment
Objectives, Policies and Risks" herein. The Fund also will invest in municipal
securities of issuers located in states other than New York, the interest income
on which will be exempt from regular Federal income tax, but will be subject to
New York State and New York City personal income tax for New York residents.
Although the Fund does not intend to do so, it reserves the right to invest up
to 20% of the value of its net assets in taxable obligations. This is a summary
of the Fund's fundamental investment policies which are set forth in full under
"Investment Objectives, Policies and Risks" herein and in the Statement of
Additional Information and may not be changed without approval of a majority of
the Fund's outstanding shares. No assurance can be given that these objectives
will be achieved.
The Fund's investment manager is Reich & Tang Asset Management L.P. (the
"Manager") which is a registered investment adviser and which currently acts as
manager or administrator to eighteen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors
L.P. (the "Distributor"), and the Fund has entered into a Distribution Agreement
and a Shareholder Servicing Agreement pursuant to the Fund's distribution and
service plan adopted under Rule 12b-1 under the Investment Company Act of 1940,
as amended, (the "1940 Act"). (See "Distribution and Service Plan".)
The Fund intends that its investment portfolio will be concentrated in New York
Municipal Obligations and bank participation certificates therein. A summary of
recent financial and credit developments and special risk factors affecting New
York State and New York City is set forth under "Special Factors Affecting New
York" in the Statement of Additional Information. Investment in the Fund should
be made with an understanding of the risks which an investment in New York
Municipal Obligations may entail. Payment of interest and preservation of
capital are dependent upon the continuing ability of New York issuers and/or
obligors of state, municipal and public authority debt obligations to meet their
obligations hereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated portfolio
and should compare yields available on portfolios of New York issues with those
of more diversified portfolios including out-of-state issues before making an
investment decision. The Fund's Board of Directors is authorized to divide the
unissued shares into separate series of stock, one for each of the Fund's
separate investment portfolios that may be created in the future.
Victory Shares have been created for the primary purpose of providing a New York
tax-free money market fund product for shareholders or persons qualified to buy
shares of The Victory Funds (see "Investments in Participating Organizations"
herein). Victory Shares are identical to other shares of the Fund, which are
offered pursuant to a series of prospectuses, with respect to investment
objectives and yield, but differ with respect to certain other matters. For
example, shareholders who hold other shares of the Fund may not participate in
the exchange privilege described herein and have different arrangements for
redemptions by check.
MANAGEMENT OF THE FUND
The Fund's Board of Directors which is responsible for the overall management
and supervision of the Fund, has employed Reich & Tang Asset Management L.P.
(the "Manager") to serve as investment manager of the Fund. The Manager provides
persons satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors or officers of Reich & Tang Asset Management, Inc., the
sole general partner of the Manager, or employees of the Manager or its
affiliates. Due to the services performed by the Manager, the Fund currently has
no employees and its officers are not required to devote full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each Director and principal officer of the
Fund.
3
<PAGE>
The Manager is a Delaware limited partnership with its principal offices at 600
Fifth Avenue, New York, New York 10020. The Manager was at June 30, 1995
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $7.5 billion. The Manager acts as manager or administrator of eighteen
other investment companies and also advises pension trusts, profit-sharing
trusts and endowments.
Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and Administrative Services
Contract with the Manager. The Manager's predecessor, New England Investment
Companies, L.P. ("NEICLP") is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.,
the Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager. Reich & Tang Asset Management L.P. has succeeded NEICLP as the Manager
of the Fund. The re-execution of the Investment Management Contract did not
result in "assignment" of the Investment Management Contract with NEICLP under
the 1940 Act, since there is no change in actual control or management of the
Manager caused by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. New England Mutual Life Insurance
Company ("The New England") wholly owns NEIC and approximately 67.3% of the
total partnership units outstanding of NEICLP and Reich & Tang, Inc. owns
approximately 22.6% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England, which may be deemed a
"controlling person" of the Manager.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through eight investment advisory/management
affiliates and three distribution subsidiaries. These include 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 Investment
Associates, Inc.; and an affiliate, Capital Growth Management Limited
Partnership. These affiliates in the aggregate are investment advisors or
managers to 57 other registered investment companies.
The re-executed Investment Management Contract contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with NEICLP except for (i) the
dates of execution and termination and (ii) the identity of the Manager.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
Pursuant to the Investment Management Contract, the Manager receives from the
Fund a fee equal to .30% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services. In
addition to its fees under the Investment Management Contract, Reich & Tang
Distributors L.P., the Distributor, receives a service fee equal to .20% per
annum of the Fund's average daily net assets under the Shareholder Servicing
Agreement. The fees are accrued daily and paid monthly. Any portion of the total
fees received by the Manager and the Distributor may be used to provide
shareholder and administrative services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Fund pays the Manager the costs
of such personnel at rates which must be agreed upon between the Fund and the
Manager and provided that no payments shall be made for any services performed
by any officer of the general partner of the Manager or its affiliates. The
Manager at its discretion may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .20% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares
(See "Distribution and Service Plan" herein).
For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets (the "Management Fee") for managing the Fund's investment portfolio and
performing related administrative and clerical services.
4
<PAGE>
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the unissued shares into separate
series of stock, each series representing a separate, additional investment
portfolio. Shares of all series will have identical voting rights, except where,
by law, certain matters must be approved by a majority of the shares of the
affected series. Each share of any series of shares when issued has equal
dividend, distribution, liquidation and voting rights within the series for
which it was issued, and each fractional share has those rights in proportion to
the percentage that the fractional share represents of a whole share. Shares
will be voted in the aggregate. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued in accordance
with the terms of the offering will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the shareholder.
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
Victory Shares have been created for the primary purpose of providing a New York
tax-free money market fund product for shareholders or persons qualified to buy
shares of The Victory Funds (see "Investments in Participating Organizations"
herein). Victory Shares are identical to other shares of the Fund, which are
offered pursuant to a series of prospectuses, with respect to investment
objectives and yield, but differ with respect to certain other matters. For
example, shareholders who hold other shares of the Fund may not participate in
the exchange privilege described herein and have different arrangements for
redemptions by check.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor who is a shareholder of record, the Fund does not issue certificates
evidencing Fund shares.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund is a no-load, open-end, non-diversified, management investment company
whose investment objectives are to provide investors with a money market
portfolio from which the interest income is exempt from regular Federal, and to
the extent possible, New York State and New York City income taxes, preservation
of capital, maintenance of liquidity and relative stability of principal. There
can be, of course, no assurance that the Fund will achieve its investment
objectives.
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New York, other states, territories and
possessions of the United States, and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations") and in
participation certificates in such obligations purchased from banks, insurance
companies or other financial institutions. Dividends paid by the Fund which are
attributable to interest income on tax-exempt obligations of the State of New
York and its political subdivisions, or by or on behalf of Puerto Rico or other
U.S. possessions or territories or their political subdivisions, the interest on
which is exempt from regular Federal income tax under section 103 of the Code
and cannot be taxed by any state under Federal law, ("New York Municipal
Obligations"), will be exempt under current law from regular Federal, New York
State and New York City personal income taxes.
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. However, "exempt-interest" dividends may be subject to the Federal
alternative minimum tax. To the extent suitable New York Municipal Obligations
are not available for investment by the Fund, the Fund may purchase Municipal
Obligations issued by other states, their agencies and instrumentalities, the
interest income on which will be exempt from Federal income tax but will be
subject to New York State and New York City personal income taxes. Except when
acceptable securities are unavailable for investment by the Fund as determined
by the Manager, the Fund will invest at least 65% of its total assets in New
York Municipal Obligations, although the exact amount of the Fund's assets
invested in such securities will vary from time to time. The Fund may hold
uninvested cash reserves pending investment and reserves the right to borrow up
to 15% of the Fund's total assets for temporary purposes from banks. The Fund's
5
<PAGE>
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in tax-exempt Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its net assets in securities, the
interest income on which is subject to Federal, state and local income tax,
including securities the interest of which is subject to the federal alternative
minimum tax. The Fund expects to invest more than 25% of its assets in
participation certificates purchased from banks in New York Municipal
Obligations, including industrial revenue bonds. In view of this "concentration"
in bank participation certificates in New York Municipal Obligations, an
investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Fund.
The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories and (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. Where
the issuer of a long-term security with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have rated short-term
debt outstanding, the long-term security is treated as unrated but may not be
purchased if it has a long-term rating from any NRSRO that is below the two
highest long-term categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds or notes, and "Aaa" and "Aa" by Moody's in
the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in
the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's
in the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "SP-1AA" by S&P and "VMIG-1" by Moody's.
Such instruments may produce a lower yield than would be available from less
highly rated instruments. The Fund's Board of Directors has determined that
Municipal Obligations which are backed by the credit of the Federal government
(the interest on which is not exempt from Federal income taxation) will be
considered to have a rating equivalent to Moody's "Aaa."
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
promptly whether the security presents minimal credit risks and shall cause the
Fund to take such action as the Board of Directors determines is in the best
interest of the Fund and its shareholders. However, reassessment is not required
if the security is disposed of or matures within five business days of the
Manager becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (1) is in default, (2) ceases to be an
eligible investment under Rule 2a-7 or (3) is determined to no longer present
minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
6
<PAGE>
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
In view of the "concentration" of the Fund in bank participation certificates in
New York Municipal Obligations, which may be secured by bank letters of credit
or guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail which include extensive governmental regulations, changes
in the availability and cost of capital funds, and general economic conditions
(see "Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information) which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
any portfolio in securities that are related in such a way that an economic,
business or political development or change affecting one of the securities
would also affect the other securities including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.
As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of each such issuer. In addition, at the close of each quarter of its taxable
year, not more than 25% in value of the Fund's total assets may be invested in
securities of one issuer other than government securities. The limitations
described in this paragraph are not fundamental policies and may be revised to
the extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)
The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident individual
investors. However, payment of interest and preservation of principal is
dependent upon the continuing ability of the New York issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Over the long term, New York State and New York City face serious
potential economic problems. The State has long been one of the wealthiest
States in the nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. For additional information, please refer to "Special
Factors Affecting New York" in the Statement of Additional Information.
Investors should consider the greater risk of the Fund's concentration versus
the safety that comes with a less concentrated investment portfolio and should
compare yields available on portfolios of New York issues with those of more
diversified portfolios including out-of-state issues before making an investment
decision. The Fund's management believes that by maintaining the Fund's
investment portfolio in liquid, short-term, high quality investments, including
the participation certificates and other variable rate demand instruments that
have high quality credit support from banks, insurance companies or other
financial institutions, the Fund is largely insulated from the credit risks that
may exist on long-term New York Municipal Obligations. For additional
information, please refer to the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and generally pays dividends monthly. There is no fixed
dividend rate. In computing these dividends, interest earned and expenses are
accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares immediately upon payment thereof unless a shareholder has elected by
written notice to the Fund to receive either of such distributions in cash or
has elected to reinvest distributions in shares of The Victory Funds.
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HOW TO PURCHASE AND REDEEM SHARES
Investors may invest in Victory Shares through Key Trust, its affiliates, or
through dealers with whom Key Trust or its affiliates have entered into
agreements for this purpose as described herein and those who have accounts with
Participating Organizations may invest in Victory Shares through their
Participating Organizations. (See "Investment Through Participating
Organizations" herein.) The minimum initial investment in Victory Shares is
$500. The minimum amount for subsequent investments is $25 unless the investor
is a client of a Participating Organization whose clients have made aggregate
subsequent investments of $100.
The Fund sells and redeems its shares on a continuing basis at net asset value
and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations,
Key Trust and its affiliates, and from dealers with whom Key Trust or its
affiliates, have entered into agreements for this purpose.
In order to maximize earnings on its Portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept an account application or invest an investor's payment in
portfolio securities until the payment is converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share made after receipt of the investor's account application. The
Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, Eastern time, on any Fund Business Day on which
an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon on a Fund Business Day will not result in share issuance
until the following Fund Business Day. Fund shares begin accruing income on the
day on which shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for redemption and no restriction on frequency of withdrawals. Proceeds
of redemptions are paid by check unless specified otherwise. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption, only if the account was coded "reinvest" otherwise
dividends are paid out the next time the normal distribution date occurs.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days, after shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the Securities and Exchange Commission determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
Securities and Exchange Commission) exists as a result of which disposal by the
Fund of its securities is not reasonably practicable or as a result of which it
is not reasonably practicable for the Fund fairly to determine the value of its
net assets, or for such other period as the Securities and Exchange Commission
may by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any day on which the New York Stock Exchange, Inc. is open for
trading become effective at the net asset value per share determined at 12 noon
that day. Shares redeemed are not entitled to participate in dividends declared
on the day a redemption becomes effective. Redemption requests received after 12
noon will result in a share redemption on the following Fund Business Day.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 60 days
in advance to any shareholder whose account is to be redeemed. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization, and the Participating
Organization will be responsible for notifying the Participant Investor of the
proposed mandatory redemption. During the notice period a shareholder or
Participating Organization who receives such a notice may avoid mandatory
redemption by purchasing sufficient additional shares to increase the total net
asset value to the minimum amount and thereby avoid such mandatory redemption.
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<PAGE>
The redemption of shares may result in the investor's receipt of more or less
than he paid for his shares and, thus, is a taxable gain or loss to the
investor.
INVESTMENT THROUGH PARTICIPATING ORGANIZATIONS
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Manager with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Victory Shares for the customers'
accounts. Also, Participating Organizations may send their customers periodic
account statements showing the total number of Victory Shares owned by each
customer as of the statement closing date, purchases and redemptions of Victory
Shares by each customer during the period covered by the statement and the
income earned by Victory Shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Victory Shares).
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Victory Shares may be
purchased and redeemed through the Participating Organization.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Manager for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Manager, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be re-registered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
Orders received by the Fund's transfer agent before 12 noon, Eastern time, on a
Fund Business Day, with accompanying Federal Funds will result in the issuance
of shares on that day. Orders received by the Fund's transfer agent after 12
noon with accompanying Federal Funds will result in the issuance of shares on
the following Fund Business Day. Participating Organizations are responsible for
instituting procedures to insure that purchase orders by their respective
clients are processed expeditiously.
INITIAL PURCHASES OF VICTORY SHARES
Mail
A completed and signed application is required to invest in Victory Shares.
Additional paperwork may be required from corporations, associations and certain
fiduciaries. Contact the Transfer Agent, Primary Funds Service Corporation toll
free at 1-800-539-3863 for instructions and to obtain an account application and
other materials.
Investors may send a check made payable to "Victory Shares of New York Daily Tax
Free Income Fund, Inc." along with a completed application to:
Victory Shares of New York
Daily Tax Free Income Fund, Inc.
c/o Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741
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<PAGE>
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of Victory Shares using the wire system for transmittal of
money among banks, investors should first obtain a new account number (initial
purchase only) and a wire control number by calling the Transfer Agent, at
1-800-539-3863 and then instruct a member commercial bank to wire their money
immediately to:
Boston Safe Deposit & Trust Co.
ABA # 011001234
for credit to PFSC DDA# 16-918-8
for further credit to Victory Account #________
wire control #________________________
The investor should then promptly complete and mail the account application.
Investors planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon, Eastern time, on that same
day. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12 noon, Eastern time, on a Fund
Business Day will be treated as a Federal Funds payment received on that day.
YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS AT 1-800-539-3863 TO OBTAIN
A WIRE CONTROL NUMBER.
Subsequent Purchases of Shares
Subsequent purchases can be made by bank wire, as indicated above, or by mailing
a check to:
Victory Shares of New York
Daily Tax Free Income Fund, Inc.
c/o Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741
There is a $25 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number and name. Provided that the
information on the account application on file with the Fund is still
applicable, a shareholder may reopen an account without filing a new account
application at any time during the year the shareholder's account is closed or
during the following calendar year.
REDEMPTION OF SHARES
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share following
receipt by the Fund's transfer agent of the redemption order. Normally, payment
for redeemed shares is made on the same Fund Business Day after the redemption
is effected, provided the redemption request is received prior to 12 noon,
Eastern time. However, redemption payments will not be made unless the check
(including a certified or cashier's check) used to purchase the shares has been
cleared for payment by the investor's bank and converted into Federal Funds. A
bank check is currently considered by the Fund to have cleared within 15 days
after it is deposited by the Fund.
A shareholder's original account application permits the shareholder to redeem
by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original account application by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and signed and guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
system or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
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<PAGE>
Written Requests
Shareholders may make a redemption in any amount by sending a written request to
the Fund addressed to:
Victory Shares of New York
Daily Tax Free Income Fund, Inc.
c/o Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741
All written requests for redemption must be signed by the shareholder. A
signature guaranteed is required if you wish to redeem more than $1,000 worth of
shares; if your account registration has changed within the last 60 days; if the
check is not being mailed to the address on your account; if the check is not
being made out to the account owner(s); or if the redemption proceeds are being
transferred to another account of The Victory Funds with a different
registration. A signature guarantee may not be provided by a Notary Public.
Banks, brokers, dealers, credit unions (if authorized under state law),
securities exchanges and associations, clearing agencies and savings
associations should be able to provide a signature guarantee. Normally the
redemption proceeds are paid by check mailed to the shareholder of record.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption may be sent to the
shareholders at their addresses or to their bank accounts, both as set forth in
the Fund account or in a subsequent written authorization. The Fund may accept
telephone redemption requests from any person with respect to accounts of
shareholders who elect this service and thus such shareholders risk possible
loss of principal and interest in the event of a telephone redemption not
authorized by them. The Fund and its agents will employ reasonable procedures to
confirm that telephone redemption instructions are genuine, and may require that
shareholders electing such option provide a form of personal identification. The
failure by the Fund to employ such procedures may cause the Fund to be liable
for any losses incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Transfer Agent at
1-800-539-3863 and state (i) the name of the shareholder appearing on the Fund's
records, (ii) the shareholder's account number with the Fund, (iii) the amount
to be withdrawn, (iv) whether such amount is to be forwarded to the
shareholder's designated bank account or address, and (v) the name of the person
requesting the redemption. Usually the proceeds are sent to the designated bank
account or address on the same Fund Business Day the redemption is effected,
provided the redemption request is received before 12 noon, Eastern time and on
the next Fund Business Day if the redemption request is received after 12 noon,
Eastern time. The Fund reserves the right to terminate or modify the telephone
redemption service in whole or in part at any time and will notify shareholders
accordingly.
Exchange Privilege
Shareholders of Victory Shares are entitled to exchange some or all of their
shares in the Fund for shares of The Victory Funds. Currently the exchange
privilege program has been established between the Fund and The Victory Funds.
There is presently no administrative charge for the exchange privilege or
limitation as to frequency of exchange, but the right to impose such a charge is
reserved. Shares are exchanged at their respective net asset values, and any
applicable sales charge.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between
investment company accounts registered in identical names. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is to be made. When an exchange of all the
Victory Fund shareholder's shares is made, all declared but unpaid distributions
shall also be invested in the fund exchanged into, unless the shareholder
otherwise specifies at the time the exchange is requested or unless cash payment
has been elected under the dividend payment options.
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<PAGE>
Investors should note that exchange transactions actually involve the redemption
of Victory Shares in one fund and an investment of the redemption proceeds into
the other fund.
An exchange pursuant to the exchange privilege is treated for Federal income tax
purposes as a sale on which a shareholder may realize a taxable gain or loss.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Victory Shares of New York
Daily Tax Free Income Fund, Inc.
c/o Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741
or, for shareholders who have elected that option, by telephone. The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege upon 60 days notice.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 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 Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement with Reich & Tang Distributors L.P.
(the "Distributor") and a Shareholder Servicing Agreement with the Distributor
and the Manager.
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., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Under the Distribution Agreement, the Distributor for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any applications and orders will not be binding on the
Fund until accepted by the Fund as principal.
For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a service fee equal to .20% per annum of the Fund's
average daily net assets (the "Shareholder Servicing Fee"). The fee is accrued
daily and paid monthly and any portion of the fee may be deemed to be used by
the Distributor for purposes of distribution of Fund shares and for payments to
Participating Organizations with respect to servicing their clients or customers
who are shareholders of the Fund.
The Plan and the Shareholder Servicing and Administration Agreement provides
that, in addition to the Shareholder Servicing Fee, the Fund will pay for (i)
telecommunications expenses not to exceed in the aggregate .05% per annum of the
Fund's average daily net assets, including the cost of dedicated lines and CRT
terminals, incurred by the Manager, Distributor and Participating Organizations
in carrying out their respective obligations under the Shareholder Servicing and
Administration Agreement and the Shareholder Servicing Agreements and (ii)
preparing, printing and delivering the Fund's Prospectus to existing
shareholders of the Fund and preparing and printing account application forms
for shareholder accounts.
The Plan and the Shareholder Servicing Agreement provides that the Manager may
make payments from time to time from its own resources, which may include the
Management Fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Distributor has entered into written agreements, for performing
shareholder servicing and related administrative functions on behalf of the
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Fund's shares; (iii) to pay the costs of printing
and distributing the Fund's prospectus to prospective investors; and to defray
the cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee and past profits, for the
purposes enumerated in (i) above. The Manager and the Distributor may make
payments to Participating Organizations for providing certain of such services.
However, the Distributor, in its sole discretion, will determine the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and
Distributor for any fiscal year under the Investment Management Contract the
Shareholder Servicing Agreement or the Administrative Services Contract in
effect for that year.
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<PAGE>
For the fiscal year ended April 30, 1995, the total amount spent pursuant to the
Plan was .30% of the average daily net assets of the Fund, of which .20% of the
average daily net assets was paid by the Fund to the Manager, pursuant to the
Shareholder Servicing Agreement and an amount representing .10% of the average
daily net assets was paid by the Manager (which may be deemed an indirect
payment by the Fund).
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code and under New York law as a
regulated investment company that distributes "exempt-interest dividends" as
defined in the Code. The Fund's policy is to distribute as dividends each year
100% (and in no event less than 90%) of its tax-exempt interest income, net of
certain deductions, and its investment company taxable income (if any). If
distributions are made in this manner dividends derived from the interest earned
on Municipal Obligations are "exempt-interest dividends" and are not subject to
regular Federal income tax, although as described below, such "exempt-interest
dividends" may be subject to the Federal alternative minimum tax. (See "Federal
Income Taxes" in the Statement of Additional Information.) Dividends paid from
taxable income, if any, and distributions of any realized short-term capital
gains (whether from tax-exempt or taxable obligations) are taxable to
shareholders as ordinary income, for Federal income tax purposes, whether
received in cash or reinvested in additional shares of the Fund. The Fund does
not expect to realize long-term capital gains and thus does not contemplate
distributing "capital gains dividends" or have undistributed capital gain income
within the meaning of the Code. The Fund will inform shareholders of the amount
and nature of its income and gains in a written notice mailed to shareholders
not later than 60 days after the close of the Fund's taxable year. For Social
Security recipients, interest on tax-exempt bonds, including tax-exempt interest
dividends paid by the Fund, is to be added to adjusted gross income for purposes
of computing the amount of Social Security benefits includible in gross income.
The Revenue Reconciliation Act of 1993 (P.L. 103-66) and other recent tax
legislation affects many of the Federal tax aspects of Municipal Obligations and
makes many important changes to the Federal income tax system, including an
increase in marginal tax rates. In addition to these changes, the Tax Reform Act
of 1986 (P.L. 99-514) limited the annual amount of many types of tax-exempt
bonds that a state may issue and revised current arbitrage restrictions. P.L.
99-514 also provided that interest on certain "private activity bonds"
(generally, a bond issue in which more than 10% of the proceeds are used for a
non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax and P.L. 103-66 increases the alternative
minimum tax rate for taxpayers other than corporations to up to 28%. Further,
corporations will be required to include in alternative minimum taxable income,
75% of the amount by which its adjusted current earnings (including generally,
tax-exempt interest) exceeds its alternative minimum taxable income (determined
without this tax item). Certain tax-exempt interest is also included in the tax
base for the additional corporate minimum tax imposed by the Superfund
Amendments and Reauthorization Act of 1986 for taxable years beginning before
January 1, 1996. In addition, in certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income," including tax-exempt interest.
With respect to the variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be exempt from regular Federal income taxes to the Fund. Counsel has pointed out
that the Internal Revenue Service has announced that it will not ordinarily
issue advance rulings on the question of ownership of securities or
participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel. (See "Federal Income Taxes" in the
Statement of Additional Information.)
13
<PAGE>
The exemption of interest income for Federal income tax purposes does not
necessarily result in an exemption under the income or other tax laws of any
state or local taxing authority. However, to the extent that dividends are
derived from interest on New York Municipal Obligations, the dividends will also
be excluded from a New York resident shareholder's gross income for New York
State and New York City personal income tax purposes. This exclusion does not
result in a corporate shareholder being exempt for New York State and New York
City franchise tax purposes. Shareholders should consult their own tax advisors
about the status of distributions from the Fund in their own states and
localities.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on January 31,
1984 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end, management investment company.
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders or shares entitled to cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. Each Director serves until the next meeting
of the shareholders called for the purpose of considering the election or
reelection of such Director or of a successor to such Director, and until the
election and qualification of his or her successor, elected at such a meeting,
or until such Director sooner dies, resigns, retires or is removed by the vote
of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's registration statement filed with the Securities
and Exchange Commission, including the exhibits thereto. The Registration
Statement and the exhibits thereto may be examined at the Securities and
Exchange Commission and copies thereof may be obtained upon payment of certain
duplicating fees.
NET ASSET VALUE
The net asset value of the Fund's shares is determined as of 12 noon, Eastern
time, on each Fund Business Day. Fund Business Day means weekdays (Monday
through Friday) except customary business holidays and Good Friday. It is
computed by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of shares
outstanding.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
CUSTODIAN AND TRANSFER AGENT
Primary Funds Service Corporation, P.O. Box 9741, Providence, Rhode IslandI
02940-9741 is transfer agent for the Victory Shares of the Fund. Investors
Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri 64105 is
custodian for its cash and securities. The Fund's transfer agent and custodian
do not assist in, and are not responsible for, investment decisions involving
assets of the Fund.
14
<PAGE>
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NEW YORK 600 FIFTH AVENUE, NEW YORK, NY 10020
DAILY TAX FREE (212) 830-5220
INCOME FUND, INC.
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 1995
Relating to the New York Daily Tax Free Income Fund, Inc.
and the
Victory Shares of New York Daily Tax Free Income Fund, Inc.
Prospectuses dated September 1, 1995
This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of New York Daily Tax Free Income Fund, Inc. (the "Fund") and the Prospectus of
Victory Shares of the Fund both dated September 1, 1995 and should be read in
conjunction with the respective Prospectus. The Fund's Prospectus may be
obtained from any Participating Organization or by writing or calling the Fund.
If you wish to invest in Victory Shares of the Fund you should obtain a separate
prospectus by writing to Primary Funds Service Corporation, P.O. Box 9741,
Providence, Rhode Island 02940-9741 or by calling (800) 539-FUND. This Statement
of Additional Information is incorporated by reference into the respective
Prospectus in its entirety.
<TABLE>
<CAPTION>
Table of Contents
- -------------------------------------------------------------------------------
<C> <C>
Investment Objectives, Manager
Policies and Risks.................... Management of the Fund............
Description of Municipal Obligations... Counsel and Auditors..............
Variable Rate Demand Instruments...... Compensation Table................
and Participation Certificates....... Distribution and Service Plan.....
When-Issued Securities................ Description of Common Stock.......
Stand-by Commitments.................. Expense Limitation................
Taxable Securities..................... Federal Income Taxes..............
Repurchase Agreements................ Custodian and Transfer Agent......
Special Factors Affecting New York..... Description of Ratings............
Investment Restrictions................ Taxable Equivalent Yield Table....
Portfolio Transactions................. Report of Certified Public
Accountants.....................
How to Purchase and Redeem Shares...... Independent Auditors Report.......
Net Asset Value........................ Financial Statements..............
Yield Quotations......................
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, the Fund is a no-load, open-end, non-diversified,
management investment company whose investment objective is to provide investors
with a liquid, money market portfolio from which the interest income is exempt
from regular Federal, and to the extent possible, New York State and New York
City income taxes along with preservation of capital, maintenance of liquidity
and relative stability of principal. The following discussion expands upon the
description of the Fund's investment objectives and policies in the Prospectus.
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New York, other states, territories and
possessions of the United States, and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations") and in
participation certificates in such obligations purchased from banks, insurance
companies or other financial institutions. Dividends paid by the Fund which are
attributable to interest income on tax-exempt obligations of the State of New
York and its political subdivisions, or by or on behalf of Puerto Rico or other
U.S. possessions or territories and their political subdivisions, the interest
on which is exempt from regular Federal income tax under section 103 of the
Internal Revenue Code (the "Code") and cannot be taxed by any state under
Federal law ("New York Municipal Obligations"), will be exempt from regular
Federal, New York State and New York City personal income taxes. Although the
Supreme Court has determined that Congress has the authority to subject the
interest on bonds such as the Municipal Obligations to Federal income taxation,
existing law excludes such interest from regular Federal income tax. However,
"exempt-interest" dividends may be subject to the Federal alternative minimum
tax. To the extent suitable New York Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states, their agencies and instrumentalities, the interest income on which
will be exempt from regular Federal income tax but will be subject to New York
State and New York City personal income taxes. Except when acceptable securities
are unavailable for investment by the Fund as determined by the Manager, the
Fund will invest at least 65% of its assets in New York Municipal Obligations,
although the exact amount of the Fund's assets invested in such securities will
vary from time to time. The Fund seeks to maintain an investment portfolio with
a dollar-weighted average maturity of 90 days or less and to value its
investment portfolio at amortized cost and maintain a net asset value at a $1.00
per share. There can be no assurance that this value will be maintained. The
Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements.
Although the Fund will attempt to invest 100% of its assets in tax-exempt
Municipal Obligations, the Fund reserves the right to invest up to 20% of the
value of its net assets in securities, the interest income on which is subject
to Federal, state and local income tax. The Fund expects to invest more than 25%
of its assets in participation certificates purchased from banks in industrial
revenue bonds and other New York Municipal Obligations. In view of this
"concentration" in bank participation certificates in New York Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail (see "Variable Rate Demand Instruments and Participation
Certificates" herein). The investment objectives of the Fund described in this
paragraph may not be changed unless approved by the holders of a majority of the
outstanding shares of the Fund that would be affected by such a change. As used
in this Statement of Additional Information, the term "majority of the
outstanding shares" of the Fund means, respectively, the vote of the lesser of
(i) 67% or more of the shares of the Fund present at a meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy or (ii) more than 50% of the outstanding shares of the
Fund.
The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories and (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. Where
the issuer of a long-term security with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have rated short-term
2
<PAGE>
debt outstanding, the long-term security is treated as unrated but may not be
purchased if it has a long-term rating from any NRSRO that is below the two
highest long-term categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) While there are several organizations that currently
qualify as NRSROs, two examples of NRSROs are Standard & Poor's Corporation
("S&P") and Moody's Investors Service, Inc. ("Moody's"). The two highest ratings
by S&P and Moody's are "AAA" and "AA" by S&P in the case of long-term bonds or
notes or "Aaa" and "Aa" by Moody's in the case of bonds; "SP-1" and "SP-2" by
S&P or "MIG-1" and "MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by
S&P's or "Prime-1" and "Prime-2" by Moody's, in the case of tax-exempt
commercial paper. The highest rating in the case of variable and floating demand
notes is "SP-1/A" by S&P and "VMIG-1" by Moody's. Such instruments may produce a
lower yield than would be available from less highly rated instruments. The
Fund's Board of Directors has determined that Municipal Obligations which are
backed by the credit of the Federal government will be considered to have a
rating equivalent to Moody's "Aaa". (See "Description of Ratings" herein.)
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund's
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the Investment Company Act of 1940 (the "1940 Act")
with respect to investing its assets in one or relatively few issuers. This
non-diversification may present greater risks than in the case of a diversified
company. However, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Code. The Fund will be restricted in that at
the close of each quarter of the taxable year, at least 50% of the value of its
total assets must be represented by cash, government securities, investment
company securities and other securities limited in respect of any one issuer to
not more than 5% in value of the total assets of the Fund and to not more than
10% of the outstanding voting securities of each issuer. In addition, at the
close of each quarter of its taxable year, not more than 25% in value of the
Fund's total assets may be invested in securities of one issuer other than
Government securities. The limitations described in this paragraph regarding
qualification as a "regulated investment company" are not fundamental policies
and may be revised to the extent applicable Federal income tax requirements are
revised. (See "Federal Income Taxes" herein.)
DESCRIPTION OF MUNICIPAL OBLIGATIONS
As used in this Statement of Additional Information, "Municipal Obligations"
include the following as well as "Variable Rate Demand Instruments and
Participation Certificates" herein.
1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities") which
generally have a maturity at the time of issue of one year or more and
which are issued to raise funds for various public purposes such as
construction of a wide range of public facilities, to refund outstanding
obligations and to obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Issuers of general obligation bonds include
states, counties, cities, towns and other governmental units. The principal
of, and interest on, revenue bonds are payable from the income of specific
projects or authorities and generally are not supported by the issuer's
general power to levy taxes. In some cases, revenues derived from specific
taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by
public authorities to provide funding for various privately operated
industrial facilities (hereinafter referred to as "industrial revenue
bonds" or "IRBs"). Interest on the IRBs is generally exempt, with certain
exceptions, from Federal income tax pursuant to Section 103(a) of the Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Federal Income Taxes" herein.) IRBs are, in most cases,
revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the facilities
financed by the bonds or other guarantor to meet its financial obligations
3
<PAGE>
and, in certain instances, the pledge of real and personal property as
security for payment. If there is no established secondary market for
the IRBs, the IRBs or the participation certificates in IRBs purchased
by the
Fund will be supported by letters of credit, guarantees or insurance
that meet the definition of Eligible Securities at the time of
acquisition and provide the demand feature which may be exercised by
the Fund at anytime to provide liquidity. Shareholders should note
that the Fund may invest in IRBs acquired in transactions involving a
Participating Organization. In accordance with investment restriction
number 6 (herein), the Fund is permitted to invest up to 10% of the
portfolio in high quality, short term Municipal Obligations (including
IRBs) meeting the definition of Eligible Securities at the time of
acquisition that may not be readily marketable or have a liquidity
feature.
2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation
notes, revenue anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale or receipt of other
revenues are usually general obligations of the issuing municipality
or agency. Project notes are issued by local agencies and are
guaranteed by the United States Department of Housing and Urban
Development. Project notes are also secured by the full faith and
credit of the United States. The Fund's investments may be
concentrated in Municipal Notes of New York issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent
very short-term, unsecured, negotiable promissory notes. These
obligations are often issued to meet seasonal working capital needs of
municipalities or to provide interim construction financing and are
paid from general revenues of municipalities or are refinanced with
long-term debt. In most cases Municipal Commercial Paper is backed by
letters of credit, lending agreements, note repurchase agreements or
other credit facility agreements offered by banks or other
institutions which may be called upon in the event of default by the
issuer of the commercial paper.
4. Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or
revenue bonds. Leases and installment purchase or conditional sale
contracts (which normally provide for title to the leased asset to
pass eventually to the governmental issuer) have evolved as a means
for governmental issuers to acquire property and equipment without
meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and
statutes are deemed to be inapplicable because of the inclusion in
many leases or contracts of "non-appropriation" clauses that provide
that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other
periodic basis. To reduce this risk, the Fund will only purchase
Municipal Leases subject to a non-appropriation clause where the
payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, a guarantee, insurance or
other comparable undertaking of an approved financial institution.
These types of municipal leases may be considered illiquid and subject
to the 10% limitation of investments in illiquid securities set forth
under "Investment Restrictions" contained herein. The Board of
Directors may adopt guidelines and delegate to the Manager the daily
function of determining and monitoring the liquidity of municipal
leases. In making such determination, the Board and the Manager may
consider such factors as the frequency of trades for the obligation,
the number of dealers willing to purchase or sell the obligations and
the number of other potential buyers and the nature of the marketplace
for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board
determines that any municipal leases are illiquid, such lease will be
subject to the 10% limitation on investments in illiquid securities.
5. Any other Federal tax-exempt, and to the extent possible, New York
State and New York City tax-exempt obligations issued by or on behalf
of states and municipal governments and their authorities, agencies,
instrumentalities and political subdivisions, whose inclusion in the
Fund would be consistent with the Fund's "Investment Objectives,
4
<PAGE>
Policies and Risks" and permissible under Rule 2a-7 under the 1940
Act. Subsequent to its purchase by the Fund, a rated Municipal
Obligation may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. If this occurs, the
Board of Directors of the Fund shall reassess promptly whether the
Municipal Obligation presents minimal credit risks and shall cause the
Fund to take such action as the Board of Directors determines is in
the best interest of the Fund and its shareholders. However,
reassessment is not required if the Municipal Obligation is disposed
of or matures within five business days of the Manager becoming aware
of the new rating and provided further that the Board of Directors is
subsequently notified of the Manager's actions.
In addition, in the event that a Municipal Obligation (1) is in default, (2)
ceases to be an Eligible Security or (3) there is a determination that it no
longer presents minimal credit risks, the Fund will dispose of the Municipal
Obligation absent a determination by the Fund's Board of Directors that disposal
of the Municipal Obligation would not be in the best interests of the Fund. In
the event that the Municipal Obligation is disposed of it shall be disposed of
as soon as practicable consistent with achieving an orderly disposition by sale,
exercise of any demand feature or otherwise. In the event of a default with
respect to a Municipal Obligation which immediately before default accounted for
1/2 of 1% or more of the Fund's total assets, the Fund shall promptly notify the
Securities and Exchange Commission of such fact and of the actions that the Fund
intends to take in response to the situation. Certain Municipal Obligations
issued by instrumentalities of the United States Government are not backed by
the full faith and credit of the United States Treasury but only by the
creditworthiness of the instrumentality. The Fund's Board of Directors has
determined that any Municipal Obligation that depends directly, or indirectly
through a government insurance program or other guarantee, on the full faith and
credit of the United States Government will be considered to have a rating in
the highest category. Where necessary to ensure that the Municipal Obligations
are Eligible Securities, or where the obligations are not freely transferable,
the Fund will require that the obligation to pay the principal and accrued
interest be backed by an unconditional irrevocable bank letter of credit, a
guarantee, insurance or other comparable undertaking of an approved financial
institution that would qualify the investment as an Eligible Security.
VARIABLE RATE DEMAND INSTRUMENTS
AND PARTICIPATION CERTIFICATES
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations that provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days' notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised either
at any time or at specified intervals not exceeding 397 days depending upon the
terms of the instrument. The terms of the instruments provide that interest
rates are adjustable at intervals ranging from daily to up to 397 days and the
adjustments are based upon the "prime rate"* of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Fund will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed by its Board of Directors to minimize
credit risk. A fund utilizing the amortized cost method of valuation under Rule
2a-7 of the 1940 Act may only purchase variable rate demand instruments only if
(i) the instrument is subject to an unconditional demand feature, exercisable by
the Fund in the event of a default in the payment of principal or interest on
the underlying securities, that is an Eligible Security, or (ii) the instrument
is not subject to an unconditional demand feature but does qualify as an
Eligible Security and has a long-term rating by the Requisite NRSROs in one of
the two highest rating categories, or if unrated, is determined to be of
comparable quality by the Fund's Board of Directors. The Fund's Board of
Directors may determine that an unrated variable rate demand instrument meets
the Fund's quality criteria if it is backed by a letter of credit or guarantee
or is insured by an insurer that meets the quality criteria for the Fund stated
herein or on the basis of a credit evaluation of the underlying obligor. If an
instrument is ever not deemed to be an Eligible Security, the Fund either will
sell it in the market or exercise the demand feature.
- -------------------------------------------------------------------------------
* Prime rate is generally the rate charged by a bank to its most creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.
- -------------------------------------------------------------------------------
5
<PAGE>
The variable rate demand instruments that the Fund may invest in include
participation certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase participation certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A participation certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be the bank issuing the participation certificate, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
certificate of participation) or insurance policy of an insurance company that
the Board of Directors of the Fund has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the participation
certificate back to the institution and draw on the letter of credit or
insurance after no more than 30 days notice either at any time or at specified
intervals not exceeding 397 days (depending on terms of participation), for all
or any part of the full principal amount of the Fund's participation interest in
the security, plus accrued interest. The Fund intends to exercise the demand
only (1) upon a default under the terms of the bond documents, (2) as needed to
provide liquidity to the Fund in order to make redemptions of Fund shares or (3)
to maintain a high quality investment portfolio. The institutions issuing the
participation certificates will retain a service and letter of credit fee where
applicable and a fee for providing the demand repurchase feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the participations were purchased by the Fund. The total fees
generally range from 5% to 15% of the applicable prime rate or other interest
rate index. With respect to insurance, the Fund will attempt to have the issuer
of the participation certificate bear the cost of the insurance, although the
Fund retains the option to purchase insurance if necessary, in which case the
cost of insurance will be an expense of the Fund subject to the Fund's expense
limitation (see "Expense Limitation" herein). The Manager has been instructed by
the Fund's Board of Directors to continually monitor the pricing, quality and
liquidity of the variable rate demand instruments held by the Fund, including
the participation certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to which
the Fund may subscribe. Although these instruments may be sold by the Fund, the
Fund intends to hold them until maturity, except under the circumstances stated
above. (See "Federal Income Taxes" herein.)
In view of the "concentration" of the Fund in bank participation certificates in
New York Municipal Obligations, secured by bank letters of credit or guarantees,
an investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. Banks are subject to extensive governmental regulations which may
limit both the amounts and types of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of this industry is largely dependent upon the availability and cost of capital
funds for the purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an important part in
the operations of this industry and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations under a letter of credit. The Fund may invest 25% or more
of the net assets of any portfolio in securities that are related in such a way
that an economic, business or political development or change affecting one of
the securities would also affect the other securities including, for example,
securities the interest upon which is paid from revenues of similar type
projects, or securities the issuers of which are located in the same state.
The recent period has seen wide fluctuations in interest rates, particularly
"prime rates" charged by banks. While the value of the underlying variable rate
demand instruments may change with changes in interest rates generally, the
variable rate nature of the underlying variable rate demand instruments should
minimize changes in value of the instruments. Accordingly, as interest rates
decrease or increase, the potential for capital appreciation and the risk of
potential capital depreciation is less than would be the case with a portfolio
of fixed income securities. The portfolio may contain variable maximum rates set
by state law limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent it does, increases or decreases in
value may be somewhat greater than would be the case without such limits.
Additionally, the portfolio may contain variable rate demand participation
certificates in fixed rate Municipal Obligations. The fixed rate of interest on
these Municipal Obligations will be a ceiling on the variable rate of the
participation certificate. In the event that interest rates increased so that
6
<PAGE>
the variable rate exceeded the fixed rate on the Municipal Obligations, the
Municipal Obligations could no longer be valued at par and may cause the Fund to
take corrective action, including the elimination of the instruments from the
portfolio. Because the adjustment of interest rates on the variable rate demand
instruments is made in relation to movements of the applicable banks' "prime
rates", or other interest rate adjustment index, the variable rate demand
instruments are not comparable to long-term fixed rate securities. Accordingly,
interest rates on the variable rate demand instruments may be higher or lower
than current market rates for fixed rate obligations of comparable quality with
similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to be an
eligible security, it will be sold in the market or through exercise of the
repurchase demand feature to the issuer.
WHEN-ISSUED SECURITIES
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on the Municipal Obligations are each fixed at the time the buyer
enters into the commitment although delivery and payment of the Municipal
Obligations normally take place within 45 days after the date of the Fund's
commitment to purchase. Although the Fund will only make commitments to purchase
when-issued Municipal Obligations with the intention of actually acquiring them,
the Fund may sell these securities before the settlement date if deemed
advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way, that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
income tax.
STAND-BY COMMITMENTS
When the Fund purchases Municipal Obligations it may also acquire stand-by
commitments from banks and other financial institutions with respect to such
Municipal Obligations. Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Fund's option a specified Municipal Obligation at a
specified price with same day settlement. A stand-by commitment is the
equivalent of a "put" option acquired by the Fund with respect to a particular
Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.
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The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio would not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment was acquired.
The Fund would enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks and, where the issuer of the Municipal Obligation does not meet the
eligibility criteria, only where the issuer of the stand-by commitment has
received a rating which meets the eligibility criteria or, if not rated,
presents a minimal risk of default as determined by the Board of Directors. The
Fund's reliance upon the credit of these banks and broker-dealers would be
supported by the value of the underlying Municipal Obligations held by the Fund
that were subject to the commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income taxes
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment.
The acquisition of a stand-by commitment would not affect the valuation or
assumed maturity of the underlying Municipal Obligations which will continue to
be valued in accordance with the amortized cost method. Stand-by commitments
acquired by the Fund would be valued at zero in determining net asset value. In
those cases in which the Fund paid directly or indirectly for a stand-by
commitment, its cost would be reflected as unrealized depreciation for the
period during which the commitment is held by the Fund. Stand-by commitments
would not affect the dollar weighted average maturity of the Fund's portfolio.
The maturity of a security subject to a stand-by commitment is longer than the
stand-by repurchase date.
The stand-by commitments that the Fund may enter into are subject to certain
risks, which include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation. (See
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
TAXABLE SECURITIES
Although the Fund will attempt to invest 100% of its net assets in Municipal
Obligations, the Fund may invest up to 20% of the value of its total assets in
securities of the kind described below, the interest income on which is subject
to Federal income tax, under any one or more of the following circumstances: (a)
pending investment of proceeds of sales of Fund shares or of portfolio
securities, (b) pending settlement of purchases of portfolio securities and (c)
to maintain liquidity for the purpose of meeting anticipated redemptions. In
addition, the Fund may temporarily invest more than 20% in such taxable
securities when, in the opinion of the Manager, it is advisable to do so because
of adverse market conditions affecting the market for Municipal Obligations. The
kinds of taxable securities in which the Fund may invest are limited to the
following short-term, fixed-income securities (maturing in 397 days or less from
the time of purchase): (1) obligations of the United States Government or its
agencies, instrumentalities or authorities; (2) commercial paper meeting the
definition of Eligible Security at the time of acquisition; (3) certificates of
deposit of domestic banks with assets of $1 billion or more; and (4) repurchase
agreements with respect to any Municipal Obligations or other securities which
the Fund is permitted to own. (See "Federal Income Taxes" herein.)
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REPURCHASE AGREEMENTS
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund would acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon, and the
Fund or its custodian shall have possession of the collateral, which the Fund's
Board believes will give it a valid, perfected security interest in the
collateral. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs
in connection with the disposition of the collateral. The Fund's Board believes
that the collateral underlying repurchase agreements may be more susceptible to
claims of the seller's creditors than would be the case with securities owned by
the Fund. It is expected that repurchase agreements will give rise to income
which will not qualify as tax-exempt income when distributed by the Fund. The
Fund will not invest in a repurchase agreement maturing in more than seven days
if any such investment together with illiquid securities held by the Fund exceed
10% of the Fund's total net assets. (See Investment Restriction Number 6
herein.) Repurchase agreements are subject to the same risks described herein
for stand-by commitments.
SPECIAL FACTORS AFFECTING NEW YORK
This summary is included for the purpose of providing a general description of
New York State and New York City credit and financial conditions. As stated
previously, the Fund will invest only in securities that are rated high quality
by either of the major rating services or that are unrated but are determined to
be of comparable quality by the Fund's Board of Directors on the basis of credit
enhancement features such as letters of credit, guarantees or insurance.
Economic Trends. Over the long term, the State of New York (the "State") and the
City of New York (the "City") face serious potential economic problems. The City
accounts for approximately 41% of the State's population and personal income,
and the City's financial health affects the State in numerous ways. The State
historically has been one of the wealthiest states in the nation. For decades,
however, the State has grown more slowly than the nation as a whole, gradually
eroding its relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more affluent to the
suburbs and an influx of generally less affluent residents. Regionally, the
older Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City has also
had to face greater competition as other major cities have developed financial
and business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City. In recent years
the State's economic position has improved in a manner consistent with that for
the Northeast as a whole.
The State has for many years had a very high State and local tax burden relative
to other states. The State and its localities have used these taxes to develop
and maintain their transportation networks, public schools and colleges, public
health systems, other social services and recreational facilities. Despite these
benefits, the burden of State and local taxation, in combination with the many
other causes of regional economic dislocation, has contributed to the decisions
of some businesses and individuals to relocate outside, or to not locate within,
the State.
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Notwithstanding the numerous initiatives that the State and its localities may
take to encourage economic growth and achieve balanced budgets, reductions in
Federal spending could materially and adversely affect the financial condition
and budget projections of the State and its localities.
New York City. The City, with a population of approximately 7.3 million, is an
international center of business and culture. Its non-manufacturing economy is
broadly based, with the banking and securities, life insurance, communications,
publishing, fashion design, retailing and construction industries accounting for
a significant portion of the City's total employment earnings. Additionally, the
City is the nation's leading tourist destination. The City's manufacturing
activity is conducted primarily in apparel and publishing.
The national economic downturn which began in July 1990 adversely affected the
local economy, which had been declining since late 1989. As a result, the City
experienced job losses in 1990 and 1991 and real Gross City Product (GCP) fell
in those two years. Beginning in calendar year 1992, the improvement in the
national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
For each of the 1981 through 1994 fiscal years, the City achieved balanced
operating results as reported in accordance with generally accepted accounting
principles ("GAAP"), and the City's 1995 fiscal year results are projected to be
balanced in accordance with GAAP. The City was required to close substantial
budget gaps in recent years in order to maintain balanced operating results. For
fiscal year 1995, the City has adopted a budget which has halted the trend in
recent years of substantial increases in City spending from each year to the
next. There can be no assurance that the City will continue to maintain a
balanced budget as required by State law without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. There can be no assurance that
there will not be reductions in State aid to the City from amounts currently
projected or that State budgets in future fiscal years will be adopted and that
such reductions or delays will not have adverse effects on the City's cash flow
or expenditures.
New York State and its Authorities. The economic and financial condition of the
State may be affected by various financial, social, economic and political
factors. Those factors can be very complex, may vary from fiscal year to fiscal
year, and are frequently the result of actions taken not only by the State and
its agencies and instrumentalities, but also by entities, such as the Federal
government, that are not under the control of the State.
The State Financial Plan is based upon forecasts of national and State economic
activity. Economic forecasts have frequently failed to predict accurately the
timing and magnitude of changes in the national and the State economies. Many
uncertainties exist in forecasts of both the national and State economies,
including consumer attitudes toward spending, Federal financial and monetary
policies, the availability of credit, and the condition of the world economy,
which could have an adverse effect on the State. There can be no assurance that
the State economy will not experience results in the current fiscal year that
are worse than predicted, with corresponding material and adverse effects on the
State's projections of receipts and disbursements.
As noted above, the financial condition of the State is affected by several
factors, including the strength of the State and regional economy and actions of
the Federal government, as well as State actions affecting the level of receipts
and disbursements. Owing to these and other factors, the State may, in future
years, face substantial potential budget gaps resulting from a significant
disparity between tax revenues projected from a lower recurring receipts base
and the future costs of maintaining State programs at current levels. Any such
recurring imbalance would be exacerbated if the State were to use a significant
amount of nonrecurring resources to balance the budget in a particular fiscal
year. To address a potential imbalance for a given fiscal year, the State would
be required to take actions to increase receipts and/or reduce disbursements as
it enacts the budget for that year, and under the State Constitution the
Governor is required to propose a balanced budget each year. To correct
recurring budgetary imbalances, the State would need to take significant actions
to align recurring receipts and disbursements in future fiscal years. There can
be no assurance, however, that the State's actions will be sufficient to
preserve budgetary balance in a given fiscal year or to align recurring receipts
and disbursements in future fiscal years.
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The General Fund is the general operating fund of the State and is used to
account for all financial transactions, except those required to be accounted
for in another fund. It is the State's largest fund and receives almost all
State taxes and other resources not dedicated to particular purposes. In the
State's 1994-95 fiscal year, the General Fund is expected to account for
approximately 52% of total governmental-fund receipts and 51% of total
governmental-fund disbursements. General Fund moneys are also transferred to
other funds, primarily to support certain capital projects and debt service
payments in other fund types.
As a result of the national and regional economic recession, the State's tax
receipts for its 1991 and 1992 fiscal years were substantially lower than
projected, which resulted in reduction in State aid to localities for the
State's 1992 and 1993 fiscal years from amounts previously projected. The State
completed its 1993 fiscal year with a positive margin of $671 million in the
General Fund, which was deposited into a tax refund reserve account.
In recent years, State actions affecting the level of receipts and
disbursements, as well as the relative strength of the State and regional
economy, action of the Federal government and other factors have created
structural budget gaps for the State. These gaps resulted from a significant
disparity between recurring revenues and the costs of maintaining or increasing
the level of support for State programs.
The fiscal stability of the State is related to the fiscal stability of its
authorities, which generally have responsibility for financing, constructing and
operating revenue-producing public benefit facilities. The authorities are
generally supported by revenues generated by the projects financed or operated,
such as fares, user fees on bridges, highway tolls and rentals for dormitory
rooms and housing. The authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. As of September 30, 1992 there were 18
authorities that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 18 authorities was $63.5
billion as of September 30, 1993. As of March 31, 1994, aggregate public
authority debt outstanding as State-supported debt was $21.1 billion and as
State-related debt was $29.4 billion.
Ratings. In recent years, the State and certain of its municipalities and state
agencies (the "Agencies") and the City have experienced financial difficulties
which have jeopardized the credit standings and impaired the borrowing abilities
of the State and the respective Agencies, and have contributed to higher
interest rates on, and lower market prices for, debt obligations issued by them.
On November 19, 1987, S&P revised its rating of City bonds upward from "BBB+" to
"A-". On July 10, 1995, S&P revised downward its rating on City general
obligation bonds from A- to BBB+ and removed City bonds from CreditWatch. S&P
stated that "structural budgetary balance remains elusive because of persistent
softness in the City's economy, highlighted by weak job growth and a growing
dependence on the historically volatile financial services sector". Other
factors identified by S&P in lowering its rating on City bonds included a trend
of using one-time measures, including debt refinancings, to close projected
budget gaps, dependence on unratified labor savings to help balance the
Financial Plan, optimistic projections of additional federal and State aid or
mandate relief, a history of cash flow difficulties caused by State budget
delays and continued high debt levels. In May 1988, Moody's revised its rating
of City bonds upward to "A" and again in February 1991 to "Baa1".. Fitch
Investors Service, Inc. ("Fitch") continues to rate the City general obligation
bonds A-.
On January 13, 1992, S&P reduced its ratings on the State's general obligation
bonds from "A" to "A-" and, in addition, reduced its ratings on the State's
moral obligation, lease purchase, guaranteed and contractual obligation debt.
S&P also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, S&P revised the rating outlook assessment to
stable. On February 14, 1994, S&P raised its outlook to positive and, on July
13, 1995, confirmed its "A-" rating. On January 6, 1992, Moody's reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On July 3, 1995, Moody's reconfirmed its A rating on
the State's general obligation long-term indebtedness. The State's tax and
revenue anticipation notes issued in February 1991 and in June 1991 were rated
"MIG-2" by Moody's and "SP-1" by S&P. The State's tax and revenue anticipation
notes issued in June 1990 and in March 1990 were rated "MIG-2" by Moody's and
"SP-1" by S&P. For the meaning of ratings see "Description of Ratings" herein.
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INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund may not:
1. Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks" or any other form of Federal
tax-exempt investment which meets the Fund's quality criteria, as
determined by the Board of Directors and which is consistent with the
Fund's objectives and policies.
2. Borrow Money. This restriction shall not apply to borrowings from
banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests that might otherwise require the
untimely disposition of securities, in an amount up to 15% of the
value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed)
at the time the borrowing was made. While borrowings exceed 5% of the
value of the Fund's total assets, the Fund will not make any
investments. Interest paid on borrowings will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 15% of the value of its total assets and only to
secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in
the purchase and sale of put, call, straddle or spread options or in
writing such options, except to the extent that securities subject to
a demand obligation and stand-by commitments may be purchased as set
forth under "Investment Objectives, Policies and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand
feature. The Fund will not invest in a repurchase agreement maturing
in more than seven days if any such investment together with
securities that are not readily marketable held by the Fund exceed 10%
of the Fund's total net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this
shall not prevent the Fund from investing in Municipal Obligations
secured by real estate or interests in real estate.
8. Make loans to others, except through the purchase of portfolio
investments, including repurchase agreements, as described under
"Investment Objectives, Policies and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers" in
any single industry, provided that the Fund may invest more than 25%
of its assets in bank participation certificates and there shall be no
limitation on the purchase of those Municipal Obligations and other
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities. When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are
separate from those of the government creating the issuing entity and
a security is backed only by the assets and revenues of the entity,
the entity would be deemed to be the sole issuer of the security.
Similarly, in the case of an industrial revenue bond, if that bond is
backed only by the assets and revenues of the non-governmental user,
then such non-governmental user would be deemed to be the sole issuer.
If, however, in either case, the creating government or some other
entity, such as an insurance company or other corporate obligor,
guarantees a security or a bank issues a letter of credit, such a
guarantee or letter of credit would be considered a separate security
and would be treated as an issue of such government, other entity or
bank. With respect to 75% of the total amortized cost value of the
Fund's assets, not more than 5% of the Fund's assets may be invested
in securities that are subject to underlying puts from the same
institution, and no single bank shall issue its letter of credit and
no single financial institution shall issue a credit enhancement
covering more than 5% of the total assets of the Fund. However, if the
puts are exercisable by the Fund in the event of default on payment of
principal and interest on the underlying security, then the Fund may
invest up to 10% of its assets in securities underlying puts issued or
guaranteed by the same institution; additionally, a single bank can
issue its letter of credit or a single financial institution can issue
a credit enhancement covering up to 10% of the Fund's assets, where
the puts offer the Fund such default protection.
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<PAGE>
11. Invest in securities of other investment companies, except the Fund
(i) may purchase unit investment trust securities where such unit
trusts meet the investment objectives of the Fund and then only up to
5% of the Fund's net assets, except as they may be acquired as part of
a merger, consolidation or acquisition of assets and (ii) may purchase
securities as permitted by section 12(d) of the 1940 Act.
12. Issue senior securities, except insofar as the Fund may be deemed to
have issued a senior security in connection with any permitted
borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal underwriter. In addition, the Fund will not buy bankers'
acceptances, certificates of deposit or commercial paper from the Manager or its
affiliates.
HOW TO PURCHASE AND REDEEM SHARES
The material relating to the purchase and redemption of shares in the Prospectus
is herein incorporated by reference. The national and local holidays on which
the Fund will be closed and shares may not be purchased or redeemed are the
following: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
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NET ASSET VALUE
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. It is computed by dividing the value of
the Fund's net assets (i.e., the value of its securities and other assets less
its liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares outstanding.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated, as
described in the following paragraph. Although the amortized cost method
provides certainty in valuation, it may result in periods during which the value
of an instrument is higher or lower than the price an investment company would
receive if the instrument were sold.
The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share. These procedures include a review of the
extent of any deviation of net asset value per share, based on available market
rates, from the Fund's $1.00 amortized cost per share. Should that deviation
exceed 1/2 of 1%, the Board will consider whether any action should be initiated
to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. The Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less, will not purchase any instrument with a remaining maturity
greater than 397 days, will limit portfolio investments, including repurchase
agreements, to those United States dollar-denominated instruments that the
Fund's Board of Directors determines present minimal credit risks, and will
comply with certain reporting and record keeping procedures. The Fund has also
established procedures to ensure compliance with the requirement that portfolio
securities are Eligible Securities. (See "Investment Objectives, Policies and
Risks" herein.)
YIELD QUOTATIONS
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. Under that
method, the Fund's yield figure, which is based on a chosen seven-day period, is
computed as follows: the Fund's return for the seven-day period (which is
obtained by dividing the net change in the value of a hypothetical account
having a balance of one share at the beginning of the period by the value of
such account at the beginning of the period (expected to always be $1.00) is
multiplied by (365/7) with the resulting annualized figure carried to the
nearest hundredth of one percent). For purposes of the foregoing computation,
the determination of the net change in account value during the seven-day period
reflects (i) dividends declared on the original share and on any additional
shares, including the value of any additional shares purchased with dividends
paid on the original share and (ii) fees charged to all shareholder accounts.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Fund's portfolio securities are not included in the computation. Therefore
annualized yields may be different from effective yields quoted for the same
period.
The Fund's "effective yield" is obtained by adjusting its "current yield" to
give effect to the compounding nature of the Fund's portfolio, as follows: The
unannualized base period return is compounded and brought out to the nearest one
hundredth of one percent by adding one to the base period return, raising the
sum to a power equal to 365 divided by 7, and subtracting one from the result,
i.e., effective yield = (base period return + 1)365/7 - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.
The Fund may from time to time advertise its taxable equivalent yield. The tax
equivalent yield is computed based upon a 30-day (or one month) period ended on
the date of the most recent balance sheet included in this Statement of
Additional Information, computed by dividing that portion of the yield of the
Fund (as computed pursuant to the formulae previously discussed) which is tax
exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield of the Fund that is not tax exempt. The taxable
equivalent yield for the Fund may also fluctuate daily and does not provide a
basis for determining future yields.
14
<PAGE>
The Fund may from time to time advertise a taxable equivalent yield table which
shows the yield that an investor would need to receive from a taxable investment
in order to equal a tax-free yield from the Fund. (See "Taxable Equivalent Yield
Table" herein.)
The Fund's yield for the seven day period ending July 31, 1995 was 3.15% which
is equivalent to an effective yield of 3.20%.
MANAGER
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., with
principal offices at 600 Fifth Avenue, New York, New York 10020 (the "Manager").
In addition to the Fund, 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, Lebenthal New York Tax Free Money Fund, Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal 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, Short Term
Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc. The Manager also advises
pension trusts, profit-sharing trusts and endowments.
Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and Administrative Services
Contract with the Manager. The Manager's predecessor, New England Investment
Companies, L.P. ("NEICLP") is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.,
the Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager. Reich & Tang Asset Management L.P. has succeeded NEICLP as the Manager
of the Fund. The re-execution of the Investment Management Contract did not
result in "assignment" of the Investment Management Contract with NEICLP under
the 1940 Act, since there is no change in actual control or management of the
Manager caused by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 68.1% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc. owns
approximately 22.8% of the outstanding partnership units of NEICLP.
NEIC is a wholly-owned subsidiary of The New England which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through eight
investment advisory/management affiliates and three distribution subsidiaries.
These include Loomis, Sayles & Company, L.P.; Copley Real Estate Advisors, Inc.;
Westpeak Investment Advisors, L.P.; Draycott Partners, Ltd,; TNE Investment
Services, L.P.; New England Investment Associates, Inc.; and an affiliate, and
Capital Growth Management Limited Partnership. These affiliates in the aggregate
are investment advisors or managers of 57 other registered investment companies.
The Investment Management Contract contains the same terms and conditions
governing the Manager's investment management and administrative
responsibilities, respectively, as the Fund's previous Investment Management
Contract with Reich & Tang L.P. except for (i) the dates of execution and
termination and (ii) the identity of the Manager.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
15
<PAGE>
The Manager also performs clerical, accounting supervision, office service and
related functions for the Fund and provides the Fund with personnel to (i)
supervise the performance of bookkeeping and related services by Investors
Fiduciary Trust Company, the Fund's bookkeeping or recordkeeping agent, (ii)
prepare reports to and filings with regulatory authorities, and (iii) perform
such other services as the Fund may from time to time request of the Manager.
The personnel rendering such services may be employees of the Manager, of its
affiliates or of other organizations. The Fund pays the Manager for such
personnel and for rendering such services at rates which must be agreed upon by
the Fund and the Manager, provided that the Fund does not pay for services
performed by any such persons who are also officers of Reich & Tang, Inc. It is
intended that such rates will be the actual costs of the Manager.
The re-executed Investment Management Contract was approved by the Board of
Directors, including a majority of directors who are not interested persons (as
defined in the 1940 Act), of the Fund or the Manager, effective September 15,
1993. The re-executed Investment Management Contract 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 Fund's outstanding voting
securities or by its Board of Directors, and in either case by a majority of the
directors who are not parties to the Investment Management Contract or
interested persons 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 the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Investment Management Contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or of reckless disregard of its
obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.
For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
administrative and clerical services. 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 and administrative services. (See
"Distribution and Service Plan" herein.)
For the Fund's fiscal years ended April 30, 1995, April 30, 1994 and April 30,
1993, the fee paid to the Manager under the Investment Management Contract was
$702,867, $824,707 and $1,060,765, respectively. The Fund's net assets at the
close of business on April 30, 1995 totaled $254,421,613. The Manager may waive
its rights to any portion of the management fee and may use any portion of the
management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares.
Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping agent, (ii) prepare reports to and filings with
regulatory authorities and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, of its affiliates or of other organizations.
The Fund pays the Manager for such personnel and for rendering such services at
rates which must be agreed upon by the Fund and the Manager, provided that the
Fund does not pay for services performed by any such persons who are also
officers of the general partner of the Manager. It is intended that such rates
will be the actual costs of the Manager. For its services under the
Administrative Services Contract, the Manager receives from the Fund a fee equal
to .20% per annum of the Fund's average daily net assets. For the Fund's fiscal
year ended April 30, 1995, the Manager received a fee of $468,578.
MANAGEMENT OF THE FUND
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. The address of each such person unless
otherwise indicated is 600 Fifth Avenue, New York, N.Y. 10020. Mr. Duff may be
deemed an "interested person" of the Fund, as defined in the 1940 Act, on the
basis of his affiliation with the Manager.
16
<PAGE>
STEVEN W. DUFF, 41 - President of the Fund, is President of the Mutual Funds
Division of the Manager since September 1994. Mr. Duff was formerly Director of
Mutual Fund Administration at NationsBank which he was associated with from June
1981 to August 1994. Mr. Duff is 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., North Carolina Daily Municipal Income Fund, Inc. and Short Term Income
Fund, Inc., Senior Vice President of Lebenthal Funds, Inc., President and a
Trustee of Florida Daily Municipal Income Fund, Institutional Daily Income Fund,
Pennsylvania Daily Municipal Income Fund, Executive Vice President and a
Director of Reich & Tang Equity Fund, Inc., and President and Chief Executive
Officer of Tax Exempt Proceeds Fund, Inc.
EDWARD A. KUCZMARSKI, 46 - Director of the Fund, Trustee of The Empire Builder
Tax Free Bond Fund; Certified Public Accountant and Partner of Hays & Company
since 1980. His address is 477 Madison Avenue, New York, N.Y. 10022-5892.
MILTON R. NEAMAN, 83 - Director of the Fund, Trustee of The Empire Builder Tax
Free Bond Fund; Retired Attorney; Chairman of the Board of Metrocare, Inc. until
March 12, 1986. His address is 1010 Waltham St., Lexington, MA. 02173-8044.
CAROLINE E. NEWELL, 55 - Director of the Fund, Trustee of The Empire Builder Tax
Free Bond Fund; Director, International Preschools, Inc. Her address is
International Preschools, Inc., 330 East 45th Street, New York, N.Y. 10017.
JOHN P. STEINES, 47 - Director of the Fund, Trustee of The Empire Builder Tax
Free Bond Fund; Professor of Law, New York University School of Law. His address
is New York University School of Law, 40 Washington Square South, New York, N.Y.
10012.
LESLEY M. JONES, 47 - Vice President of the Fund, is Senior Vice President of
the Reich & Tang Mutual Funds Division of the Manager since September 1993. Ms.
Jones was formerly Senior Vice President of Reich & Tang, Inc. with which she
was associated with from April 1973 to September 1993. Ms. Jones is also a Vice
President of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government Securities
Trust and Short Term Income Fund, Inc.
BERNADETTE N. FINN, 47 - Secretary of the Fund, is Vice President and Assistant
Secretary of the Reich & Tang Mutual Funds Division of the Manager since
September 1993. Ms. Finn was formerly Vice President and Assistant Secretary of
Reich & Tang, Inc. with which she was associated with from September 1970 to
September 1993. Ms. Finn is also Secretary of 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, Lebenthal Funds, Inc., Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund and Tax Exempt Proceeds Fund, Inc., a Vice President and Secretary
of Reich & Tang Equity Fund, Inc., Reich & Tang Government Securities Trust and
Short Term Income Fund, Inc.
MOLLY FLEWHARTY, 44 - Vice President of the Fund, is Vice President of the Reich
& Tang Mutual Funds Division of the Manager since September 1993. Ms. Flewharty
was formerly Vice President of Reich & Tang, Inc. with which she was associated
with from December 1977 to September 1993. Ms. Flewharty is also Vice President
of 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, Lebenthal Funds, Inc., Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal 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 Short Term Income Fund,
Inc.
17
<PAGE>
DANA E. MESSINA, 38 - Vice President of the Fund, is Executive Vice President of
the Mutual Funds Division of the Manager since September 1993. Ms. Messina was
formerly Vice President of Reich & Tang, Inc. with which she was associated with
from December 1980 to September 1993. Ms. Messina is Vice President of
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, Lebenthal Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal 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, Short Term Income Fund, Inc.,
and of Tax Exempt Proceeds Fund, Inc.
RICHARD DE SANCTIS, 38 - Treasurer of the Fund, is Assistant Treasurer of NEIC
since September 1993. Mr. De Sanctis was formerly Controller of Reich & Tang,
Inc. from January 1991 to September 1993 and Vice President and Treasurer of
Cortland Financial Group, Inc. and Vice President of Cortland Distributors, Inc.
from 1989 to December 1990. Mr. DeSanctis is Treasurer of California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc. Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund, Inc., Reich & Tang Government Securities Trust, Tax Exempt
Proceeds Fund, Inc. and Short Term Income Fund, Inc. and Vice President and
Treasurer of Cortland Trust, Inc.
The Fund paid an aggregate remuneration of $22,000 to its directors with respect
to the period ended April 30, 1995, all of which consisted of aggregate
directors' fees paid to the four disinterested directors, pursuant to the terms
of the Investment Management Contract. (See "Manager" herein.)
_______________________________________________________________________________
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Name Aggregate Pension or Estimated Annual Total Compensation
of Compensation from Retirement Benefits Benefits upon from Fund and Fund
Person, Registrant for Fiscal Accrued as Part of Retirement Complex Paid to
Position Year Fund Expenses Directors
------- ----------- ---------- ----------- ---------------
Edward A.
Kuczmarski, $5,500.00 0 0 $5,500 (1 Fund)
Director
Milton R.
Neaman, $5,500.00 0 0 $5,500 (1 Fund)
Director
Caroline E. $5,500.00 0 0 $5,500 (1 Fund)
Newell,
Director
John P. $5,500.00 0 0 $5,500 (1 Fund)
Steines
Director
_______________________________________________________________________________
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending April 30, 1995 and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ending April
30, 1995. The parenthetical number represents the number of investment companies
(including the Fund) from which such person receives compensation that are
considered part of the same Fund complex as the Fund, because, among other
things, they have a common investment advisor.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Messrs. Battle Fowler LLP, 75 East 55th Street, New York, N.Y.
10022.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, N.Y. 10017, independent
certified public accountants, have been selected as auditors for the Fund.
18
<PAGE>
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 (the "Rule") under the 1940 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 Fund's Board of Directors has
adopted a distribution and service plan (the "Plan") and, pursuant to the Plan,
the Fund has entered into a Distribution Agreement and a Shareholder Servicing
Agreement with Reich & Tang Distributors L.P., (the "Distributor") as
distributor of the Fund's shares.
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., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor. The Board of Directors approved the re-execution of the
Distribution Agreement and the execution of the Shareholder Servicing Agreement.
For its services under the Shareholder Servicing Agreement, the Manager receives
from the Fund a service fee equal to .20% per annum of the Fund's average daily
net assets (the "Shareholder Servicing Fee"). The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for purposes of distribution of Fund shares and for payments to Participating
Organizations with respect to servicing their clients or customers who are
shareholders of the Fund. For the Fund's fiscal year ended April 30, 1995, the
amount payable to the Distributor under the Distribution Plan and Shareholder
Servicing Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940
Act, totaled $468,578 of which $22,126 was spent on sales personnel and related
expenses, $2,612 was spent on travel and entertainment, $8,447 was spent on
prospectus, application and miscellaneous printing and $1,042 was spent on
miscellaneous expenses. During the same period, the Manager made total payments
under the Plan to or on behalf of Participating Organizations of $660,683. The
excess of such payments over the total payments the Manager and Distributor
received from the Fund under the Plan represents distribution expenses funded by
the Manager from its own resources including the Management Fee.
Under the Distribution Agreement, the Distributor, as agent for the Fund, will
solicit orders for the purchase of the Fund's shares, provided that any
subscriptions and orders will not be binding on the Fund until accepted by the
Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Manager, Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement and (ii) preparing,
printing and delivering the Fund's prospectus to existing shareholders of the
Fund and preparing and printing subscription application forms for shareholder
accounts.
The Plan and the Shareholder Servicing Agreement provides that the Manager may
make payments from time to time from its own resources, which may include the
Management Fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Manager has entered into written agreements, for performing shareholder
servicing and related administrative functions on behalf of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Fund's shares; (iii) to pay the costs of printing and
distributing the Fund's prospectus to prospective investors; and to defray the
cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising, and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee and past profits for the
purposes enumerated in (i) above. The Distributor, in its sole discretion, will
determine the amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Fund is required to pay to
the Manager and Distributor for any fiscal year under either the Investment
Management Contract, the Shareholder Servicing Agreement or the Administrative
Services Contract in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
19
<PAGE>
The Plan provides that it may continue in effect for successive annual periods
provided it is approved by the shareholders or by the Board of Directors,
including a majority of directors who are not interested persons of the Fund and
who have no direct or indirect interest in the operation of the Plan or in the
agreements related to the Plan. The Board of Directors has approved the
continuance of the Plan until May 1, 1996. The Plan was approved by a majority
of the Fund's shareholders at the Annual Meeting on November 13, 1985. The Plan
further provides that it may not be amended to increase materially the costs
which may be spent by the Fund for distribution pursuant to the Plan without
shareholder approval, and the other material amendments must be approved by the
directors in the manner described in the preceding sentence. The Plan may be
terminated at any time by a vote of a majority of the disinterested directors of
the Fund or the Fund's shareholders.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on January 31,
1984 in Maryland, consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. Each share has equal dividend,
distribution, liquidation and voting rights and a fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering will be fully paid and
nonaccessible. Shares are redeemable at net asset value, at the option of the
shareholder. On July 31, 1995 there were 280,808,995 shares of the Fund
outstanding. As of July 31, 1995, the amount of shares owned by all officers and
directors of the Fund, as a group, was less than 1% of the outstanding shares.
Set forth below is certain information as to persons who owned 5% or more of the
Fund's outstanding shares as of July 31, 1995:
Nature of
Name and address % of Class Ownership
Fundtech Services L.P. 63.99% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
Neuberger & Berman 19.60% Record
as Agent for Customer
11 Broadway
Operations Control Dept.
New York, NY 10004
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the Fund's
revised investment avisory agreement with respect to a particular class or
series of stock, (c) for approval of the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the 1940 Act, any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Directors may consider necessary or
desirable. Each director serves until the next meeting of the shareholders
called for the purpose of considering the election or re-election of such
Director or a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders. On August 31, 1990 the Fund's shareholders voted to amend the
Fund's Articles of Incorporation to change the name of the Fund to the New York
Daily Tax Free Income Fund, Inc.
20
<PAGE>
EXPENSE LIMITATION
The Manager has agreed to reimburse the Fund for its expenses (exclusive of
interest, taxes, brokerage, and extraordinary expenses) which in any year exceed
the lesser of (i) 1 1/2% of the Fund's average annual net assets or (ii) the
limits on investment company expenses prescribed by any state in which the
Fund's shares are qualified for sale. For the purpose of this obligation to
reimburse expenses, the Fund's annual expenses are estimated and accrued daily,
and any appropriate estimated payments are made to it on a monthly basis.
Subject to the obligations of the Manager to reimburse the Fund for its excess
expenses as described above, the Fund has, under the Investment Management
Contract, confirmed its obligation for payment of all its other expenses,
including taxes, brokerage fees and commissions, commitment fees, certain
insurance premiums, interest charges and expenses of the custodian, transfer
agent and dividend disbursing agent's fees, telecommunications expenses,
auditing and legal expenses, bookkeeping agent fees, costs of forming the
corporation and maintaining corporate existence, compensation of directors,
officers and employees of the Fund and costs of other personnel performing
services for the Fund who are not officers of New England Investment Companies,
Inc., the general partner of the Manager or its affiliates, costs of investor
services, shareholders' reports and corporate meetings, Securities and Exchange
Commission registration fees and expenses, state securities laws registration
fees and expenses, expenses of preparing and printing the Fund's prospectus for
delivery to existing shareholders and of printing application forms for
shareholder accounts, the fees payable to the Distributor under the Shareholder
Servicing Agreement and the Distribution Agreement and all other costs borne by
the Fund pursuant to the Distribution Plan.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to the expense
limitation described above.
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code, as amended, and under New York
law as a "regulated investment company" that distributes "exempt-interest
dividends". The Fund intends to continue to qualify for regulated investment
company status so long as such qualification is in the best interests of its
shareholders. Such qualification relieves the Fund of liability for Federal
income taxes to the extent its earnings are distributed in accordance with the
applicable provisions of the Code.
The Fund's policy is to distribute as dividends each year 100% and in no event
less than 90% of its tax-exempt interest income and other income, net of certain
deductions. Exempt-interest dividends, as defined in the Code, are dividends or
any part thereof (other than capital gain dividends) paid by the Fund that are
attributable to interest on obligations, the interest on which is exempt from
regular Federal income tax and designated by the Fund as exempt-interest
dividends in a written notice mailed to the Fund's shareholders not later than
60 days after the close of its taxable year. The percentage of the total
dividends paid by the Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during the year.
Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest excludible from their gross income under Section 103(a) of the Code.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share has been held for six months or less, then any loss on the sale
or exchange of such share will be disallowed to the extent of the amount of such
exempt-interest dividend. The Code provides that interest on indebtedness
incurred, or continued, to purchase or carry certain tax-exempt securities such
as shares of the Fund is not deductible. Therefore, among other consequences, a
certain proportion of interest on indebtedness incurred, or continued, to
purchase or carry securities on margin may not be deductible during the period
an investor holds shares of the Fund. P.L. 99-514 expands the application of
this rule as it applies to financial institutions, effective with respect to
taxable years ending after December 31, 1986. For Social Security recipients,
interest on tax-exempt bonds, including exempt-interest dividends paid by the
Fund, is to be added to adjusted gross income for purposes of computing the
amount of social security benefits includible in gross income. Under P.L.
99-514, as amended by the Technical and Miscellaneous Revenue Act of 1988 (P.L.
100-647) and the Revenue Reconciliation Act of 1990 (P.L. 101-508), the amount
of such interest received will have to be disclosed on the shareholders' Federal
income tax returns. Further, under P.L. 99-514, taxpayers other than
corporations are required to include as an item of tax preference for purposes
21
<PAGE>
of the Federal alternative minimum tax, all tax-exempt interest on "private
activity" bonds (generally, a bond issue in which more than 10% of the proceeds
are used in a non-governmental trade or business) (other than Section 501(c)(3)
bonds) issued after August 7, 1986. Thus, this provision will apply to the
portion of the exempt-interest dividends from the Fund's assets, if any, that
are attributable to such post-August 7, 1986 private activity bonds, if any such
bonds are acquired by the Fund. Corporations are required to increase their
alternative minimum tax by 75% of the amount by which the adjusted current
earnings (which will include tax-exempt interest) of the corporation exceeds the
alternative minimum taxable income (determined without this item). Further,
interest on the Municipal Obligations is includable in a 0.12% additional
corporate minimum tax imposed by the Superfund Amendments and Reauthorization
Act of 1986. In addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years are subject to a
minimum tax on excess "passive investment income" which includes tax-exempt
interest. The Fund may realize ordinary income upon the maturity or disposition
of securities acquired at discounts resulting from market fluctuations.
A shareholder is advised to consult his tax adviser with respect to whether
exempt-interest dividends retain the exclusion under Section 103(a) of the Code
if such shareholder would be treated as a "substantial user" or "related person"
under Section 147(a) of the Code with respect to some or all of the "private
activity bonds," if any, held by the Fund.
Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. Short-term
capital gains will be taxable to shareholders as ordinary income when they are
distributed. Any net capital gains (the excess of its net realized long-term
capital gain over its net realized short-term capital loss) will be distributed
annually to the Fund's shareholders. The Fund will have no tax liability with
respect to distributed net capital gains and the distributions will be taxable
to shareholders as long-term capital gains regardless of how long the
shareholders have held Fund shares. However, Fund shareholders who at the time
of a net capital gain distribution have not held their Fund shares for more than
6 months, and who subsequently dispose of those shares at a loss, will be
required to treat such loss as a long-term capital loss to the extent of net
capital gain distribution. Distributions of net capital gains will be designated
as a "capital gain dividend" in a written notice mailed to the Fund's
shareholders not later than 60 days after the close of the Fund's taxable year.
Under P.L. 99-514, effective as of January 1, 1988, net capital gain was taxable
at the same rates as ordinary income. However, P.L. 101-508 restored
preferential treatment for net capital gains by placing a 28% ceiling on the
marginal tax rate applicable to net capital gains realized by individuals.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. The Fund will be subject to Federal income tax on any
undistributed investment company taxable income. To the extent such income is
distributed it will be taxable to shareholders as ordinary income. Expenses paid
or incurred by the Fund will be allocated between tax-exempt and taxable income
in the same proportion as the amount of the Fund's tax-exempt income bears to
the total of such exempt income and its gross income (excluding from gross
income the excess of capital gains over capital losses). If the Fund does not
distribute at least 98% of its ordinary income and 98% of its capital gain net
income for a taxable year, the Fund will be subject to a non-deductable 4%
excise tax on the excess of such amounts over the amounts actually distributed.
If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund generally is required to withhold 31% of taxable
interest and dividend payments, and proceeds from the redemption of shares of
the Fund.
Dividends and distributions to shareholders will be treated in the same manner
for Federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund.
With respect to the variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be tax-exempt to the Fund. Counsel has pointed out that the Internal Revenue
Service has announced that it will not ordinarily issue advance rulings on the
question of ownership of securities or participation interests therein subject
to a put and, as a result, the Internal Revenue Service could reach a conclusion
different from that reached by counsel.
22
<PAGE>
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would re-evaluate its investment objectives and policies and
consider changes in the structure. Many important changes were made to the
Federal income tax system by P.L. 103-66, The Omnibus Budget Reconciliation Act
of 1993, including an increase in marginal tax rates.
In South Carolina vs. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and
that there is no constitutional prohibition against the Federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the Federal government to regulate and control
bonds such as the Municipal Obligations and to tax such bonds in the future. The
decision does not, however, affect the current exemption from taxation of the
interest earned on the Municipal Obligations in accordance with Section 103 of
the Code.
The exemption for Federal income tax purposes of dividends derived from interest
on Municipal Obligations does not necessarily result in an exemption under the
income or other tax laws of any state or local taxing authority. However, to the
extent that dividends are derived from interest on New York Municipal
Obligations, the dividends will also be excluded from a New York shareholder's
gross income for New York State and New York City personal income tax purposes.
This exclusion will not result in a corporate shareholder being exempt for New
York Sate and New York City franchise tax purposes. Shareholders are advised to
consult with their tax advisers concerning the application of state and local
taxes to investments in the Portfolio which may differ from the Federal income
tax consequences described above.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105 is custodian for the Fund's cash and securities and, is transfer agent and
dividend agent for the shares of the Fund. Primary Funds Service Corporation,
P.O. Box 9741, Providence, Rhode Island 02940 is transfer agent for the Victory
Shares of the Fund. The Fund's transfer agent and custodian does not assist in,
and is not responsible for, investment decisions involving assets of the Fund.
23
<PAGE>
DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s two highest municipal bond
ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con. (_____) - Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s
two highest ratings of state and municipal notes
and other short-term loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1 - Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2 - Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Corporation's two highest debt ratings:
AAA - Debt rated AAA has the highest rating assigned by Standard & 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.
Plus ( + ) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
- ------------
* As described by the rating agencies.
24
<PAGE>
Description of Standard & Poor's Corporation's two highest commercial paper
ratings:
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 - Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s two highest commercial paper
ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
Description of Standard & Poor's Corporation's two highest municipal note
ratings:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
25
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELD TABLE
- --------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Single 23,350- 25,001- 56,551- 60,001- 117,951- 256,501
Return 25,000 56,550 60,000 117,950 256,500 and over
- --------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
Joint 39,000- 45,001- 94,251- 108,001- 143,601- 256,501
Return 45,000 94,250 108,000 143,600 256,500 and over
- --------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- --------------------------------------------------------------------------------------------------------------------
Federal
Tax 28.0% 28.0% 31.0% 31.0% 36.0% 39.6%
Bracket
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
State
Tax 7.59% 7.59% 7.59% 7.59% 7.59% 7.59%
Bracket
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
City Tax
Bracket 4.389% 4.40% 4.40% 4.457% 4.457% 4.457%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
Combined
Tax 36.625% 36.633% 39.273% 39.313% 43.710% 46.877%
Bracket
- --------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields
With Taxable Income Yields
- --------------------------------------------------------------------------------------------------------------------
Tax Equivalent Taxable Investment Yield
Exempt Required to Match Tax Exempt Yield
Yield
- ---------- ---------------------------------------------------------------------------------------------------------
2.0% 3.16% 3.16% 3.29% 3.30% 3.55% 3.76%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
2.5% 3.94% 3.95% 4.12% 4.12% 4.44% 4.71%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
3.0% 4.73% 4.73% 4.94% 4.94% 5.33% 5.65%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
3.5% 5.52% 5.52% 5.76% 5.77% 6.22% 6.59%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
4.0% 6.31% 6.31% 6.59% 6.59% 7.11% 7.53%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
4.5% 7.10% 7.10% 7.41% 7.42% 7.99% 8.47%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
5.0% 7.89% 7.89% 8.23% 8.24% 8.88% 9.41%
- ---------- ----------------- ---------------- ------------------ ----------------- --------------- -----------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
- -------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
New York Daily Tax Free Income Fund, Inc.
We have audited the accompanying statement of net assets of New York Daily Tax
Free Income Fund, Inc. as of April 30, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the selected financial
information for each of the five years in the period then ended. These financial
statements and selected financial information are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and selected financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of April 30, 1995, by correspondence with the custodian. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of New York Daily Tax Free Income Fund, Inc. as of April 30, 1995, the
results of its operations, the changes in its net assets and the selected
financial information for the periods indicated, in conformity with generally
accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
May 19, 1995
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
APRIL 30, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (15.23%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 Brentwood NY USFD TAN (c) 06/30/95 3.75 % $ 5,005,529
4,000,000 Elmira NY GO BAN 08/11/95 3.95 4,005,369 MIG-1
5,000,000 Longwood CSD NY TAN (c) 06/23/95 3.65 5,003,848
2,000,000 Monroe County, NY Public Improvement Bond
AMBAC Insured 06/01/95 3.58 2,005,350 Aaa AAA
3,500,000 Onondaga County, NY BAN (c) 10/27/95 4.16 3,504,894
500,000 Onondaga County, NY GO Bond 05/01/95 3.75 500,000 Aa AA
3,975,000 Orange County, NY BAN (c) 11/22/95 4.44 3,985,671
3,800,000 Oswego County BOCES RAN (c) 06/27/95 3.80 3,802,286
2,000,000 Suffolk County, NY TAN
LOC National Westminster Bank PLC 09/14/95 4.02 2,003,002 MIG-1
2,435,000 Syracuse NY BAN (c) 06/16/95 3.75 2,435,574
4,000,000 Town of Hempstead NY BAN 08/17/95 4.10 4,003,782 MIG-1
2,500,000 Town of Islip NY BAN (c) 08/22/95 4.14 2,502,207
---------- ----------
38,710,000 Total Other Tax Exempt Investments 38,757,512
---------- ----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (70.41%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,300,000 Counties of Warren & Washington IDA IDRB Series 94
(Griffith Micro Science Inc. Project)
LOC First Chicago 12/01/14 4.90 % $ 5,300,000 A1
3,000,000 Franklin County, NY IDA IDRB
(KES Chatauqua Project)
LOC Bank of Tokyo, Ltd. 07/01/21 4.50 3,000,000 A1+
1,300,000 Glen Falls, NY IDA IDRB (Broad Street Plaza)
LOC Fleet National Bank 12/01/06 4.40 1,300,000 P1 A1
1,000,000 Islip, NY IDA IDRB (Brentwood Distribution)
LOC Bankers Trust Company 05/01/09 4.75 1,000,000 Aa2
7,000,000 Metropolitan Transportation Authority - Series 1991A
LOC Morgan Guar./Morgan Del./Bank of Tokyo/
Mitsubishi/Sumitomo/Ind. Bk. Japan/Nat West 07/01/21 4.55 7,000,000 VMIG-1 A1
520,000 Monroe County, NY IDA IDRB (Brazil Merk Partnership)
LOC Fleet National Bank 01/01/06 3.80 520,000 P1 A1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
27
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,900,000 NY Local Govt Assistance Corp (LGAC) 1994
Series B VRB's
LOC Swiss Bank Corp. 04/01/23 4.35 % $ 5,900,000 VMIG-1 A1+
8,000,000 NY Medical Care Facilities Financial Authority
LOC Chemical Bank 11/01/15 4.40 8,000,000 VMIG-1
3,000,000 NYC GO 1993 Series E-3
LOC Morgan Guaranty Trust Company 08/01/23 5.00 3,000,000 VMIG-1 A1+
3,100,000 NYC GO Series D
LOC Citibank 08/01/95 5.10 3,100,000 P1 A1+
2,700,000 NYS Dormitory Authority
Miriam Osborn Memorial Home Association
LOC Banque Paribas 07/01/24 4.40 2,700,000 VMIG-1 A1
1,500,000 NYS Medical Care Pooled Equipment Authority Series 94A
LOC Chemical Bank 11/01/03 4.50 1,500,000 VMIG-1
1,000,000 Nassau County, NY IDA
(Cold Spring Harbor Laboratory Project)
LOC Morgan Guaranty Trust Company 07/01/19 4.90 1,000,000 A1+
1,000,000 Nassau County, NY IDA IDRB
(Manhassett Association)
LOC Bankers Trust Company 12/01/99 5.08 1,000,000 Aa2
2,500,000 New York City Cultural Resources Trust RB
(Solomon R. Guggenheim Foundation) - Series 90B
LOC Swiss Bank Corp. 12/01/15 4.85 2,500,000 A1+
3,300,000 New York City Trust Cultural Resource RB
(Jewish Museum)
LOC Sumitomo Bank, Ltd. 12/01/21 4.60 3,300,000 VMIG-1 A1+
2,400,000 New York City Trust Cultural Resource RB
(Museum of Broadcasting)
LOC Sumitomo Bank, Ltd. 05/01/14 4.60 2,400,000 VMIG-1 A1+
3,000,000 New York City, NY - Series A5
LOC Kredietbank 08/01/16 5.00 3,000,000 VMIG-1 A1
2,500,000 New York City, NY - Subseries E4
LOC State Street Bank & Trust Co. 08/01/21 5.00 2,500,000 VMIG-1 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
28
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,200,000 New York City, NY GO Bond - Subseries E6
FGIC Insured 08/01/19 5.00 % $ 3,200,000 VMIG-1 A1+
700,000 New York City, NY GO Bond - Series B
FGIC Insured 10/01/21 5.30 700,000 VMIG-1 A1+
3,100,000 New York City, NY GO Bond - Series B
FGIC Insured 10/01/22 5.30 3,100,000 VMIG-1 A1+
3,000,000 New York City, NY GO Bond 1993 Subseries E - 5
LOC Sumitomo Bank, Ltd. 08/01/10 5.10 3,000,000 VMIG-1 A1
3,400,000 New York City, NY HDC (East 17th St.) - Series A
LOC Chemical Bank 01/01/23 5.00 3,400,000 A1
6,500,000 New York City, NY HDC (East 96th St.) - Series A
LOC Mitsubishi Bank, Ltd. 08/01/15 4.35 6,500,000 VMIG-1
3,000,000 New York City, NY HDC - Series 1989A
Upper Fifth Avenue Project
LOC Bankers Trust Company 01/01/16 4.60 3,000,000 VMIG-1
3,200,000 New York City, NY IDA (JFK Field Hotel Associates)
LOC Banque Indosuez 12/01/15 4.40 3,200,000 VMIG-1 A1+
200,000 New York City, NY IDA (LaGuardia Associates)
LOC Banque Indosuez 12/01/15 4.40 200,000 VMIG-1 A1+
10,100,000 New York City, NY IDA (Nippon Cargo Airlines Co.)
LOC Industrial Bank of Japan, Ltd. 11/01/15 5.67 10,100,000 A1+
500,000 New York City, NY IDRB (Airport Project)
LOC Bayerische Landesbank Girozentrale 04/01/00 4.60 500,000 P1 A1+
2,100,000 New York City, NY Municipal Water Finance Authority
& Sewer System - Series 1994G
FGIC Insured 06/15/24 5.00 2,100,000 VMIG-1 A1+
1,900,000 New York City, NY Municipal Water Finance Authority
& Sewer System - Series 1992C
FGIC Insured 06/15/22 5.10 1,900,000 VMIG-1 A1+
1,500,000 New York State Dormitory Authority (Cornell University)
Series B 07/01/25 4.85 1,500,000 VMIG-1 SP-1+
4,200,000 New York State ERDA PCRB
(Hudson Gas & Electric) - Series A
LOC J.P. Morgan 11/01/20 4.10 4,200,000 P1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
29
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 New York State ERDA PCRB
(Hudson Gas & Electric) - Series B
LOC Deutsche Bank A.G. 11/01/20 4.30 % $ 2,000,000 P1 A1+
3,100,000 New York State ERDA PCRB
(Niagara Mohawk Power Corp.)
LOC Toronto-Dominion Bank 12/01/25 4.95 3,100,000 P1
4,300,000 New York State ERDA PCRB
(Niagara Mohawk Power Corp.) - Series 1985C
LOC Canadian Imperial Bank of Commerce 12/01/25 4.95 4,300,000 P1
10,300,000 New York State ERDA PCRB
(Niagara Mohawk Power Corp.) - Series B
LOC Toronto-Dominion Bank 12/01/26 5.05 10,300,000 P1
1,700,000 New York State ERDA PCRB
(Orange & Rockland County)
FGIC Insured 10/01/14 4.30 1,700,000 VMIG-1 A1+
2,700,000 New York State ERDA PCRB
(Rochester Gas & Electric) - Series 1984
LOC The Bank of New York 10/01/14 3.80 2,700,000 P1
540,000 New York State JDA 03/01/05 5.35 540,000 VMIG-1
1,300,000 New York State JDA - Series A-1
LOC Fuji Bank, Ltd. 03/01/03 5.50 1,300,000 VMIG-1
765,000 New York State JDA - Series D
LOC Sumitomo Bank, Ltd. 03/01/99 3.85 765,000 VMIG-1 A1
910,000 New York State JDA - Series G
LOC Sumitomo Bank, Ltd. 03/01/99 3.85 910,000 VMIG-1 A1
12,600,000 New York State Local Government Assistance Corp.
LOC Credit Suisse/Swiss Bank/
Union Bank of Switzerland 04/01/22 4.50 12,600,000 VMIG-1 A1+
3,000,000 New York State Thruway Authority,
General RB VRDN
FGIC Insured 01/01/24 4.90 3,000,000 VMIG-1 A1+
3,500,000 New York, NY Series B Subseries B-6
MBIA Insured 08/15/05 5.40 3,500,000 VMIG-1 A1+
6,700,000 Oswego County, NY IDA PCRB
(Philip Morris Companies Inc.) 12/01/08 4.65 6,700,000 P1 A1
3,100,000 Port Authority of New York & New Jersey - Series 1 08/01/28 4.95 3,100,000 VMIG-1 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
30
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 Puerto Rico Industrial Medical
& Environmental PCFA PCRB
LOC Lloyds Bank PLC 12/01/15 4.55 % $ 500,000 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC National Bank of Detroit 11/01/97 4.70 500,000 P1 A1+
200,000 Southeast, NY IDA (1989 Unilock, NY)
LOC National Bank of Detroit 11/01/95 4.70 200,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC National Bank of Detroit 11/01/98 4.70 500,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC National Bank of Detroit 11/01/99 4.70 500,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC National Bank of Detroit 11/01/00 4.70 500,000 P1 A1+
3,000,000 Suffolk County NY Water Authority BAN 12/14/99 4.50 3,000,000 VMIG-1
7,300,000 Suffolk County, NY IDA (Nissequogue Cogen Partners)
LOC Toronto-Dominion Bank 12/15/23 4.65 7,300,000 VMIG-1 A1+
5,000,000 Suffolk County, NY IDA (Target Rock Corp.)
LOC Bank of Nova Scotia 02/01/07 4.40 5,000,000 P1 A1+
----------- -----------
179,135,000 Total Other Variable Rate Demand Instruments 179,135,000
----------- -----------
<CAPTION>
Put Bonds (2.23%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Albany County, NY IDA (West Eagle Co.)
LOC Key Bank, N.A. 08/15/95 4.65 % $ 2,000,000 P1 A1
430,000 Fulton County, NY IDA (LCM Properties Realty Trust)
LOC The Bank of New York 06/15/95 4.25 430,000 P1 A1
1,750,000 New York State ERDA (NYS Electric & Gas Corp.)
LOC Union Bank of Switzerland 12/01/95 4.60 1,750,000 A1+
1,500,000 Puerto Rico Industrial Medical
& Environmental PCFA PCRB (Reynolds Metals Co.)
LOC ABN-AMRO Bank N.V. 09/01/95 4.00 1,500,000 VMIG-1 A1+
----------- ---------
5,680,000 Total Put Bonds 5,680,000
----------- ---------
<CAPTION>
Tax Exempt Commercial Paper (0.60%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,525,000 Port Authority of NY & NJ 07/06/95 3.95 % $ 1,525,000 P1 A1+
---------- ---------
1,525,000 Total Tax Exempt Commercial Paper 1,525,000
---------- ---------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
31
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Variable Rate Demand Instruments - Participations (b) (7.74%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 33,750 1985 Standard Paper Box Co.
LOC Chemical Bank 12/01/95 5.85 % $ 33,750 P1 A1
375,000 BSE Corp. Project
LOC Chemical Bank 07/01/01 5.85 375,000 P1 A1
439,963 Centennial Associates/W&H Stampings, Inc.
LOC Chemical Bank 10/01/00 5.85 439,963 P1 A1
482,759 Datagraphic Inc.
LOC Chemical Bank 10/01/98 5.85 482,759 P1 A1
1,533,344 Duralab Equipment Corporation 1985
LOC Dai-Ichi Kangyo Bank, Ltd. 12/01/95 5.85 1,533,344 P1 A1
1,780,000 Executive Square Business Park
LOC Chemical Bank 06/01/01 5.85 1,780,000 P1 A1
327,586 Faden Paper Supply Co.
LOC Chemical Bank 01/01/00 5.85 327,586 P1 A1
186,666 Ferrara Bros. Building
LOC Chemical Bank 01/01/97 5.85 186,666 P1 A1
1,269,000 GL II Associates
LOC Chemical Bank 01/01/99 5.85 1,269,000 P1 A1
1,915,000 Giaquinto Joint Venture
LOC Chemical Bank 07/01/02 5.85 1,915,000 P1 A1
420,125 I.G. Federal Electric
LOC Chemical Bank 11/01/99 5.85 420,125 P1 A1
625,000 Ja-Cole Realty Co./IHM Systems Inc.
LOC Dai-Ichi Kangyo Bank, Ltd. 12/01/95 5.85 625,000 P1 A1
797,840 Metro Seliger Industries, Inc. 1984
LOC Chemical Bank 08/10/99 5.85 797,840 P1 A1
1,100,000 Miteq Realty Association
LOC Dai-Ichi Kangyo Bank, Ltd. 09/01/95 5.85 1,100,000 P1 A1
321,250 One Crouse Medical Plaza 1983
LOC Chemical Bank 12/10/98 5.85 321,250 P1 A1
548,000 Parrtown Facility
LOC Dai-Ichi Kangyo Bank, Ltd. 12/01/95 5.85 548,000 P1 A1
1,615,000 Penn-Plax Plastics, Nassau County
LOC Dai-Ichi Kangyo Bank, Ltd. 01/01/00 5.85 1,615,000 P1 A1
4,763,202 Puntillo Limited Partner
LOC Dai-Ichi Kangyo Bank, Ltd. 10/01/04 5.85 4,763,202 P1 A1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
32
<PAGE>
- ------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------- ------- ------
Variable Rate Demand Instruments - Participations (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 74,999 Ram Realty Co. Project
LOC The Bank of New York 02/01/99 5.40 % $ 74,999 P1 A1
182,100 Rozal Properties Project
LOC Chemical Bank 09/01/96 5.85 182,100 P1 A1
536,642 Texpak, Inc. 1985
LOC Chemical Bank 01/01/01 5.85 536,642 P1 A1
361,726 Unitel Video Service 82
LOC Chemical Bank 10/01/97 5.85 361,726 P1 A1
----------- -----------
19,688,952 Total Variable Rate Demand Instruments - Participations 19,688,952
----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (3.82%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 741,306 Adirondack Transit Lines
LOC Key Bank, N.A. 02/01/01 5.40 % $ 741,306 P1 A1
3,500,000 Blaser Real Estate 1990
LOC Union Bank of Switzerland 09/01/21 5.85 3,500,000 P1 A1
3,000,000 Blaser Real Estate Inc. 1986
LOC Union Bank of Switzerland 09/01/21 5.85 3,000,000 P1 A1
756,000 FTS Systems Inc.
LOC Key Bank, N.A. 01/15/09 4.16 756,000 P1 A1
358,750 J. Treffeletti & Sons
LOC Key Bank, N.A. 09/01/00 5.40 358,750 P1 A1
328,750 Troy Mall Associates - Series 1985B
LOC Key Bank, N.A. 07/01/15 5.40 328,750 P1 A1
1,023,750 Troy Mall Associates - Series 1985C
LOC Key Bank, N.A. 04/01/16 5.40 1,023,750 P1 A1
---------- ------------
9,708,556 Total Variable Rate Demand Instruments - Private Placements 9,708,556
---------- ------------
Total Investments (100.03%) (Cost $254,495,020+) 254,495,020
Liabilities in Excess of Cash and Other Assets (-0.03%) ( 73,407)
------------
Net Assets (100.00%), 254,423,867 Shares Outstanding (Note 3) $ 254,421,613
=============
Net Asset Value, offering and redemption price per share $ 1.00
=============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
33
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
FOOTNOTES:
(a) The ratings noted for variable rate demand instruments are those of the
bank whose letter of credit secures such instruments or the guarantor of
the bond. P1 and A1+ are the highest ratings assigned for tax exempt
commercial paper.
(b) Securities payable on demand at par including accrued interest (usually
with seven days notice) and where indicated are unconditionally secured as
to principal and interest by a bank letter of credit. The interest rates
are adjustable and are based on bank prime rates or other interest rate
adjustment indices. The rate shown is the rate in effect at the date of
this statement.
(c) Securities that are not rated which the Fund's Board of Directors has
determined to be of comparable quality to those rated securities in which
the Fund invests.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note PCFA = Pollution Control Finance Authority
CI = Certificate of Indebtedness PCRB = Pollution Control Revenue Bond
CLN = Construction Loan Note RAN = Revenue Anticipation Note
CRRB = Cultural Resource Revenue Bond RAW = Revenue Anticipation Warrant
ERDA = Energy and Research Development Authority RB = Revenue Bond
FAN = Fund Anticipation Note RN = Revenue Note
GAN = Grant Anticipation Note TAN = Tax Anticipation Note
HDC = Housing Development Corporation TLN = Tax Loan Note
HRB = Hospital Revenue Bond TRAN = Tax and Revenue Anticipation Note
IDA = Industrial Development Authority VRB = Variable Rate Bond
IDRB = Industrial Development Revenue Bond VRDN = Variable Rate Demand Note
JDA = Job Development Authority
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
34
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
===============================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest............................................................. $ 8,403,877
-------------
Expenses: (Note 2)
Investment management fee............................................ 702,867
Administration Fee................................................... 468,578
Shareholder servicing fee............................................ 468,578
Custodian, shareholder servicing and
related shareholder expenses..................................... 258,167
Legal, compliance and filing fees.................................... 28,646
Audit and accounting................................................. 71,027
Directors' fees and expenses......................................... 21,427
Other expenses....................................................... 27,247
-------------
Total expenses..................................................... 2,046,537
-------------
Net investment income.................................................... 6,357,340
REALIZED GAIN (LOSS) ON INVESTMENTS...................................... 284
-------------
Increase in net assets from operations................................... $ 6,357,624
=============
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
35
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED APRIL 30, 1995 AND 1994
===============================================================================
<TABLE>
<CAPTION>
1995 1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 6,357,340 $ 4,035,611
Net realized gain (loss) on investments....................... 284 1,369
--------------- ---------------
Increase in net assets from operations............................ 6,357,624 4,036,980
Dividends to shareholders from net investment income.............. ( 6,357,340)* ( 4,035,611)*
Capital share transactions (Note 3)............................... 36,073,321 7,860,179
--------------- ---------------
Total increase (decrease)..................................... 36,073,605 7,861,548
Net assets:
Beginning of year............................................. 218,348,008 210,486,460
--------------- ---------------
End of year................................................... $ 254,421,613 $ 218,348,008
=============== ===============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
36
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Summary of Accounting Policies
New York Daily Tax Free Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles for investment companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.
d) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (Manager), equal to .30% of the Fund's
average daily net assets. The Manager is required to reimburse the Fund for its
expenses (exclusive of interest, taxes, brokerage, and extraordinary expenses)
to the extent that such expenses, including the investment management and the
shareholder servicing and administration fees, for any fiscal year exceed the
lesser of (i) 1 1/2% of the Fund's average net assets or (ii) the limits on
investment company expenses prescribed by any state in which the Fund's shares
are qualified for sale. No such reimbursement was required for the year ended
April 30, 1995.
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .20% of the Fund's average daily net assets.
Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund a fee equal to .20% of the Fund's average daily net assets. There
were no additional expenses borne by the Fund pursuant to the Distribution Plan.
- -------------------------------------------------------------------------------
37
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates (Continued)
Included in the Statement of Operations under the caption "Custodian,
shareholder servicing and related shareholder expenses" are fees of $29,552 paid
to Fundtech Services L.P., an affiliate of the Manager as servicing agent for
the Fund.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$3,000 per annum plus $500 per meeting attended.
3. Capital Stock
At April 30, 1995, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $254,422,178. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Sold................................... 448,737,421 418,063,703
Issued on reinvestment of dividends.... 5,640,644 3,873,172
Redeemed............................... ( 418,304,744) ( 414,076,696)
------------ ------------
Net increase (decrease)................ 36,073,321 7,860,179
============ ============
</TABLE>
4. Sales of Securities
Accumulated undistributed realized losses at April 30, 1995 amounted to $565.
Such losses represent tax basis net capital losses which may be carried forward
to offset future capital gains. Such losses expire April 30, 2002.
5. Concentration of Credit Risk
The Fund invests primarily in obligations of political subdivisions of the State
of New York and, accordingly, is subject to the credit risk associated with the
non-performance of such issuers. Approximately 72% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the credit worthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.
- -------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
6. Selected Financial Information
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year.... $ 1.000 $1.000 $1.000 $1.000 $1.000
------- ------ ------ ------ ------
Income from investment operations:
Net investment income............... .027 0.018 0.023 0.037 0.048
Less distributions:
Dividends from net investment income .027 0.018 0.023 0.037 0.048
------ ------ ------ ------ ------
Net asset value, end of year.......... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return.......................... 2.74% 1.84% 2.28% 3.73% 4.92%
Ratios/Supplemental Data
Net assets, end of year (000)......... $254,422 $218,348 $210,486 $202,291 $191,622
Ratios to average net assets:
Expenses............................ 0.87% 0.89% 0.89% 0.87% 0.82%+
Net investment income............... 2.71% 1.82% 2.25% 3.63% 4.82%+
+ Net of management and shareholder servicing waived equivalent to .07% of
average net assets.
</TABLE>
- -------------------------------------------------------------------------------
39
<PAGE>
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
*** (a) Financial Statements
Included in Prospectus Part A:
(1) Table of Fees and Expenses
(2) Selected Financial Information
Included in Statement of Additional Information Part B:
(1) Report of McGladrey & Pullen, LLP independent
certified public accountants, dated May 19, 1995;
(2) Statement of Net Assets, April 30, 1995 (audited);
(3) Statement of Operations, April 30, 1995 (audited);
(4) Statement of Changes in Net Assets, April 30, 1995
(audited);
(5) Notes to Financial Statements;
(b) Exhibits.
++ (1) Amended Articles of Incorporation of the Registrant.
* (2) By-Laws of the Registrant.
(3) Not applicable.
+ (4) Form of certificate for shares of Common Stock, par
value $.001 per share, of the Registrant
**** (5) Investment Management Contract between the Registrant
and Reich & Tang Asset Management L.P.
**** (6) Amended Distribution Agreement between the Registrant
and Reich & Tang Distributors L.P.
(7) Not applicable.
++ (8) Custody Agreement between the Registrant and
Investors Fiduciary Trust Company.
- --------------------------
+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement on
May 8, 1984 and incorporated herein by reference.
++Filed with Post-Effective Amendment No. 9 to said Registration Statement on
August 31, 1990 and incorporated herein by reference.
* Filed with the initial Registration Statement No. 2-89264 on February 6, 1984,
and incorporated herein by reference.
***Filed herewith.
****Filed with Post-Effective Amendment No.17 to said Registration Statement No.
2-89264 on June 30, 1994 and incorporated herein by reference.
C-1
<PAGE>
++ (9) Transfer Agent Agreement between Registrant and
American Transtech Inc.
+ (10) Opinion of Messrs. Battle Fowler LLP as to the
legality of the Securities being registered,
including their consent to the filing thereof and to
the use of their name under the heading "Federal
Income Taxes" in the Prospectus and in the Statement
of Additional Information, and under the heading
"Counsel and Auditors" in the Statement of Additional
Information.
*** (11) Consent of Independent Certified Public Accountants.
(12) Not applicable.
+ (13) Written assurance of Empire Group, Inc. that its
purchase of shares of the registrant was for
investment purposes without any present intention of
redeeming or reselling.
(14) Not applicable.
+++ (15.1) Amended Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940.
****(15.2) Amended Distribution Agreement between the Registrant
and Reich & Tang Distributors L.P.
****(15.3) Amended Shareholder Servicing Agreement between the
Registrant and Reich & Tang Distributors L.P.
** (15.4) Form of Shareholder Servicing Agreements between the
Manager and Participating Organizations.
****(15.5) Amended Administrative Services Contract between the
Registrant and Reich & Tang Distributors L.P.
+* (16) Power of Attorney of the Registrant, its Principal
Officers and Directors
*** (17) Financial Data Schedule
Item 25. Persons controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of July 31, 1995
-------------- ---------------------
Common Stock
(par value $.001) 3,697
- --------------------------
+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement on
May 8, 1984 and incorporated herein by reference.
++Filed with Post-Effective Amendment No. 9 to said Registration Statement on
August 31, 1990 and incorporated herein by reference.
* Filed with the initial Registration Statement No. 2-89264 on February 6, 1984,
and incorporated herein by reference.
***Filed herewith.
****Filed with Post-Effective Amendment No.17 to said Registration Statement No.
2-89264 on June 30, 1994 and incorporated herein by reference.
C-2
<PAGE>
Item 27. Indemnification.
Registrant incorporates herein by reference the response to Item 27 of
Post-Effective Amendment No. 2 to the Registration Statement filed with the
Commission on July 3, 1985.
Item 28. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. under the caption
"Management of the Fund" in the Prospectus and "Manager" and "Management of the
Fund" in the Statement of Additional Information constituting parts A and B,
respectively, of the Registration Statement are incorporated herein by
reference.
New England Mutual Life Insurance Company, ("The New England") of which
New England Investment Companies, Inc. ("NEIC") is an indirect wholly-owned
subsidiary, owns approximately 68.1% of the outstanding partnership units of New
England Investment Companies, L.P., Reich & Tang, Inc., the former general
partner of New England Investment Companies, L.P. owns approximately 22.8% of
the outstanding partnership units of New England Investment Company, L.P. 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., the Reich &
Tang Asset Management, L.P. serves as the sole limited partner of the
Distributor.
Registrant's investment adviser, Reich & Tang Asset Management L.P., is a
registered investment adviser. Reich & Tang Asset Management L.P.'s investment
advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, North
Carolina Daily Municipal Income Fund, Inc., Short Term Income Fund, Inc. and Tax
Exempt Proceeds Fund, Inc., registered investment companies whose addresses are
600 Fifth Avenue, New York, New York 10020, which invest principally in money
market instruments; Reich & Tang Government Securities Trust, a registered
investment company which invests solely in securities issued or guaranteed by
the United States Government, whose address is 600 Fifth Avenue, New York, New
York 10020; Delafield Fund, Inc., Reich & Tang Equity Fund, Inc., a registered
investment company whose address is 600 Fifth Avenue, New York, New York 10020,
which invests principally in equity securities; Cortland Trust, Inc., a
registered investment company whose address is Three University Plaza,
Hackensack, New Jersey 07601 and Lebenthal Funds, Inc. {Lebenthal New York Tax
Free Income Fund, Inc. and Lebenthal New York Municipal Bond Fund}, a registered
investment company whose address is 25 Broadway, New York, New York 10004, which
invest primarily in money market instruments. In addition, New England
Investment Companies L.P. is the sole general partner of Alpha Associates,
August Associates, Reich & Tang Small Cap L.P. and Tucek Partners, private
investment partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of NEIC's subsidiaries
other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay Advisors, L.P.
("Back Bay"), where he serves as a Director, and Chairman of the Board of
Trustees of all of the mutual funds in the TNE Fund Group and the Zenith Funds
G. Neil Ryland, Executive Vice President, Treasurer and Chief Financial Officer
NEIC since July 1993, Executive Vice President and Chief Financial Officer of
The Boston Company, a diversified financial services company, from March 1989
until July 1993, from September 1985 to December 1988, Mr. Ryland was employed
by Kenner Parker Toys, Inc. as Senior Vice President and Chief Financial
Officer.
C-3
<PAGE>
Edward N. Wadsworth, Executive Vice President, General Counsel, Clerk and
Secretary of NEIC since December 1989, Senior Vice President and Associate
General Counsel of The New England from 1984 until December 1992, and Secretary
of Westpeak and Draycott and the Treasurer of NEIM. Lorraine C. Hysler has been
Secretary of Reich & Tang Asset Management Inc. since July 1994, Assistant
Secretary of NEIC since September 1993, Vice President of the Mutual Funds Group
of New England Investment Companies, L.P. from September 1993 until July 1994,
and Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler
joined Reich & Tang, Inc. in May 1977 and served as Secretary from April 1987
until September 1993. Richard E. Smith, III has been a Director of Reich & Tang
Asset Management Inc. since July 1994, President and Chief Operating Officer of
the Capital Management Group of New England Investment Companies, L.P. from May
1994 until July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994, Executive Vice President and Director
of Rhode Island Hospital Trust from March 1993 to May 1994, President, Chief
Executive Officer and Director of USF&G Review Management Corp. from January
1988 until September 1992. Steven W. Duff has been a Director of Reich & Tang
Asset Management Inc. since October 1994, President and Chief Executive Officer
of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is 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., North Carolina Daily Municipal Income Fund,
Inc. and Short Term Income Fund, Inc., President and Chairman of Reich & Tang
Government Securities Trust, President and Trustee of Florida Daily Municipal
Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., Executive Vice President of
Reich & Tang Equity Fund, Inc., and Senior Vice President of Lebenthal Funds,
Inc. Bernadette N. Finn has been Vice President - Compliance of Reich & Tang
Asset Management Inc. since July 1994, Vice President of Mutual Funds Division
of New England Investment Companies, L.P. from September 1993 until July 1994,
Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Finn joined
Reich & Tang, Inc. in September 1970 and served as Vice President from September
1982 until May 1987 and as Vice President and Assistant Secretary from May 1987
until September 1993. Ms. Finn is also Secretary of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Delafield Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily
Municipal Income Fund, Lebenthal Funds, Inc., Michigan Daily Tax Free Income
Funds, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund and Tax Exempt Proceeds Fund, Inc., a
Vice President and Secretary of Reich & Tang Equity Fund, Inc., Reich & Tang
Government Securities Trust and Short Term Income Fund, Inc. Richard De Sanctis
has been Treasurer of Reich & Tang Asset Management Inc. since July 1994,
Assistant Treasurer of NEIC since September 1993 and Treasurer of the Mutual
Funds Group of New England Investment Companies, L.P. from September 1993 until
July 1994, Treasurer of the Reich & Tang Mutual Funds since July 1994. Mr De
Sanctis joined Reich & Tang, Inc. in December 1990 and served as Controller of
Reich & Tang, Inc., from January 1991 to September 1993. Mr De Sanctis was Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also
Treasurer of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income
C-4
<PAGE>
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, Tax Exempt
Proceeds Fund, Inc. and Short Term Income Fund, Inc. and is Vice President and
Treasurer of Cortland Trust, Inc. Edward E. Phillips, Chairman of the Board of
NEIC from December 1989 until December 1991 and from August 1992 until December
1992, Chief Executive Officer of NEIC from August 1992 until October 1992,
Chairman of the Board of The New England from 1978 to January 1992, and Director
of NYNEX Corporation and Affiliated Publications, Inc. Robert A. Shafto, a
Director of NEIC since August 1992, Chairman of The New England since July 1993,
and President and Chief Executive Officer of The New England since July 1933,
having served in that capacity since January 1992, President and Chief Operating
Officer of The New England from 1990 to 1992 and President--Insurance and
Personal Financial Services of The New England from 1988 to 1990, and Director
of Fleet Bank of Massachusetts, N.A. Lawrence E. Fouracker, Director of NEIC
since May 1990, Director of The New England, Alcan Aluminum, Limited, Citicorp,
Inc., Enserch Corporation, General Electric Company, The Gillette Company and
Ionics, Inc. Thomas J. Galligan, Jr., Director of NEIC since May 1990, Chairman
of the Board of Directors of Boston Edison Company from 1979 until his
retirement in December 1986, served as its Chief Executive Officer from 1979 to
1984 and served as a Director until May 1990, Director of the New England from
1971 to 1990. Charles M. Leighton, Director of NEIC since May 1990, has been
Chairman of the Board and Chief Executive Officer of CML Group, Inc. a
speciality consumer products company, since 1969, and Director of The New
England and Corporate Software, Inc. Oscar L. Tang, Director of NEIC, Chairman
and Chief Executive Officer of Mid Pacific Air Corporation, and Director of
South Seas Textile Manufacturing Co., Ltd. G. Neil Ryland, Executive Vice
President, Treasurer and Chief Financial Officer NEIC since July 1993, Executive
Vice President and Chief Financial Officer of The Boston Company, a diversified
financial services company, from March 1989 until July 1993, from September 1985
to December 1988, Mr. Ryland was employed by Kenner Parker Toys, Inc. as Senior
Vice President and Chief Financial Officer. Sherry A. Umberfield, Executive Vice
President, Corporate Development of NEIC since December 1989, Vice President of
The New England from December 1988 to December 1992 and a Second Vice President
of The New England from 1984 to 1988, and Director of TNE Investment Services
Corporation ("TNEIS"), New England Investment Marketing, Inc. ("NEIM"), Westpeak
Investment Advisors, Inc. ("Westpeak") and Draycott Partners, Ltd, ("Draycott").
Edward N. Wadsworth, Executive Vice President, General Counsel, Clerk and
Secretary of NEIC since December 1989, Senior Vice President and Associate
General Counsel of The New England from 1984 until December 1992, and Secretary
of Westpeak and Draycott and the Treasurer of NEIM.
Item 29. Principal Underwriters.
(a) Reich & Tang Distributors L.P. is also distributor for 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.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government Securities
Trust, Short Term Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc.
(b) The following are the directors and officers of Reich & Tang Asset
Management Inc., the general partner of Reich & Tang Asset Management L.P. Reich
& Tang Distributors L.P. does not have any officers. The principal business
address of Messrs. Voss, Ryland, and Wadsworth is 399 Boylston Street, Boston,
Massachusetts 02116. All other persons' principal business address is 600 Fifth
Avenue, New York, New York 10020.
C-5
<PAGE>
Positions and Offices
With General Partner Positions and Offices
Name Of the Distributor With Registrant
Peter S. Voss President, CEO, and Director None
G. Neal Ryland Director None
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director President and Director
Bernadette N. Finn Vice President Vice President and Secretary
Lorraine C. Hylsler Secretary None
Richard De Sanctis Vice President and Treasurer
Treasurer
(c) Not applicable.
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at Reich &
Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020, the
Registrant's Manager; Fundtech Services L.P., the Registrant's transfer agent
and dividend disbursing agent; and at Investors Fiduciary Trust Company, 127
West 10th Street, Kansas City, Missouri, 64105, the Registrant's custodian.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The Registrant undertakes to call ameeting of shareholders
for purposes of voting upon the question of removal of a director or directors,
if requested to do so by the holders of at least 10% of the Fund's outstanding
shares, and the Registrant shall assist in communications with other
shareholder.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York, on the 29th day of August, 1995
NEW YORK DAILY TAX FREE INCOME FUND, INC.
By: :/s/Steven W. Duff
Steven W. Duff
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated and on August 29, 1995.
SIGNATURE TITLE
(1) Principal Executive Officer
/s/Steven W. Duff
Steven W. Duff President and Director
(2) Principal Financial and
Accounting Officer
/s/Richard De Sanctis
Richard De Sanctis Treasurer
(3) Majority of The Board of Directors
/s/Steven W. Duff
Steven W. Duff Director
Edward A. Kuczmarski (Director )
Caroline E. Newell (Director )
John P. Steines (Director )
Milton R. Neaman (Director )
By: /s/Bernadette N. Finn
* Bernadette N. Finn
Attorney-in-Fact
* An executed copy of the Power of Attorney is filed with Post
Effective Amendment No. 3 to the Registration Statement on August 25, 1986
and incorporated herein by reference.
<PAGE>
EXHIBIT 11a
McGLADREY & PULLEN L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated May 19, 1995, on the
financial statements of New York Daily Tax Free Income Fund, Inc. referred to
therein in Post-Effective Amendment No. 19 to the Registration Statement on Form
N-1A, File No. 2-89264, as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in the Prospectus under the
caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel and Auditors."
/s/McGLADREY & PULLEN, LLP
McGLADREY & PULLEN, LLP
New York, New York
August 28, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 740372
<NAME> New York Daily Tax Free Income Fund, Inc.
<SERIES>
<NUMBER> 1
<NAME> New York Daily Tax Free Income Fund, Inc.
<S> <C>
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1994
<PERIOD-END> APR-30-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 254495020
<INVESTMENTS-AT-VALUE> 254495020
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