As filed with the Securities and Exchange Commission on August 28, 1998
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. 23 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 21 [X]
(Check appropriate box or boxes)
NEW YORK DAILY TAX FREE INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212) 830-5220
BERNADETTE N. FINN
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):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on [date] pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant filed a Rule 24f-2 Notice for its fiscal year ended
April 30, 1998 on June 12, 1998.
<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
Information . . . . . . . . . . . Financial Highlights
4. General Description General Information; Investment
of Registrant and Policies. . . . Objectives, Policies and Risks;
5. Management of the Fund . . . . . . Management of the Fund; Custodian,
Transfer Agent and Dividend Agent;
Distribution and Service Plan
5A. Management's Discussion of
Fund Performance . . . . . . . . . Not Applicable
6. Capital Stock and Description of Common Stock; How to
Other Securities. . . . . . . . . . Purchase and Redeem Shares; General
Information; Dividends and
Distributions; Federal Income Taxes
7. Purchase of Securities How to Purchase and Redeem Shares;
Being Offered . . . . . . . . . . . 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 . .General Information
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, Policies
and Other Practices . . . . . . . .and Risks
18. Capital Stock and
Other Securities. . . . . . . . . .Description of Common Stock
19. Purchase, Redemption and Pricing How to Purchase and Redeem Shares;
of Securities Being Offered . . . .Net Asset Value
20. Tax Status. . . . . . . . . . . . .Federal Income Taxes
21. Underwriters. . . . . . . . . . . .Distribution and Service Plan
22. Calculations of Yield Quotations
of Money Market Funds. . . . . . . Yield Quotations
23. Financial Statements. . . . . . . . Independent Auditors' Report;
Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
NEW YORK DAILY TAX 600 FIFTH AVENUE
FREE INCOME FUND, INC. NEW YORK, NY 10020
(212) 830-5220
- -------------------------------------------------------------------------------
PROSPECTUS
September 1, 1998
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money market fund
designed 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, portfolio of high quality, short-term municipal
obligations. No assurance can be given that these objectives will be achieved.
The Fund offers two classes of shares to the general public. The Class A shares
of the Fund are subject to a service fee pursuant to the Fund's Rule 12b-1
Distribution and Service Plan and are sold through financial intermediaries who
provide servicing to Class A shareholders for which they receive compensation
from the Manager and the Distributor. The Class B shares of the Fund are not
subject to a service fee and either are sold directly to the public or are sold
through financial intermediaries that do not receive compensation from the
Manager or the Distributor. In all other respects, the Class A and Class B
shares represent the same interest in the income and assets of the Fund. See
"Description of Common Stock". The Fund is concentrated in the securities issued
by the State of New York (the "State") or entities within the State and may
invest a significant percentage of its assets in a single issuer, therefore an
investment in the Fund may be riskier than an investment in other types of money
market funds.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know prior to making their investment decisions.
Additional Information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without charge
by calling or writing the Fund at the above address. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference into this Prospectus in its entirety. The SEC maintains a website
(http.//www.sec.gov.) that contains the Statement of Additional Information and
other reports and information regarding the Fund which have been filed
electronically with the SEC.
Reich & Tang Asset Management L.P. acts as the investment manager of the Fund
and is a registered investment adviser. Reich & Tang Distributors, Inc. acts as
distributor of the Fund's shares and is a registered broker-dealer and member of
the National Association of Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the 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 insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
This Prospectus should be read and retained by investors for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
<PAGE>
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FINANCIAL HIGHLIGHTS
The following financial highlights of New York Daily Tax Free Income Fund,
Inc. has been audited by McGladrey & Pullen, LLP, Independent Certified
Public Accountants, whose report thereon is incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A Year Ended April 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------- ----- ----- ----- ------ ------
Income from investment operations:
Net investment income.......... 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
Less distributions:
Dividends from net investment income 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
------ ------ ----- ------ ------ ----- ----- ------ ------ -----
Net asset value, end of year...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ====== ====== ====== ====== ====== ======
Total Return...................... 2.90% 2.80% 3.08% 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86%
Ratios/Supplemental Data
Net assets,
end of year (000's omitted).... $370,044 $323,746 $283,368 $254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060
Ratios to average net assets:
Expenses....................... 0.85%+ 0.82%+ 0.84%+ 0.87% 0.89% 0.89% 0.87% 0.82%++ 0.77%++ 0.80%++
Net investment income.......... 2.85% 2.76% 3.02% 2.71% 1.82% 2.25% 3.63% 4.82%++ 5.32%++ 4.73%++
Expenses paid indirectly....... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Year October 10, 1996
CLASS B Ended (Commencement of Sales) to
April 30, 1998 April 30, 1997
-------------- --------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00 $ 1.00
----------- -----------
Income from investment operations:
Net investment income.................. 0.031 0.017
Less distributions:
Dividends from net investment income... ( 0.31) ( 0.017)
---------- -----------
Net asset value, end of period............ $ 1.00 $ 1.00
============ ============
Total Return.............................. 3.12% 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... $ 4,412 $ 7
Ratios to average net assets:
Expenses .............................. 0.64%+ 0.62%*
Net investment income.................. 2.94% 2.99%*
Expenses paid indirectly............... 0.00% 0.00%
</TABLE>
+ Includes expenses paid indirectly.
++ Net Management and Shareholder Servicing Fees Waived,
Equivalent to .07%, .10% and .02% of Average Net Assets in years
1991, 1990 and 1989 respectively.
* Annualized
2
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Class B
------- -------
Management Fees .30% .30%
12b-1 Fees .20% --
Other Expenses .35% .34%
Administrative Services Fee .21% ______ .21 _____
Total Fund Operating Expenses .85% .64%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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):
Class A $9 $27 $47 $105
Class B $7 $20 $36 $80
</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 figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
INTRODUCTION
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load, 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, Reich & Tang Asset Management L.P. (the
"Manager"), is a registered investment adviser and currently acts as manager or
administrator to seventeen other open-end management investment companies. The
Fund's shares are distributed through Reich & Tang Distributors, Inc. (the
"Distributor") with whom the
3
<PAGE>
Fund has entered into a Distribution Agreement and a Shareholder Servicing
Agreement (with respect to Class A Shares only) pursuant to the Fund's
distribution and service plan adopted under Rule 12b-1 under the Investment
Company Act of 1940,as amended, (the "1940 Act"). (See "Distribution and Service
Plan".)
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 the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager,
or employees of the Manager or its affiliates. Due to the services performed by
the Manager, the Fund currently has no employees and its officers are not
required to devote full-time to the affairs of the Fund. The Statement of
Additional Information contains general background information regarding each
Director and principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal offices at 600
Fifth Avenue, New York, New York 10020. The Manager was at July 31, 1998,
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $ 11.3 billion. The Manager acts as manager or administrator of
seventeen other investment companies and also advises pension trusts,
profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager.
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Manager. Nvest Corporation, a Massachusetts Corporation (formerly known
as New England Investment Companies, Inc.), serves as the managing general
partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly,
4
<PAGE>
approximately 13% of the outstanding partnership interests of Nvest Companies.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, Limited Partnership Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds,
L.P., Nvest Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson,
Scarborough & McCullough, L.P., and Westpeak Investment Advisors, L.P. These
affiliates in the aggregate are investment advisors or managers to 80 other
registered investment companies.
The name change did not result in a change in control of the Manager and has no
impact upon the Manager's performance of its responsibilities and obligations.
The Investment Management Contract has a term which extends to April 30, 1999
and may be continued in force thereafter for successive twelve-month periods
beginning each May 1, provided that such majority vote of the Fund's outstanding
voting securities or 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.
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 the Distributor receives a service fee equal to .20% per annum of the
Fund's average daily net assets for the Class A shares of the Fund under the
Shareholder Servicing Agreement. The fees are accrued daily and paid monthly.
Investment management fees and operating expenses, which are attributable to
both classes of the Fund will be allocated daily to each class share based on
the percentage of outstanding shares at the end of the day. 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 .21% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)
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
5
<PAGE>
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. Generally, all shares will be voted on in the
aggregate except if voting by Class is required by law or the matter involved
affects only one class, in which case shares will be voted on separately by
Class. There are no conversion or preemptive rights in connection with any
shares of the Fund. All shares, when issued in accordance with the terms of the
offering will be fully paid and nonassessable. Shares are redeemable at net
asset value at the option of the shareholder.
The Fund is subdivided into two classes of stock, Class A and Class B. Each
share, regardless of class, will represent an interest in the same portfolio of
investments and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) the Class A and Class B
shares will have different class designations; (ii) only the Class A shares will
be assessed a service fee pursuant to the Rule 12b-1 Distribution and Service
Plan of the Fund of .20% of the Fund's average daily net assets; (iii) only the
holders of the Class A shares would be entitled to vote on matters pertaining to
the Plan and any related agreements in accordance with provisions of Rule 12b-1;
and (iv) the exchange privilege will permit shareholders to exchange their
shares only for shares of the same Class of a Fund that participates in an
exchange privilege with the Fund. (See "Exchange Privilege" herein.) Payments
that are made under the Plans will be calculated and charged daily to the
appropriate Class prior to determining daily net asset value per share and
dividends/distributions.
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, 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 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 ("Participation Certificates"). 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
6
<PAGE>
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. "Exempt-interest" dividends, however, 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
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"), (ii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality and (iii) Municipal Obligations
which are subject to a Demand Feature or Guarantee (as such terms are defined in
Rule 2a-7 of the 1940 Act) which meet the rating criteria set forth in either of
the above clauses (i) or (ii). A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's Rating Services, a division of the McGraw-Hill Companies
("S&P") and Moody's Investors Service, Inc. ("Moody's"). The two highest ratings
by S&P and Moody's are "AAA" and "AA" by S&P in the case of long-term bonds and
notes, or "Aaa"
7
<PAGE>
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.
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 promptly
reassess 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. Reassessment is not required,
however, 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 or an event of insolvency occurs with respect to the issuer
of a portfolio security or the provider of any Demand Feature or Guarantee, the
Fund will dispose of the security absent a determination by the Fund's Board of
Directors that disposal of the security would not be in the best interests of
the Fund. In the event that the security is disposed of it shall be disposed of
as soon as practicable consistent with achieving an orderly disposition by sale,
exercise of any demand feature or otherwise. In the event of a default with
respect to a security which immediately before default accounted for 1/2 of 1%
or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
In view of the "concentration" of the Fund in 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.
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. The Fund intends to continue to qualify as a "regulated investment
8
<PAGE>
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. Payment of interest and preservation of principal, however, 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 pays dividends monthly. There is no fixed dividend rate.
In computing these dividends, interest earned and expenses are accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares of the same Class of shares immediately upon payment thereof unless a
shareholder has elected by written notice to the Fund to receive either of such
distributions in cash.
The Class A shares will bear the service fee under the Plan. As a result, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations. Certain Participating
Organizations are compensated by the Distributor from its shareholder servicing
fee and by the Manager from its management fee for the performance of these
services. An investor who purchases shares through a Participating Organization
that receives payment from the
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Manager or the Distributor will become a Class A shareholder. (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 as Class B shareholders of the Fund and not receive the benefit of the
servicing functions performed by a Participating Organization. Class B shares
may also be offered to investors who purchase their shares through Participating
Organizations who do not receive compensation from the Distributor or the
Manager because they may not be legally permitted to receive such as
fiduciaries. The Manager pays the expenses incurred in the distribution of Class
B shares. Participating Organizations whose clients become Class B shareholders
will not receive compensation from the Manager or Distributor for the servicing
they may provide to their clients. (See "Direct Purchase and Redemption
Procedures" herein.) With respect to both Classes of shares, 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.
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 for each Class 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. Unless other instructions are given in proper
form to the Fund's transfer agent, a check for the proceeds of a redemption will
be sent to the shareholders' address of record. If a shareholder elects to
redeem all the shares of the Fund he owns, all dividends accrued to the date of
such redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days, after shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as 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
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<PAGE>
assets, or for such other period as the SEC may by order permit for the
protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any 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.
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. It is the Fund management's
position, however, that banks are not prohibited
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<PAGE>
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. This is an unsettled
area of the law, however, 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.
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 Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's subscription will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, investors should first obtain a new account number by telephoning
the Fund at 212-830-5220 (within New York State) or 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 #820
SS #/Tax ID #
The investor should then promptly complete and mail the subscription order form.
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<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 Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct Deposit Privilege
You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments, interest payments or any other payments designated by you, or by
having federal salary, social security, or certain veteran's, military or other
payments from the federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up Form
for each type of payment that you desire to include in the Privilege. The
appropriate form may be obtained from your broker or the Fund. Death or legal
incapacity will automatically terminate your participation in the Privilege. You
may elect at any time to terminate your participation by notifying in writing
the appropriate depositing entity and/or federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
Subsequent purchases can be made by bank wire or personal delivery, as indicated
above, or by mailing a check to:
New York Daily Tax Free Income Fund, Inc.
Mutual Funds Group
Post Office Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription 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 of each
Class 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.
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<PAGE>
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
13
<PAGE>
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 Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed. Normally the redemption
proceeds are paid by check and mailed to the shareholder of record.
Checks
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks which may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the 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.
Since the dollar value of the account changes daily, the total value of the
account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check, a postdated check and a check
written for an amount below the Fund minimum of $250. The Fund reserves the
right to terminate or modify the check redemption procedure at any time or to
impose additional fees.
Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the 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
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<PAGE>
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.
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 Class of
shares in the Fund for shares of the same Class of certain other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
and which participate in the exchange privilege program with the Fund. If only
one Class of shares is available in a particular exchange Fund, the shareholder
of the Fund is entitled to exchange their shares for the shares available in
that exchange Fund. Currently the exchange privilege program has been
established between the Fund and California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., 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. Each Class of 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 of the same Class 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 Funds at the address or telephone number set
forth on the cover page of this Prospectus.
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<PAGE>
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 Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
(212) 830-5220; outside New York State at (800) 221-5079. 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 SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a Distribution and Service Plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement with Reich & Tang Distributors, Inc. (the "Distributor") and a
Shareholder Servicing Agreement (with respect to Class A shares of the Fund
only) with the Distributor and the Manager.
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.
Under the Shareholder Servicing Agreement, the Distributor receives (with
respect only to the Class A shares) a service fee equal to .20% per annum of the
Class A shares' average daily net assets (the "Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly and any portion of the fee
may be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement 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
16
<PAGE>
lines and CRT terminals, incurred by the Manager, Distributor and Participating
Organizations in carrying out their respective obligations under the Shareholder
Servicing Agreement with respect to Class A shares, and (ii) preparing, printing
and delivering the Fund's Prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan 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
Class A shares of the Fund; (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Class A shares of the
Fund; and (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors; 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 Class A shares. The Distributor may also make
payments from time to time from its own resources, which may include the
Shareholder Servicing Fee (with respect to Class A shares) and past profits, for
the purposes enumerated in (i) above. The Distributor, 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 new Investment
Management Contract, the Shareholder Servicing Agreement or the Administrative
Services Contract in effect for that year.
For the fiscal year ended April 30, 1998, the total amount spent pursuant to the
Plan for the Class A shares was .37% 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 .17% of the average daily net assets was paid by the Manager
(which may be deemed an indirect payment by the Fund). Of the total amount paid
by the Distributor, $1,315,608 was utilized for Broker assistance payments,
$13,524 for compensation to sales personnel, $5,364 for travel and expenses,
$9,733 for Prospectus printing and $364 on miscellaneous expenses.
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 having undistributed capital gain
income within the meaning of the Code. The Fund will inform shareholders of the
amount and nature of its income and gains in a written notice mailed to
shareholders not later than 60 days after the close of the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including
tax-exempt interest dividends paid by the Fund, is to be added to adjusted gross
income for purposes of computing the amount of Social Security benefits
includible in gross income.
17
<PAGE>
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. Further a corporation will be required to include in alternative
minimum taxable income 75% of the amount by which its adjusted current earnings
(including generally, tax-exempt interest) exceeds its alternative minimum
taxable income (determined without this tax item). In addition, in certain cases
Subchapter S corporations with accumulated earnings and profits from Subchapter
C years will be subject to a tax on "passive investment income," including
tax-exempt interest. Although the Fund intends to maintain a $1.00 per share net
asset value, a Shareholder may realize a taxable gain or loss upon the
disposition of shares.
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.
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 SEC as a 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 shareholders entitled to cast not less than 67% in interest 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 including the removal of Fund director(s) and
communication among shareholders, any registration of the Fund with the SEC or
any state, or as the Directors may consider necessary or desirable. Each
Director serves until the next meeting of the shareholders called for the
purpose of considering the election or reelection of such Director or of a
successor to such Director, and until the election and qualification of his or
her successor, elected at such a meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's registration statement filed with the SEC,
including the exhibits thereto. The registration statement and the exhibits
thereto may be examined at the SEC and copies thereof may be obtained upon
payment of certain duplicating fees.
18
<PAGE>
NET ASSET VALUE
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except customary business holidays and Good
Friday. The net asset value of a Class is computed by dividing the value of the
Fund's net assets (i.e., the value of its securities and other assets less its
liabilities, including expenses payable or accrued but excluding capital stock
and surplus) for such Class by the total number of shares outstanding for such
Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
YEAR 2000 ISSUE
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be year 2000 compliant. Although the Manager does not anticipate that the
year 2000 Issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the year 2000 will be sufficient to avoid an adverse impact on
the Fund.
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., 600 Fifth Avenue, New York, New York 10020, is transfer agent and dividend
agent for the shares of the Fund. The Fund's custodian and transfer agent do not
assist in, and are not responsible for, investment decisions involving assets of
the Fund.
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Financial Highlights.............................
Table of Fees and Expenses ...................... NEW YORK
Introduction..................................... DAILY TAX
Management of the Fund........................... FREE
Description of Common Stock...................... INCOME
Investment Objectives, Policies and Risks........ FUND, INC.
Dividends and Distributions......................
How to Purchase and Redeem Shares................
Investment through
Participating Organizations.................. PROSPECTUS
Direct Purchase and September 1, 1998
Redemption Procedures..........................
Initial Purchases of Shares......................
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct
Deposit Privilege..............................
Subsequent Purchases of Shares..................
Redemption of Shares.............................
Exchange Privilege...............................
Specified Amount Automatic
Withdrawal Plan................................
Distribution and Service Plan......................
Federal Income Taxes...............................
General Information................................
Net Asset Value....................................
Year 2000 Issue ...................................
Custodian, Transfer Agent
and Dividend Agent.............................
<PAGE>
PROSPECTUS September 1, 1998
EVERGREEN SHARES OF New York
DAILY TAX FREE INCOME FUND, INC.
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money
market fund designed 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, portfolio of high quality, short-term
municipal obligations. No assurance can be given that these objectives will be
achieved. The Fund offers two classes of shares to the general public, however
only Class A shares are offered by this Prospectus ("The Evergreen Shares"). The
Class A shares of the Fund are subject to a service fee pursuant to the Fund's
Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or Distributor. In all other respects, the Class A
and Class B shares represent the same interests in the income and assets of the
Fund. See "Description of Common Stock". The Fund is concentrated in the
securities issued by the State of New York (the "State") or entities within the
State and may invest a significant percentage of its assets in a single issuer,
therefore, an investment in the Fund may be riskier than an investment in other
types of money market funds. Only Evergreen shares are offered by this
Prospectus.
This Prospectus sets forth concisely the information about the Fund
that prospective investors should know prior to making their investment
decisions. Additional information about the Fund has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request and
without charge by calling the Fund at (800) 807-2940. The "Statement of
Additional Information" bears the same date as this Prospectus and is
incorporated by reference into this Prospectus in its entirety. The SEC
maintains a website (http.//www.sec.gov.) that contains the Statement of
Additional Information and other reports and information regarding the Fund
which have been filed electronically with the SEC.
Investors should be aware that the Evergreen shares may not be
purchased other than through certain securities dealers with whom Evergreen
Distributor, Inc. ("EDI") has entered into agreements for this purpose or
directly from EDI. Evergreen shares have been created for the primary purpose of
providing a New York tax-free money market fund product for shareholders of
certain funds distributed by EDI. Shares of the Fund other than Evergreen shares
are offered pursuant to a separate Prospectus.
Reich & Tang Asset Management L.P. acts as investment manager of the
Fund and is a registered investment adviser. Reich & Tang Distributors, Inc.
acts as distributor of the Fund's shares and is a registered broker-dealer and
member of the National Association of Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the 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 insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
This Prospectus Should Be Read And Retained By Investors For Future Reference.
<PAGE>
TABLE OF CONTENTS
TABLE OF FEES AND EXPENSES HOW TO PURCHASE AND REDEEM SHARES
FINANCIAL HIGHLIGHTS How to Buy Shares
INTRODUCTION How To Redeem Shares
MANAGEMENT OF THE FUND SHAREHOLDER SERVICES
DESCRIPTION OF COMMON STOCK Effect of Banking Laws
INVESTMENT OBJECTIVES, DISTRIBUTION AND SERVICE PLAN
POLICIES AND RISKS FEDERAL INCOME TAXES
DIVIDENDS AND DISTRIBUTIONS GENERAL INFORMATION
Management and Investment Management Contract NET ASSET VALUE
DESCRIPTION OF SHARES CUSTODIAN AND TRANSFER AGENT
DIVIDENDS AND DISTRIBUTIONS
HOW TO PURCHASE AND REDEEM SHARES
How to Buy Shares
How to Redeem Shares
2
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Class B
------- -------
Management Fees .30% .30%
12b-1 Fees .20% --
Other Expenses .35% .34%
Administrative Services Fee .21% ______ .21 _____
Total Fund Operating Expenses .85% .64%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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):
Class A $9 $27 $47 $105
Class B $7 $20 $36 $80
</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 figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights 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>
CLASS A Year Ended April 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------- ----- ----- ----- ------ ------
Income from investment operations:
Net investment income.......... 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
Less distributions:
Dividends from net investment income 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
------ ------ ----- ------ ------ ----- ----- ------ ------ -----
Net asset value, end of year...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ====== ====== ====== ====== ====== ======
Total Return...................... 2.90% 2.80% 3.08% 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86%
Ratios/Supplemental Data
Net assets,
end of year (000's omitted).... $370,044 $323,746 $283,368 $254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060
Ratios to average net assets:
Expenses....................... 0.85%+ 0.82%+ 0.84%+ 0.87% 0.89% 0.89% 0.87% 0.82%++ 0.77%++ 0.80%++
Net investment income.......... 2.85% 2.76% 3.02% 2.71% 1.82% 2.25% 3.63% 4.82%++ 5.32%++ 4.73%++
Expenses paid indirectly....... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Year October 10, 1996
CLASS B Ended (Commencement of Sales) to
April 30, 1998 April 30, 1997
-------------- --------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00 $ 1.00
----------- -----------
Income from investment operations:
Net investment income.................. 0.031 0.017
Less distributions:
Dividends from net investment income... ( 0.31) ( 0.017)
---------- -----------
Net asset value, end of period............ $ 1.00 $ 1.00
============ ============
Total Return.............................. 3.12% 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... $ 4,412 $ 7
Ratios to average net assets:
Expenses .............................. 0.64%+ 0.62%*
Net investment income.................. 2.94% 2.99%*
Expenses paid indirectly............... 0.00% 0.00%
</TABLE>
+ Includes expenses paid indirectly.
++ Net Management and Shareholder Servicing Fees Waived,
Equivalent to .07%, .10% and .02% of Average Net Assets in years
1991, 1990 and 1989 respectively.
* Annualized
4
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load,
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 seventeen other open-end management
investment companies. The Fund's shares are distributed through Reich & Tang
Distributors, Inc. (the "Distributor"), with whom the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
Class A shares only) pursuant to the Fund's distribution and service plan
adopted under Rule 12b-1 under the Investment Company Act of 1940, as amended,
(the "1940 Act"). (See "Distribution and Service Plan".)
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.
Evergreen shares are identical to other shares of the Fund, which are
offered pursuant to a separate prospectus, with respect to investment objectives
and yield, but differ with respect to certain other matters. See "How to
Purchase and Redeem Shares" and "Shareholder Services."
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's Board of Directors which is responsible for the overall
management and supervision of the Fund, has employed the Manager to serve as
investment manager of the Fund. The Manager provides persons satisfactory to the
Fund's Board of Directors to serve as officers of the Fund. Such officers, as
well as certain other employees and directors of the Fund, may be directors or
officers of Reich & Tang Asset Management, Inc., the sole general partner of the
Manager, or employees of the Manager or its affiliates. Due to the services
performed by the Manager, the Fund currently has no employees and its officers
are not required to devote full-time to the affairs of the Fund. The Statement
of Additional Information contains general background information regarding each
Director and principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal
offices at 600 Fifth Avenue, New York, New York 10020. The Manager was at July
31, 1998 investment manager, adviser or supervisor with respect to assets
aggregating in excess of $11.3 billion. The Manager acts as manager or
administrator of seventeen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP")
was the limited partner and owner of a 99.5% interest in the Manager replacing
New England Investment Companies, L.P. ("NEICLP") as the limited partner and
owner of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager.
5
<PAGE>
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Manager. Nvest Corporation, a Massachusetts Corporation (formerly known
as New England Investment Companies, Inc.), serves as the managing general
partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
Nvest Companies and may be deemed a "controlling person" of the Manager. Reich &
Tang, Inc. owns, directly and indirectly, approximately 13% of the outstanding
partnership interests of Nvest Companies.
Nvest Companies is a holding company offering a broad array of
investment styles across a wide range of asset categories through thirteen
subsidiaries, divisions and affiliates offering a wide array of investment
styles and products to institutional clients. Its business units, in addition to
the manager, include AEW Capital Management, L.P., Back Bay Advisors, L.P.,
Capital Growth Management, Limited Partnership Greystone Partners, L.P., Harris
Associates, L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New
England Funds, L.P., Nvest Associates, Inc., Snyder Capital Management, L.P.,
Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak Investment
Advisors, L.P. These affiliates in the aggregate are investment advisors or
managers to 80 other registered investment companies.
The name change did not result in a change in control of the Manager
and has no impact upon the Manager's performance of its responsibilities and
obligations.
The Investment Management Contract has a term which extends to April
30, 1999 and may be continued in force thereafter for successive twelve-month
periods beginning each May 1, provided that such majority vote of the Fund's
outstanding voting securities or 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.
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, 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 Manager at its discretion
may voluntarily waive all or a portion of the administrative services fee. For
its services under the Administrative Services Contract, the Manager receives a
fee equal to .21% per annum of the Fund's average daily net assets. Any portion
of the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares. (See "Distribution and Service
Plan" herein.)
- --------------------------------------------------------------------------------
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. Generally, all shares will be voted on in the aggregate except if voting
by Class is required by law or the matter involved affects only one class, in
which case shares will be voted on separately by Class. There are no conversion
or preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholder.
The Fund is subdivided into two classes of stock, Class A and Class B.
Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares
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<PAGE>
will be assessed a service fee pursuant to the Rule 12b-1 Distribution and
Service Plan of the Fund of .20% of the Fund's average daily net assets; (iii)
only the holders of the Class A shares would be entitled to vote on matters
pertaining to the Plan and any related agreements in accordance with provisions
of Rule 12b-1; and (iv) the exchange privilege will permit shareholders to
exchange their shares only for shares of the same Class of a Fund that
participates in an exchange privilege with the Fund. (See "Exchange Privilege"
herein.) Payments that are made under the Plans will be calculated and charged
daily to the appropriate Class prior to determining daily net asset value per
share and dividends/distributions.
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.
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INVESTMENT OBJECTIVES,
POLICIES AND RISKS
- --------------------------------------------------------------------------------
The Fund is a no-load, open-end, 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 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 ("Participation Certificates").
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 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
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<PAGE>
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"), (ii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality, and
(iii) Municipal Obligations which are subject to a Demand Feature or Guarantee
(as such terms are defined in Rule 2a-7 of the 1940 Act) which meet the rating
criteria set forth in either of the above clauses (i) or (ii). A determination
of comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the Municipal
Obligations or participation certificates. (See "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information.) While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of the McGraw-Hill Companies ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and 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 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.
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 promptly reassess 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 or an event of insolvency occurs with respect to
the issuer of a portfolio security or the provider of any Demand Feature or
Guarantee, the Fund will dispose of the security absent a determination by the
Fund's Board of Directors that disposal of the security would not be in the best
interests of the Fund. In the event that the security is disposed of it shall be
disposed of as soon as practicable consistent with achieving an orderly
disposition by sale, exercise of any demand feature or otherwise. In the event
of a default with respect to a security which immediately before default
accounted for 1/2 of 1% or more of the Fund's total assets, the Fund shall
promptly notify the SEC of such fact and of the actions that the Fund intends to
take in response to the situation.
All investments by the Fund will mature or will be deemed to mature
within 397 days or less from the date of acquisition and the average maturity of
the Fund portfolio (on a dollar-weighted basis) will be 90 days or less. The
maturities of variable rate demand instruments held in the Fund's portfolio will
be deemed to be the longer of the period required before the Fund is entitled to
receive payment of the principal amount of the instrument through demand, or the
period remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
In view of the "concentration" of the Fund in 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.
8
<PAGE>
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. The Fund intends to continue 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.
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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 pays dividends monthly. There is no
fixed dividend rate. In computing these dividends, interest earned and expenses
are accrued daily.
Net realized capital gains, if any, are distributed at least annually
and in no event later than 60 days after the end of the Fund's fiscal year. All
dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same Class immediately upon payment thereof unless
a shareholder has elected by written notice to the Fund to receive either of
such distributions in cash.
The Class A shares will bear the service fee under the Plan. As a
result, the net income of and the dividends payable to the Class A shares will
be lower than the net income of and dividends payable to the Class B shares of
the Fund. Dividends paid to each Class of shares of the Fund will, however, be
declared and paid on the same days at the same times and, except as noted with
respect to the service fees payable under the Plan, will be determined in the
same manner and paid in the same amounts.
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HOW TO PURCHASE AND REDEEM SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. The minimum initial
investment is $1,000 which may be waived in certain situations. There is no
minimum for subsequent investments. In states where EDI is not registered as a
broker-dealer, shares of the Fund will only be sold through other broker-dealers
or other financial institutions that are registered. Only Evergreen Shares are
offered through this Prospectus. Instructions on how to purchase shares of the
Fund are set forth in the Share Purchase Application.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's Manager incurs.
If such investor is an existing shareholder, the Fund may redeem shares from his
or her account to reimburse the Fund or the Fund's Manager for any loss. In
addition, such investors may be prohibited or restricted from making further
purchase in any of the Evergreen mutual funds.
9
<PAGE>
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any
Fund Business Day, either directly or through your financial intermediary. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend disbursing agent
for the Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street at 800-423-2615 between the hours of 8:00 a.m. to 5:30
p.m. (Eastern time) each Fund Business Day. Redemption requests made after 4:00
p.m. (Eastern time) will be processed using the net asset value determined on
the next business day. Such redemption requests must include the shareholder's
account name, as registered with the Fund, and the account number. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone redemptions. Shareholders who are unable to
reach State Street by telephone should follow the procedures outlined above for
redemption by mail.
The telephone redemption service is not available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If the Fund fails to follow such
procedures, it may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund will not be liable for following telephone instructions
reasonably believed to be genuine. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephone requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Evergreen
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure
10
<PAGE>
for withdrawal enables shareholders to continue earning income on the shares to
be redeemed up to but not including the date the redemption check is presented
to State Street for payment.
Shareholders wishing to use this method of redemption should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Fund offers the following shareholder services. For more
information about these services or your account, contact EDI or the toll-free
number on the front of this Prospectus. Some services are described in more
detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly
investments into an existing account automatically in amounts of not less than
$25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designated a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. 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. 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.
Investments Through Employee Benefit and Savings Plan. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
The Fund sells and redeems its shares on a continuing basis at their
net asset value and does not impose a charge for either sales or redemptions.
In order to maximize earnings on its portfolio, the Fund normally has
its assets as fully invested as is practicable. Many securities in which the
Fund invests require immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Accordingly, the Fund does not accept a subscription or invest an investor's
payment in portfolio securities until the payment has been converted into
Federal Funds.
Shares will be issued as of the first determination of the Fund's net
asset value per share made after acceptance of the investor's purchase order at
the net asset value per share next determined after receipt of the
11
<PAGE>
purchase order. Shares begin accruing income dividends on the day they are
purchased. The Fund reserves the right to reject any subscription for its
shares.
Shares are issued as of 12 noon, Eastern time, on any Fund Business Day
as defined herein on which an order for the shares and accompanying Federal
Funds are received by the Fund's transfer agent before 12 noon. Orders
accompanied by Federal Funds and received after 12 noon, Eastern time, on a Fund
Business Day will not result in share issuance until the following Fund Business
Day. Fund shares begin accruing income on the day the shares are issued to an
investor.
There is no redemption charge, no minimum period of investment, no
minimum amount for a redemption, and no restriction on frequency of withdrawals.
Unless other instructions are given in proper form to the Fund's transfer agent,
a check for the proceeds of a redemption will be sent to the shareholder's
address of record. If a shareholder elects to redeem all the shares of the Fund
he owns, all dividends accrued to the date of such redemption will be paid to
the shareholder along with the proceeds of the redemption.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after the shares are tendered
for redemption, except for any period during which the New York Stock Exchange,
Inc. is closed (other than customary weekend and holiday closings) or during
which the SEC determines that trading thereon is restricted, or for any period
during which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12
noon, 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 close an account that through
redemptions has remained below $1,000 for 30 days. Shareholders will receive 60
days' written notice to increase the account value before the account is closed.
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.
EFFECT OF BANKING LAWS
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. It is the Fund management's
position, however, 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. This is an unsettled area of the law, however, 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.
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DISTRIBUTION AND SERVICE PLAN
- -------------------------------------------------------------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a Distribution and Service Plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement with Reich & Tang Distributors, Inc. (the "Distributor") and a
Shareholder Servicing Agreement with the Distributor and the Manager (with
respect to Class A shares only).
Under the Distribution Agreement, the Distributor for nominal
consideration and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any 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
Class A shares 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 Class A shares of the Fund. The
Class B
12
<PAGE>
shareholders will not receive the benefit of such services from participating
organizations and, therefore will not be assessed a shareholder servicing fee.
The Plan and the Shareholder Servicing Agreement 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 with respect to Class A shares, and (ii) preparing, printing and
delivering the Fund's Prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan 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 Class A shares Fund; (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Fund's Class A
shares; (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors; and (iv) 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 the new Investment Management Contract, the Shareholder
Servicing Agreement or the Administrative Services Contract in effect for that
year.
For the fiscal year ended April 30, 1998, the total amount spent
pursuant to the Plan was .37% 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 .17%
of the average daily net assets was paid by the Manager (which may be deemed an
indirect payment by the Fund). Of the total amount paid by the Distributor,
$1,315,608 was utilized for Broker assistance payments, $13,524 for compensation
to sales personnel, $5,364 for travel and expenses, $9,733 for Prospectus
printing and $364 on miscellaneous expenses.
- --------------------------------------------------------------------------------
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 having undistributed capital gain
income within the meaning of the Code. The Fund will inform shareholders of the
amount and nature of its income and gains in a written notice mailed to
shareholders not later than 60 days after the close of the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including
tax-exempt interest dividends paid by the Fund, is to be added to adjusted gross
income for purposes of computing the amount of Social Security benefits
includible in gross income. Interest on certain "private activity bonds"
(generally, a bond issue in which more than 10% of the proceeds are used for a
non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax. Further, a corporation will be required
to include in alternative minimum taxable income 75% of the amount by which its
adjusted current earnings (including generally, tax-exempt interest) exceeds its
alternative minimum taxable income (determined without this tax item). In
addition, in certain cases Subchapter S corporations with accumulated earnings
and profits from Subchapter C years will be subject to a tax on "passive
investment income," including tax-exempt interest. Although the Fund intends to
maintain a $1.00 per share net asset value, a Shareholder may realize a taxable
gain or loss upon the disposition of shares.
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
13
<PAGE>
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.
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 SEC as a 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 shareholders entitled to cast not less than 67% in
interest 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 including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of the shareholders
called for the purpose of considering the election or reelection of such
Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's registration statement filed with the
SEC, including the exhibits thereto. The registration statement and the exhibits
thereto may be examined at the SEC and copies thereof may be obtained upon
payment of certain duplicating fees.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value of each Class of the Fund's shares is determined as
of 12 noon, Eastern time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except customary business holidays and Good
Friday. The net asset value of a Class is computed by dividing the value of the
Fund's net assets for such Class (i.e., the value of its securities and other
assets less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the total number of shares outstanding for such
Class.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, except that if
fluctuating interest rates cause the market value of the Fund's portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Board of Directors will consider whether any action should be
initiated. Although the amortized cost method provides certainty in valuation,
it may result in periods during which the value of an instrument is higher or
lower than the price an investment company would receive if the instrument were
sold. The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
YEAR 2000 ISSUE
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Manager does not
14
<PAGE>
expect that the Fund will incur material costs to be year 2000 compliant.
Although the Manager does not anticipate that the year 2000 Issue will have a
material impact on the Fund's ability to provide service at current levels,
there can be no assurance that steps taken in preparation for the year 2000 will
be sufficient to avoid an adverse impact on the Fund.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, is custodian for the Fund's cash and securities. Evergreen
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121 is the
registrar, transfer agent and dividend disbursing agent for the Evergreen 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.
15
<PAGE>
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
537623 (REV02)
9/98
<PAGE>
- --------------------------------------------------------------------------------
VICTORY SHARES OF For current yield, purchase, and
NEW YORK DAILY TAX FREE redemption information call
INCOME FUND, INC. 800-KEY-FUND (800-539-3863)
PROSPECTUS
September 1, 1998
- --------------------------------------------------------------------------------
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money market fund
designed 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, portfolio of high quality, short-term municipal
obligations. No assurance can be given that these objectives will be achieved.
The Fund offers two classes of shares to the general public, however only Class
A shares are offered by this Prospectus ("The Victory Shares"). The Class A
shares of the Fund are subject to a service fee pursuant to the Fund's Rule
12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or Distributor. In all other respects, the Class A
and Class B shares represent the same interests in the income and assets of the
Fund. See "Description of Common Stock". The Fund is concentrated in the
securities issued by the State of New York (the "State") or entities within the
State and may invest a significant percentage of its assets in a single issuer,
therefore an investment in the Fund may be riskier than an investment in other
types of money market funds.
This Prospectus relates exclusively to the Victory Shares class of the Fund.
This Prospectus sets forth concisely the information about the Fund that
prospective investors show know prior to making their investment decisions.
Additional Information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without charge
by calling or writing the Fund. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated by reference into this
Prospectus in its entirety. The SEC maintains a website (http.//www.sec.gov.)
that contains the Statement of Additional Information and other reports and
information regarding the Fund which have been filed electronically with the
SEC.
Reich & Tang Asset Management L.P. acts as the investment manager of the Fund
and is a registered investment adviser. Reich & Tang Distributors, Inc. acts as
distributor of the Fund's shares and is a registered broker-dealer and member of
the National Association of Securities Dealers, Inc.
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 Funds") 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; AND
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 SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C> <C>
Table of Fees and Expenses............................. Initial Purchases of Victory Shares...........................
Financial Highlights................................... Subsequent Purchases of Shares................................
Introduction........................................... Redemption of Shares..........................................
Management of The Fund................................. Exchange Privilege............................................
Description of Common Stock............................ Distribution and Service Plan....................................
Investment Objectives, Policies and Risks.............. Federal Income Taxes.............................................
Dividends and Distributions............................ General Information..............................................
How to Purchase and Redeem Shares...................... Net Asset Value..................................................
Investment Through Participating Organizations...... Year 2000 Issue..................................................
Custodian, Transfer Agent and Servicing Agent....................
</TABLE>
<PAGE>
TABLE OF FEES AND EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Class B
------- -------
Management Fees .30% .30%
12b-1 Fees .20% --
Other Expenses .35% .34%
Administrative Services Fee .21% ______ .21 _____
Total Fund Operating Expenses .85% .64%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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):
Class A $9 $27 $47 $105
Class B $7 $20 $36 $80
</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 figures reflected in this example should not be considered to be a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights 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>
CLASS A Year Ended April 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------- ----- ----- ----- ------ ------
Income from investment operations:
Net investment income.......... 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
Less distributions:
Dividends from net investment income 0.029 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047
------ ------ ----- ------ ------ ----- ----- ------ ------ -----
Net asset value, end of year...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ====== ====== ====== ====== ====== ======
Total Return...................... 2.90% 2.80% 3.08% 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86%
Ratios/Supplemental Data
Net assets,
end of year (000's omitted).... $370,044 $323,746 $283,368 $254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060
Ratios to average net assets:
Expenses....................... 0.85%+ 0.82%+ 0.84%+ 0.87% 0.89% 0.89% 0.87% 0.82%++ 0.77%++ 0.80%++
Net investment income.......... 2.85% 2.76% 3.02% 2.71% 1.82% 2.25% 3.63% 4.82%++ 5.32%++ 4.73%++
Expenses paid indirectly....... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Year October 10, 1996
CLASS B Ended (Commencement of Sales) to
April 30, 1998 April 30, 1997
-------------- --------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00 $ 1.00
----------- -----------
Income from investment operations:
Net investment income.................. 0.031 0.017
Less distributions:
Dividends from net investment income... ( 0.31) ( 0.017)
---------- -----------
Net asset value, end of period............ $ 1.00 $ 1.00
============ ============
Total Return.............................. 3.12% 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... $ 4,412 $ 7
Ratios to average net assets:
Expenses .............................. 0.64%+ 0.62%*
Net investment income.................. 2.94% 2.99%*
Expenses paid indirectly............... 0.00% 0.00%
</TABLE>
+ Includes expenses paid indirectly.
++ Net Management and Shareholder Servicing Fees Waived,
Equivalent to .07%, .10% and .02% of Average Net Assets in years
1991, 1990 and 1989 respectively.
* Annualized
3
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load, 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 seventeen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors,
Inc. (the "Distributor"), and the Fund has entered into a Distribution Agreement
and a Shareholder Servicing Agreement (with respect to Class A shares only)
pursuant to the Fund's distribution and service plan adopted under Rule 12b-1
under the Investment Company Act of 1940, as amended (the "1940 Act"). (See
"Distribution and Service Plan".)
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 through 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.
MANAGEMENT OF THE FUND
The Fund's Board of Directors which is responsible for the overall management
and supervision of the Fund, has employed Reich & Tang Asset Management L.P.
(the "Manager") to serve as investment manager of the Fund. The Manager provides
persons satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors or officers of Reich & Tang Asset Management, Inc., the
sole general partner of the Manager, or employees of the Manager or its
affiliates. Due to the services performed by the Manager, the Fund currently has
no employees and its officers are not required to devote full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each Director and principal officer of the
Fund.
The Manager is a Delaware limited partnership with its principal offices at 600
Fifth Avenue, New York, New York 10020. The Manager was at July 31, 1998,
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $11.3 billion. The Manager acts as manager or administrator of
seventeen other investment companies and also advises pension trusts,
profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager, due to a restructuring by New England
Investment Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998,
Nvest Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP,
replaced NEICOP as the limited partner and owner of a 99.5% interest in the
Manager.
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of Nvest
Companies) is the sole general partner and owner of the remaining 0.5% interest
of the Manager. Nvest Corporation, a Massachusetts Corporation (formerly known
as New England Investment Companies, Inc.), serves as the managing general
partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business
4
<PAGE>
units, in addition to the manager, include AEW Capital Management, L.P., Back
Bay Advisors, L.P., Capital Growth Management, Limited Partnership Greystone
Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P., Loomis, Sayles &
Company, L.P., New England Funds, L.P., Nvest Associates, Inc., Snyder Capital
Management, L.P., Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak
Investment Advisors, L.P. These affiliates in the aggregate are investment
advisors or managers to 80 other registered investment companies.
The name change did not result in a change in control of the Manager and has no
impact upon the Manager's performance of its responsibilities and obligations.
The Investment Management Contract has a term which extends to April 30, 1999
and may be continued in force thereafter for successive twelve-month periods
beginning each May 1, provided that such majority vote of the Fund's outstanding
voting securities or 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.
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, 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 .21% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares
(See "Distribution and Service Plan" herein).
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. Generally,
all shares will be voted on in the aggregate except if voting by Class is
required by law or the matter involved affects only one class, in which case
shares will be voted on separately by Class. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholder. The Fund is subdivided into two classes of stock, Class A and Class
B. Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .20% of the Fund's average daily
net assets; (iii) only the holders of the Class A shares would be entitled to
vote on matters pertaining to the Plan and any related agreements in accordance
with provisions of Rule 12b-1; and (iv) the exchange privilege will permit
shareholders to exchange their shares only for shares of the same Class of a
Fund that participates in an exchange privilege with the Fund. (See "Exchange
Privilege" herein.) Payments that are made under the Plans will be calculated
and charged daily to the appropriate Class prior to determining daily net asset
value per share and dividends/distributions.
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.
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. The Fund does not
issue certificates evidencing Fund shares.
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INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund is a no-load, open-end, 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 ("Participation Certificates").
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
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 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"); (ii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality and (iii) Municipal Obligations
which are subject to a Demand Feature or Guarantee (as such terms are defined in
Rule 2a-7 of the 1940 Act) which meet the rating criteria set forth in either of
the above clauses (i) or (ii). A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's Rating Services, a division of the McGraw-Hill Companies
("S&P") and Moody's Investors Service, Inc. ("Moody's"). The two highest ratings
by S&P and Moody's are "AAA" and "AA" by S&P in the case of long-term bonds and
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 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.
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 or an event of insolvency occurs with respect to the issuer
of a portfolio security or the provider of any Demand Feature or Guarantee, the
Fund will dispose of the security absent a determination by the Fund's Board of
Directors that disposal of the security would not be in the best interests of
the Fund. In the event that the security is disposed of it shall be disposed of
as soon as practicable consistent with achieving an orderly disposition by sale,
exercise of any demand feature or otherwise. In the event of a default with
respect to a security which immediately before default accounted for 1/2 of 1%
or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of
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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 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.
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 continue 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. Payment of interest and preservation of principal, however, 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 pays dividends monthly. There is no fixed dividend rate.
In computing these dividends, interest earned and expenses are accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares of the same Class immediately upon payment thereof unless a shareholder
has elected by written notice to the Fund to receive either of such
distributions in cash or has elected to reinvest distributions in shares of The
Victory Funds.
The Class A shares will bear the service fee under the Plan. As a result, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
HOW TO PURCHASE AND REDEEM SHARES
Investors 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.
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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 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 SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) 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 SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon,
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.
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. It is the Fund management's
position, however, 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. This is an unsettled area of
the law, however, 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
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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 Fund's Servicing Agent, Boston Financial Data Services
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 "The Victory Funds" along with a
completed application to:
The Victory Funds
c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527
Checks are accepted subject to collection at full value in United States
currency. Third party checks will not be accepted. 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 confirmation number by calling the Fund's Servicing
Agent, at 1-800-539-3863 and then instruct a member commercial bank to wire
their money immediately to:
State Street Bank & Trust Co.
ABA # 011000028
for credit to DDA# 9905-201-1
for further credit to:
Victory Account #
wire confirmation #
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 CONFIRMATION NUMBER.
Subsequent Purchases of Shares
Subsequent purchases can be made by bank wire, as indicated above,
or by mailing a check to: or you may overnight the check to:
The Victory Funds The Victory Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8527 66 Brooks Drive
Boston, MA 02266-8527 Braintree, MA 02184
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.
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.
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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.
Written Requests
Shareholders may make a redemption in any amount by sending
a written request to the Fund addressed to: or you may overnight the request to:
The Victory Funds The Victory Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8527 66 Brooks Drive
Boston, MA 02266-8527 Braintree, MA 02184
All written requests for redemption must be signed by the shareholder(s). A
signature guaranteed is required if you wish to redeem more than $25,000 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 Fund's Servicing
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 Funds 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 Fund accounts registered
in identical names. Before making an exchange, the investor should review the
current prospectus of the Fund 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.
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:
The Victory Funds
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c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527
or, for shareholders who have elected that option, by telephone at
1-800-539-3863. 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 SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a Distribution and Service Plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement with Reich & Tang Distributors, Inc. (the "Distributor") and a
Shareholder Servicing Agreement with the Distributor and the Manager (with
respect to Class A shares only).
Under the Distribution Agreement, the Distributor for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any 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 Class A
shares' 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 Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from participating
organizations and, therefore will not be assessed a shareholder servicing fee.
The Plan and the Shareholder Servicing 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 with respect
to Class A shares and (ii) preparing, printing and delivering the Fund's
Prospectus to existing shareholders of the Fund and preparing and printing
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
Class A shares of the Fund; (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Fund's Class A
shares; (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors; and (iv) 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 the new Investment Management Contract the Shareholder
Servicing Agreement or the Administrative Services Contract in effect for that
year.
For the fiscal year ended April 30, 1998, the total amount spent pursuant to the
Plan was .37% 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 .17% of the
average daily net assets was paid by the Manager (which may be deemed an
indirect payment by the Fund). Of the total amount paid by the Distributor,
$1,315,608 was utilized for Broker assistance payments, $13,524 for compensation
to sales personnel, $5,364 for travel and expenses, $9,733 for Prospectus
printing and $364 on miscellaneous expenses.
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 having undistributed capital gain
income within the meaning of the Code. The Fund will inform shareholders of the
amount and nature of its income and gains in a written notice mailed to
shareholders not later than 60 days after the close of the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including
tax-exempt interest dividends paid by the Fund, is to be added to adjusted gross
income for purposes of computing the amount of Social Security benefits
includible in gross income. Interest on certain "private activity bonds"
(generally, a bond issue in which more than 10% of the proceeds are used for a
non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax. Further, a corporation 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
11
<PAGE>
minimum taxable income (determined without this tax item). In addition, in
certain cases Subchapter S corporations with accumulated earnings and profits
from Subchapter C years will be subject to a tax on "passive investment income,"
including tax-exempt interest. Although the Fund intends to maintain a $1.00 per
share net asset value, a Shareholder may realize a taxable gain or loss upon the
disposition of shares.
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.)
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 SEC as a 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 shareholders entitled to cast not less than 67% in interest of all
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 including the removal of Fund director(s) and
communication among shareholders, any registration of the Fund with the SEC or
any state, or as the Directors may consider necessary or desirable. Each
Director serves until the next meeting of the shareholders called for the
purpose of considering the election or reelection of such Director or of a
successor to such Director, and until the election and qualification of his or
her successor, elected at such a meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's registration statement filed with the SEC,
including the exhibits thereto. The Registration Statement and the exhibits
thereto may be examined at the SEC and copies thereof may be obtained upon
payment of certain duplicating fees.
NET ASSET VALUE
The net asset value of each Class of the Fund's shares is determined as of 12
noon, Eastern time, on each Fund Business Day. Fund Business Day means weekdays
(Monday through Friday) except customary business holidays and Good Friday. The
net asset value of a Class is computed by dividing the value of the Fund's net
assets for such Class (i.e., the value of its securities and other assets less
its liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
YEAR 2000 ISSUE
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be year 2000 compliant. Although the Manager does not anticipate that the
year 2000 Issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the year 2000 will be sufficient to avoid an adverse impact on
the Fund.
CUSTODIAN, TRANSFER AGENT AND SERVICING AGENT
State Street Bank and Trust Company, the Fund's transfer agent, subcontracts all
services to Boston Financial Data Services. Boston
Financial Data Services, P.O. Box 8527, Boston, Massachusetts 02266-8527 is the
Fund's servicing agent for the Victory shares of the Fund. Investors Fiduciary
Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105 is custodian for
its cash and securities. The Fund's transfer agent, servicing agent and
custodian do not assist in, and are not responsible for, investment decisions
involving assets of the Fund.
12
<PAGE>
- --------------------------------------------------------------------------------
NEW YORK
DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
Relating to the New York Daily Tax Free Income Fund, Inc.
and the
Victory Shares of New York Daily Tax Free Income Fund, Inc.
and the
Evergreen Shares of New York Daily Tax Free Income Fund, Inc.
Prospectuses dated September 1, 1998
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., Victory Shares of New York Daily
Tax Free Income Fund, Inc., and Evergreen Shares of New York Daily Tax Free
Income Fund, Inc., (each the "Fund") 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. This Statement of
Additional Information is incorporated by reference into the respective
Prospectus in its entirety. If you wish to invest in Victory Shares of the Fund
you should obtain a separate prospectus by writing to The Victory Funds, c/o
Boston Financial Data Services, P.O. Box 8527, Boston, Massachusetts 02266-8527
or by calling (800) KEY-FUND. If you wish to invest in Evergreen Shares of the
Fund you should obtain a separate prospectus by writing to State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 or by calling
(800) 807-2840.
<TABLE>
<CAPTION>
Table of Contents
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Objectives............................ Yield Quotations........................................
Policies and Risks............................ Manager.................................................
Description of Municipal Obligations............. Management of the Fund..................................
Variable Rate Demand Instruments Compensation Table...................................
and Participation Certificates............ Counsel and Auditors.................................
When-Issued Securities........................ Distribution and Service Plan...........................
Stand-by Commitments.......................... Description of Common Stock.............................
Taxable Securities............................... Expense Limitation......................................
Repurchase Agreements......................... Federal Income Taxes....................................
Special Factors Affecting New York............... Custodian, Transfer Agent and Dividend Agent............
Investment Restrictions.......................... Financial Statements....................................
Portfolio Transactions........................... Description of Ratings..................................
How to Purchase and Redeem Shares................ Taxable Equivalent Yield Table..........................
Net Asset Value..................................
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, the Fund is a no-load, open-end 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 ("Participation Certificates").
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 of each
Class. There can be no assurance that this value will be maintained. The Fund
may hold uninvested cash reserves pending investment. The Fund's investments may
include "when-issued" Municipal Obligations, stand-by commitments and taxable
repurchase agreements.
Although the Fund will attempt to invest 100% of its assets in 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 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"), (ii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality and (iii) Municipal Obligations
which are subject to a Demand Feature or Guarantee (as such terms are defined in
Rule 2a-7 of the 1940 Act) which meet the rating criteria set forth in either of
the above clauses (i) or (ii). 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 three 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 Rating Services, a division of the McGraw-Hill Companies
("S&P") and Moody's Investors Service, Inc. ("Moody's"). The two highest ratings
by S&P and Moody's are "AAA" and "AA" by S&P in the case of long-term bonds and
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
2
<PAGE>
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. (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.
The Fund is not subject to any statutory restriction under the Investment
Company Act of 1940, as amended (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 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
3
<PAGE>
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, 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 or an event of insolvency occurs with
respect to the issuer of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the 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 when
it is 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.
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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.
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
- --------------------------------------------------------------------------------
* 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.
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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
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.
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The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio would not exceed 1/2 of 1% 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.
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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. The
information set forth below is derived from the official statements and/or
preliminary drafts of preliminary statements prepared in connection with the
issuance of New York State and New York City municipal bonds. 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.
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.
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 7.4 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.
For each of the 1981 through 1997 fiscal years, the City had an operating
surplus, before discretionary transfers, and achieved balanced operating results
reported in accordance with then applicable generally accepted accounting
principles ("GAAP"), after discretionary transfers. The City has been required
to close substantial gaps between forecast revenues and forecast expenditures in
order to maintain balanced operating results. There can be no assurance that the
City will continue to maintain balanced operating results as required by State
law without tax or other revenue increases or reductions in City services or
entitlement programs, which could adversely affect the City's economic base.
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As required by law, the City prepares a four-year annual financial plan, which
is reviewed and revised on a quarterly basis and which includes the City's
capital, revenue and expense projections and outlines proposed gap-closing
programs for years with projected budget gaps. The City's current financial plan
projects a surplus in each of the 1998 and 1999 fiscal years, before
discretionary transfers, and budgets gaps for each of the 2000, 2001 and 2002
fiscal years. This pattern of current year surplus operating results and
projected subsequent year budget gaps has been consistent through the entire
period since 1982, during which the City has achieved surplus operating results,
before discretionary transfers, for each fiscal year.
The City depends on aid from the State of New York (the "State") 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; that State budgets will be adopted by the April 1
statutory deadline, or interim appropriations enacted; or that any such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures. In addition, the Federal budget negotiation process could result
in a reduction in or a delay in the receipt of Federal grants which could have
additional adverse effects on the City's cash flow or revenues.
New York State and its Authorities. The State currently projects that it will
end its 1997-1998 fiscal year balanced on a cash basis, with a reported surplus
of $2.04 billion resulting from revenue growth and lower than expected
entitlement spending. The Governor presented his 1998-1999 Executive Budget to
the Legislature on January 20, 1998. The Governor's Executive Budget, as amended
on February 13, 1998, projected balance on a cash basis in the General Fund. The
Legislature passed a State budget for the 1998-1999 fiscal year on April 14,
1998, and on April 26, 1998 the Governor vetoed certain of the increased
spending in the State Budget passed by the Legislature.
The Executive Budget, as amended, contains projections of a potential imbalance
in the 1999-2000 fiscal year of $1.66 billion and in the 2000-2001 fiscal year
of $3.72 billion, assuming implementation of the 1998-1999 Executive Budget
recommendations and implementation of $600 million and $800 million of
unspecified efficiency initiatives and other actions in the 1999-2000 and
2000-2001 fiscal years, respectively. The Executive Budget stated that the
assumed unspecified efficiency initiatives and other actions for such fiscal
years are comparable with reductions over the past several years, and that the
Governor plans to make additional proposals to limit State spending and to take
such other actions as are necessary in order to address any potential remaining
gap. As a result of the budget passed by the State Legislature and the
subsequent vetoes by the Governor, the potential imbalance in the 1999-2000
fiscal year is expected to be somewhat less than projected in the Executive
Budget. The projections in the Executive Budget reflect constant law income tax
liability growth of approximately 5.3% and sales tax growth averaging slightly
less than 5%, while business tax receipts are projected to rise slowly over the
two years. The Executive Budget identifies various risks, including either a
financial market or broader economic correction during the period, which risks
are heightened by the relatively lengthy expansion currently underway, and the
financial turmoil in Asia. In addition, the Executive Budget notes that a normal
forecast error of one percentage point in the expected growth rate could raise
or lower receipts by over $1 billion by the last year of the projection period,
and that funding is not included for any costs associated with new collective
bargaining agreements after the expiration of the current contracts at the end
of the 1998-1999 fiscal year.
The 1997-1998 adopted State budget and the 1998-1999 Executive Budget include
multi-year tax reductions, including a State funded property and local income
tax reduction program, estate tax relief, utility gross receipts tax reductions,
permanent reductions in the State sales tax on clothing, and elimination of
assessments on medical providers. The various elements of the State and local
tax and assessment reductions have little or no impact on the 1997-1998 State
Financial Plan, but reduce projected revenues by greater than $3.0 billion in
the 2000-2001 fiscal year.
On February 3, 1998, the New York State Controller issued a report which noted
that a significant cause for concern is the budget gaps in the 1999-2000 and
2000-2001 fiscal years, which the State Comptroller projected at $2.6 billion
and $4.8 billion, respectively, reflecting uncertainty concerning the receipt by
the State of $250 million of funds from the tobacco settlement assumed for each
fiscal years, as well as the unspecified actions assumed in the State's
projections. The State Comptroller also states that if the economy slows, the
size of the gaps would increase.
Ratings. Standard & Poor's rates the State's general obligation bonds A, and
Moody's rates the State's general obligation bonds A2. On August 28, 1997,
Standard & Poor's revised its rating on the State's general obligation bonds
from A- to A.
Litigation. The court actions in which the State is a defendant generally
involve State programs and miscellaneious tort, real property, and contract
claims. While the ultimate outcome and fiscal impact, if any, on the State of
those proceedings and claims are not currently predicatable, adverse
determinations in certain of them might have a material adverse effect upon the
State's ability to carry out the 1999-2002 Financial Plan. The
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City has estimated that its potential future liability on account of outstanding
claims against it as of June 30, 1997 amounted to approximately $3.5 billion.
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. Immediately after the acquisition of any securities subject to a
Demand Feature or Guarantee (as such terms are defined in Rule 2a-7 under the
Investment Company Act of 1940), with respect to 75% of the total assets of the
Fund, not more than 10% of the Fund's assets may be invested in securities that
are subject to a Guarantee or Demand Feature from the same institution. However,
the Fund may only invest more than 10% of its assets in securities subject to a
Guarantee or Demand Feature issued by a Non-Controlled Person (as such terms are
defined in Rule 2a-7).
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
10
<PAGE>
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, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
NET ASSET VALUE
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. The net asset value of a
Class 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) for such
Class 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 of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Directors determines present minimal credit
risks, and will
11
<PAGE>
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.
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 Class A shares yield for the seven day period ended July 31, 1998 was
2.76%, which is equivalent to an effective yield of 2.80%. The Fund's Class B
shares yield for the seven-day period ended July 31, 1998 was 2.97% which is
equivalent to an effective yield of 3.02%.
MANAGER
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was at July 31, 1998, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $11.3
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of seventeen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaced
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly or indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
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<PAGE>
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, division
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
Back Bay Advisors, L.P., Capital Growth Management, Limited Partnership,
Greystone partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Company, L.P., New England Funds, Inc., Nvest Associates, Inc.,
Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough & McCullough,
L.P., and Westpeak Investment Advisors, L.P. These affiliates in the aggregate
are investment advisors or managers to 80 other registered investment companies.
The name change did not result in a change in control of the Manager and has no
impact upon the Manager's performance of its responsibilities and obligations.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The 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 Investment Management Contract has a term which extends to April 30, 1999
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 a 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, 1998, 1997 and 1996, the fees paid
to the Manager under the Investment Management Contract were $1,100,638,
$865,046 and $819,852, respectively. The Fund's net assets at the close of
business on April 30, 1998 totaled $374,456,446. 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.
Investment management fees and operating expenses which are attributable to both
Classes of the Fund will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, the Manager from its management fee and the Fund
itself. Expenses incurred in the distribution of Class B shares and the
servicing of Class B shares shall be paid by the Manager.
Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of 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.
For its services under the Administrative Services Contract, the Manager
receives from the Fund a fee equal
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<PAGE>
to .21% per annum of the Fund's average daily net assets. For the Fund's fiscal
year ended April 30, 1998, the Manager received a fee of $770,447.
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.
Steven W. Duff, 44 - President of the Fund, has been President of the Mutual
Funds Division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration at NationsBank 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., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc. and Short Term Income Fund, Inc., President and a Trustee of Florida
Daily Municipal Income Fund, Institutional Daily Income Fund, and Pennsylvania
Daily Municipal Income Fund, President and Director of Cortland Trust, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc., and President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
Edward A. Kuczmarski, 47 - 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.
Caroline E. Newell, 57 - 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, 48 - 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, 50 - Vice President of the Fund, has been Senior Vice President
of the 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., and Short Term Income Fund, Inc.
Bernadette N. Finn, 50 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. with which she was
associated 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.,
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 and Tax Exempt
Proceeds Fund, Inc., a Vice President and Secretary of Delafield Fund, Inc.,
Institutional Daily Income Fund, Reich & Tang Equity Fund, Inc., and Short Term
Income Fund, Inc.
Molly Flewharty, 47 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. 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, 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., Short
Term Income Fund, Inc., and Tax Exempt Proceeds Fund, Inc.
Dana E. Messina, 41 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995, and
was Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated 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.,
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., Short Term Income Fund, Inc., and Tax Exempt Proceeds
Fund, Inc.
Richard De Sanctis, 41 - Treasurer of the Fund, has been Assistant Treasurer of
Nvest Companies since September 1993. Mr. De Sanctis was formerly Controller of
Reich & Tang, Inc. from January 1991 to September 1993. Mr. De Sanctis
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<PAGE>
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., Tax Exempt Proceeds Fund,
Inc. and Short Term Income Fund, Inc. and Vice President and Treasurer of
Cortland Trust, Inc.
Rosanne Holtzer, 33 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986. She is also Assistant Treasurer of Back Bay
Funds, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia
Daily Municipal Income Fund, Inc., Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World Money
Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity
Fund, Inc., Short Term Income Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc. and is Vice President and Assistant Treasurer of Cortland Trust, Inc.
The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the period ended April 30, 1998, 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>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
Aggregate Pension or Total Compensation
Name of Person Compensation from Retirement Benefits Estimated Annual from Fund and Fund
Position Registrant for Fiscal Accrued as Part of Benefits upon Complex Paid to
-------- Year Fund Expenses Retirement Directors*
---- ------------- ---------- ---------
Edward A.
Kuczmarski, $5,000 0 0 $5,000 (1 Fund)
Director
Caroline E. Newell,
Director $5,000 0 0 $5,000 (1 Fund)
John P. Steines $5,000 0 0 $5,000 (1 Fund)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending April 30, 1998 and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ending April
30, 1998. 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 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.
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 respect to Class A shares only) with Reich & Tang Distributors,
Inc., (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, Inc., 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.
Effective October 3, 1996, a majority of the Fund's Board of Directors including
independent directors, approved the creation of a second class of shares of the
Fund's outstanding common stock. In furtherance of this action, the Board of
15
<PAGE>
Directors has reclassified the common stock of the Fund into Class A and Class B
shares. The Class A shares will be offered to investors who desire certain
additional shareholder services from Participating Organizations that are
compensated by the Fund's Manager and Distributor for such services.
For its services under the Shareholder Servicing Agreement with respect to Class
A shares only, the Manager receives from the Fund a service fee equal to .20%
per annum of the Fund's average daily net assets of Class A shares (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for purposes of distribution of the Fund's Class A shares and for payments to
Participating Organizations with respect to servicing their clients or customers
who are Class A shareholders of the Fund. The Class B shareholders will not
receive the benefit of such services from participating organizations and,
therefore will not be assessed a shareholder servicing fee. 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, 1998, 1997 and 1996, 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
$732,056, $576,689 and $546,568 of which $13,524, $12,996 and $19,946 was spent
on sales personnel and related expenses, $5,364, $2,885 and $4,668 was spent on
travel and entertainment, $9,733, $15,581 and $22,527 was spent on prospectus,
application and miscellaneous printing and $364, $232 and $1,116 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 $1,315,608,
$974,724 and $906,744.
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 with respect to Class A
shares only, 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 Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Fund's Class A shares; (iii) to pay the
costs of printing and distributing the Fund's prospectus to prospective
investors; and (iv) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee with respect to Class
A shares and past profits for the purposes enumerated in (i) above. The
Distributor, 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.
The Plan provides that it may continue in effect for successive annual periods
provided it is approved by the Class A shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan or in the agreements related to the Plan. The Board of Directors has
approved the continuance of the Plan until May 1, 1999. 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 Class A shareholder approval, and the other material amendments
must be approved by the directors in the manner described in
16
<PAGE>
the preceding sentence. The Plan may be terminated at any time by a vote of a
majority of the disinterested directors of the Fund or the Fund's Class A
shareholders.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on 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. Generally, all shares will be voted on in the aggregate except if
voting by Class is required by law or the matter involved affects only one
class, in which case shares will be voted on separately by Class. 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. The Fund is subdivided into two classes of stock, Class A
and Class B. Each share, regardless of class, will represent an interest in the
same portfolio of investments and will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .20% of the Fund's average daily
net assets; (iii) only the holders of the Class A shares would be entitled to
vote on matters pertaining to the Plan and any related agreements in accordance
with provisions of Rule 12b-1; and (iv) the exchange privilege will permit
shareholders to exchange their shares only for shares of the same class of a
Fund that participates in an exchange privilege with the Fund. Payments that are
made under the Plans will be calculated and charged daily to the appropriate
class prior to determining daily net asset value per share and
dividends/distributions. A fractional share has those rights in proportion to
the percentage that the fractional share represents of a whole share. On July
31, 1998 there were 446,502,791 shares of the Fund's Class A shares outstanding
and 3,484,449 Class B shares outstanding. As of July 31, 1998, 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,
1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Nature of
Name and address % of Class Ownership
Class A Shares:
Key Bank 25.03% Beneficial
Key Services Corporation
Two Heritage Drive
Quincy, MA 02171
Class B Shares:
Lewco Securities 50.85% Beneficial
34 Exchange Place
New Jersey, NJ
Stephen Kahn, President 14.35% Record
Lewco Securities
34 Exchange Place
New Jersey, NJ
Peter J. Salvatore (E) 1.83% Record
C/O Spear, Leeds & Kellogg
120 Broadway - 6th Floor
New York, N.Y.
Adela Elow/Lawrence Elow 9.07% Record
JT/WROS
P.O. Box 277
Bedford, NY 10506
Angelo Lobosco 5.35% Record
Angelo Lobosco JT/WROS
350 Edge Grove Avenue
Staten Island, N.Y. 10020
</TABLE>
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to
17
<PAGE>
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 advisory 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.
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. As a result of the passage of the National
Securities Market Improvement Act of 1996, all state expense limitations have
been eliminated at this time.
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 6 months or less, then any loss on the sale or
exchange of such share will be
18
<PAGE>
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. The amount of such interest received will have to be
disclosed on the shareholders' federal income tax returns. Taxpayers other than
corporations are required to include as an item of tax preference for purposes
of the Federal alternative minimum tax, all tax-exempt interest on "private
activity" bonds (generally, a bond issue in which more than 10% of the proceeds
are used in a non-governmental trade or business) (other than Section 501(c)(3)
bonds) issued after August 7, 1986. Thus, this provision will apply to the
portion of the exempt-interest dividends from the Fund's assets, 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). 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 the 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 the shareholders as long-term capital gains subject to tax at a maximum rate
of 20% when received by non-corporate shareholders regardless of how long the
shareholders have held Fund shares. However, the 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.
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 only be subject to federal income tax on any
investment company taxable income that is not distributed to the Fund
shareholders. To the extent such income is distributed it will be taxable to the
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.
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.
In South Carolina vs. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require
19
<PAGE>
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 from tax
on such dividends for New York State 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, 801 Pennsylvania, Kansas City, Missouri 64105
is custodian for the Fund's cash and securities. Reich & Tang Services, Inc.,
600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend agent
for the shares of the Fund. State Street Bank and Trust Company, the transfer
agent for Victory Shares of the Fund, subcontracts all services to Boston
Financial Data Services at P.O. Box 8527, Boston, Massachusetts 02266-8527.
Boston Financial Data Services is also the servicing agent for the Victory
shares of the Fund. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 is the registrar, transfer agent and dividend
disbursing agent for the Evergreen Shares of the Fund. The custodian and
transfer agents do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.
FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended April
30, 1998 and the report thereon of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
20
<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 Rating Services 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.
Description of Standard & Poor's Rating Services two highest commercial paper
ratings:
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 - Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
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.
* As described by the rating agencies.
21
<PAGE>
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 1998)
_______________________________________________________________________________
1. If Your Taxable Income Bracket Is . . .
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Single 15,000- 25,351- 50,001- 60,401- 128,101- 278,451
Return 25,350 50,000 61,400 128,100 278,450 and over
Single 42,351- 45,001- 90,001- 102,301- 155,951- 278,451
Return 45,000 90,000 102,300 155,950 278,450 and over
________________________________________________________________________________
2. Then Your Combined Income Tax Bracket Is . . .
________________________________________________________________________________
Federal 28.0% 28.0% 28.0% 31.0% 36.0% 39.6%
Tax Bracket
________________________________________________________________________________
State 6.85% 6.85% 6.85% 6.85% 6.85% 6.85%
Tax Bracket
________________________________________________________________________________
City 4.39% 4.40% 4.46% 4.46% 4.46% 4.46%
Tax Bracket
________________________________________________________________________________
Combined 36.093% 36.100% 36.143% 38.804% 43.238% 46.431%
Tax Bracket
________________________________________________________________________________
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
________________________________________________________________________________
2.0% 3.13% 3.13% 3.13% 3.27% 3.52% 3.73%
________________________________________________________________________________
2.5% 3.91% 3.91% 3.92% 4.09% 4.40% 4.67%
________________________________________________________________________________
3.0% 4.69% 4.69% 4.70% 4.90% 5.29% 5.60%
________________________________________________________________________________
3.5% 5.48% 5.48% 5.48% 5.72% 6.17% 6.53%
________________________________________________________________________________
4.0% 6.26% 6.26% 6.26% 6.54% 7.05% 7.47%
________________________________________________________________________________
4.5% 7.04% 7.04% 7.05% 7.35% 7.93% 8.40%
________________________________________________________________________________
5.0% 7.82% 7.82% 7.83% 8.17% 8.81% 9.33%
________________________________________________________________________________
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
22
<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
Incorporated by Reference Part B:
(1) Report of McGladrey & Pullen, LLP independent
certified public accountants, dated May 20, 1998;
(2) Statement of Net Assets, April 30, 1998 (audited);
(3) Statement of Operations, year ended April 30, 1998
(audited);
(4) Statement of Changes in Net Assets, years ended April 30,
1998 (audited);
(5) Notes to Financial Statements;
(b) Exhibits.
(1) Amended Articles of Incorporation of the Registrant filed
with Post-Effective Amendment No. 9 to said Registration
Statement on August 31, 1990 and filed herewith for Edgar
purposes only.
(2) By-Laws of the Registrant filed with the initial
Registration Statement No. 2-89264 on February 6, 1984, and
filed herewith for Edgar purposes only.
(4) Form of certificate for shares of Common Stock, par value
$.001 per share, of the Registrant filed with Pre-Effective
Amendment No. 1 to said Registration Statement on May 8,
1984 and filed herewith for Edgar purposes only.
(5) Form of Investment Management Contract between the
Registrant and Reich & Tang Asset Management L.P. filed
herewith.
(6) Form of Distribution Agreement between the Registrant and
Reich & Tang Distributors, Inc. filed herewith.
(7) Not applicable.
(8) Custody Agreement between the Registrant and Investors
Fiduciary Trust Company filed with Post-Effective Amendment
No. 9 to said Registration Statement on August 31, 1990 and
filed herewith for Edgar purposes only.
C-1
<PAGE>
(9) Transfer Agent Agreement between Registrant and American
Transtech Inc. filed with Post-Effective Amendment No. 9 to
said Registration Statement on August 31, 1990 and filed
herewith for Edgar purposes only.
(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 filed with Pre-Effective Amendment No. 1 to said
Registration Statement on May 8, 1984 and filed herewith for
Edgar purposes only.
(11) Consent of Independent Certified Public Accountants filed
herewith.
(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 filed with
Pre-Effective Amendment No. 1 to said Registration Statement
on May 8, 1984 and filed herewith for Edgar purposes only.
(14) Not applicable.
(15.1) Form of Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 filed herewith.
(15.2) Form of Distribution Agreement between the Registrant and
Reich & Tang Distributors, Inc. filed as exhibit 6 herein.
(14.3) Form of Shareholder Servicing Agreement between the
Registrant and Reich & Tang Distributors, Inc. filed
herewith. (14.4)Form of Shareholder Servicing Agreements
between the Manager and Participating Organizations filed
with Post-Effective Amendment No. 2 to said Registration
Statement on July 13, 1985 and filed herewith for Edgar
purposes only. (14.5)Amended Administrative Services
Contract between the Registrant and Reich & Tang
Distributors L.P. filed with Post-Effective Amendment No.17
to said Registration Statement No. 2-89264 on June 30, 1994
and filed herewith for Edgar purposes only.
(16) Power of Attorney of the Registrant, its Principal Officers
and Directors filed with Post-Effective Amendment No. 3 to
said Registration Statement on August 25, 1986 and filed
herewith for Edgar purposes only.
(17) Financial Data Schedule filed herewith for EDGAR purposes.
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, 1998
-------------- ---------------------
Common Stock
(par value $.001)
Class A 2716
Class B 46
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 "Management and Investment
Management Contract" of the Fund in the Statement of Additional Information
constituting parts A and B, respectively, of the Registration Statement are
incorporated herein by reference.
The 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 Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Florida Daily Municipal Income Fund, Georgia
Daily Municipal Income Fund, Inc., Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., Tax
Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income Fund, Inc.,
registered investment companies whose addresses are 600 Fifth Avenue, New York,
New York 10020, which invest principally in money market instruments; Delafield
Fund, Inc. and Reich & Tang Equity Fund, Inc. are registered investment
companies whose address is 600 Fifth Avenue, New York, New York 10020, which
invests principally in equity securities. In addition, RTAMLP is the sole
general partner of Alpha Associates L.P., August Associates L.P., Reich & Tang
Minutus L.P., Reich & Tang Minutus II, L.P., Reich & Tang Equity Partnerships
L.P. and Tucek Partners L.P., private investment partnerships organized as
limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of Nvest
Corporation (Formerly New England Investment Companies, Inc.) since October
1992, Chairman of the Board of Nvest Corporation 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 Nvest Corporation'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. Neal Ryland, Executive Vice President, Treasurer and Chief
Financial Officer since July 1993, Executive Vice President and Chief Financial
Officer of The Boston Company, a diversified financial services company, from
March 1989 until July 1993, from September 1985 to December 1988, Mr. Ryland was
employed by Kenner Parker Toys, Inc. as Senior Vice President and Chief
Financial Officer. Edward N. Wadsworth, Executive Vice President, General
Counsel, Clerk and Secretary of Nvest Corporation since December 1989, Senior
Vice President and Associate General Counsel of The New England from 1984 until
December 1992, and Secretary of Westpeak and Draycott and the Treasurer of Nvest
Corporation. Lorraine C. Hysler has been Secretary of RTAM since July 1994,
Assistant Secretary since September 1993, Vice President of the Mutual Funds
Group of NEICLP from September 1993 until July 1994, and Vice President of Reich
& Tang Mutual Funds since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May
1977 and served as Secretary from
C-3
<PAGE>
April 1987 until September 1993. Richard E. Smith, III has been a Director of
RTAM since July 1994, President and Chief Operating Officer of the Capital
Management Group of NEICLP from May 1994 until July 1994, President and Chief
Operating Officer of the Reich & Tang Capital Management Group since July 1994,
Executive Vice President and Director of Rhode Island Hospital Trust from March
1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAM since October 1994, President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pax World Money Market Fund, Inc., Short Term
Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc. President and
Trustee of Institutional Daily Municipal Income Fund, Pennsylvania Daily
Municipal Income Fund, President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc., and Executive Vice President of Reich & Tang Equity Fund,
Inc. Bernadette N. Finn has been Vice President/Compliance of RTAM since July
1994, Vice President of Mutual Funds Division of NEICLP from September 1993
until July 1994, Vice President of Reich & Tang 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 Back
Bay Funds, Inc., 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., Institutional Daily Municipal Income Fund, Michigan
Daily Tax Free Income Funds, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Tax Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc. a Vice President and Secretary of Reich & Tang Equity Fund, Inc., and
Short Term Income Fund, Inc. Richard DeSanctis has been Treasurer of RTAM since
July 1994, Assistant Treasurer since September 1993 and Treasurer of the Mutual
Funds Group of NEICLP from September 1993 until July 1994, Treasurer of the
Reich & Tang Mutual Funds since July 1994. Mr. DeSanctis joined Reich & Tang,
Inc. in December 1990 and served as Controller of Reich & Tang, Inc., from
January 1991 to September 1993. Mr. DeSanctis was Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. DeSanctis is also Treasurer of Back Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Institutional Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc., and is Vice President and
Treasurer of Cortland Trust, Inc. Richard I. Weiner has been Vice President of
RTAM since July 1994, has been Vice President of Nvest Corporation since
September 1993, Vice President of the Capital Management Group of NEIC from
September 1993 until July 1994, Vice President of Reich & Tang Asset Management
L.P. Capital Management Group since July 1994. Mr. Weiner joined Reich & Tang,
Inc. in August 1970 and has served as a Vice President since September 1982.
Rosanne D. Holtzer has been Vice President of the Mutual Funds division of the
Manager since December 1997. Ms. Holtzer was formerly Manager of Fund Accounting
for the Manager with which she was associated with from June 1986. She is also
Assistant Treasurer of Back Bay Funds, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
C-4
<PAGE>
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc. Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., Tax
Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund, Inc. and is
Vice President and Assistant Treasurer of Cortland Trust, Inc.
Item 29. Principal Underwriters.
(a) Reich & Tang Distributors, Inc. is also distributor for Back Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Income Fund, Inc., Institutional Daily Income Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons, the principal business address is 600 Fifth Avenue, New York, New York
10020.
Positions and Offices Positions and
with General Partner Offices With
Name of the Distributor Registrant
---- --------------------- -----------
Peter S. Voss President and Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III Director None
Steven W. Duff Director President
and Director
Bernadette N. Finn Vice President - Compliance Vice President
& Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Vice President and Treasurer Treasurer
Richard I. Weiner Vice President None
Rosanne Holtzer Vice President Assistant 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; Reich & Tang Services, Inc., the Registrant's transfer
agent and dividend disbursing agent; and at Investors Fiduciary Trust Company,
801 Pennsylvania, 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) Not applicable.
C-5
<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 28th day of August, 1998
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 28, 1998.
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 )
By: /s/Bernadette N. Finn
* Bernadette N. Finn
Attorney-in-Fact
* An executed copy of the Power of Attorney was filed with Post
Effective Amendment No. 3 to the Registration Statement on August 25, 1986
incorporated herein by reference.
<PAGE>
EXHIBIT 1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
EMPIRE TAX FREE MONEY MARKET, INC.
To the State Department
of Assessments and Taxation
State of Maryland
Pursuant to the provisions of Section 2-609 of the Maryland
General Corporation Law, Empire Tax Free Money Market, Inc. (the "Corporation"),
a Maryland corporation having its principal office in Baltimore City, hereby
certifies that:
FIRST: The corporation desires to amend and restate its
character as currently in effect.
SECOND: The amendment to the charter of the Corporation
effected hereby is to amend the name of the Corporation and to remove paragraph
(a) of Article TENTH in its entirety and the removal of the first sentence of
paragraph (b) of Article TENTH.
THIRD: The amendment and the restatement of the charter of the
Corporation herein certified was approved by a majority of the entire Board of
Directors of the Corporation, followed by the approval of two-thirds of the
holders of all of the outstanding shares of the Corporation entitled to vote.
FOURTH: The provisions hereinafter set forth in the Articles
of Restatement are all the provisions of the charter of the Corporation as
currently in effect.
FIFTH: The current address of the principal office of the
Corporation in the State of Maryland is 1123 North Eutaw Street, Baltimore,
Maryland 21201.
SIXTH: The name and the address of the current resident agent
of the Corporation in the State of Maryland is Prentice Hall Corporation System,
Maryland.
<PAGE>
SEVENTH: The number of directors of the corporation is five,
and the names of the directors of the corporation currently in office are:
William Berkowitz
Edward A. Kuczmarski
Milton R. Neaman
Caroline E. Newell
John P. Steines
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
EMPIRE TAX FREE MONEY MARKET, INC.
FIRST: (1) The name of the incorporator is
Michael B. Jeffers.
(2) The incorporator's post office address
is 280 Park Avenue, New York, New York 10017.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the General
Corporation Law of the State of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is New York Daily Tax Free Income Fund, Inc.
THIRD: The purposes for which the Corporation is formed are:
(a) to conduct, operate and carry on the
business of an investment company;
(b) to subscribe for, invest in, reinvest
in, purchase or otherwise acquire, hold, pledge, sell,
assign, transfer, exchange, distribute or otherwise dispose of
<PAGE>
notes, bills, bonds, debentures and other negotiable or
non-negotiable instruments, obligations and evidences of
indebtedness issued or guaranteed as to principal and interest
by the United States Government, or any agency or
instrumentality thereof, any State or local government, or any
agency or instrumentality thereof, or any other securities of
any kind issued by any corporation or other issuer organized
under the laws of the United States or any State, territory or
possession thereof or any foreign country or any subdivision
thereof or otherwise, to pay for the same in cash or by the
issue of stock, including treasury stock, bonds and notes of
the Corporation or otherwise; and to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including and without limitation, the right to
consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and
privileges in respect of any said investments;
(c) to conduct research and investigations
in respect of securities, organizations, business and general
business and financial conditions in the United States of
America and elsewhere for the purpose of obtaining information
pertinent to the investment and employment of the assets of
the Corporation and to procure any and all of the foregoing to
be done by others as independent contractors and to pay
compensation therefor;
(d) to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the
Corporation, and to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any
other person, firm, association or corporation;
(e) to issue, sell, distribute, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue,
dispose of, transfer, and otherwise deal in, shares of stock
of the Corporation, including shares of stock of the
Corporation in fractional denominations, and to apply to any
such repurchase, redemption, retirement, cancellation or
acquisition of shares of stock of the
<PAGE>
Corporation, any funds or property of the Corporation, whether
capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the State of Maryland and
by these Articles of Incorporation;
(f) to conduct its business, promote its
purposes, and carry on its operations in any and all of its
branches and maintain offices both within and without the
State of Maryland, in any and all States of the United States
of America, in the District of Columbia, and in any or all
commonwealths, territories, dependencies, colonies,
possessions, agencies, or instrumentalities of the United
States of America and of foreign governments;
(g) to carry out all or any part of the
foregoing purposes or objects as principal or agent, or in
conjunction with any other person, firm, association,
corporation or other entity, or as a partner or member of a
partnership, syndicate or joint venture or otherwise, and in
any part of the world to the same extent and as fully as
natural persons might or could do;
(h) to have and exercise all of the powers
and privileges conferred by the laws of the State of Maryland
upon corporations formed under the laws of such State; and
(i) to do any and all such further acts and
things and to exercise any and all such further powers and
privileges as may be necessary, incidental, relative,
conducive, appropriate or desirable for the foregoing
purposes.
The enumeration herein of the objects and purposes of the
Corporation shall be construed as powers as well as objects and purposes and
shall not be deemed to exclude by inference any powers, objects or purposes
which the Corporation is empowered to exercise, whether expressly by force of
the laws of the State of Maryland now or hereafter in effect, or impliedly by
the reasonable construction of the said law.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland is 1123 North Eutaw Street, Baltimore,
Maryland 21201.
<PAGE>
The resident agent of the Corporation in the State of Maryland
is Prentice-Hall Corporation System, Maryland, at 1123 North Eutaw Street,
Baltimore, Maryland 21201.
FIFTH: (1) The total number of shares of stock of all classes
which the Corporation shall have authority to issue is twenty billion
(20,000,000,000), all of which stock shall have a par value of One Tenth of One
Cent ($.001) per share. The aggregate par value of all authorized shares of
stock of the Corporation is Twenty Million Dollars ($20,000,000).
(2)(a) The Board of Directors of the Corporation is
authorized to classify or to reclassify, from time to time, any unissued shares
of stock of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preference, conversion or other rights, voting
powers, restrictions, limitations as to dividends, and qualifications or terms
and conditions of or rights to require redemption of the stock and, pursuant to
such classification or reclassification, to increase or decrease the number of
authorized shares of any class, but the number of shares of any class shall not
be reduced by the Board of Directors below the number of shares thereof then
outstanding.
(b) Without limiting the generality of the
foregoing, the dividends and distributions of investment income and capital
gains with respect to the stock of the Corporation, and with respect to each
class that hereafter may be created, shall be in such amount as may be declared
from time to time by the Board of Directors, and such dividends and
distributions may vary from class to class to such extent and for such purposes
as the Board of Directors may deem appropriate, including but not limited to,
the purpose of complying with requirements of regulatory or legislative
authorities.
(3) Until such time as the Board of Directors
shall provide otherwise in accordance with section (2) of this Article FIFTH,
all of the authorized shares of stock of the Corporation are designated as
Common Stock. Such shares and the holders thereof shall be subject to the
following provisions.
(a) As more fully set forth hereafter, the assets
and liabilities and the income and expenses of each class of the Corporation's
stock shall be determined separately and, accordingly, the net asset value, the
dividends payable to holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the Corporation's stock
may vary from class to class. Except for
<PAGE>
these differences and certain other differences hereafter set forth, each class
of the Corporation's stock shall have the same preference, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of and rights to require redemption.
(b) All consideration received by the Corporation
for the issue or sale of shares of a class of the Corporation's stock, together
with all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that class for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books of
account of the Corporation. Such consideration, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds, in whatever form the same may be, are herein referred to as
"assets belonging to" that class.
(c) The assets belonging to a class of the
Corporation's stock shall be charged with the liabilities of the Corporation
with respect to that class and with that class's share of the liabilities of the
Corporation not attributable to any particular class, in the latter case in the
proportion that the net asset value of that class bears to the net asset value
of all classes of the Corporation's stock as determined in accordance with
Article NINTH of these Articles of Incorporation. The determination of the Board
of Directors shall be conclusive as to the allocation of liabilities, including
accrued expenses and reserves, and assets to a particular class or classes.
(d)Each holder of stock of the Corporation, upon
request to the Corporation (accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer, if any certificates
have been issued to represent such shares) shall be entitled to require the
Corporation to redeem, to the extent that the Corporation may lawfully effect
such redemption under the laws of the State of Maryland, all or any part of the
shares of stock standing in the name of such holder on the books of the
Corporation at a price per share equal to the net asset value per share computed
in accordance with Article NINTH hereof.
(e)(i) The term "Minimum Amount" when used
herein shall mean One Thousand Dollars ($1,000) unless otherwise fixed by the
Board of Directors from time to time,
<PAGE>
provided that the Minimum Amount may not in any event exceed Twenty-Five
Thousand Dollars ($25,000). The Board of Directors may establish differing
Minimum Amounts for each class of the Corporation's stock and for holders of
shares of each class of stock based on such criteria as the Board of Directors
may deem appropriate.
(ii) If the net asset value of the shares
of a class of the Corporation's stock held by a stockholder shall be less than
the Minimum Amount then in effect with respect to shares of that class or with
respect to shares of that class held by the stockholders in the same category as
that stockholder, the Corporation may redeem all of those shares, upon notice
given in accordance with paragraph (iv) of this subsection (e), to the extent
that the Corporation may lawfully effect such redemption under the laws of the
State of Maryland.
(iii) The Corporation shall be entitled but
not required to redeem shares of stock from any stockholder or stockholders, to
the extent and at such times as the Board of Directors shall, in its absolute
discretion, determine to be necessary or advisable to prevent the Corporation
from qualifying as a "personal holding company", within the meaning of the
Internal Revenue Code of 1986, as amended from time to time. Notice shall be
given in accordance with paragraph (iv) of this subsection (e).
(iv) The notice referred to in paragraphs
(ii) and (iii) of this subsection (e) shall be in writing personally delivered
or deposited in the mail, at least thirty days (or such other number of days as
may be specified from time to time by the Board of Directors) prior to such
redemption. If mailed, the notice shall be addressed to the stockholder at his
post office address as shown on the books of the Corporation, and sent by
certified or registered mail, postage prepaid. The price for shares acquired by
the Corporation pursuant to this subsection (e) shall be an amount equal to the
net asset value of such shares, computed in accordance with Article NINTH
hereof.
(f) Payment by the Corporation for shares of
stock of the Corporation surrendered to it for redemption shall be made by the
Corporation within seven business days of such surrender out of the funds
legally available therefor, provided that the Corporation may suspend the right
of the holders of stock of the Corporation to redeem shares of stock and may
postpone the right of such holders to receive payment for any
<PAGE>
shares when permitted or required to do so by applicable statutes or
regulations. Payment of the aggregate of such price may be made in cash or, at
the option of the Corporation, wholly or partly in such portfolio securities of
the Corporation as the Corporation shall select.
(g) The right of any holder of stock of the
Corporation redeemed by the Corporation as provided in subsection (d) or (e) of
this section (3) to receive dividends thereon and all other rights of such
holder with respect to such shares shall terminate at the time as of which the
purchase or redemption price of such shares is determined, except the right of
such holder to receive (i) the redemption price of such shares from the
Corporation or its designated agent and (ii) any dividend or distribution to
which such holder has previously become entitled as the record holder of such
shares on the record date for such dividend or distribution. If shares of stock
are redeemed by the Corporation pursuant to subsection (e) of this section (3)
and certificates representing the redeemed shares have been issued, the
redemption price need not be paid by the Corporation until the certificates have
been received by the Corporation or its agent duly endorsed for transfer.
(h) The Corporation shall be entitled to
purchase shares of its stock, to the extent that the Corporation may lawfully
effect such purchase under the laws of the State of Maryland, upon such terms
and conditions and for such consideration as the Board of Directors shall deem
advisable, by agreement with the stockholder at a price not exceeding the net
asset value per share computed in accordance with Article NINTH hereof.
(i) The net asset value of each share of a
class of the Corporation's stock issued and sold or redeemed or purchased at net
asset value shall be the net asset value per share of the shares of that class
determined in accordance with Article NINTH hereof based on the assets belonging
to that class less the liabilities charged to that class.
(j) In the absence of any specification as to
the purpose for which shares of stock of the Corporation are redeemed or
purchased by it, all shares so redeemed or purchased shall be deemed to be
retired in the sense contemplated by the laws of the State of Maryland and the
number of the authorized shares of stock of the Corporation shall not be reduced
by the number of any shares redeemed or purchased by it.
(k) Shares of each class of stock shall be
<PAGE>
entitled to such dividends or distributions, in stock or cash or both, as may be
declared from time to time by the Board of Directors, acting in its sole
discretion, with respect to such class, provided that dividends or distributions
shall be paid on shares of a class of stock only out of lawfully available
assets belonging to that class.
(l) For the purpose of allowing the net asset
value per share of a class of the Corporation's stock to remain constant, the
Corporation shall be entitled to declare, pay and credit as dividends daily the
net income (which may include or give effect to realized and unrealized gains
and losses, as determined in accordance with the Corporation's accounting and
portfolio valuation policies) of the Corporation allocated to that class. If the
amount so determined for any day is negative, the Corporation shall be entitled,
without the payment of monetary compensation but in consideration of the
interest of the Corporation and its stockholders in maintaining a constant net
asset value per share of the class, to redeem pro rata from all the stockholders
of record of shares of the class at the time of such redemption (in proportion
to their respective holdings thereof) such number of outstanding shares of the
class, or fractions thereof, as shall be required to permit the net asset value
per share of the class to remain constant.
(m) In the event of the liquidation or
dissolution of the Corporation, the stockholders of a class of the Corporation's
stock shall be entitled to receive, as a class, out of the assets of the
Corporation available for distribution to stockholders, the assets belonging to
that class. The assets so distributable to the stockholders of a class shall be
distributed among such stockholders in proportion to the number of shares of
that class held by them and recorded on the books of the Corporation. In the
event that there are any assets available for distribution that are not
attributable to any particular class of stock, such assets shall be allocated to
all classes in proportion to the net asset value of the respective classes and
then distributed to the holders of stock of each class in proportion to the net
asset value of the shares of that class held by the respective holders.
(n) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be entitled to one vote for
each such share standing in his name on the books of the Corporation
irrespective of the class thereof; provided, however, that to the extent class
voting is required by the Investment Company Act of 1940 or regulations
thereunder, as from time to time amended, or the laws of the State of Maryland
<PAGE>
as to any such matter, those requirements shall apply.
(o) The Corporation may issue shares of stock
in fractional denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of stock having proportionately to
the respective fractions represented thereby all the rights of whole shares,
including without limitation, the right to vote, the right to receive dividends
and distributions, and the right to participate upon liquidation of the
Corporation, but excluding the right to receive a stock certificate representing
fractional shares.
(4) No holder of any shares of stock of the
Corporation shall be entitled as of right to subscribe for, purchase, or
otherwise acquire any such shares which the Corporation shall issue or propose
to issue; and any and all of the shares of stock of the Corporation, whether now
or hereafter authorized, may be issued, or may be reissued or transferred if the
same have been reacquired and have treasury status, by the Board of Directors to
such persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering same, or any thereof, to any said holder.
(5) All persons who shall acquire stock or
other securities of the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation, as from time to time amended.
SIXTH: The number of directors of the Corporation, until such
number shall be increased pursuant to the By-Laws of the Corporation, shall be
three. The number of directors shall never be less than the number prescribed by
the General Corporation Law of the State of Maryland and shall never be more
than twenty. The names of the persons who shall act as directors of the
Corporation until the first annual meeting or until their successors are duly
chosen and qualify are Thomas J. Metallo, James Lebenthal and George Bernard.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the Corporation and
of the Board of Directors and stockholders.
(a) The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors which
shall have and may exercise all powers of the Corporation except those powers
which are by law, by these Articles of Incorporation or by the By-Laws conferred
upon or
<PAGE>
reserved to the stockholders. In furtherance and not in limitation of the powers
conferred by law, the Board of Directors shall have power:
(i) to make, alter and repeal the By-Laws of the
Corporation;
(ii) to issue and sell, from time to time, shares of any
class of the Corporation's stock in such amounts and on such
terms and conditions, and for such amount and kind of
consideration, as the Board of Directors shall determine,
provided that the consideration per share to be received by the
Corporation shall be not less than the greater of the net asset
value per share of that class of stock at such time computed in
accordance with Article NINTH hereof or the par value thereof;
(iii) from time to time to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or
reserves for working capital or for any other proper purpose or
purposes, and to reduce, abolish or add to any such reserve or
reserves from time to time as said Board of Directors may deem to
be in the best interests of the Corporation; and to determine in
its discretion what part of the assets of the Corporation
available for dividends in excess of such reserve or reserves
shall be declared in dividends and paid to the stockholders of
the Corporation; and
(iv) from time to time to determine to what extent and at what
times and places and under what conditions and regulations the
accounts, books and records of the Corporation, or any of them,
shall be open to the inspection of the stockholders; and no
stockholder shall have any right to inspect any account or book
or document of the Corporation, except as conferred by the laws
of the State of Maryland, unless and until authorized to do so by
resolution of the Board of Directors or of the stockholders of
the Corporation.
(b) Notwithstanding any provision of the
General Corporation Law of the State of Maryland requiring a greater proportion
than a majority of the votes of all classes or of any class of the Corporation's
stock entitled to be cast in order to take or authorize any action, any such
action may be taken or authorized upon the concurrence of a majority of the
aggregate number of votes entitled to be cast thereon subject to any applicable
requirements of the Investment Company Act of
<PAGE>
1940, as from time to time in effect, or rules or orders of the Securities and
Exchange Commission or any successor thereto.
(c) Except as may otherwise be expressly
provided by applicable statutes or regulatory requirements, the presence in
person or by proxy of the holders of one-third of the shares of stock of the
Corporation entitled to vote shall constitute a quorum at any meeting of the
stockholders.
(d) Any determination made in good faith
and, so far as accounting matters are involved, in accordance with generally
accepted accounting principles by or pursuant to the discretion of the Board of
Directors, as to the amount of the assets, debts, obligations, or liabilities of
the Corporation, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time of or purposes for creating such reserves or
charges, as to the use, alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged or shall by
then or thereafter required to be paid or discharged), as to the value of or the
method of valuing any investment owned or held by the Corporation, as to the
market value or fair value of any investment or fair value of any other asset of
the Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability of the Corporation to a particular class or classes of the
Corporation's stock, as to the number of shares of the Corporation outstanding,
as to the estimated expense to the Corporation in connection with purchases of
its shares, as to the ability to liquidate investments in orderly fashion, or as
to any other matters relating to the issue, sale, purchase and/or other
acquisition or disposition of investments or shares of the Corporation, shall be
final and conclusive and shall be binding upon the Corporation and all holders
of its shares, past, present and future, and shares of the Corporation are
issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
(e) Except to the extent prohibited by the
Investment Company Act of 1940, as amended, or rules, regulations or orders
thereunder promulgated by the Securities and Exchange Commission or any
successor thereto or by the By-Laws of the Corporation, a director, officer or
employee of the Corporation shall not be disqualified by his position from
dealing or contracting with the Corporation, nor shall any transaction or
contract of the Corporation be void or voidable by reason of the fact that any
director, officer or employee or any firm of which
<PAGE>
any director, officer or employee is a member or any corporation of which any
director, officer or employee is a stockholder, officer or director, is in any
way interested in such transaction or contract; provided that in case a
director, or a firm or corporation of which a director is a member, stockholder,
officer or director, is so interested, such fact shall be disclosed to or shall
have been known by the Board of Directors or a majority thereof; and any
director of the Corporation who is so interested, or who is a member,
stockholder, officer or director of such firm or corporation, may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
of the Corporation which shall authorize any such transaction or contract, with
like force and effect as if he were not such director, or member, stockholder,
officer or director of such firm or corporation.
(f) Specifically and without limitation of
the foregoing subsection (e) but subject to the exception therein prescribed,
the Corporation may enter into management or advisory, underwriting,
distribution and administration contracts and other contracts, and may otherwise
do business, with Reich & Tang L.P., and any parent, subsidiary, partner, or
affiliate of such firm or any affiliates of any such affiliate, or the
stockholders, directors, officers, partners and employees thereof, and may deal
freely with one another notwithstanding that the Board of Directors of the
Corporation may be composed in part of directors, officers, partners or
employees of such firm and/or its parents, subsidiaries or affiliates and that
officers of the Corporation may have been, be or become directors, officers, or
employees of such firm, and/or its parents, subsidiaries or affiliates, and
neither such management or advisory, underwriting, distribution or
administration contracts nor any other contract or transaction between the
Corporation and such firm and/or its parents, subsidiaries or affiliates shall
be invalidated or in any way affected thereby, nor shall any director or officer
of the Corporation be liable to the Corporation or to any stockholder or
creditor thereof or to any person for any loss incurred by it or him under or by
reason of such contract or transaction; provided that nothing herein shall
protect any director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office; and provided always that
such contract or transaction shall have been on terms that were not unfair to
the Corporation at the time at which it was entered into.
<PAGE>
EIGHTH: Subject to the requirements of the Investment Company
Act of 1940 and rules promulgated thereunder, as from time to time amended, to
the maximum extent permitted by the General Corporation Law of the State of
Maryland as from time to time amended, the Corporation shall indemnify its
currently acting and its former directors and officers and those persons who, at
the request of the Corporation, serve or have served another corporation,
partnership, joint venture, trust or other enterprise in one or more of such
capacities.
NINTH: For the purpose of the computation of net asset
value referred to in these Articles of Incorporation, the following rules shall
apply:
(a) The net asset value of each share of a
class of the Corporation's stock issued or sold at its net asset value shall be
the net asset value per share of that class when next determined as provided in
paragraph (d) of this Article NINTH following acceptance by the Corporation of
the subscription or other agreement with respect to the issue or sale of such
share.
(b) The net asset value of each share of a
class of the Corporation's stock redeemed by the Corporation at the request of
its holder shall be the net asset value per share of that class when next
determined as provided in paragraph (d) of this Article NINTH following the time
the Corporation receives a request for redemption of such share in good order
with all appropriate documentation, including stock certificates, if any, duly
endorsed for transfer.
(c) The net asset value of each share of a
class of the Corporation's stock purchased or redeemed by it otherwise than upon
request for redemption by its holder shall be the net asset value per share of
that class of the Corporation's stock when next determined as provided in
paragraph (d) of this Article NINTH following the Corporation's determination or
agreement to purchase or redeem such share, the expiration of any notice period
fulfillment of any other conditions precedent to such purchase or redemption, or
such lower price per share as may be specified in the agreement, if any, with
the stockholder for the purchase or redemption of his shares.
(d) The net asset value of a share of a
class of the Corporation's stock as at the time of a particular determination
shall be the quotient obtained by dividing the value at such time of the net
asset of that class (i.e., the value of the assets belonging to that class less
the liabilities
<PAGE>
charged to that class exclusive of capital stock and surplus) by the total
number of shares of that class outstanding at such time, all determined and
computed as provided in the Corporation's By-Laws or by or pursuant to the
direction of the Board of Directors.
(e) The Corporation shall determine the net
asset value per share of a class of its stock on such days and at such times as
prescribed by the rules and regulations of the Securities and Exchange
Commission or any successor thereto. The Corporation may also determine such net
asset value at other times.
(f) The Corporation may suspend the
determination of the net asset value of a class of its stock during any period
when it may suspend the right of the holders of shares of that class to require
the Corporation to redeem their shares.
TENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation or
in any amendment hereto in the manner now or hereafter prescribed by the laws of
the State of Maryland and all rights conferred upon stockholders herein are
granted subject to this reservation.
IN WITNESS WHEREOF: NEW YORK DAILY TAX FREE INCOME FUND, INC.,
has caused these presents to be signed in its name and on its behalf by its Vice
President and attested by its Secretary on August 31, 1990.
NEW YORK DAILY TAX FREE INCOME
FUND, INC.
By:
ATTEST:
By: ______________________
Secretary
<PAGE>
THE UNDERSIGNED, Vice President of NEW YORK DAILY TAX FREE
INCOME FUND, INC., who executed on behalf of said corporation, the foregoing
Amended and Restated Articles of Incorporation, of which this certificate is
made a part, hereby acknowledges, in the name and on behalf of said corporation,
the foregoing Amended and Restated Articles of Incorporation to be the corporate
act of said corporation and further certifies that, to the best of his
knowledge, information, and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
______________________________
BY-LAWS EXHIBIT 2
OF
EMPIRE TAX FREE MONEY MARKET, INC.
a Maryland corporation
ARTICLE 1
Offices
Section 1. Principal Office in Maryland. The Corporation
shall have a principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices
also at such other places within and without the State of Maryland as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be
held at such place, either within the State of Maryland or at such other place
within the United States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. Annual meetings of stockholders
shall be held on a date fixed from time to time by the Board of Directors not
less than ninety nor more than one hundred twenty days following the end of each
fiscal year of the Corporation, for the election of directors and the
transaction of any other business within the powers of the Corporation.
Section 3. Notice of Annual Meeting. Written or printed notice
of the annual meeting, stating the place, date and hour thereof, shall be given
to each stockholder entitled to vote thereat not less than ten nor more than
ninety days before the date of the meeting.
Section 4. Special Meetings. Special meetings of stockholders
may be called by the chairman, the president or by the Board of Directors and
shall be called by the secretary upon the written request of holders of shares
entitled to cast not less than twenty-five percent of all the votes entitled to
be cast at such meeting. Such request shall state the purpose
<PAGE>
or purposes of such meeting and the matters proposed to be acted on thereat. In
the case of such request for a special meeting, upon payment by such
stockholders to the Corporation of the estimated reasonable cost of preparing
and mailing a notice of such meeting, the secretary shall give the notice of
such meeting. The secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a matter acted upon at
any special meeting of stockholders held within the preceding twelve months
unless requested to do so by the holders of shares entitled to cast not less
than a majority of all votes entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed
notice of a special meeting of stockholders, stating the place, date, hour and
purpose thereof, shall be given by the secretary to each stockholder entitled to
vote thereat not less than ten nor more than ninety days before the date fixed
for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice thereof.
Section 7. Quorum. Except as may otherwise be expressly
provided by applicable statutes or regulations, the holders of one-third of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business.
Section 8. Voting. When a quorum is present at any meeting,
the affirmative vote of a majority of the votes cast shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the Investment Company Act of 1940, as from time to time in effect,
or other statutes or rules or orders of the Securities and Exchange Commission
or any successor thereto or of the Articles of Incorporation, a different vote
is required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Proxies. Each stockholder shall at every meeting of
stockholders be entitled to one vote in person or by proxy for each share of the
stock having voting power held by such stockholder, but no proxy shall be voted
after eleven months from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, to express consent to corporate action
in writing without a meeting, or to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date
which shall be not more than ninety days and, in the case of a meeting of
stockholders, not less than ten days prior to the date on which the particular
action requiring such determination of stockholders is
<PAGE>
to be taken. In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed, in any case, twenty days. If the stock transfer books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days
immediately preceding such meeting. If no record date is fixed and the stock
transfer books are not closed for the determination of stockholders: (1) the
record date for the determination of stockholders entitled to notice of, or to
vote at, a meeting of stockholders shall be at the close of business on the day
on which notice of the meeting of stockholders is mailed or the day thirty days
before the meeting, whichever is the closer date to the meeting; and (2) the
record date for the determination of stockholders entitled to receive payment of
a dividend or an allotment of any rights shall be at the close of business on
the day on which the resolution of the Board of Directors, declaring the
dividend or allotment of rights, is adopted, provided that the payment or
allotment date shall not be more than ninety days after the date of the adoption
of such resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more inspectors to act
at the meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting or any stockholder, the inspector or inspectors, if any, shall make
a report in writing of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or them.
Section 12. Informal Action by Stockholders. Except to the
extent prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to vote on the
subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action, and such consent and
waiver are filed with the records of the Corporation.
<PAGE>
ARTICLE 3
Board of Directors
Section 1. Number of Directors. The number of directors shall
be fixed at no less than two nor more than twenty. Within the limits specified
above, the number of directors shall be fixed from time to time by the Board of
Directors, but the tenure of office of a director in office at the time of any
decrease in the number of directors shall not be affected as a result thereof.
The directors shall be elected to hold office at the annual meeting of
stockholders, except as provided in Section 2 of this Article, and each director
shall hold office until, the next annual meeting of stockholders or until his
successor is elected and qualifies. Any director may resign at any time upon
written notice to the Corporation. Any director may be removed, either with or
without cause, at any meeting of stockholders duly called and at which a quorum
is present by the affirmative vote of the majority of the votes entitled to be
cast thereon, and the vacancy in the Board of Directors caused by such removal
may be filled by the stockholders at the time of such removal. Directors need
not be stockholders.
Section 2. Vacancies and Newly Created Directorships.
Any vacancy occurring in the Board of Directors for any cause, including an
increase in the number of directors, may be filled by the stockholders or by a
majority of the remaining members of the Board of Directors even if such
majority is less than a quorum. So long as the Corporation is a registered
investment company under the Investment Company Act of 1940,vacancies in the
Board of Directors may be filled by a majority of the remaining members of the
Board of Directors only if, immediately after filling any such vacancy, at least
two-thirds of the directors then holding office shall have been elected to such
office at a meeting of stockholders. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders or until his successor is elected and qualifies.
Section 3. Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors which shall
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
By-Laws conferred upon or reserved to the stockholders.
Section 4. Annual Meeting. The first meeting of each newly
elected Board of Directors shall be held immediately following the adjournment
of the annual meeting of stockholders and at the place thereof. No notice of
such meeting to the directors shall be necessary in order legally to constitute
the meeting, provided a quorum shall be present. In the event such meeting is
not so held, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors.
<PAGE>
Section 5. Other Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both regular and
special, either within or without the State of Maryland. Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the chairman, the president
or by two or more directors. Notice of special meetings of the Board of
Directors shall be given by the secretary to each director at least three days
before the meeting if by mail or at least 24 hours before the meeting if given
in person or by telephone or by telegraph. The notice need not specify the
business to be transacted.
Section 6. Quorum and Voting. At meetings of the Board of
Directors, two of the directors in office at the time, but in no event less than
one-third of the entire Board of Directors, shall constitute a quorum for the
transaction of business. When required pursuant to Section 15(c) under the
Investment Company Act of 1940 or Rule 12b-1 thereunder a quorum shall also
require the presence in person of a majority of directors who are not parties to
a contract or agreement to be voted upon or interested persons of any such
party. The action of a majority of the directors present at a meeting at which a
quorum is present shall be the action of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, appoint from
among its members an executive committee and other committees of the Board of
Directors, each committee to be composed of two or more of the directors of the
Corporation. The Board of Directors may, to the extent provided in the
resolution, delegate to such committees, in the intervals between meetings of
the Board of Directors, any or all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except the power
to declare dividends, to issue stock, to recommend to stockholders any action
requiring stockholders' approval, to amend the by-laws or to approve any merger
or share exchange which does not require stockholders' approval. Such committee
or committees shall have the name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Unless the Board of
Directors designates one or more directors as alternate members of any
committee, who may replace an absent or disqualified member at any meeting of
the committee, the members of any such committee present at any meeting and not
disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member of such committee. At
meetings of any such committee, a majority of the members or alternate members
of such committee shall constitute a quorum for the transaction of business and
the act of a majority of the members or alternate members present at any meeting
at which a quorum is present shall be the act of the committee.
<PAGE>
Section 8. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent thereto is signed by all members of the Board of Directors or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board of Directors or committee.
Section 10. Meetings by Conference Telephone. Except to the
extent prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, the members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and such participation shall constitute presence in person at such meeting.
Section 11. Fees and Expenses. The directors may be paid their
expenses of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE 4
Notices
Section 1. General. Notices to directors and
stockholders mailed to them at their post office addresses appearing on the
books of the Corporation shall be deemed to be given at the time when deposited
in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is required
to be given under the provisions of the statutes, of the Article of
Incorporation or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed the equivalent of notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 1.
<PAGE>
ARTICLE 5
Officers
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors at its first meeting after each annual meeting
of stockholders and shall be a chairman of the Board of Directors, a president,
a secretary and a treasurer. The Board of Directors may also choose such vice
presidents and additional officers or assistant officers as it may deem
advisable. Any number of offices, except the offices of president and vice
president, may be held by the same person. No officer shall execute, acknowledge
or verify any instrument in more than one capacity if such instrument is
required by law to be executed, acknowledged or verified by two or more
officers.
Section 2. Other Officers and Agents. The Board of Directors
may appoint such other officers and agents as it desires who shall hold their
offices for such terms and shall exercise such power and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officer of the Corporation
shall hold office at the pleasure of the Board of Directors. Each officer shall
hold his office until his successor is elected and qualifies or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors when, in its
judgment, the best interests of the Corporation will be served thereby. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of
the Board of Directors shall be the chief executive officer of the Corporation,
shall preside at all meetings of the stockholders and of the Board of Directors,
shall have general and active management of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. He shall execute on behalf of the Corporation, and may affix the
seal or cause the seal to be affixed to, all instruments requiring such
execution except to the extent that signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 5. President. The president shall, in the absence of
the chairman of the Board of Directors, preside at all meetings of the
stockholders or of the Board of Directors. He shall be ex officio a member of
all committees designated by the Board of Directors, shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. He
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where
<PAGE>
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall act
under the direction of the president and in the absence or disability of the
president shall perform the duties and exercise the power of the president. They
shall perform such other duties and have such other powers as the president or
the Board of Directors may from time to time prescribe. The Board of Directors
may designate one or more executive vice presidents or may otherwise specify the
order of seniority of the vice presidents and, in that event, the duties and
powers of the president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under the
direction of the president. Subject to the direction of the president he shall
attend all meetings of the Board of Directors and all meetings of stockholders
and record the proceedings in a book to be kept for that purpose and shall
perform like duties for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the president or the Board of
Directors. He shall keep in safe custody the seal of the Corporation and shall
affix the seal or cause it to be affixed to any instrument requiring it.
Section 8. Assistant Secretaries. The assistant secretaries in
the order of their seniority, unless otherwise determined by the president or
the Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the president or the Board of
Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the
direction of the president. Subject to the direction of the president he shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the president or the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers in
the order of their seniority, unless otherwise determined by the president or
the Board of Directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the
<PAGE>
treasurer. They shall perform such other duties and have such other powers as
the president or the Board of Directors may from time to time prescribe.
ARTICLE 6
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation
who has made full payment of the consideration for such stock shall be entitled
upon request to have a certificate, signed by, or in the name of the Corporation
by, the president or a vice president and countersigned by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, certifying the number and class of whole shares of stock owned by
him in the Corporation.
Section 2. Fractional Share Interests or Scrip. The
Corporation may, but shall not be obliged to, issue fractions of a share of
stock, arrange for the disposition of fractional interests by those entitled
thereto, pay in cash the fair value of fractions of a share of stock as of the
time when those entitled to receive such fractions are determined, or issue
scrip or other evidence of ownership which shall entitle the holder to receive a
certificate for a full share of stock upon the surrender of such scrip or other
evidence of ownership aggregating a full share. Fractional shares of stock shall
have proportionately to the respective fractions represented thereby all the
rights of whole shares, including the right to vote, the right to receive
dividends and distributions and the right to participate upon liquidation of the
Corporation, excluding, however, the right to receive a stock certificate
representing such fractional shares. The Board of Directors may cause such scrip
or evidence of ownership to be issued subject to the condition that it shall
become void if not exchanged for certificates representing full shares of stock
before a specified date or subject to the condition that the shares of stock for
which such scrip or evidence of ownership is exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of such scrip or
evidence of ownership, or subject to any other reasonable conditions which the
Board of Directors shall deem advisable, including provision for forfeiture of
such proceeds to the Corporation if not claimed within a period of not less than
three years after the date of the original issuance of scrip certificates.
Section 3. Signatures on Certificates. Any of or all the
signatures on a certificate may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
cease to be such officer before such certificate is issued, it may be issued
with the same effect as if he were such officer at the date of issue. The seal
of the Corporation or a facsimile thereof may, but need not, be affixed to
certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board
of Directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates
<PAGE>
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of any affidavit of that fact by the person claiming
the certificate or certificates to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate or certificates alleged
to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered
owner of shares, and if a certificate has been issued to represent such shares
upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, subject to the Corporation's
rights to redeem or purchase such shares, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the Articles of
Incorporation, of the By-Laws and of the law regarding the transfer of shares
have been duly complied with, to record the transaction upon its books, issue a
new certificate to the person entitled thereto upon request for such
certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the owner of shares
to be the exclusive owner for all purposes including redemption, voting and
dividends, and the Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE 7
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for repairing or maintaining any
property of the Corporation, or for the purchase of additional property, or for
such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve.
Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of Incorporation and
of the provisions of applicable law, be declared by the Board of Directors at
any time. Dividends may be paid in cash, in property or in shares of the
Corporation's stock, subject to the provisions of the Articles of Incorporation
and of applicable law.
<PAGE>
Section 1.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders during each
fiscal year shall be determined by the Board of Directors. Each such payment
shall be accompanied by a statement as to the source of such payment, to the
extent required by law.
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words, "Corporate Seal, Maryland". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in another manner reproduced.
Section 7. Filing of By-Laws. A certified copy of the
By-Laws, including all amendments, shall be kept at the principal office of the
Corporation in the State of Maryland.
Section 8. Annual Report. The books of account of the
Corporation shall be examined by an independent firm of public accountants at
the close of each annual fiscal period of the Corporation and at such other
times, if any, as may be directed by the Board of Directors of the Corporation.
Within one hundred and twenty days of the close of each annual fiscal period a
report based upon such examination at the close of that fiscal period shall be
mailed to each stockholder of the Corporation of record at the close of such
annual fiscal period, unless the Board of Directors shall set another record
date, at his address as the same appears on the books of the Corporation. Each
such report shall contain such information as is required to be set forth
therein by the Investment Company Act of 1940 and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder. Such report
shall also be submitted at the annual meeting of the stockholders and filed
within twenty days thereafter at the principal office of the Corporation in the
State of Maryland.
Section 9. Stock Ledger. The Corporation shall maintain at its
principal office outside of the State of Maryland an original or duplicate stock
ledger containing the names and addresses of all stockholders and the number of
shares of stock held by each stockholder. Such stock ledger may be in written
form or in any other form capable of being converted into written form within a
reasonable time for visual inspection.
Section 10. Ratification of Accountants by Stockholders. At
every annual meeting of the stockholders of the Corporation there shall be
submitted for ratification or
<PAGE>
rejection the name of the firm of independent public accountants which has been
selected for the current fiscal year in which such annual meeting is held by a
majority of those members of the Board of Directors who are not investment
advisers of, or interested person (as defined in the Investment Company Act of
1940) of, an investment adviser of, or officers or employees of, the
Corporation.
Section 11. Custodian. All securities and similar investments
owned by the Corporation shall be held by a custodian which shall be either a
trust company or a national bank of good standing, having a capital surplus and
undivided profits aggregating not less than two million dollars ($2,000,000), or
a member firm of the New York Stock Exchange, Inc. The terms of custody of such
securities and cash shall include such provisions required to be contained
therein by the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
Upon the resignation or inability to serve of any such
custodian the Corporation shall (a) use its best efforts to obtain a successor
custodian, (b) require the cash and securities of the Corporation held by the
custodian to be delivered directly to the successor custodian, and (c) in the
event that no successor custodian can be found, submit to the stockholders of
the Corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the Corporation
shall be dissolved or shall function without a custodian; provided, however,
that nothing herein contained shall prevent the termination of any agreement
between the Corporation and any such custodian by the affirmative vote of the
holders of a majority of all the stock of the Corporation at the time
outstanding and entitled to vote. Upon its resignation or inability to serve and
pending action by the Corporation as set forth in this section, the custodian
may deliver any assets of the Corporation held by it to a qualified bank or
trust company in the City of New York, or to a member firm of the New York Stock
Exchange, Inc. selected by it, such assets to be held subject to the terms of
custody which governed such retiring custodian.
Section 12. Investment Advisers. The Corporation may enter
into one or more management or advisory, underwriting, distribution or
administration contracts with any person, firm, partnership, association or
corporation but such contract or contracts shall continue in effect only so long
as such continuance is specifically approved annually by a majority of the Board
of Directors or by vote of the holders of a majority of the voting securities of
the Corporation, and in either case by vote of a majority of the directors who
are not parties to such contracts or interested persons (as defined in the
Investment Company Act of 1940) of any such party cast in person at a meeting
called for the purpose of voting on such approval.
<PAGE>
ARTICLE 8
Amendments
The Board of Directors shall have the power, by a majority vote of the
entire Board of Directors at any meeting thereof, to make, alter and repeal
by-laws of the Corporation.
EXHIBIT 5
INVESTMENT MANAGEMENT CONTRACT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
the "Fund"
New York, New York
______________, 1998
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Amended Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
extent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the investment management services
specified below.
(b) Subject to the general control of our Board of
Directors, you will make decisions with respect to all purchases and sales of
the portfolio securities. To carry out such decisions, you are hereby
authorized, as our agent and attorney-in-fact for our account and at our risk
and in our name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in our portfolio
securities you are authorized to exercise full discretion and act for us in the
same manner and with the same force and effect as the Fund itself might or could
do with respect to such purchases, sales or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
<PAGE>
(c) You will report to our Board of Directors at each
meeting thereof all changes in our portfolio since your prior report, and will
also keep us in touch with important developments affecting our portfolio and,
on your initiative, will furnish us from time to time with such information as
you may believe appropriate for this purpose, whether concerning the individual
entities whose securities are included in our portfolio, the activities in which
such entities engage, Federal income tax policies applicable to our investments,
or the conditions prevailing in the money market or the economy generally. You
will also furnish us with such statistical and analytical information with
respect to our portfolio securities as you may believe appropriate or as we may
reasonably request. In making such purchases and sales of our portfolio
securities, you will comply with the policies set from time to time by our Board
of Directors as well as the limitations imposed by our Amended Articles of
Incorporation and by the provisions of the Internal Revenue Code and the 1940
Act relating to regulated investment companies and the limitations contained in
the Registration Statement.
(d) It is understood that you will from time to time
employ, subcontract with or otherwise associate with yourself, entirely at your
expense, such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder.
(e) You or your affiliates will also furnish us, at your
own expense, such investment advisory supervision and assistance as you may
believe appropriate or as we may reasonably request subject to the requirements
of any regulatory authority to which you may be subject. You and your affiliates
will also pay the expenses of promoting the sale of our shares (other than the
costs of preparing, printing and filing our registration statement, printing
copies of the prospectus contained therein and complying with other applicable
regulatory requirements), except to the extent that we are permitted to bear
such expenses under a plan adopted pursuant to Rule 12b-1 under the 1940 Act or
a similar rule.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses, including: (a) brokerage and commission expenses, (b) Federal, state
or local taxes, including issue and transfer taxes incurred by or levied on us,
(c) commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian, (f) charges, expenses and
payments relating to the issuance, redemption, transfer and dividend disbursing
functions for us, (g) recurring and nonrecurring legal and accounting expenses,
including those of the bookkeeping agent, (h) telecommunications expenses, (i)
the costs of organizing and maintaining our
<PAGE>
existence as a corporation, (j) compensation, including directors' fees, of any
of our directors, officers or employees who are not your officers or officers of
your affiliates, and costs of other personnel providing clerical, accounting
supervision and other office services to us as we may request, (k) costs of
stockholders' services including, charges and expenses of persons providing
confirmations of transactions in our shares, periodic statements to
stockholders, and recordkeeping and stockholders' services, (l) costs of
stockholders' reports, proxy solicitations, and corporate meetings, (m) fees and
expenses of registering our shares under the appropriate Federal securities laws
and of qualifying such shares under applicable state securities laws, including
expenses attendant upon the initial registration and qualification of such
shares and attendant upon renewals of, or amendments to, those registrations and
qualifications, (n) expenses of preparing, printing and delivering our
prospectus to existing stockholders and of printing stockholder application
forms for stockholder accounts, (o) payment of the fees and expenses provided
for herein, under the Administrative Services Agreement and under the
Shareholder Servicing Agreement and Distribution Agreement and (p) any other
distribution or promotional expenses contemplated by an effective plan adopted
by us pursuant to Rule 12b-1 under the Act. Our obligation for the foregoing
expenses is limited by your agreement to be responsible, while this Agreement is
in effect, for any amount by which our annual operating expenses (excluding
taxes, brokerage, interest and extraordinary expenses) exceed the limits on
investment company expenses prescribed by any state in which our shares are
qualified for sale.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at
the annual rate of .30 of 1% of the Fund's average daily net assets. Your fee
will be accrued by us daily, and will be payable on the last day of each
calendar month for services performed hereunder during that month or on such
other schedule as you shall request of us in writing. You may use any portion of
this fee for distribution of our shares, or for making servicing payments to
organizations whose customers or clients are our shareholders. You may waive
your right to any fee to which you are entitled hereunder, provided such waiver
is delivered to us in writing. Any reimbursement of our expenses,
<PAGE>
to which we may become entitled pursuant to paragraph 3 hereof, will be paid to
us at the same time as we pay you.
6. This Agreement will become effective on the date hereof and
shall continue in effect until _______________ and thereafter for successive
twelve-month periods (computed from each ____________), provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities, as defined in the 1940 Act and the rules thereunder, and, in either
case, by a majority of those of our directors who are neither party to this
Agreement nor, other than by their service as directors of the corporation,
interested persons, as defined in the 1940 Act and the rules thereunder, of any
such person who is party to this Agreement. Upon the effectiveness of this
Agreement, it shall supersede all previous agreements between us covering the
subject matter hereof. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of our outstanding voting
securities, as defined in the 1940 Act and the rules thereunder, or by a vote of
a majority of our entire Board of Directors, on sixty days' written notice to
you, or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your employees or the officers and directors of Reich & Tang
Asset Management, Inc., your general partner, who may also be a director,
officer or employee of ours, or of a person affiliated with us, as defined in
the 1940 Act, to engage in any other business or to devote time and attention to
the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NEW YORK DAILY TAX FREE INCOME FUND, INC.
By:
ACCEPTED: _____________, 1996
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., General Partner
By: ___________________________________
EXHIBIT 6
DISTRIBUTION AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
the "Fund"
600 Fifth Avenue
New York, New York 10020
________________, 1998
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein contained
and of the payment by us to you of a fee of $1 per year and on the terms and
conditions set forth herein, on behalf of our Fund, we have agreed that you
shall be, for the period of this agreement, a distributor, as our agent, for the
unsold portion of such number of shares of our common stock, $.001 par value per
share, as may be effectively registered from time to time under the Securities
Act of 1933, as amended (the "1933 Act"). This agreement is being entered into
pursuant to the Distribution and Service Plan (the "Plan") adopted by us in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our common stock as shall then be effectively
registered under the Act. All subscriptions for shares of our common stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our common
stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our common stock issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in shares of our common stock by our stockholders of dividends or
other distributions or any other offering by us of securities to our
stockholders.
<PAGE>
3. You will use your best efforts to obtain subscriptions to shares
of our common stock upon the terms and conditions contained herein and in our
Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our common stock, such other
information with respect to us and shares of our common stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the Class A Shares of the Fund, you will arrange for
organizations whose customers or clients are shareholders of our corporation
("Participating Organizations") to enter into agreements with you for the
performance of shareholder servicing and related administrative functions not
performed by you or the Transfer Agent. Pursuant to our Shareholder Servicing
Agreement with you, you may make payments to Participating Organizations for
performing shareholder servicing and related administrative functions with
respect to the Class A Shares of the Fund. Such payments will be made only
pursuant to written agreements approved in form and substance by our Board of
Directors to be entered into by you and the Participating Organizations. It is
recognized that we shall have no obligation or liability to you or any
Participating Organization for any such payments under the agreements with
Participating Organizations. Our obligation is solely to make payments to you
under the Shareholder Servicing Agreement (With respect to the Class A Shares)
and to the Manager under the Investment Management Contract and the
Administrative Services Contract. All sales of our shares effected through you
will be made in compliance with all applicable federal securities laws and
regulations and the Constitution, rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
4. We reserve the right to suspend the offering of shares of our
common stock at any time, in the absolute discretion of our Board of Directors,
and upon notice of such suspension you shall cease to offer shares of our common
stock hereunder.
<PAGE>
5. Both of us will cooperate with each other in taking such action
as may be necessary to qualify shares of our common stock for sale under the
securities laws of such states as we may designate, provided, that you shall not
be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our common stock under the Act
and of qualification of shares of our common stock, and to the extent necessary,
our qualification under applicable state securities laws. You will pay all
expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our common stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our common stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you that any amendment
to our Registration Statement or Prospectus hereafter filed by us will be
carefully prepared in conformity within the requirements of the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder and will, when it
becomes effective, contain all statements required to be stated therein in
<PAGE>
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
7. We agree to indemnify, defend and hold you, and any person who
controls you within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which you or any such controlling
person may incur, under the 1933 Act or the 1940 Act, or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in our Registration Statement or Prospectus in effect
from time to time or arising out of or based upon any alleged omission to state
a material fact required to be stated in either of them or necessary to make the
statements in either of them not misleading; provided, however, that in no event
shall anything herein contained be so construed as to protect you against any
liability to us or our security holders to which you would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties under this agreement. Our agreement to indemnify you and
any such controlling person is expressly conditioned upon our being notified of
any action brought against you or any such controlling person, such notification
to be given by letter or by telegram addressed to us at our principal office in
New York, New York, and sent to us by the person against whom such action is
brought within ten days after the summons or other first legal process shall
have been served. The failure so to notify us of any such action shall not
relieve us from any liability which we may have to the person against whom such
action is brought other than on account of our indemnity agreement contained in
this paragraph 7. We will be entitled to assume the defense of any suit brought
to enforce any such claim, and to retain counsel of good standing chosen by us
and approved by you. In the event we do elect to assume the defense of any such
suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case we do not elect to assume the
defense of any such suit, or in case you, in good faith, do not approve of
counsel chosen by us, we will reimburse you or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by you or them. Our indemnification agreement contained in this
paragraph 7 and our representations
<PAGE>
and warranties in this agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of you or any controlling
person and shall survive the sale of any shares of our common stock made
pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any shares of our common stock.
8. You agree to indemnify, defend and hold us, our several officers
and directors, and any person who controls us within the meaning of Section 15
of the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers or directors, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person other than on account of your indemnity
agreement contained in this paragraph 8.
9. We agree to advise you immediately:
<PAGE>
a. of any request by the SEC for amendments to our
Registration Statement or Prospectus or for additional information,
b. of the issuance by the SEC of any stop order
suspending the effectiveness of our Registration Statement or Prospectus or the
initiation of any proceedings for that purpose,
c. of the happening of any material event which makes
untrue any statement made in our Registration Statement or Prospectus or which
requires the making of a change in either of them in order to make the
statements therein not misleading, and
d. of all action of the SEC with respect to any
amendments to our Registration Statement or Prospectus.
10. This Agreement (which was re-executed on the date hereof) became
effective on _____________ and will remain in effect thereafter for successive
twelve-month periods (computed from each ____________), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this agreement.
This agreement may be terminated at any time, without the payment of any
penalty, (a) on sixty days' written notice to you (i) by vote of a majority of
our entire Board of Directors, and by a vote of a majority of our Directors who
are not interested persons (as defined in the 1940 Act) and who have no direct
or indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of our outstanding voting
securities, as defined in the Act, or (b) by you on sixty days' written notice
to us.
11. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
<PAGE>
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
NEW YORK DAILY TAX FREE INCOME
FUND, INC.
By
Accepted: ___________________, 1998
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________
EXHIBIT 8
CUSTODY AGREEMENT
THIS AGREEMENT made the ___ day of _____________, 19__, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 801 Pennsylvania,
Kansas City, Missouri 64105 ("Custodian"), and New York Daily Tax Free Income
Fund, Inc., a Maryland corporation, having its principal office and place of
business at 600 Fifth Avenue, New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints
Custodian as custodian of the securities and monies at any time owned
by the Fund.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a corporation or trust (as specified
above) duly organized and existing and in good
standing under the laws of its state of organization,
and that it is registered under the Investment
Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under
applicable law, its articles of incorporation and its
bylaws to enter into this Agreement; that it has
taken all requisite action necessary to appoint
Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by
Fund; and that this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable in
accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Missouri; and
<PAGE>
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; that this Agreement
has been duly executed and delivered by Custodian;
and that this Agreement constitutes a legal, valid
and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery Of Assets
Except as permitted by the 1940 Act, Fund will deliver or
cause to be delivered to Custodian on the effective date of
this Agreement, or as soon thereafter as practicable, and from
time to time thereafter, all portfolio securities acquired by
it and monies then owned by it or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies
not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian
all of the Fund's relevant accounts and records previously
maintained. Custodian shall be entitled to rely conclusively
on the completeness and
<PAGE>
correctness of the accounts and
records turned over to it, and Fund shall indemnify and hold
Custodian harmless of and from any and all expenses, damages
and losses whatsoever arising out of or in connection with any
error, omission, inaccuracy or other deficiency of such
accounts and records or in the failure of Fund to provide, or
to provide in a timely manner, any accounts, records or
information needed by the Custodian to perform its functions
hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets
of Fund delivered to it from time to time segregated in a
separate account, and if Fund is comprised of more than one
portfolio of investment securities (each a "Portfolio")
Custodian shall keep the assets of each Portfolio segregated
in a separate account. Custodian will not deliver, assign,
pledge or hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any agreement
executed by it according to the terms of Section 3.S. of this
Agreement. Upon delivery of any such assets to a subcustodian
pursuant to Section 3.S. of this Agreement, Custodian will
create and maintain records identifying those assets which
have been delivered to the subcustodian as belonging to the
Fund, by Portfolio if applicable. The Custodian is
<PAGE>
responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and
received by other persons as permitted under the terms of
this Agreement, except for securities and monies transmitted
to subcustodians appointed under Section 3.S. of this
Agreement, for which Custodian remains responsible to the
extent provided in Section 3.S. hereof. Custodian may
participate directly or indirectly through a subcustodian in
the Depository Trust Company (DTC), Treasury/Federal Reserve
Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such
entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively, the "Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of
the Fund in the name of the Custodian, the Fund, or a nominee
of either of them, unless specifically directed by
instructions to hold such registered securities in so-called
"street name," provided that, in any event, all such
securities and other assets shall be held in an account of the
Custodian containing only assets of the Fund, or only assets
held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the
<PAGE>
records of the Custodian at all times shall indicate the Fund
or other customer for which such securities and other assets
are held in such account and the respective interests therein.
If, however, the Fund directs the Custodian to maintain
securities in "street name", notwithstanding anything
contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect
income due the Fund on such securities and to notify the Fund
of relevant corporate actions including, without limitation,
pendency of calls, maturities, tender or exchange offers. All
securities, and the ownership thereof by Fund, which are held
by Custodian hereunder, however, shall at all times be
identifiable on the records of the Custodian. The Fund agrees
to hold Custodian and its nominee harmless for any liability
as a shareholder of record of securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance
with
<PAGE>
the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange
securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par
value of the stock is changed, and, upon receiving payment
therefor, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of
securities shall be made by it, deliver to Custodian
instructions which shall specify with respect to each such
purchase:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the
security;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
<PAGE>
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or
dealer through whom the purchase was made.
9. Whether the security is to be received in
certificated form or via a specified Depository.
In accordance with such instructions, Custodian will pay for out of monies held
for the account of Fund, but only insofar as such monies are available for such
purpose, and receive the portfolio securities so purchased by or for the account
of Fund, except that Custodian may in its sole discretion advance funds to the
Fund which may result in an overdraft because the monies held by the Custodian
on behalf of the Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall be made by
the Custodian only upon receipt of securities: (a) by the Custodian; (b) by a
clearing corporation of a national exchange of which the Custodian is a member;
or (c) by a Depository. Notwithstanding the foregoing, (i) in the case of a
repurchase agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities underlying such
repurchase agreement have been transferred by book-entry into the account
maintained with such Depository by the Custodian, on behalf of its customers,
provided that the Custodian's instructions to the Depository require that the
Depository make payment of such funds only upon transfer by book-entry of the
<PAGE>
securities underlying the repurchase agreement in such account; (ii) in the case
of time deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation evidencing
said deposit or entry into such transaction; and (iii) in the case of the
purchase of securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian appointed
pursuant to Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been
made, deliver to Custodian instructions specifying with
respect to each such sale:
1. If applicable, the name of the Portfolio making such
sale;
2. The name of the issuer and description of the
securities;
3. The number of shares and principal amount sold, and
accrued interest, if any;
<PAGE>
4. The date on which the securities sold were purchased
or other information identifying the securities sold
and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
8. The total amount to be received by Fund upon such
sale; and
9. The name and address of the broker or dealer through
whom or person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered in
accordance with "street delivery custom" to a broker or its clearing
agent;
<PAGE>
or (ii) in the case of the sale of securities, the settlement of which
occurs outside of the United States of America, the Custodian may
make, or cause a subcustodian appointed pursuant to Section 3.S.2. of
this Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it,
deliver to Custodian instructions which shall specify with
respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
<PAGE>
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
<PAGE>
e. The need for a segregated margin account (in
addition to instructions, and if not already
in the possession of Custodian, Fund shall
deliver a substantially complete and
executed custodial safekeeping account and
procedural agreement which shall be
incorporated by reference into this Custody
Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
<PAGE>
If specifically allowed for in the prospectus of Fund, and
subject to such additional terms and conditions as Custodian
may require:
1. Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of
pledge or hypothecation to secure any loan incurred by
Fund; provided, however, that the securities shall be
released only upon payment to Custodian of the monies
borrowed, except that in cases where additional
collateral is required to secure a borrowing already
made, further securities may be released or caused to
be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian
will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated
in such instructions; provided, however, that the
securities will be released only upon deposit with
Custodian of full cash collateral as specified in such
instructions, and
<PAGE>
that Fund will retain the right to any dividends,
interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities,
Custodian will release the cash collateral to the
borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time to
time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose
deposit accounts in the name of Custodian ("Accounts"),
subject only to draft or order by Custodian upon receipt of
instructions. All monies received by Custodian from or for the
account of Fund shall be deposited in said Accounts. Barring
events not in the control of the Custodian such as strikes,
lockouts or labor disputes, riots, war or equipment or
transmission failure or damage, fire, flood, earthquake or
other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m.,
Kansas City time, on the second business day after deposit of
any check into an
<PAGE>
Account, Custodian agrees to make Fed Funds available to the
Fund in the amount of the check. Deposits made by Federal
Reserve wire will be available to the Fund immediately and
ACH wires will be available to the Fund on the next business
day. Income earned on the portfolio securities will be
credited to the Fund based on the schedule attached as
Exhibit A. The Custodian will be entitled to reverse any
credited amounts where credits have been made and monies are
not finally collected. If monies are collected after such
reversal, the Custodian will credit the Fund in that amount.
Custodian may open and maintain Accounts in its own banking
department, or in such other banks or trust companies as may
be designated by it or by Fund in writing, all such
Accounts, however, to be in the name of Custodian and
subject only to its draft or order. Funds received and held
for the account of different Portfolios shall be maintained
in separate Accounts established for each Portfolio.
L. Income and other Payments to the Fund
Custodian will:
1. Collect, claim and receive and deposit for the
account of Fund all income and other payments which
become due and payable on or after the effective date
of this Agreement with respect to the securities
deposited under this Agreement and
<PAGE>
credit the account of Fund in accordance with the
schedule attached hereto as Exhibit A. If, for any
reason, the Fund is credited with income that is not
subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with:
a. the collection, receipt and deposit of such
income and other payments, including but not
limited to the presentation for payment of:
1. all coupons and other income items
requiring presentation; and
2. all other securities which may
mature or be called, redeemed,
retired or otherwise become payable
and regarding which the Custodian
has actual knowledge, or should
reasonably be expected to have
knowledge; and
b. the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
<PAGE>
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt of
instructions and upon being indemnified to its satisfaction against the
costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary, Custodian
will, without further instructions, sell any rights held for the
account of Fund on the last trade date prior to the date of expiration
of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on
the shares of capital stock of Fund ("Fund Shares") by the
Board of Directors of Fund, Fund shall deliver to Custodian
instructions with respect thereto. On the date specified in
such instructions for the payment of such dividend or other
distribution, Custodian will pay out of the monies held for
the account of Fund, insofar as the same shall be available
for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to
pay the amount per share payable in cash on Fund Shares issued
and outstanding on the record date established by such
resolution.
<PAGE>
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice, Custodian
shall charge such aggregate dollar amount to the account of
Fund and either deposit the same in the account maintained for
the purpose of paying for the repurchase or redemption of Fund
Shares or deliver the same in accordance with such advice.
Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of
Fund Shares have been cancelled and removed from the
shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with Custodian the amount
received for such shares. Custodian shall not have any duty or
responsibility to determine that Fund Shares purchased from
Fund have been added to the proper shareholder account or
accounts or that the proper number of such shares have been
added to the shareholder records.
P. Proxies and Notices
<PAGE>
Custodian will promptly deliver or mail or have delivered or
mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to securities held by
Custodian for Fund and will, upon receipt of instructions,
execute and deliver or cause its nominee to execute and
deliver or mail or have delivered or mailed such proxies or
other authorizations as may be required. Except as provided by
this Agreement or pursuant to instructions hereafter received
by Custodian, neither it nor its nominee will exercise any
power inherent in any such securities, including any power to
vote the same, or execute any proxy, power of attorney, or
other similar instrument voting any of such securities, or
give any consent, approval or waiver with respect thereto, or
take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations
in connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors' fees, transfer agents' fees, brokerage
<PAGE>
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a
detailed statement of the amounts received or paid and of
securities received or delivered for the account of Fund
during each business day. Custodian will, from time to time,
upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are
necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's
independent public accountants, reasonable access to such
records or will provide reasonable confirmation of the
contents of such records, and if demanded, Custodian will
permit federal and state regulatory agencies to examine the
securities, books and records. Upon the written instructions
of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit
such persons as are authorized by Fund, including Fund's
independent public accountants, reasonable access to such
records or to .
<PAGE>
provide reasonable confirmation of the contents of such
records, and to permit such agencies to examine the books,
records and securities held by such subcustodian which
relate to Fund
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement,
all or any of the monies or securities of Fund may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as subcustodians as
may be selected by Custodian. Any such subcustodian selected
by the Custodian must have the qualifications required for a
custodian under the 1940 Act, as amended. It is understood
that Custodian initially intends to appoint United Missouri
Bank, N.A. (UMB) and United Missouri Trust Company of New
York (UMTCNY) as subcustodians. Custodian shall be
responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions
or omissions of UMB, UMTCNY and any other subcustodians
selected and appointed by Custodian (except subcustodians
appointed at the request of Fund and as provided in
Subsection 2 below) to the same extent Custodian would be
responsible to the Fund under Section 5. of this Agreement
if it
<PAGE>
committed the act or omission itself. Upon request of the
Fund, Custodian shall be willing to contract with other
subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase
transactions with banks, brokers, dealers, or other entities
through the use of a common custodian or subcustodian, or
(ii) providing depository and clearing agency services with
respect to certain variable rate demand note securities, or
(iii) for other reasonable purposes specified by Fund;
provided, however, that the Custodian shall be responsible
to the Fund for any loss, damage or expense suffered or
incurred by the Fund resulting from the actions or omissions
of any such subcustodian only to the same extent such
subcustodian is responsible to the Custodian. The Fund shall
be entitled to review the Custodian's contracts with any
such subcustodians appointed at the request of Fund.
Custodian shall be responsible to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting
from the actions or omissions of any Depository only to the
same extent such Depository is responsible to Custodian.
<PAGE>
2. Notwithstanding any other provisions of this Agreement,
Fund's foreign securities (as defined in Rule 17f-5(c)(1)
under the 1940 Act) and Fund's cash or cash equivalents, in
amounts deemed by the Fund to be reasonably necessary to
effect Fund's foreign securities transactions, may be held
in the custody of one or more banks or trust companies
acting as subcustodians, and thereafter, pursuant to a
written contract or contracts as approved by Fund's Board of
Directors, may be transferred to accounts maintained by any
such subcustodian with eligible foreign custodians, as
defined in Rule 17f-5(c)(2). Custodian shall be responsible
to the Fund for any loss, damage or expense suffered or
incurred by the Fund resulting from the actions or omissions
of any foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to the
Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable period of time,
upon demand. Custodian
<PAGE>
will assist Fund's independent auditors, or upon approval of
Fund, or upon demand, any regulatory body, in any requested
review of Fund's accounts and records but shall be
reimbursed by Fund for all expenses and employee time
invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary
information or instructions, Custodian will supply
information from the books and records it maintains for Fund
that Fund needs for tax returns, questionnaires, periodic
reports to shareholders and such other reports and
information requests as Fund and Custodian shall agree upon
from time to time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as
they agree upon, and Custodian may conclusively assume that no
procedure approved or directed by Fund or its accountants or
other advisors conflicts with or violates any requirements of
its prospectus, articles of incorporation, bylaws, any
applicable law, rule or regulation, or any order, decree or
agreement by which Fund may be bound. Fund will be responsible
to notify Custodian of any changes in statutes, regulations,
rules, requirements or policies which might necessitate
changes in Custodian's responsibilities or procedures.
<PAGE>
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft in any
Account because the monies held therein by Custodian on behalf
of the Fund are insufficient to pay the total amount payable
upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the
overdraft shall be payable by the Fund to Custodian upon
demand together with the overdraft charge set forth on the
then-current Fee Schedule from the date advanced until the
date of payment. Fund hereby grants Custodian a lien on and
security interest in the assets of the Fund to secure the full
amount of any outstanding overdraft and related overdraft
charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the
issuer or trustee thereof, or to the agent of such issuer or
trustee, for the purpose of exercise or sale, provided that
the new securities, cash or other assets, if any, are to be
delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the
consideration for such securities is to be paid or
<PAGE>
delivered to the Custodian or the tendered securities are to
be returned to the Custodian.
INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may be
received and accepted by Custodian as conclusive evidence of the authority
of any designated representative to act for Fund and may be considered to
be in full force and effect (and Custodian will be fully protected in
acting in reliance thereon) until receipt by Custodian of notice to the
contrary. Unless such written instructions delegating authority to any
person to give instructions specifically limit such authority to specific
matters or require that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire into the right
of such person, acting alone, to give any instructions whatsoever which
Custodian may receive from such person. If Fund fails to provide Custodian
any such instructions naming designated representatives, any instructions
received by Custodian from
<PAGE>
a person reasonably believed to be an appropriate representative of Fund
shall constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such oral
instruction. At Custodian's sole discretion, Custodian may record on tape,
or otherwise, any oral instruction whether given in person or via
telephone, each such recording identifying the parties, the date and the
time of the beginning and ending of such oral instruction.
LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
which may be asserted against Custodian, incurred by Custodian or for
which Custodian may be held to be liable, arising out of or
attributable to:
1. All actions taken by Custodian pursuant to this Agreement or
any instructions provided to it hereunder, provided that
Custodian has acted in good faith and with due diligence and
reasonable care; and
<PAGE>
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to
pay or reimburse Custodian under this indemnification
provision), the Fund's negligence or willful misconduct, or
the failure of any representation or warranty of the Fund
hereunder to be and remain true and correct in all respects at
all times.
B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity with
such advice or opinion. If Custodian reasonably believes that it could
not prudently act according to the instructions of the Fund or the
Fund's accountants or counsel, it may in its discretion, with notice to
the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon which
they are consulted, and Custodian shall not be liable for any actions
taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of
<PAGE>
monies or in any other way, Custodian shall be indemnified and held
harmless by Fund against any liability on account of such action;
provided, however, that nothing herein shall obligate Custodian to
take any such action except in its sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase of any securities or
foreign currency positions or evidence of ownership required
by Fund to be received by Custodian, or the propriety of the
decision to purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
<PAGE>
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of any
stock dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer, clearinghouse
funds, uncollected funds, or instrument for the payment of money to be
received by it on behalf of Fund until Custodian actually receives such
money; provided, however, that it shall advise Fund promptly if it
fails to receive any such money in the ordinary course of business and
shall cooperate with Fund toward the end that such money shall be
received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or
<PAGE>
indirectly, by circumstances beyond the affected entity's reasonable
control, including, without limitations: any interruption, loss or
malfunction of any utility, transportation, computer (hardware or
software) or communication service; inability to obtain labor,
material, equipment or transportation, or a delay in mails;
governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT
OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED
OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will
pay to Custodian such compensation ------------ as shall be set forth
in a separate fee schedule to be agreed to by Fund and Custodian from
time to time. A copy of the initial fee schedule is attached hereto
and incorporated herein by reference. Custodian shall also be entitled
to receive, and Fund agrees to pay to Custodian, on demand,
reimbursement
<PAGE>
for Custodian's cash disbursements and reasonable out-of-pocket costs
and expenses, including attorney's fees, incurred by Custodian in
connection with the performance of services hereunder. Custodian may
charge such compensation against monies held by it for the account of
Fund. Custodian will also be entitled to charge against any monies
held by it for the account of Fund the amount of any loss, damage,
liability, advance, overdraft or expense for which it shall be
entitled to reimbursement from Fund, including but not limited to fees
and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund
for the losses, damages, liabilities, advances, overdrafts and
expenses of subcustodians only to the extent that (i) Custodian would
have been entitled to reimbursement hereunder if it had incurred the
same itself directly, and (ii) Custodian is obligated to reimburse the
subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for
a period of __________. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than ninety
(90) days prior to the date upon which such termination will take
<PAGE>
effect. Upon termination of this Agreement, Fund will pay Custodian
its fees and compensation due hereunder and its reimbursable
disbursements, costs and expenses paid or incurred to such date and
Fund shall designate a successor custodian by notice in writing to
Custodian by the termination date. In the event no written order
designating a successor custodian has been delivered to Custodian on
or before the date when such termination becomes effective, then
Custodian may, at its option, deliver the securities, funds and
properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in
the 1940 Act and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for
the appointment of a successor custodian or other proper relief, or
take any other lawful action under the circumstances; provided,
however, that Fund shall reimburse Custodian for its costs and
expenses, including reasonable attorney's fees, incurred in connection
therewith. Custodian will, upon termination of this Agreement and
payment of all sums due to Custodian from Fund hereunder or otherwise,
deliver to the successor custodian so specified or appointed, or as
specified by the court, at Custodian's office, all securities then
held by Custodian hereunder, duly endorsed and in form for transfer,
and all
<PAGE>
funds and other properties of Fund deposited with or held by Custodian
hereunder, and Custodian will co-operate in effecting changes in
book-entries at all Depositories. Upon delivery to a successor
custodian or as specified by the court, Custodian will have no further
obligations or liabilities under this Agreement. Thereafter such
successor will be the successor custodian under this Agreement and
will be entitled to reasonable compensation for its services. In the
event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Fund to appoint a successor custodian, the Custodian
shall be entitled to compensation as provided in the then-current fee
schedule hereunder for its services during such period as the
Custodian retains possession of such securities, funds and other
properties, and the provisions of this Agreement relating to the
duties and obligations of the Custodian shall remain in full force and
effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
to Fund at 600 Fifth Avenue, New York, New York 10020, or at such
other address as Fund may have designated to Custodian in writing,
will be deemed to have been properly given to Fund hereunder; and
notices, requests, instructions and other writings addressed to
Custodian at its offices at 801 Pennsylvania, Kansas City, Missouri
64105, Attention: Custody Department, or to such
<PAGE>
other address as it may have designated to Fund in writing, will be
deemed to have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder
as a separate party apart from each other Portfolio. Unless
the context otherwise requires, with respect to every
transaction covered by this Agreement, every reference
herein to the Fund shall be deemed to relate solely to the
particular Portfolio to which such transaction relates.
Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a
right, obligation or remedy applicable to any other
Portfolio. The use of this single document to memorialize
the separate agreement of each Portfolio is understood to be
for clerical convenience only and shall not constitute any
basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement,
provided that Custodian consents to such addition. Rates or
charges for each additional Portfolio shall be as agreed
upon by Custodian and Fund in writing.
<PAGE>
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and
the rights and liabilities of the parties hereto
shall be governed by, the laws of the State of
Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be
binding upon, inure to the benefit of and be
enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties and the
indemnifications extended hereunder are intended to
and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by each party
hereto.
E. The failure of either party to insist upon the
performance of any terms or conditions of this
Agreement or to enforce any rights resulting from any
breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall
not be construed as a continuing or permanent waiver
of any such terms, conditions,
<PAGE>
rights or privileges, but the same shall continue and
remain in full force and effect as if no such
forbearance or waiver had occurred. No waiver,
release or discharge of any party's rights hereunder
shall be effective unless contained in a written
instrument signed by the party sought to be charged.
F. The captions in the Agreement are included for
convenience of reference only, and in no way define
or delimit any of the provisions hereof or otherwise
affect their construction or effect.
G. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original but all of which together shall constitute
one and the same instrument.
H. If any part, term or provision of this Agreement is
determined by the courts cir any regulatory authority
to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be
considered severable and not be affected, and the
rights and obligations of the parties shall be
construed and enforced as if the Agreement did not
contain the particular part, term or provision held
to be illegal or invalid.
<PAGE>
I. This Agreement may not be assigned by either party
hereto without the prior written consent of the other
party.
J. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or
joint venture by and between Custodian and Fund.
K. Except as specifically provided herein, this
Agreement does not in any way affect any other
agreements entered into among the parties hereto and
any actions taken or omitted by either party
hereunder shall not affect any rights or obligations
of the other party hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By:
Title:
NEW YORK DAILY TAX FREE INCOME FUND, INC.
By:
Title:
<PAGE>
EXHIBIT 9
TRANSFER AGENCY AGREEMENT
Agreement made as of the lst day of May, 1984 between EMPIRE TAX FREE
MONEY MARKET, INC., a corporation organized and existing under the laws of the
State of Maryland, having its principal office and place of business at 84
Williams Street, New York, New York 10038 (hereinafter referred to as the
"Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 48 Wall
Street, New York, New York 10015 (hereinafter referred to as the "Transfer
Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
1. "Approved Institution" shall mean an entity so named in a
Certificate. From time to time the Fund may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
3. "Custodian" shall mean The Bank of New York, as custodian under the
terms and conditions of the Custody Agreement between The Bank of New York and
the Fund, or its successor.
4. "Fund Business Day" shall be deemed to be each day on which the New
York Stock Exchange, Inc. is open for trading.
5. "Officer" shall be deemed to be the Fund's Chairman of the Board,
the Fund's President, any Vice President of the Fund,
<PAGE>
the Fund's Secretary, the Fund's Treasurer, the Fund's Controller, any Assistant
Controller of the Fund, any Assistant Treasurer of the Fund, and any other
person duly authorized by the Board of Directors of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
named in the Certificate annexed hereto as Appendix A, as such Certificate may
be amended from time to time, and any person believed by the Transfer Agent to
be such a person.
6. "Shares" shall mean all or any part of each class of the capital
stock of the Fund listed in the Certificate annexed hereto as Appendix B, as may
be amended from time to time, which from time to time are authorized and/or
issued by the Fund.
7. "Prospectus" shall mean the last Fund prospectus actually received
by the Transfer Agent from the Fund with respect to which the Fund has indicated
a registration statement under the Federal Securities Act of 1933 has become
effective.
8. "Transfer Agent" shall mean The Bank of New York, as transfer agent
and dividend disbursing agent under the terms and conditions of this Agreement,
its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
9. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
10. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
11. In connection with such appointment, the Fund shall deliver the
following documents to the Transfer Agent:
(1) A certified copy of the Articles of Incorporation of
the Fund and all amendments thereto;
(2) A certified copy of the By-Laws of the Fund;
(3) A certified copy of a resolution of the Board of
Directors of the Fund appointing the Transfer Agent and authorizing the
execution of this Transfer Agency Agreement;
(4) A Certificate signed by the Secretary of the Fund
specifying with respect to each class of Shares: the number of authorized
Shares, the number of such authorized Shares issued, and the number of such
authorized Shares issued and currently
<PAGE>
outstanding the names and specimen signatures of the Officers of the Fund, and
the name and address of the legal counsel for the Fund;
(5) Specimen Share certificates for each class of Shares in
the form approved by the Board of Directors of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(6) Copies of the Fund's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(7) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.
12. The Fund shall furnish the Transfer Agent with a sufficient supply
of blank Share certificates and from time to time will renew such supply upon
request of the Transfer Agent. Such blank Share certificates shall be properly
signed, by facsimile or otherwise, by Officers of the Fund authorized by law or
by the by-laws to sign Share certificates, and, if required, shall bear the
corporate seal or facsimile thereof.
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
13. The Fund shall deliver to the Transfer Agent the following
documents on or before the effective date of any increase or decrease in the
total number of Shares authorized to be issued:
(1) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(2) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of capital stock of the Fund and
the status of such Shares under the Securities Act of 1933, as amended, and any
other applicable federal law or regulation (i.e., if subject to registration,
that
<PAGE>
they have been registered and that the Registration Statement has become
effective or, if exempt, the specific grounds therefor); and
(3) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
<PAGE>
14. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of Shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(1) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be; and
(2) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective or, if exempt, the specific
grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
15. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(1) A Certificate authorizing the issuance of Share
certificates in the new form;
(2) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(3) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(4) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor).
16. The Fund shall furnish the Transfer Agent with a sufficient supply
of blank Share certificates in the new form,
<PAGE>
and from time to time will replenish such supply upon the request of the
Transfer Agent. Such blank Share certificates shall be properly signed by
Officers of the Fund authorized by law or by the by-laws to sign Share
certificates and, if required, shall bear the corporate seal or facsimile
thereof. The Fund agrees to indemnify and exonerate, save and hold the Transfer
Agent harmless, from and against any and all claims or demands that may be
asserted against the Transfer Agent with respect to the genuineness of any Share
certificate supplied to the Transfer Agent pursuant to this section.
ARTICLE V
ISSUANCE, REDEMPTION, AND TRANSFER OF SHARES
17. (a) The Transfer Agent shall accept with respect to each Fund
Business Day, at such times as are agreed upon from time to time by the Transfer
Agent and the Fund, each (i) purchase order received from a purchaser, or
shareholder, whether or not an Approved Institution, and (ii) redemption request
either received from a shareholder, whether or not an Approved Institution, or
contained in a Certificate, provided, that (A) such purchase order or redemption
request, as the case may be, is reasonably believed by the Transfer Agent to be
in conformity with the Fund's purchase and redemption procedures described in
the Prospectus, and (B) the Transfer Agent has agreed to accept and act in
accordance with such type of purchase order or redemption request, as the case
may be.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape consistent in all respects with the
Transfer Agent's tape layout package, as amended from time to time, which is
believed by the Transfer Agent to be furnished by or on behalf of any Approved
Institution.
18. On each Fund Business Day a duly authorized officer or employee of
the Transfer Agent shall furnish the following information by telephone call to
an Officer of the Fund or by such other form to such other person as shall be
agreed upon from time to time by the Fund and the Transfer Agent:
(1) The total dollar amount of Shares to be applied to the
purchase of each class on such day, computed by aggregating the amount so
specified in (i) such of the purchase orders described in preceding paragraph l
(a) of this Article with respect to which payment has been, or will be, credited
by the Custodian to the Fund's custody account on such day, and (ii) all
computer tapes described in preceding paragraph l (b) of this Article timely
received by the Transfer
<PAGE>
Agent with respect to such day and with respect to which payment has been, or
will be, credited by the Custodian to the Fund's custody account on such day;
and
(2) The total dollar amount of Shares of each class to be
redeemed on such day, computed by aggregating the amount so specified in (i)
such of the redemption requests described in preceding paragraph l (a) of this
Article with respect to which the amount payable as redemption proceeds has
been, or will be, charged by the Custodian against the Fund's custody account on
such day, and (ii) all computer tapes described in preceding paragraph l (b) of
this Article with respect to which the amount payable as redemption proceeds has
been, or will be, charged by the Custodian against the Fund's custody account on
such day.
19. On each Fund Business Day the Transfer Agent shall, as of the time
at which the Fund computes its net asset value, issue to, and redeem from, the
accounts specified in a purchase order, redemption request, or computer tape
which in accordance with the Prospectus is effective on such Fund Business Day
the appropriate number of full and fractional Shares based on the net asset
value per Share of such class specified in an advice received on such Fund
Business Day from the Fund, provided, however, that no Shares shall be issued
pursuant to any purchase order or computer tape unless the Custodian has
notified the Transfer Agent that the money with respect to such purchase has
been received by the Custodian. Notwithstanding the foregoing, if a redemption
specified in a computer tape is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or part, and shall orally advise
both the Fund and the Approved Institution which supplied such tape of such
discrepancy.
20. The Transfer Agent shall, as of each Fund Business Day specified in
a Certificate or resolution described in paragraph 1 of succeeding Article VI,
issue Shares of a class, based on the net asset value per Share of such class
specified in an advice received from the Fund on such Fund Business Day, in
connection with a reinvestment of a dividend or distribution on Shares of such
class.
21. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of each class (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of each class sold to The Bank of New York, as agent for the
purchasers, on such day, pursuant to preceding paragraph 3 of this Article; the
total number of Shares of each
<PAGE>
class redeemed by The Bank of New York, as agent for the respective redeeming
shareholders, on such day; the total number of Shares of each class, if any,
sold to The Bank of New York, as agent for shareholders, on such day pursuant to
preceding paragraph 4 of this Article, and the total number of Shares of each
class issued and outstanding. On the same day such statement is received by the
Fund, the Fund shall confirm the information contained therein by delivering to
the Transfer Agent a Certificate with respect to the same.
22. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are described in the Prospectus. If
the Prospectus indicates that certificates for Shares are available, and if
specifically requested in writing by any shareholder, or if' otherwise required
hereunder, the Transfer Agent will countersign, issue and mail by not less than
first class insured mail, to such shareholder at the address set forth in the
records of the Transfer Agent, a Share certificate for any full Shares
requested.
23. As of each Fund Business Day the Transfer Agent shall furnish the
Custodian with an advice setting forth the number and dollar amount of Shares to
be redeemed on such Fund Business Day in accordance with paragraph 3 of this
Article.
1.
24. Upon receipt of moneys paid to it by the Custodian in connection
with a redemption of Shares, the Transfer Agent shall cancel the redeemed Shares
and after making appropriate deduction for any withholding of taxes required of
it by applicable law (a) in the case of a redemption of Shares pursuant to a
redemption described in preceding paragraph 1 (a) of this Article, make payment
in accordance with the Fund's redemption and payment procedures described in the
prospectus, and (b) in the case of a redemption of Shares pursuant to a computer
tape described in preceding paragraph 1(b) of the Article, make payment by
directing a federal funds wire order to the account previously designated by the
Approved Institution specified in said computer tape.
25. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
26. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
<PAGE>
27. Shares which are subject to restriction on transfer or redemption
(including, without limitation, Shares required pursuant to a restrictive
investment representation, Shares held by controlling persons, Shares subject to
shareholder's agreements, etc.), other than the general restrictions on the
transferability of the Shares described in the Prospectus, must be issued in
Share certificate form and must be stamped on the face thereof with a legend
describing the extent and conditions of the restriction or referring to the
source of such restriction, and shall be so issued and so legended by the
Transfer Agent only if the Fund so directs in a Certificate. Legended Shares may
not be transferred or redeemed except upon receipt by the Transfer Agent of an
opinion of counsel for the Fund stating that such transfer or redemption is
rightful, in accordance with applicable law, and may be properly effected. The
Transfer Agent shall be entitled to rely upon such opinion and shall be
indemnified by the Fund for any transfer or redemption made in reliance upon any
such opinion.
28. The Transfer Agent shall accept a computer tape consistent with the
Transfer Agent's tape layout package, as amended from time to time, which is
believed by the Transfer Agent to be furnished by or on behalf of any Approved
Institution and is represented to be instructions with respect to the transfer
of Shares from one account of such Approved Institution to another such account,
and shall effect the transfers specified in said computer tape.
29. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 14 of this Article, Shares will be transferred or
redeemed upon presentation to the Transfer Agent of Share certificates or
instructions properly endorsed for transfer or redemption, accompanied by such
documents as the Transfer Agent deems necessary to evidence the authority of the
person making such transfer or redemption, and bearing satisfactory evidence of
the payment of stock transfer taxes. In the case of small estates, where no
administration is contemplated, the Transfer Agent may, when furnished with an
appropriate surety bond, and without further approval of the Fund, transfer or
redeem Shares registered in the name of a decedent where the current market
value of the Shares being transferred does not exceed such amount as may from
time to time be prescribed by various states. The Transfer Agent reserves the
right to refuse to transfer or redeem Shares until it is satisfied that the
endorsement on the stock certificate or instructions is valid and genuine, and
for that purpose it will require, unless otherwise instructed by an authorized
officer of the Fund, a guarantee of signature by a member firm of a National
Securities Exchange or by a bank or trust company acceptable to the Transfer
Agent. The Transfer Agent also reserves the right to refuse to transfer or
redeem Shares until it is satisfied that the requested transfer or redemption
<PAGE>
is legally authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or redemptions which the Transfer Agent, in its
judgment, deems improper or unauthorized, or until it is satisfied that there is
no basis to any claims adverse to such transfer or redemption. The Transfer
Agent may, in effecting transfers and redemptions of Shares, rely upon those
provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended from time
to time, applicable to the transfer of securities, and the Fund shall indemnify
the Transfer Agent for any act done or omitted by it in reliance upon such laws.
(b) Notwithstanding the foregoing or any other provision
contained in this Agreement to the contrary, the Transfer Agent shall be fully
protected by the Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
30. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 12 of this Article
or any redemption of any Shares pursuant to a computer tape described in this
Article, any documents, including, without limitation, any documents of the kind
described In sub-paragraph (a) of paragraph 13 of this Article, to evidence the
authority of the person requesting the transfer or redemption and/or the payment
of any stock transfer taxes, and shall be fully protected in acting in
accordance with the applicable provisions of this Article.
31. (a) As used in this Agreement, the terms "computer tape" and
"computer tape believed by the Transfer Agent to be furnished by an Approved
Institution", shall include any tapes generated by the Transfer Agent to reflect
information believed by the Transfer Agent to have been inputted by an Approved
Institution, via a remote terminal or other similar link, into a data
processing, storage, or collection system, or similar system (the "System"),
located on the Transfer Agent's premises. For purposes of paragraph 1 of this
Article, such a computer tape shall be deemed to have been furnished at such
times as are agreed upon from time to time by the Transfer Agent and Fund only
if the information reflected thereon was inputted into the System at such times
as are agreed upon from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent
<PAGE>
to permit, or to agree to permit, any Approved Institution to input information
into a System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
32. The Fund shall furnish to the Transfer Agent a copy of a resolution
of its Board of Directors, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to a class of Shares the date
of the declaration of a dividend or distribution, the date of accrual or
payment, as the case may be, thereof, the record date as of which Shareholders
entitled to payment, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
33. Upon the payment date specified In such Certificate or resolution,
as the case may be, the Fund shall, in the case of a cash dividend or
distribution, cause the Custodian to pay to the Transfer Agent an amount of
cash, if any, sufficient for the Transfer Agent to make the payment, if any,
specified in such Certificate or resolution, as the case may be, to the
Shareholders of record as of such payment date. The Transfer Agent will, upon
receipt of any such cash, make payment of such cash dividends or distributions
to the Shareholders of record as, of the record date by: (i) mailing a check,
payable to the registered shareholder, to the address of record or dividend
mailing address, or (ii) wiring such amounts to the accounts previously
designated by an Approved Institution, as the case may be. The Transfer Agent
shall not be liable for any improper payments made in accordance with a
Certificate or resolution described in the preceding paragraph. If the Transfer
Agent shall not receive from the Custodian sufficient cash to make payments of
any cash dividend or distribution to all shareholders of the Fund as of the
record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
34. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders.
<PAGE>
35. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends and capital
gain distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required of it by applicable
law.
ARTICLE VII
CONCERNING THE FUND
36. The Fund shall promptly deliver to the Transfer Agent written
notice of any change in the Officers authorized to sign Share Certificates,
Certificates, notifications or requests, together with a specimen signature of
each new Officer. In the event any Officer who shall have signed manually or
whose facsimile signature shall have been affixed to blank Share certificates
shall die, resign or be removed prior to issuance of such Share certificates,
the Transfer Agent may issue such Share certificates of the Fund notwithstanding
such death, resignation or removal, and the Fund shall promptly deliver to the
Transfer Agent such approval, adoption or ratification as may be required by
law.
37. Each copy of the Articles of Incorporation of the Fund and copies
of all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of incorporation, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund
under the corporate seal.
38. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until it is actually received by the
Transfer Agent.
ARTICLE VIII
<PAGE>
CONCERNING THE TRANSFER AGENT
39. The Transfer Agent shall not be liable and shall be fully protected
in acting upon any computer tape, writing or document believed by it to be
genuine and to have been signed or made by the proper person or persons and
shall not be held to have any notice of any change of authority of any person
until receipt of written notice thereof from the Fund or such person. It shall
also be protected in processing Share certificates which it reasonably believes
to bear the proper manual or facsimile signatures of the Officers of the Fund
and the proper countersignature of the Transfer Agent.
1.
40. The Transfer Agent may establish such additional procedures, rules
and regulations governing the transfer or registration of certificates of stock
as it may deem advisable and consistent with such rules and regulations
generally adopted by bank transfer agents.
41. The Transfer Agent shall keep such records as are specified in
Appendix C hereto in the form and manner, and for such period, as it may deem
advisable but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under the federal
Investment Company Act as amended from time to time. The Transfer Agent may
deliver to the Fund from time to time at Its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, Share
certificates which have been cancelled in transfer, exchange or redemption, or
other documents accumulated in the execution of its duties as such Transfer
Agent, as the Transfer Agent may deem expedient, other than those which the
Transfer Agent is itself required to maintain pursuant to applicable laws and
regulations, and the Fund shall assume all responsibility for any failure
thereafter to produce any record, paper, cancelled Share certificate, or other
document so returned, if and when required. The records specified in Appendix C
hereto maintained by the Transfer Agent pursuant to this paragraph 3, which have
not been previously delivered to the Fund pursuant to the foregoing provisions
of this paragraph 3, shall be considered to be the property of the Fund, shall
be made available upon request for inspection by the officers, employees, and
auditors of the Fund, and records shall be delivered to the Fund upon request
and in any event upon the date of termination of this Agreement, as specified in
Article IX of this Agreement, in the form and manner kept by the Transfer Agent
on such date of termination or such earlier date as may be requested by the
Fund.
42. The Transfer Agent may employ agents or attorneys-in-fact at the
expense of the Fund, and shall not be liable for any loss or expense arising out
of, or in connection with,
<PAGE>
the actions or omissions to act of its agents or attorneys-in-fact so long as
the Transfer Agent acts without bad faith, negligence or willful misconduct in
connection with the selection of such agents or attorneys-in-fact.
43. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its own bad faith,
negligence or willful misconduct.
44. The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including attorney's fees) and
liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by the
Transfer Agent without bad faith, negligence or willful misconduct or in
reliance upon (i) any provision of this Agreement; (ii) the Prospectus; (iii)
any instruction or order including, without limitation, any computer tape
believed by the Transfer Agent to have been received from an Approved
Institution; (iv) any instrument, order or Share certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
Officer of the Fund; (v) any Certificate or other instructions of an Officer; or
(vi) any opinion of legal counsel for the Fund or the Transfer Agent. The Fund
shall indemnify and exonerate, save and hold the Transfer Agent harmless from
and against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person by reason of or as a result of any
action taken or omitted to be taken by the Transfer Agent in connection with its
appointment or in reliance upon any law, act, regulation or any interpretation
of the same even though such law, act or regulation may thereafter have been
altered, changed, amended or repealed.
45. Specifically, but not by way of limitation, the Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person in connection with the genuineness of a
Share certificate, the Transfer Agent's capacity and authorization to issue
Shares and the form and amount of authorized Shares.
46. Notwithstanding the foregoing, the Transfer Agent shall
<PAGE>
be liable to the Fund with respect to any redemption check which the Transfer
Agent pays on which the signature of the drawer is forged, but only to the
extent of the lesser of (a) the amount of such redemption check minus $2,500.00
and (b) the amount of insurance proceeds received by the Transfer Agent with
respect to such redemption check, and only if, and for so long as, each of the
following conditions is satisfied: (i) insurance with respect to Fund redemption
checks is maintained by the Transfer Agent, and (ii) the Fund pays to the
Transfer Agent monthly the amount which the Transfer Agent determines to be the
Fund's pro rata share of the cost of such insurance coverage. The Fund agrees
that the insurance may be discontinued or cancelled without any prior notice,
and that the Transfer Agent shall at all times have the absolute right, without
any prior notice to the Fund, to cease to maintain such insurance, and the
Transfer Agent agrees to notify the Fund promptly upon cancelling or
discontinuing any such insurance or upon learning of any such cancellation or
discontinuance. In the event such insurance is not maintained, or in the event
the Fund does not pay monthly to the Transfer Agent the amount which Transfer
Agent determines to be the Fund's pro rata share of the cost of such insurance
coverage, the Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its paying or not paying any redemption
check, unless such loss or damage arises out of the Transfer Agent's bad faith,
negligence or willful misconduct.
47. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may, at the
option of the Transfer Agent, set forth in writing any action proposed to be
taken or omitted by the Transfer Agent with respect to its duties or obligations
under this Agreement and the date on and/or after which such action shall be
taken, and the Transfer Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting any such
action, the Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted. The Transfer Agent may
consult counsel to the Fund, or its own counsel, at the expense of the Fund and
shall be fully protected with respect to anything done or omitted by it in good
faith in accordance with the advice or opinion of counsel to the Fund or its own
counsel.
<PAGE>
48. When mail is used for delivery of non-negotiable Share
certificates, the value of which does not exceed the limits of the Transfer
Agent's Blanket Bond, the Transfer Agent shall send such non-negotiable Share
certificates by first class mail, and such deliveries will be covered while in
transit by the Transfer Agent's Blanket Bond, non-negotiable Share certificates,
the value of which exceed the limits of the Transfer Agent's Blanket Bond, will
be sent by insured registered mail. Negotiable Share certificates will be sent
by insured registered mail. The Transfer Agent shall advise the Fund of any
Share certificates returned as undelivered after being mailed as herein provided
for.
49. The Transfer Agent may issue new Share certificates in place of
Share certificates represented to 'have been lost, stolen, or destroyed upon
receiving instructions in writing from an Officer and indemnity satisfactory to
the Transfer Agent. Such instructions from the Fund shall be in such form as
approved by the Board of Directors of the Fund in accordance with the provisions
of law or of the By-Laws the Fund governing such matters. If the Transfer Agent
receives written notification from the owner of the lost, destroyed, or stolen
Share certificate within a reasonable time after he has notice of it, the
Transfer Agent shall promptly notify the Fund and shall act pursuant to written
instructions signed by an Officer. If the Fund receives such written
notification from the owner of the lost, destroyed or stolen Share certificate
within a reasonable time after he has notice of it, the Fund shall promptly
notify the Transfer Agent and the Transfer Agent shall act pursuant to written
instructions signed by an Officer. The Transfer Agent shall not be liable for
any act done or omitted by it pursuant to the written instructions described
herein. The Transfer Agent may issue new Share certificates in exchange for, and
upon surrender of, mutilated Share certificates.
50. The Transfer Agent will issue and mail subscription warrants for
Shares of capital stock, Shares representing stock dividends, exchanges or
splits, or act as conversion agent upon receiving written instructions from an
Officer and such other documents as the Transfer Agent may deem necessary.
51. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
52. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an Officer as to such inspection. The
Transfer Agent reserves the right, however, to exhibit the Shareholder records
to any person whenever it receives an opinion from its counsel that it may be
held liable for the failure to exhibit the shareholder records to
<PAGE>
such person.
53. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as the Fund may direct.
Notwithstanding any of the foregoing provisions of this Agreement, the Transfer
Agent shall be under no duty or obligation to inquire into, and shall not be
liable for:
(1) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(2) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(3) The legality of the declaration of any dividend by the
Fund, or the legality of the issue of any Shares in payment of any stock
dividend; or
(4) The legality of any recapitalization or readjustment of
the Shares.
54. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix C hereto, (i) its
out-of-pocket expenses (including legal expenses and attorney's fees) and (ii)
such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
55. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than 90 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a copy
of a resolution of the Board of Directors of the Fund, certified by
<PAGE>
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor transfer agent or transfer agents. In the event such
notice is given by the Transfer Agent, the Fund shall, on or before the
termination date, deliver to the Transfer Agent a copy of a resolution of its
Board of Directors certified by the Secretary or any Assistant Secretary
designating a successor transfer agent or transfer agents. In the absence of
such designation by the Fund, the Transfer Agent may designate a successor
transfer agent. If the Fund fails to designate a successor transfer agent and if
the Transfer Agent is unable to find a successor transfer agent, the Fund shall,
upon the date specified in the notice of termination of this Agreement and
delivery of the records maintained hereunder, be deemed to be its own transfer
agent and the Transfer Agent shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS
56. The Fund agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto.
57. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at 84 Williams
Street, New York, New York 10038 or at such other place as the Fund may from
time to time designate in writing.
58. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Transfer Agent shall be sufficiently given
if addressed to the Transfer Agent and mailed or delivered to it at its office
at 90 Washington Street, New York, New York 10015 or at such other place as the
Transfer Agent may from time to time designate in writing.
59. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement, and, except for an amendment to Appendix B or Appendix C hereto,
authorized or approved by a resolution of the Board of Directors of the Fund.
60. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and
<PAGE>
assigns; provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the Transfer Agent.
61. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
62. This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
63. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate officers, thereunto duly
authorized and their respective corporate seals to be hereunto affixed, as of
the day and year first above written.
Attest: EMPIRE TAX FREE MONEY MARKET, INC.
By:
Attest: THE BANK OF NEW YORK
By:
<PAGE>
TRANSFER AGENCY AGREEMENT
APPENDIX C
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT SERVICES
The Bank of New York, Transfer Agent and Dividend Agent shall:
1. DAILY ACTIVITY
Maintain on a daily basis the following shareholder information on
disc:
Name and Address (Zip Code)
Balance of shares held by The Bank of New York
Balance of shares issued in certificate form
Certificate number, number of shares and issuance date of each
certificate outstanding
Certificate number, number of shares, issuance date and cancellation
date for each certificate no longer outstanding
State of residence code
Beneficial owner code, i.e., male, female, joint tenant, etc.
Dividend code (cash, reinvestment, or income in cash--capital gains
reinvested)
Dealer Number, territory and branch code as provided; The dealer name
and address and branch addresses are maintained on disc, on a sub-file
Representative's number and name as provided
2. OTHER DAILY ACTIVITY
Answer all investor telephone and/or written inquiries, except those
concerning Fund policy which will be referred to the Fund.
Examine and process Account Applications received with cash or stock
certificates.
<PAGE>
Process payments into established accounts upon availability of funds.
Issue share certificates upon receipt of instructions.
Deposit share certificates into accounts upon receipt of instructions.
Prepare and process redemptions of shares issued in certificate form;
identify any account that had a cash and/or share transaction within
fifteen (15) days and notify Fund for further instructions concerning
the acceptance of the redemption request.
Prepare and process Book share redemptions; identify any account that
had a cash and/or share transaction within fifteen (15) days and notify
Fund for further instructions concerning the acceptance of the
redemption request.
Examine and process all transfer of shares insuring that all transfer
requirements and legal documents have been supplied.
Issue and mail replacement checks.
Handle foreign collection items, if any.
Handle bad check collection, with notification to the Fund.
Immediately liquidate the shares purchased and return to the
shareholder the check and a confirmation of the transaction.
Solicit missing taxpayer identification numbers via message printed on
the daily confirmation.
Process and confirm address changes to the former address of record,
reflecting the new address.
3. REPORTS PROVIDED TO THE FUND
Furnish the following reports to the Fund:
Daily totals of Transfer Sheets
Daily Journals
Monthly N-1R Report (correspondence and liquidation/
redemptions)
Monthly Trial Balance Totals
Monthly Report of Outstanding Shares with a copy to the
<PAGE>
Fund's Auditors, as requested
Daily analysis of accounts by beneficial owner code
Daily analysis of accounts by share range
Daily analysis of accounts by state
Monthly Blue Sky Report
Annual year-end summary statements on microfilm
4. DIVIDEND ACTIVITY
Calculate and process daily accrual or reinvestment of dividends, mail
dividend statements and one (1) capital gains distribution, in
accordance with investors standing instructions (the capital gains
distribution to be paid simultaneously with the dividend).
Compute, prepare and mail all necessary reports to shareholder,
federal and/or state authorities (forms 1096, 1099, 1042 and 1042S).
5. ANNUAL MEETINGS
Address and mail annual proxy and related material. Tabulate returned
proxies and supply daily reports when sufficient proxies have been
received (material must be adaptable to mechanical equipment of The
Bank of New York).
Prepare and submit to Fund an affidavit of mailing.
Furnish certified list of stockholders, hard copy or microfilm, and
Inspectors of Election.
6. PERIODIC ACTIVITIES
Address and mail up to four (4) periodic financial reports and one (1)
prospectus per year (material must be adaptable to mechanical
equipment of The Bank of New York).
<PAGE>
TRANSFER AGENCY AGREEMENT
APPENDIX A
I, Dean P. Gestal, President, and I, Thomas J. Metallo, Vice President
and Assistant Secretary, of EMPIRE TAX FREE MONEY MARKET INC. , a Maryland
corporation, (the "Fund") , do hereby certify that:
The following individuals have been authorized by the Board of
Directors of the Fund in conformity with the Fund's Articles of Incorporation
and By-Laws to execute any Certificate, instruction, notice or other instrument,
including an amendment to Appendix B hereto, or to give oral instruction on
behalf of the Fund, and the signatures set forth opposite their respective names
and their true and correct signatures.
Name Signature
Dean P. Gestal
Thomas J. Metallo
David Maisel
Bernadette N. Finn
William Berkowitz
Dana E. Messina
<PAGE>
TRANSFER AGENCY AGREEMENT
APPENDIX B
I, Dean P. Gestal, President, and I, Thomas J. Metallo, Vice President
and Secretary of EMPIRE TAX FREE MONEY MARKET INC., Maryland corporation, (the
"Fund"), do hereby certify that:
The following is a list of the class or classes of the capital stock
of the Fund issued and/or authorized by the Fund as of the date of this Transfer
Agency Agreement.
AUTHORIZED:
Twenty billion (20,000,000,000) shares of all Classes, all designated
as Common Stock until such time as the Board of Directors of the Fund shall
designate otherwise in accordance with the Articles of Incorporation of the
Fund.
ISSUED:
One hundred thousand shares of the Fund's Common Stock issued to Empire
Group, Inc.
Thomas J. Metallo, Vice Dean P. Gestal, President
President and Assistant
Secretary
EXHIBIT 10
August 13, 1998
Empire Tax Free Money Market, Inc.
6 East 43rd Street
New York, New York 10017
Gentlemen:
We have acted as counsel to Empire Tax Free Money Market,
Inc., a Maryland corporation (the "Fund"), in connection with the preparation
and filing of Registration Statement No. 2-89264 on Form N-1A and all amendments
thereto (the "Registration Statement") covering shares of Common Stock, par
value $.001 per share, of the Fund.
We have examined copies of the Certificate of Incorporation
and By-Laws of the Fund, the Registration Statement, and such other corporate
records, proceedings and documents, including the consent of the Board of
Directors and the minutes of the meeting of the Board of Directors of the Fund,
as we have deemed necessary for the purpose of this opinion. We have also
examined such other documents, papers, statutes and authorities as we deemed
necessary to form a basis for the opinion hereinafter expressed. In our
examination of such material, we have assumed the genuineness of all signatures
and the conformity to original documents of all copies submitted to us. As to
various questions of fact material to such opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.
Based upon the foregoing, we are of the opinion that the
shares of Common Stock, par value $.001 per share, of the Fund, to be issued in
accordance with the terms of the Offering, as set forth in the Prospectus and
Statement of Additional Information included as part of the Registration
Statement, and in accordance with applicable state securities laws, when so
issued and paid for, will constitute validly authorized and legally issued
shares of Common Stock, fully paid and non-assessable.
<PAGE>
Empire Tax Free Money Market, Inc. August 19, 1998
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us in the Prospectus
included in the Registration Statement under the headings "Federal Income Taxes"
and "Counsel and Auditors."
Very truly yours,
Brian McConaghy
EXHIBIT 11
McGLADREY & PULLEN LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated May 20, 1998, on the
financial statements of New York Daily Tax Free Income Fund, Inc., referred to
therein in Post-Effective Amendment No. 23 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 "Financial Highlights" 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 26, 1998
May 1, 1984
Board of Directors of
Empire Tax Free Money Market, Inc.
6 East 43rd Street
New York, New York 10017
Dear Sir or Madam:
We hereby subscribe for 100,000 shares of the Common Stock,
$.001 par value per share, of Empire Tax Exempt Money Market, Inc., a Maryland
corporation (the "Corporation"), at $1.00 per share for an aggregate purchase
price of $100,000. Our payment in full is confirmed.
We hereby represent and agree that we are purchasing these
shares of stock for investment purposes, for our own account and risk and not
with a view to any sale, division or other distribution thereof within the
meaning of the Securities Act of 1933 as amended, nor with any present intention
of distributing or selling such shares. We further agree that if any of such
shares are redeemed during the period that the deferred organizational expenses
of the Corporation are being amortized, we will reimburse the Corporation the
then unamortized organizational expenses in the same ratio as the number of
shares redeemed bears to the number of such shares held at the time of
redemption.
Very truly yours,
EMPIRE GROUP, INC.
By:
Confirmed and Accepted:
EMPIRE TAX FREE MONEY MARKET, INC.
By:
NEW YORK DAILY TAX FREE INCOME FUND, INC.
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
New York Daily Tax Free Income Fund, Inc. (the "Fund") in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
1. The Fund and Reich & Tang Distributors, Inc. (the
"Distributor"), have entered into a Distribution Agreement, in a form
satisfactory to the Fund's Board of Directors, under which the Distributor will
act as distributor of the Fund's shares. Pursuant to the Distribution Agreement,
the Distributor, as agent of the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders for the purchase
of the Fund's shares will not be binding on the Fund until accepted by the Fund
as principal.
2. The Fund and the Distributor have entered into a
Shareholder Servicing Agreement with respect to the Class A Shares of the Fund,
in a form satisfactory to the Fund's Board of Directors, which provides that the
Distributor will be paid a service fee for providing or for arranging for others
to provide all personal shareholder servicing and related maintenance of
shareholder account functions not performed by us or our transfer agent.
<PAGE>
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Class A Fund Shareholders
("Participating Organizations"), for performing personal shareholder
servicing and related maintenance of shareholder account functions on
behalf of the Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Class A Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, in connection with the distribution of the Fund's
shares.
The Distributor may also make payments from time to time from its own resources,
which may include the service fee and past profits for the purpose enumerated in
(i) above. Further, the Distributor may determine the amount of such payments
made pursuant to the Plan, provided that such payments will not
<PAGE>
increase the amount which the Fund is required to pay to (1) the Manager for any
fiscal year under the Investment Management Contract or the Administrative
Services Agreement in effect for that year or otherwise or (2) to the
Distributor under the Shareholder Servicing Agreement in effect for that year or
otherwise. The Investment Management Contract will also require the Manager to
reimburse the Fund for any amounts by which the Fund's annual operating
expenses, including distribution expenses, exceed in the aggregate in any fiscal
year the limits prescribed by any state in which the Fund's shares are qualified
for sale.
4. The Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Distributor in carrying out its obligations under the Shareholder Servicing
Agreement with respect to the Class A Shares of the Fund and (ii) preparing,
printing and delivering the Fund's prospectus to existing shareholders of the
Fund and preparing and printing subscription application forms for shareholder
accounts.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to compliance by them with the
terms of written agreements in a form satisfactory to the Fund's Board of
Directors to be entered into between the Distributor and the Participating
Organizations.
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly,
<PAGE>
written reports setting forth all amounts expended for servicing and
distribution purposes by the Fund, the Distributor and the Manager, pursuant to
the Plan and identifying the servicing and distribution activities for which
such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Fund (as defined in the Act), and
(ii) a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not interested persons (as defined in the Act) of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement entered into in connection with the Plan, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
8. The Plan will remain in effect until ______________ unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments of
the terms of the Plan will be effective only upon approval as provided in clause
(ii) of paragraph 7 hereof, and (ii) any amendment which increases materially
the amount which may be spent by the Fund pursuant to the Plan will be effective
only upon the additional approval as provided
<PAGE>
in clause (i) of paragraph 7 hereof (with each class of the Fund voting
separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
SHAREHOLDER SERVICING
AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
CLASS A SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
, 1998
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Class A Shares. You will
perform, or arrange for others including organizations whose customers or
clients are shareholders of our corporation (the "Participating Organizations")
to perform, all personal shareholder servicing and related maintenance of
shareholder account functions ("Shareholder Services") not performed by us or
our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses 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 Distributor and Participating Organizations in
rendering such services to the Class A Shareholders, and (ii) preparing,
printing and delivering our prospectus to existing shareholders and preparing
and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fees payable hereunder and past profits to compensate
Participating Organizations for providing Shareholder Services to the Class A
Shareholders of the Fund.
<PAGE>
Payments to Participating Organizations to compensate them for providing
Shareholder Services are subject to compliance by them with the terms of written
agreements satisfactory to our Board of Directors to be entered into between the
Distributor and the Participating Organizations. The Distributor will in its
sole discretion determine the amount of any payments made by the Distributor
pursuant to this Agreement, provided, however, that no such payment will
increase the amount which we are required to pay either to the Distributor under
this Agreement or to the Manager under the Investment Management Contract, the
Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, the Fund will pay you
a service fee, as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of two-tenths of one percent (0.20%) of the Fund's Class A
Share's average daily net assets. Your fee will be accrued by us daily, and will
be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of us
in writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement (which was re-executed on the date hereof)
became effective on ___________ and will remain in effect thereafter for
successive twelve-month periods (computed from each ___________), provided that
such continuation is specifically approved at least annually by vote of our
Board of Directors and of a majority of those of our directors who are not
interested persons (as defined in the Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on this
Agreement. With respect to each Portfolio, this Agreement may be terminated at
any time, without the payment of any penalty, (a) on sixty days' written notice
to you (i) by vote of a majority of our entire Board of Directors, and by a vote
of a majority of our Directors who are not interested persons (as defined in the
Act) and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan, or (ii) by vote of a majority
of
<PAGE>
the outstanding voting securities of the Fund's Class A Shares, as defined in
the Act, or (b) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NEW YORK DAILY TAX FREE INCOME
FUND, INC.
CLASS A SHARES
By:
ACCEPTED: , 1998
REICH & TANG DISTRIBUTORS, INC.
By:
ADMINISTRATIVE SERVICES CONTRACT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
the "Fund"
New York, New York
March 4, 1997
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Amended Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
extent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. a. We hereby employ you as our administrator (the
"Administrator") to provide all management and administrative services
reasonably necessary for our operation, other than those services you provide to
us pursuant to the Investment Management Contract. The services to be provided
by you shall include but not be limited to those enumerated on Exhibit A hereto.
The personnel providing these services may be your employees or employees of
your affiliates or of other organizations. You shall make periodic reports to
the Fund's Board of Directors in the performance of your obligations under this
Agreement and the execution of your duties hereunder is subject to the general
control of the Board of Directors.
b. It is understood that you will from time to time
employ, subcontract with or otherwise associate with yourself, entirely at your
expense, such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder. While this agreement is in effect, you
or persons affiliated with you, other than us ("your affiliates"), will provide
persons satisfactory to our Board of Directors to be elected or appointed
officers or employees of the Fund. These shall be a president, a secretary, a
treasurer, and such additional officers and employees as may reasonably be
necessary for the conduct of our business.
c. You or your affiliates will also provide persons,
who may be our officers, to (i) supervise the performance of bookkeeping and
related services and calculation of net asset value and yield by our bookkeeping
agent and (ii) prepare reports to and the filings with regulatory authorities,
and (iii) perform such clerical, other office and shareholder services for us as
we may from time to time request of you. Such personnel may be your employees or
employees of your affiliates or of other organizations. Notwithstanding the
preceding, you shall not be required to perform any accounting services not
expressly provided for herein.
d. You or your affiliates will also furnish us such
administrative and management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. You or your affiliates will also pay the expenses of promoting the sale
of our shares (other than the costs of preparing, printing and filing our
Registration Statement, printing copies of the prospectus contained therein and
complying with other applicable regulatory requirements), except to the extent
that we are permitted to bear such expenses under a plan adopted pursuant to
Rule 12b-1 under the 1940 Act or a similar rule.
3. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross negligence
in the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
4. In consideration of the foregoing we will pay you a fee
of .21% of the Fund's average daily net assets. Your fee will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as we may agree
in writing. You may use any portion of this fee for distribution of our shares,
or for making servicing payments to organizations whose customers or clients are
our shareholders. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
5. This Agreement will become effective on the date hereof
and shall continue in effect until and thereafter for successive twelve-month
periods (computed from each ), provided that such continuation is specifically
approved at least annually by our Board of Directors and by a majority of those
of our directors who are neither party to this Agreement nor, other than by
their service as directors of the corporation, interested persons, as defined in
the 1940 Act, of any such person who is party to this Agreement. This Agreement
may be terminated at any time, without the payment of any penalty, by vote of a
majority of our outstanding voting securities, as defined in the 1940 Act, or by
a vote of a majority of our entire Board of Directors on sixty days' written
notice to you, or by you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold
or in any manner hypothecated or pledged by you and this Agreement shall
terminate automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and "sale" as
used in this paragraph shall have the meanings ascribed thereto by governing law
and in applicable rules or regulations of the Securities and Exchange
Commission.
7. Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or restrict your
right, or the right of any of your officers, directors or employees who may also
be a director, officer or employee of ours, or of a person affiliated with us,
as defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
8. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the 1940 Act.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NEW YORK DAILY TAX FREE INCOME FUND, INC.
By:
ACCEPTED: March 4, 1997
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., General Partner
By:
<PAGE>
Exhibit A
Administration Services To Be Performed
By Reich & Tang Asset Management L.P.
-------------------------------------
Administration Services
1. In conjunction with Fund counsel, prepare and file all
Post-Effective Amendments to the Registration Statement, all
state and federal tax returns and all other required
regulatory filings.
2. In conjunction with Fund counsel, prepare and file all Blue
Sky filings, reports and renewals.
3. Coordinate, but not pay for, required Fidelity Bond and
Directors and Officers Insurance (if any) and monitor their
compliance with Investment Company Act.
4. Coordinate the preparation and distribution of all materials
for Directors, including the agenda for meetings and all
exhibits thereto, and actual and projected quarterly
summaries.
5. Coordinate the activities of the Fund's Manager, Custodian,
Legal Counsel and Independent Accountants.
6. Prepare and file all periodic reports to shareholders and
proxies and provide support for shareholder meetings.
7. Monitor daily and periodic compliance with respect to all
requirements and restrictions of the Investment Company Act,
the Internal Revenue Code and the Prospectus.
8. Monitor daily the Fund's bookkeeping services agent's
calculation of all income and expense accruals, sales and
redemptions of capital shares outstanding.
9. Evaluate expenses, project future expenses, and process
payments of expenses.
10. Monitor and evaluate performance of accounting and accounting
related services by Fund's bookkeeping services agent. Nothing
herein shall be construed to require you to perform any
accounting services not expressly provided for in this
Agreement.
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Virginia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Robert Straniere
Robert Straniere
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Bernadette N. Finn, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
in any and all capacities, the Registration Statement on Form N-1A, and any and
all amendments thereto (including pre-effective amendments) filed by Virginia
Daily Municipal Income Fund, Inc. (the "Fund") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and under the
Investment Company Act of 1940, as amended, and any and all other instruments
which such attorney and agent deems necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, the rules, regulations and requirements of the Securities
and Exchange Commission, and the securities or Blue Sky laws of any state or
other jurisdiction; and the undersigned hereby ratifies and confirms as his own
act and deed any and all that such attorney and agent shall do or cause to be
done by virtue hereof.
/s/ Steven W. Duff
Steven W. Duff
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Virginia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Dr. W. Giles Mellon
Dr. W. Giles Mellon
<PAGE>
SIGNATURES
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Steven W. Duff and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Virginia Daily Municipal Income
Fund, Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Dr. Yung Wong
Dr. Yung Wong
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Dana E. Messina and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Pennsylvania Daily Municipal
Income Fund (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Dana Messina
Dana Messina
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Dana E. Messina and Bernadette N. Finn, and each of
them, with full power of substitution, as his true and lawful attorney and agent
to execute in his name and on his behalf, in any and all capacities, the
Registration Statement on Form N-1A, and any and all amendments thereto
(including pre-effective amendments) filed by Pennsylvania Daily Municipal
Income Fund (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Bernadette N. Finn
Bernadette N. Finn
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 0000740372
<NAME> New York Daily Tax Free Income Fund, Inc.
<SERIES> 0
<NUMBER> 1
<NAME> Class A
<S> <C>
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<PERIOD-START> MAY-01-1997
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<PERIOD-TYPE> YEAR
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<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 0000740372
<NAME> New York Daily Tax Free Income Fund, Inc.
<SERIES> 0
<NUMBER> 2
<NAME> Class B
<S> <C>
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 376779589
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<RECEIVABLES> 3099569
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<TOTAL-ASSETS> 379879158
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 5422712
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 374465683
<SHARES-COMMON-STOCK> 374467372
<SHARES-COMMON-PRIOR> 323763821
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<EXPENSE-RATIO> .64
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</TABLE>
