As filed with the Securities and Exchange Commission on June 29, 1999
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. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22 [X]
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) 830-5200
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
(212) 856-6858
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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NEW YORK DAILY TAX FREE 600 FIFTH AVENUE
INCOME FUND, INC. NEW YORK, N.Y. 10020
(212) 830-5220
Class A Shares; Class B Shares
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PROSPECTUS
September 1, 1999
A money market fund whose investment objectives are to seek as high a level of
current income exempt from Federal income tax and, to the extent possible, from
New York State and New York City income taxes, as is believed to be consistent
with preservation of capital, maintenance of liquidity and stability of
principal.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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TABLE OF CONTENTS
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2 Risk/Return Summary: Investments, Risks, 7 Management, Organization and
and Performance Capital Structure
8 Shareholder Information
4 Risk/Return Summary: Fee Table 15 Tax Consequences
5 Investment Objectives, Principal Investment 16 Distribution Arrangements Financial
Strategies and Related Risks 18 Highlights
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I. RISK/RETURN SUMMARY: INVESTMENTS,
RISKS AND PERFORMANCE
Investment Objectives
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The Fund seeks as high a level of current income exempt from regular
Federal income tax and, to the extent possible, New York State and New York City
income taxes, as is believed to be consistent with preservation of capital,
maintenance of liquidity, and stability of principal. There can be no assurance
that the Fund will achieve its investment objectives.
Principal Investment Strategies
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The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality, debt obligations of:
(i) New York, and its political subdivisions;
(ii) Puerto Rico and other United States Territories, and their
political subdivisions; and
(iii) other states.
The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's net assets)
in New York Municipal Obligations and Industrial Revenue Bonds, including
Participation Certificates therein. Participation Certificates evidence
ownership of an interest in the underlying Municipal Obligations, purchased from
banks, insurance companies, or other financial institutions.
Principal Risks
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o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can
each decline in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in New York Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Fund's concentration versus the
safety that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the
risks that 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 obligators of state,
municipal and public authority debt obligations to meet their payment
obligations. Risk factors affecting the State of New York are described in
"New York Risk Factors" in the Statement of Additional Information.
Risk/Return Bar Chart and Table
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The following bar chart and table may assist you in your decision to invest
in the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A shares for the last ten calendar years. The table shows the
Fund's average annual total return for the last one, five and ten year periods
for both Classes. The table also includes the Fund's average annual total return
since inception for each Class. While analyzing this information, please note
that the Fund's past performance is not an indicator of how the Fund will
perform in the future. The current 7-day yield for each Class may be obtained by
calling the Fund toll-free at 1-800- 221-3079.
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New York Daily Tax Free Income Fund, Inc. - Class A (1)(2)(3)
[GRAPHIC OMITTED]
Calendar Year % Total Return
============= ==============
1998 2.66%
1997 2.92%
1996 2.80%
1995 3.21%
1994 2.28%
1993 1.88%
1992 2.60%
1991 4.25%
1990 5.14%
1989 5.57%
(1) The Fund's year-to-date return as of June 30, 1999 was _________%.
(2) The Fund's highest quarterly return was 1.45% for the quarter ending
June 30, 1998; the lowest quarterly return was .43% for the quarter ending
March 31, 1994.
(3) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may
be less than the net return by investing in the Fund directly.
Average Annual Total Returns - For the periods ended December 30, 1998
Class A Class B
One Year 2.66% 2.88%
Five Years 2.78% N/A
Ten Years 3.32% N/A
Average Annual Total Return
Since Inception* 3.69% 3.02%
* Inception is 6/12/84 for Class A shares and 10/10/96 for Class B shares.
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Class A Shares Class B Shares
Management Fees................................ 0.30% 0.30%
Distribution and Service (12b-1) Fees.......... 0.20% 0.00%
Other Expenses................................. 0.35% 0.34%
Administration Fees.......................... 0.21% 0.21%
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Total Annual Fund Operating Expenses........... 0.85% 0.64%
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Class A: $87 $271 $471 $1,049
Class B: $65 $205 $357 $ 798
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
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The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from regular
Federal income tax and, to the extent possible, from New York State and New York
City income taxes, consistent with preserving capital, maintaining liquidity and
stabilizing principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund.
Principal Investment Strategies
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Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high
quality, debt obligations which include:
(i) New York Municipal Obligations issued by or on behalf of the State of
New York or any New York local governments, or their instrumentalities,
authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities,
agencies and political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These "Participation Certificates" are purchased by the Fund from
banks, insurance companies or other financial institutions and in the opinion of
Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated as the
owner of an interest in the underlying Municipal Obligations for Federal income
tax purposes.
The Fund will invest more than 25% of its assets in Participation
Certificates purchased from banks in New York Municipal Obligations, including
industrial revenue bonds.
Although the Fund will attempt to invest 100% of its total assets in
Municipal Obligations and Participation Certificates, the Fund reserves the
right to invest up to 20% of its total assets in taxable securities, the
interest income on which is subject to Federal, state and local income tax.
Included in the same 20% of total assets in taxable securities, the Fund may
also purchase securities and Participation Certificates whose interest income
may be subject to the Federal alternative minimum tax. The kinds of taxable
securities in which the Fund may invest are limited to short-term, fixed income
securities as more fully described in "Taxable Securities" in the Statement of
Additional Information.
To the extent suitable New York Municipal Obligations and Territorial
Municipal Obligations are not available for investment by the Fund, the Fund may
purchase Municipal Obligations issued by other states, their agencies and
instrumentalities. The dividends these investors will be designated by the Fund
as derived from interest income that will be, in the opinion of bond counsel to
the issuer at the date of issuance, exempt from regular Federal income tax, but
will be subject to New York income tax.
The Fund will invest at least 65% of its total assets in New York
Municipal Obligations, although the exact amount may vary from time to time. As
a temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment adviser. Such a temporary defensive position
may cause
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the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer. The Fund shall not invest more than 5%
of its total assets in Municipal Securities or Participation Certificates issued
by a single issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more
than 10% of its total assets in Municipal Obligations or Participation
Certificates backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations
and stand-by commitments.
The Fund's investment manager considers the following factors when buying
and selling securities for the portfolio: (i) availability of cash, (ii)
redemption requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities that are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities that have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities but that have been determined by the Fund's Board of Directors to be
of comparable quality.
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 the security's credit risks and shall take such action as it 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.
For a more detailed description of (i) the securities that the Fund will
invest in, (ii) fundamental investment restrictions, and (iii) industry
regulations governing credit quality and maturity, please refer to the Statement
of Additional Information.
Risks
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The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments, which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Municipal Obligations. The Fund
may still be exposed to the credit risk of the institution providing the
investment. Changes in the credit quality of the provider could affect the value
of the security and your investment in the Fund.
Because of the Fund's concentration in investments in New York Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of New York and its political subdivisions.
The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident
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individual investors. Payment of interest and preservation of principal,
however, are 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. 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.
Because the Fund may concentrate in Participation Certificates, 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. These
characteristics and risks 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). These factors may limit both the amounts
and types of loans and other financial commitments that may be made and interest
rates and fees 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.
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 investment adviser is in the process of working with the
Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment adviser does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment adviser
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. The Year 2000 problem may also adversely affect
issuers of the securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse affect on the Fund's
performance. The investment adviser is unable to predict what affect, if any,
the Year 2000 problem will have on such issuers. At this time, it is generally
believed that municipal issuers may be more vulnerable to Year 2000 issues or
problems than will other issuers.
III. MANAGEMENT, ORGANIZATION AND
CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
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 Fund
pays the Manager 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.
Pursuant to the Administrative Services Contract, the Manager performs
clerical,
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accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of
the investment management fee and the administrative services fee. Any portion
of the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Class A shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to both Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
(discussed herein) and from investors directly.
Pricing of Fund Shares
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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 days on which the New York Stock
Exchange is closed for trading. 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 intends to maintain a stable net
asset value at $1.00 per share, although there can be no assurance that this
will be achieved.
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. 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.
Shares are issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's purchase
order. 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 the immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Fund shares begin accruing income on the day the shares are issued to an
investor. The Fund reserves the right to reject any purchase order for its
shares. Certificates for Fund shares will not be issued to an investor.
Purchase of Fund Shares
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The Fund does not accept a purchase order until an investor's payment has
been converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the
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issuance of shares on the following Fund Business Day.
Investors purchasing shares through a Participating Organization with which
they have an account become Class A shareholders. All other investors, and
investors who have accounts with Participating Organizations but do not wish to
invest in the Fund through them, may invest in the Fund directly as Class B
shareholders of the Fund. Class B shareholders do 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, as fiduciaries, may not be legally permitted to receive
compensation from the Distributor or the Manager.
The minimum initial investment in the Fund for both classes of shares is
(i) $1,000 for purchases through Participating Organizations - this may be
satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of their customers whose initial investments are less
than $1,000, (ii) $1,000 for securities brokers, financial institutions and
other industry professionals that are not Participating Organizations, and (iii)
$5,000 for all other investors. 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.
Each shareholder, except those purchasing through Participating
Organizations, will receive a personalized monthly statement from the Fund
listing (i) the total number of Fund shares owned from the Fund as of the
statement closing date, (ii) purchase and redemptions of Fund shares, and (iii)
the dividends paid on Fund shares (including dividends paid in cash or
reinvested in additional Fund shares).
Investments Through Participating Organizations - Purchase of Class A Shares
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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 that have entered into shareholder servicing
agreements with the Distributor 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 provide their customers who are
shareholders in the Fund ("Participant Investors") a confirmation of each
purchase and redemption of Fund shares for the customers' accounts. Also,
Participating Organizations may send periodic account statements to the
Participant Investors showing (i) the total number of Fund shares owned by each
customer as of the statement closing date, (ii) purchases and redemptions of
Fund shares by each customer during the period covered by the statement, and
(iii) 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 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. 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
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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.
In the case of qualified Participating Organizations, orders received by
the Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance 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 Direct Purchases of Class B Shares
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Investors who wish to invest in the Fund directly 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 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
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
will 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 order 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) or at 800-221-3079
(outside New York) and then instruct a member commercial bank to wire money
immediately to:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-953-8
For New York Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)
Account #
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank so the wire
transfer can be accomplished before 12 noon, New York City time, on the same
day. There may be a charge by the 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:
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Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Electronic Funds Transfers (EFT), Pre-authorized Credit and Direct Deposit
Privilege
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You may purchase shares of the Fund (minimum of $100) by having salary,
dividend payments, interest payments or any other payments designated by you,
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. You may elect at
any time to terminate your participation by notifying in writing the appropriate
depositing entity and/or Federal agency. Death or legal incapacity will
automatically terminate your participation in the Privilege. Further, the Fund
may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
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Subsequent purchases can be made by bank wire, as indicated above, or by
mailing a check to:
New York Daily Tax Free Income Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments
should clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the
Fund is still applicable, a shareholder may reopen an account without filing a
new subscription order form at any time during the year the shareholder's
account is closed or during the following calendar year.
Redemption of Shares
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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 upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation that it may require). Normally, payment for redeemed
shares is made on the same Fund Business Day after the redemption is effected,
provided the redemption request is received prior to 12 noon, New York City
time. However, redemption payments will not be paid out unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which can take up to 15 days after
investment. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be 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:
11
<PAGE>
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 that may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of $250 or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's transfer agent to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. The use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares purchased by check may not be redeemed by check until the check has
cleared, which can take up to 15 days following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The
Fund reserves the right to impose a charge or impose a different minimum check
amount in the future, if the Board of Directors determines that doing so is in
the best interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank 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, and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.
Corporations and other entities electing the checking option are required
to furnish a certified resolution or other evidence of authorization in
accordance with the Fund's normal practices. Individuals and joint tenants are
not required to furnish any supporting documentation. 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.
Telephone
The Fund accepts telephone requests for redemption from shareholders who
elect this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or, if in excess
of $1,000, to their bank accounts, both as set forth in the subscription order
form or in a subsequent written authorization. The Fund may accept telephone
redemption instructions from any person with respect to accounts of shareholders
who elect this service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. The Fund will employ reasonable procedures to confirm that telephone
redemption
12
<PAGE>
instructions are genuine, and will require that shareholders electing such
option provide a form of personal identification. Failure by the Fund to employ
such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone redemptions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220 (outside New York 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. Proceeds are sent 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.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the 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 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. Additional exceptions
include 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 to fairly 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.
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. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount.
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 or quarterly
basis. The monthly or quarterly withdrawal payments of the specified amount are
made by the Fund on the 23rd day of the month. Whenever such 23rd day of a month
is not a Fund Business Day, the payment date is the Fund Business Day preceding
the 23rd day of the month. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value on the Fund Business Day immediately
13
<PAGE>
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
sending a signature guaranteed written request to the transfer agent. Because
the withdrawal plan involves the redemption of Fund shares, such withdrawals may
constitute taxable events to the shareholder but the Fund does not expect that
there will be any realized capital gains.
Dividends and Distributions
- --------------------------------------------------------------------------------
The Fund declares dividends equal to all its net investment income
(excluding long-term 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, at no charge, 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.
Because Class A shares bear the service fee under the Fund's 12b-1 Plan,
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.
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 that retain Reich & Tang Asset Management L.P. as
investment adviser and that 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 its 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., Cortland Trust, 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., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily
Municipal 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 or manager.
There is no charge for the exchange privilege or limitation as to frequency
of exchange. The minimum amount for an exchange is $1,000. However, shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Each Class of shares is exchanged at its
respective net asset value.
14
<PAGE>
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. An exchange will be a
taxable event.
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 (within New York) or 800-221-3079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
Tax Consequences
- --------------------------------------------------------------------------------
Dividends paid by the Fund, which are exempt-interest dividends by virtue
of being properly designated by the Fund as derived from Municipal Obligations
and Participation Certificates, will be exempt from regular Federal income tax
provided the Fund complies with Section 852(b)(5) of the Internal Revenue Code
of 1986. Exempt-interest dividends paid by the Fund correctly identified by the
Fund as derived from obligations issued by or on behalf of the State of New York
or any New York local governments, or their instrumentalities, authorities or
districts ("New York Municipal Obligations") will be exempt from the New York
income tax. Exempt-interest dividends correctly identified by the Fund as
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that New York is prohibited from taxing under the
Constitution, the laws of the United States of America or the laws of New York
("Territorial Municipal Obligations") also should be exempt from the New York
income tax provided the Fund complies with New York law.
Federal Income Taxes
The Fund has elected and intends to qualify under the Code as a regulated
investment company that distributes exempt-interest dividends. 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,
distributions derived from interest earned on Municipal Obligations and
designated as exempt-interest dividends by the Fund not later than 60 days after
the close of the Funds' taxable year 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. Dividends paid from taxable income, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income whether
received in cash or reinvested in additional shares of the Fund. Although it is
not intended, it is possible that the Fund may realize short-term or long-term
capital gains or losses. 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. 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.
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 and Railroad Retirement benefits includable
in gross income. Further, corporations will be required to include in
alternative minimum taxable income 75% of the amount by which their
15
<PAGE>
adjusted current earnings (including generally, tax-exempt interest) exceeds
their 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 will be subject to a tax on passive
investment income, including tax-exempt interest.
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.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from Federal income taxes to the Fund to the
same extent as interest on the underlying Municipal Obligations. Counsel has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel. (See "Federal Income Taxes" in the
Statement of Additional Information.)
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax the interest on 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.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Class A shareholders. The Fund pays these fees from
its assets on an ongoing basis and therefore, over time, the payment of these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Fund pays the Distributor a
service fee of .20% per annum of the Class A shares average daily net assets
(the "Shareholder Service Fee"). The fee is accrued daily and paid monthly.
Pursuant to this Agreement, the Distributor provides personnel shareholder
services and maintains shareholder accounts. 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
16
<PAGE>
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that, in addition
to the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Class A
shares and (ii) preparing, printing and delivering the Fund's prospectus to
existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts. These payments are limited to a
maximum of .05% per annum of each Class' shares' average daily net assets.
The Plan and the Shareholder Servicing Agreement provide 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
costs, and to compensate others, including Participating Organizations with whom
the Distributor has entered into written agreements, for performing shareholder
servicing on behalf of the Class A shares of the Fund, (ii) to compensate
certain Participating Organizations for providing assistance in distributing the
Class A shares of the Fund, and (iii) to pay the costs of printing and
distributing the Fund's prospectus to prospective investors, 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 Shareholding Servicing Fee (with respect to Class A
shares) and past profits, for the purposes enumerated in (i) above. The
Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
17
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years (or since inception for the Class B
shares). Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by McGladrey and Pullen, LLP,
whose report, along with the Fund's financial statements, is included in the
annual report, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended April 30,
- ------------------------------------------------------------------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- --------- ---------
Income from investment operations:
Net Investment income.................... 0.025 0.029 0.028 0.030 0.027
Less distributions:
Dividends from net investment income..... ( 0.025%) ( 0.029 ) (0.028 ) ( 0.030 ) ( 0.027)
-------- ------------ --------- ----------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ========= =========
Total Return................................ 2.48% 2.90% 2.80% 3.08% 2.74%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 473,965 $ 370,044 $323,746 $ 283,368 $ 254,422
Ratios to average net assets:
Expenses................................. 0.85% 0.85% 0.82% 0.84% 0.87%
Net Investment income.................... 2.43% 2.85% 2.76% 3.02% 2.71%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended October 10, 1996
CLASS B April 30 (Commencement of Sales) to
1999 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 $1.00
------- ------- ----------
Income from investment operations:
Net investment income.................. 0.027 0.031 0.017
Less distributions:
Dividends from net investment income... ( 0.027) ( 0.031) ( 0.017)
-------- --------- --------
Net asset value, end of period............ $ 1.00 $ 1.00 $1.00
========= ========== ================
Total Return.............................. 2.70% 3.12% 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... $7,377 $ 4,412 $ 7
Ratios to average net assets:
Expenses................................. 0.64% 0.64% 0.62%
Net investment income.................... 2.68% 2.94% 2.99%*
Expenses paid indirectly................. 0.00% 0.00% 0.00%
</TABLE>
+ Includes expenses paid indirectly.
* Annualized
18
<PAGE>
NEW YORK
DAILY TAX
FREE
INCOME
FUND, INC.
PROSPECTUS
September 1, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
A Statement of Additional Information (SAI) dated September 1, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI, the Annual and Semi-Annual Reports and material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
================================================================================
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C.20549-6009.
811-3955
NY999P
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS September 1, 1999
- --------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Evergreen Class of Shares - distributed through Evergreen Distributor, Inc.
- --------------------------------------------------------------------------------
A money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and to the extent
possible, from New York State and New York City income taxes, as is believed to
be consistent with preservation of capital, maintenance of liquidity and
stability of principal.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary: Investments, Management, Organization and
Risks and Performance 3 Capital Structure 8
Risk return summary: Fee Table 5 Shareholder Information 8
Investment Objectives, Principal Tax Consequences 12
Investment Strategies and Distribution Arrangements 14
Related Risks 6 Financial Highlights 16
2
<PAGE>
- --------------------------------------------------------------------------------
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
- --------------------------------------------------------------------------------
Investment Objectives
The Fund seeks as high a level of current income, exempt from regular Federal
income tax and to the extent possible, from New York State and New York City
income taxes, as is believed to be consistent with preservation of capital,
maintenance of liquidity, and stability of principal. There can be no assurance
that the Fund will achieve its investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality, debt obligations of:
(i) New York, and its political subdivisions,
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) other states.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total net
assets) in New York Municipal Obligations, including Participation Certificates
therein. Participation Certificates evidence ownership of an interest in the
underlying Municipal Obligations and are purchased from banks, insurance
companies or other financial institutions.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can
each decline in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in New York Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Fund's concentration versus the
safety that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the
risks that 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 obligators of state,
municipal and public authority debt obligations to meet their payment
obligations. Risk factors affecting the State of New York are described in
"New York Risk Factors" in the Statement of Additional Information.
Risk/Return Bar Chart And Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A shares over the last 10 calendar years. The table shows the
average annual total returns of the Fund's Class A shares for the last one, five
and ten year periods. The table also includes the Class A shares average annual
total return since inception. While analyzing this information, please note that
the Fund's past performance is not an indicator of how the Fund will perform in
the future. The current 7-day yield for the Class A shares may be obtained by
calling the Fund toll-free at 1-800-221-3079.
3
<PAGE>
New York Daily Tax Free Income Fund, Inc. - Class A (1)(2)(3)(4)
[GRAPHIC OMITTED]
Calendar Year % Total Return
============= ==============
1998 2.66%
1997 2.92%
1996 2.80%
1995 3.21%
1994 2.28%
1993 1.88%
1992 2.60%
1991 4.25%
1990 5.14%
1989 5.57%
(1) The Chart shows returns for Class A shares of the Fund (which are not
offered by this prospectus). As of December 31, 1998, there were no
Evergreen shares issued by the Fund. All classes of the Fund will have
substantially similar annual returns because the shares are invested in the
same portfolio of securities and the annual returns differ only to the
extent that the classes do not have the same expenses. If the expenses of
the Evergreen shares are higher than the Class A shares, then your annual
return may be lower.
(2) The Fund's year-to-date return as of June 30, 1999 was _________%.
(3) The Fund's highest quarterly return was 1.45% for the quarter ending
June 30, 1998; the lowest quarterly return was .43% for the quarter ending
March 31, 1994.
(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may
be less than the net return by investing in the Fund directly.
Average Annual Total Returns - For the periods ended December 30, 1998
Class A
One Year 2.66%
Five Years 2.78%
Ten Years 3.32%
Average Annual Total Return
Since Inception* 3.69%
* Inception is 6/12/84 for Class A shares and 10/10/96 for Class B shares.
4
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FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Evergreen shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Evergreen Shares
Management Fees................................ .30%
Distribution and Service (12b-1) Fees.......... .20%
Other Expenses *............................... .35%
Administration Fees.......................... .21%
-----
Total Annual Fund Operating Expenses........... .85%
* Estimated because there were no Evergreen shares issued during the year ended
December 31, 1998.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Evergreen Shares: $87 $271 $471 $1,049
5
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- --------------------------------------------------------------------------------
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
- --------------------------------------------------------------------------------
Investment Objectives
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income, exempt from regular
Federal income tax and to the extent possible, from New York State and New York
City income taxes, consistent with preserving capital, maintaining liquidity and
stabilizing principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund.
Principal Investment Strategies
Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) New York Municipal Obligations issued by or on behalf of the State of
New York or any New York local governments, or their instrumentalities,
authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities,
agencies and political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These "Participation Certificates" are purchased by the Fund from
banks, insurance companies or other financial institutions and in the opinion of
Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated as the
owner of an interest in the underlying Municipal Obligations for Federal income
tax purposes.
The Fund will invest more than 25% of its assets in Participation Certificates
purchased from banks in New York Municipal Obligations, including industrial
revenue bonds.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities, the interest income
on which is subject to Federal, state and local income tax. Included in the same
20% of total assets in taxable securities, the Fund may also purchase securities
and Participation Certificates whose interest income may be subject to the
Federal alternative minimum tax. The kinds of taxable securities in which the
Fund may invest are limited to short-term, fixed income securities as more fully
described in "Taxable Securities" in the Statement of Additional Information.
To the extent suitable New York Municipal Obligations and Territorial Municipal
Obligations are not available for investment by the Fund, the Fund may purchase
Municipal Obligations issued by other states, their agencies and
instrumentalities. The dividends these investors will be designated by the Fund
as derived from interest income that will be, in the opinion of bond counsel to
the issuer at the date of issuance, exempt from regular Federal income tax, but
will be subject to New York income tax.
The Fund will invest at least 65% of its total assets in New York Municipal
Obligations, although the exact amount may vary from time to time. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment adviser. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
6
<PAGE>
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities that are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities that have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
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
the security's credit risks and shall take such action as it 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.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments, which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Municipal Obligations. The Fund
may still be exposed to the credit risk of the institution providing the
investment. Changes in the credit quality of the provider could affect the value
of the security and your investment in the Fund.
Because of the Fund's concentration in investments in New York Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of New York and its political subdivisions.
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, are
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. 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.
Because the Fund may concentrate in Participation Certificates, 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. These
characteristics and risks 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). These factors may limit both the amounts
and types of loans and other financial commitments that may be made and interest
rates and fees 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.
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 investment adviser is in the process of working with the
Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment adviser does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment adviser
does not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at
7
<PAGE>
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. The
Year 2000 problem may also adversely affect issuers of the securities contained
in the Fund, to varying degrees based upon various factors, and thus may have a
corresponding adverse affect on the Fund's performance. The investment adviser
is unable to predict what affect, if any, the Year 2000 problem will have on
such issuers. At this time, it is generally believed that municipal issuers may
be more vulnerable to Year 2000 issues or problems than will other issuers.
- --------------------------------------------------------------------------------
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
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 Fund pays the
Manager 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.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of the
investment management fee and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Evergreen 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 all Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
- --------------------------------------------------------------------------------
IV. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
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 Evergreen Distributors, Inc. ("EDI"). Shares of the Fund, other
than Evergreen shares, are offered pursuant to a separate prospectus. Evergreen
shares are identical to other shares of the Fund, with respect to investment
objectives and yield, but differ with respect to certain other matters,
including shareholder services and purchase and redemption of shares.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
Pricing of Fund Shares
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 days on which the New York Stock
Exchange is closed for trading (i.e national holidays). 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 intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
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. 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
8
<PAGE>
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.
Shares are issued as of the first determination of the Fund's net asset value
per share for each Class made after acceptance of the investor's purchase order.
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 the 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. Fund shares begin accruing income on the day the shares are
issued to an investor. The Fund reserves the right to reject any purchase order
for its shares. Certificates for Fund shares will not be issued to an investor.
How to Buy Shares
Only Evergreen shares are offered through this Prospectus. You can purchase
shares of the Fund through broker-dealers, banks or other financial
intermediaries, or directly through Evergreen Distributors, Inc. ("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.
Instructions on how to purchase shares of the Fund are set forth in the Share
Purchase Application.
The Fund does not accept a purchase order until an investor's payment has been
converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Application 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.
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 Evergreen Service Company which is the
registrar, transfer agent and dividend disbursing agent for the Fund. Stock
power forms are available from your financial intermediary, Evergreen Service
Company, 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 Evergreen Service
Company.
Shareholders may withdraw amounts of $1,000 or more from their accounts by
calling Evergreen Service Company 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 Evergreen Service Company by telephone should follow the
procedures outlined above for redemption by mail.
9
<PAGE>
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. Evergreen Service Company 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 Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121 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
Evergreen Service Company. 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
Evergreen Service Company. Shareholders will be subject to the Evergreen Service
Company 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 Evergreen Service Company.) When such
a check is presented to Evergreen Service Company for payment, Evergreen Service
Company, 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 Evergreen Service Company if
there are insufficient or uncollectable shares to meet the withdrawal amount.
The check writing procedure 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 Evergreen Service Company 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 Evergreen Service Company, P.O. Box 2121,
Boston, Massachusetts 02106-2121. Shareholders requesting this service after an
account has been opened must contact Evergreen Service Company 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.
Shareholder Services
The Fund provides Evergreen shareholders with the following shareholder
services. For more information about these services or your account, contact EDI
or the toll-free number on the back 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 designate 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
10
<PAGE>
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 realized 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.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. 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 Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon,
Eastern time, on any Fund Business Day becomes effective on the next 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.
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, at
no charge, 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.
Because Evergreen shares bear a service fee under the Fund's 12b-1 Plan, the net
income of and the dividends payable to the Evergreen 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.
11
<PAGE>
Tax Consequences
Dividends paid by the Fund, which are exempt-interest dividends by virtue of
being properly designated by the Fund as derived from Municipal Obligations and
Participation Certificates, will be exempt from regular Federal income tax
provided the Fund complies with Section 852(b)(5) of the Internal Revenue Code
of 1986. Exempt-interest dividends paid by the Fund correctly identified by the
Fund as derived from obligations issued by or on behalf of the State of New York
or any New York local governments, or their instrumentalities, authorities or
districts ("New York Municipal Obligations") will be exempt from the New York
income tax. Exempt-interest dividends correctly identified by the Fund as
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that New York is prohibited from taxing under the
Constitution, the laws of the United States of America or the laws of New York
("Territorial Municipal Obligations") also should be exempt from the New York
income tax provided the Fund complies with New York law.
Federal Income Taxes
The Fund has elected and intends to qualify under the Code as a regulated
investment company that distributes exempt-interest dividends. 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,
distributions derived from interest earned on Municipal Obligations and
designated as exempt-interest dividends by the Fund not later than 60 days after
the close of the Funds' taxable year 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. Dividends paid from taxable income, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income whether
received in cash or reinvested in additional shares of the Fund. Although it is
not intended, it is possible that the Fund may realize short-term or long-term
capital gains or losses. 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. 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.
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 and Railroad Retirement benefits includable
in gross income. Further, corporations will be required to include in
alternative minimum taxable income 75% of the amount by which their adjusted
current earnings (including generally, tax-exempt interest) exceeds their
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 will be subject to a tax on passive investment income,
including tax-exempt interest.
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.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from Federal income taxes to the Fund to the
same extent as interest on the underlying Municipal Obligations. Counsel has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel. (See "Federal Income Taxes" in the
Statement of Additional Information.)
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax the interest on 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.
12
<PAGE>
- --------------------------------------------------------------------------------
V. DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Rule 12b-1 Fees
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to Evergreen shareholders. The Fund pays these fees from its assets on
an ongoing basis and therefore, over time, the payment of these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Evergreen
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Fund pays the Distributor a
service fee equal to .20% per annum of the Evergreen shares' average daily net
assets ("the Shareholder Servicing Fee"). The fee is accrued daily and paid
monthly. Pursuant to this Agreement, the Distributor provides personnel
shareholder services and maintains shareholder accounts. 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 Evergreen shares of the Fund. The Class
B shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Evergreen
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. These payments are limited to a
maximum of 0.05% per annum of each Class' shares' average daily net assets.
The Plan and the Shareholder Servicing Agreement provide 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 costs,
and to compensate others, including Participating Organizations with whom the
Distributor has entered into written agreements, for performing shareholder
servicing on behalf of the Evergreen shares of the Fund; (ii) to compensate
certain Participating Organizations for providing assistance in distributing the
Evergreen 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 Evergreen shares.
The Distributor may also make payments from time to time from its own resources,
which may include the Shareholding Servicing Fee (with respect to the Evergreen
shares) and past profits, for the purposes enumerated in (i) above. The
Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
13
<PAGE>
- --------------------------------------------------------------------------------
VI. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
in the Class A shares since there were no Evergreen shares issued during the
fiscal year ended April 30, 1999. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by McGladrey and Pullen, LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended April 30,
- ------------------------------------------------------------------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- --------- ---------
Income from investment operations:
Net Investment income.................... 0.025 0.029 0.028 0.030 0.027
Less distributions:
Dividends from net investment income..... ( 0.025 ) ( 0.029 ) (0.028 ) ( 0.030 ) ( 0.027)
-------- ------------ --------- ----------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ========= =========
Total Return................................ 2.48% 2.90% 2.80% 3.08% 2.74%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 473,965 $ 370,044 $323,746 $ 283,368 $ 254,422
Ratios to average net assets:
Expenses................................. 0.85%+ 0.85%+ 0.82%+ 0.84%+ 0.87%
Net Investment income.................... 2.43% 2.85% 2.76% 3.02% 2.71%
</TABLE>
+ Includes expense paid indirectly.
* Annualized
14
<PAGE>
A Statement of Additional Information (SAI) dated September 1, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI, the Annual and Semi-Annual Reports and material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
811-3955
537624 (REV02)
9/99
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS September 1, 1999
- --------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE INCOME FUND, INC.
Victory Class of Shares - distributed through Key Trust
- --------------------------------------------------------------------------------
A money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and to the extent
possible, from New York State and New York City income taxes, as is believed to
be consistent with preservation of capital, maintenance of liquidity and
stability of principal.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary: Investments, Management, Organization and
Risks, and Performance 3 Capital Structure 8
Risk/Return Summary: Fee Table 5 Shareholder Information 8
Investment Objectives, Principal Tax Consequences 13
Investment Strategies, and Distribution Arrangement 14
Related Risks 6 Financial Highlights 16
2
<PAGE>
- --------------------------------------------------------------------------------
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
- --------------------------------------------------------------------------------
Investment Objectives
The Fund seeks as high a level of current income, exempt from regular Federal
income tax and to the extent possible, from New York State and New York City
income taxes, as is believed to be consistent with preservation of capital,
maintenance of liquidity, and stability of principal. There can be no assurance
that the Fund will achieve its investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing principally
in short-term, high quality, debt obligations of:
(i) New York, and its political subdivisions,
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) other states.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total net
assets) in New York Municipal Obligations, including Participation Certificates
therein. Participation Certificates evidence ownership of an interest in the
underlying Municipal Obligations and are purchased from banks, insurance
companies or other financial institutions.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can
each decline in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in New York Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Fund's concentration versus the
safety that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the
risks that 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 obligators of state,
municipal and public authority debt obligations to meet their payment
obligations. Risk factors affecting the State of New York are described in
"New York Risk Factors" in the Statement of Additional Information.
Risk/Return Bar Chart And Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A shares over the last 10 calendar years. The table shows the
average annual total returns of the Fund's Class A shares for the last one, five
and ten year periods. The table also includes the Class A shares average annual
total return since inception. While analyzing this information, please note that
the Fund's past performance is not an indicator of how the Fund will perform in
the future. The current 7-day yield for the Class A shares may be obtained by
calling the Fund toll-free at 1-800-221-3079.
3
<PAGE>
New York Daily Tax Free Income Fund, Inc. - Class A (1)(2)(3)(4)
[GRAPHIC OMITTED]
Calendar Year % Total Return
============= ==============
1998 2.66%
1997 2.92%
1996 2.80%
1995 3.21%
1994 2.28%
1993 1.88%
1992 2.60%
1991 4.25%
1990 5.14%
1989 5.57%
(1) The Chart shows returns for Class A shares of the Fund (which are not
offered by this prospectus). As of December 31, 1998, there were no
Evergreen shares issued by the Fund. All classes of the Fund will have
substantially similar annual returns because the shares are invested in the
same portfolio of securities and the annual returns differ only to the
extent that the classes do not have the same expenses. If the expenses of
the Evergreen shares are higher than the Class A shares, then your annual
return may be lower.
(2) The Fund's year-to-date return as of June 30, 1999 was _________%.
(3) The Fund's highest quarterly return was 1.45% for the quarter ending
June 30, 1998; the lowest quarterly return was .43% for the quarter ending
March 31, 1994.
(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may
be less than the net return by investing in the Fund directly.
Average Annual Total Returns - For the periods ended December 30, 1998
Class A
One Year 2.66%
Five Years 2.78%
Ten Years 3.32%
Average Annual Total Return
Since Inception* 3.69%
* Inception is 6/12/84 for Class A shares and 10/10/96 for Class B shares.
4
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Evergreen shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Evergreen Shares
Management Fees................................ .30%
Distribution and Service (12b-1) Fees.......... .20%
Other Expenses *............................... .35%
Administration Fees.......................... .21%
-----
Total Annual Fund Operating Expenses........... .85%
* Estimated because there were no Evergreen shares issued during the year ended
December 31, 1998.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Victory Shares: $87 $271 $471 $1,049
5
- --------------------------------------------------------------------------------
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
- --------------------------------------------------------------------------------
Investment Objectives
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income, exempt from regular
Federal income tax and to the extent possible, from New York State and New York
City income taxes, consistent with preserving capital, maintaining liquidity and
stabilizing principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) New York Municipal Obligations issued by or on behalf of the State of
New York or any New York local governments, or their instrumentalities,
authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities,
agencies and political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These "Participation Certificates" are purchased by the Fund from
banks, insurance companies or other financial institutions and in the opinion of
Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated as the
owner of an interest in the underlying Municipal Obligations for Federal income
tax purposes.
The Fund will invest more than 25% of its assets in Participation Certificates
purchased from banks in New York Municipal Obligations, including industrial
revenue bonds.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities, the interest income
on which is subject to Federal, state and local income tax. Included in the same
20% of total assets in taxable securities, the Fund may also purchase securities
and Participation Certificates whose interest income may be subject to the
Federal alternative minimum tax. The kinds of taxable securities in which the
Fund may invest are limited to short-term, fixed income securities as more fully
described in "Taxable Securities" in the Statement of Additional Information.
To the extent suitable New York Municipal Obligations and Territorial Municipal
Obligations are not available for investment by the Fund, the Fund may purchase
Municipal Obligations issued by other states, their agencies and
instrumentalities. The dividends these investors will be designated by the Fund
as derived from interest income that will be, in the opinion of bond counsel to
the issuer at the date of issuance, exempt from regular Federal income tax, but
will be subject to New York income tax.
The Fund will invest at least 65% of its total assets in New York Municipal
Obligations, although the exact amount may vary from time to time. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment adviser. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
6
<PAGE>
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities that are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities that have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
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
the security's credit risks and shall take such action as it 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.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments, which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Municipal Obligations. The Fund
may still be exposed to the credit risk of the institution providing the
investment. Changes in the credit quality of the provider could affect the value
of the security and your investment in the Fund.
Because of the Fund's concentration in investments in New York Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of New York and its political subdivisions.
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, are
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. 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.
Because the Fund may concentrate in Participation Certificates, 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. These
characteristics and risks 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). These factors may limit both the amounts
and types of loans and other financial commitments that may be made and interest
rates and fees 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.
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 investment adviser is in the process of working with the
Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment adviser does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment adviser
does not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at
7
<PAGE>
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. The
Year 2000 problem may also adversely affect issuers of the securities contained
in the Fund, to varying degrees based upon various factors, and thus may have a
corresponding adverse affect on the Fund's performance. The investment adviser
is unable to predict what affect, if any, the Year 2000 problem will have on
such issuers. At this time, it is generally believed that municipal issuers may
be more vulnerable to Year 2000 issues or problems than will other issuers.
- --------------------------------------------------------------------------------
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
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 Fund pays the
Manager 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.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of the
investment management fee and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Victory 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 all Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
- --------------------------------------------------------------------------------
IV. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
Victory 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 Key Trust Company ("Key Trust"). Shares of the Fund, other than Victory
shares, are offered pursuant to a separate prospectus. Victory shares are
identical to other shares of the Fund, with respect to investment objectives and
yield, but differ with respect to certain other matters, including shareholder
services and purchase and redemption of shares.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
Pricing of Fund Shares
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 days on which the New York Stock
Exchange is closed for trading (i.e national holidays). 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 intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
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. 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
8
<PAGE>
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.
Shares are issued as of the first determination of the Fund's net asset value
per share for each Class made after acceptance of the investor's purchase order.
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 the immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve Bank (commonly known as "Federal Funds"). Fund
shares begin accruing income on the day the shares are issued to an investor.
The Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
How to Purchase and Redeem Shares
Investors may invest in Victory shares through Key Trust, its affiliates, or
through dealers with whom Key Trust or its affiliates have entered into
agreements for this purpose as described herein and those who have accounts with
Participating Organizations may invest in Victory shares through their
Participating Organizations. (See "Investment Through Participating
Organizations" herein.) The minimum initial investment in Victory shares is
$500. The minimum amount for subsequent investments is $25 unless the investor
is a client of a Participating Organization whose clients have made aggregate
subsequent investments of $100.
The Fund sells and redeems its shares on a continuing basis at net asset value
and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations,
Key Trust and its affiliates, and from dealers with whom Key Trust, or its
affiliates have entered into agreements for this purpose.
In order to maximize earnings on its Portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept an account application or invest an investor's payment in
portfolio securities until the payment is converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share made after receipt of the investor's account application. The
Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, Eastern time, on any Fund Business Day on which
an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon on a Fund Business Day will not result in share issuance
until the following Fund Business Day. Fund shares begin accruing income on the
day on which shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for redemption and no restriction on frequency of withdrawals. Proceeds
of redemptions are paid by check unless specified otherwise. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption, only if the account was coded "reinvest"; otherwise
dividends are paid out the next time the normal distribution date occurs.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days, after shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the 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 (see
"Investment Through Participating Organizations" for a Description of
Participating Organizations and Participant Investors). 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
9
<PAGE>
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
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 Distributor 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 provide their customers who are shareholders in
the Fund ("Participant Investors") a confirmation of each purchase and
redemption of Victory shares for the customers' accounts. Also, Participating
Organizations may periodic account statements to the Participant Investors
showing (I) the total number of Victory shares owned by each customer as of the
statement closing date, (ii) purchases and redemptions of Victory shares by each
customer during the period covered by the statement (iii) 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). [Participant
Investors whose Participating Organizations have not undertaken to provide such
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 Victory shares may be
purchased and redeemed through the Participating Organization.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance 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-
10
<PAGE>
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.
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
11
<PAGE>
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.
Application 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 Victory mutual funds.
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, at
no charge, 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.
Because Victory shares bear a service fee under the Fund's 12b-1 Plan, 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.
Exchange Privilege
12
<PAGE>
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
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.
Tax Consequences
Dividends paid by the Fund, which are exempt-interest dividends by virtue of
being properly designated by the Fund as derived from Municipal Obligations and
Participation Certificates, will be exempt from regular Federal income tax
provided the Fund complies with Section 852(b)(5) of the Internal Revenue Code
of 1986. Exempt-interest dividends paid by the Fund correctly identified by the
Fund as derived from obligations issued by or on behalf of the State of New York
or any New York local governments, or their instrumentalities, authorities or
districts ("New York Municipal Obligations") will be exempt from the New York
income tax. Exempt-interest dividends correctly identified by the Fund as
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that New York is prohibited from taxing under the
Constitution, the laws of the United States of America or the laws of New York
("Territorial Municipal Obligations") also should be exempt from the New York
income tax provided the Fund complies with New York law.
Federal Income Taxes
The Fund has elected and intends to qualify under the Code as a regulated
investment company that distributes exempt-interest dividends. 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,
distributions derived from interest earned on Municipal Obligations and
designated as exempt-interest dividends by the Fund not later than 60 days after
the close of the Funds' taxable year 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. Dividends paid from taxable income, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income whether
received in cash or reinvested in additional shares of the Fund. Although it is
not intended, it is possible that the Fund may realize short-term or long-term
capital gains or losses. 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. 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.
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 and Railroad Retirement benefits includable
in gross income. Further, corporations will be required to include in
alternative minimum taxable income 75% of the amount by which their adjusted
current earnings (including generally, tax-exempt interest) exceeds
13
<PAGE>
their 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 will be subject to a tax on passive
investment income, including tax-exempt interest.
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.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from Federal income taxes to the Fund to the
same extent as interest on the underlying Municipal Obligations. Counsel has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel. (See "Federal Income Taxes" in the
Statement of Additional Information.)
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax the interest on 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.
- --------------------------------------------------------------------------------
V. DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Rule 12b-1 Fees
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to Victory shareholders. The Fund pays these fees from its assets on an
ongoing basis and therefore, over time, the payment of these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Victory
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Victory shares, a service fee equal to .20% per annum of the
Victory 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. 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 Victory shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Victory
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. These payments are limited to a
maximum of 0.05% per annum of each Class' shares' average daily net assets.
The Plan and the Shareholder Servicing Agreement provide 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 costs,
and to compensate others, including Participating Organizations with whom the
Distributor has entered into written agreements, for performing shareholder
servicing on behalf of the Victory shares of the Fund; (ii) to compensate
certain Participating Organizations for providing assistance in distributing the
Victory shares of the Fund; and (iii) to pay the costs of printing and
distributing the Fund's Prospectus to prospective
14
<PAGE>
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
Victory shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholding Servicing Fee (with
respect to Victory shares) and past profits, for the purposes enumerated in (i)
above. The Distributor will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
15
<PAGE>
- --------------------------------------------------------------------------------
VI. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
in the Class A shares since there were no Victory Shares issued during the
fiscal year ended April 30, 1999. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by McGladrey and Pullen, LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended April 30,
------------------------------------------------------------------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- --------- ---------
Income from investment operations:
Net Investment income.................... 0.025 0.029 0.028 0.030 0.027
Less distributions:
Dividends from net investment income..... ( 0.025 ) ( 0.029 ) (0.028 ) ( 0.030 ) ( 0.027)
-------- ------------ --------- ----------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ========= =========
Total Return................................ 2.48% 2.90% 2.80% 3.08% 2.74%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 473,965 $ 370,044 $323,746 $ 283,368 $ 254,422
Ratios to average net assets:
Expenses................................. 0.85%+ 0.85%+ 0.82%+ 0.84%+ 0.87%
Net Investment income.................... 2.43% 2.85% 2.76% 3.02% 2.71%
</TABLE>
16
<PAGE>
A Statement of Additional Information (SAI) dated September 1, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI, the Annual and Semi-Annual Reports and material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Key Trust
C/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527
811-3955
9/99
<PAGE>
NEW YORK
DAILY TAX FREE 600 Fifth Avenue, New York, NY
INCOME FUND, INC. 10020
(212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1999
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, 1999
This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current
Prospectuses 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.
A 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 of
Contents
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Fund History............................. Capital Stock and Other Securities...........
Description of the Fund and Its Investments Purchase, Redemption and Pricing of Shares....
And Risks.................................. Taxation of the Fund...........................
Management of the Fund..................... Underwriters...................................
Control Persons and Principal Holders of Calculation of Performance Data................
Securities................................. Financial Statements...........................
Investment Advisory and Other Services..... Description of Ratings.........................
Brokerage Allocation and Other Practices... Taxable Equivalent Yield Tables................
</TABLE>
<PAGE>
I. FUND HISTORY
The Fund was incorporated on January 31, 1984, in the State of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund. The Fund's investment objectives are to seek a
high level of current income exempt from regular Federal tax and New York State
and New York City income taxes consistent with preserving capital, maintaining
liquidity and stabilizing principal. No assurance can be given that these
objectives will be achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund's assets will be invested primarily in (i) 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, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from regular Federal and New York income taxation ("Municipal
Obligations") and in (ii) Participation Certificates (which, in the opinion of
Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated as the
owner of an interest in the underlying Municipal Obligations for Federal income
tax purposes) in Municipal Obligations purchased from banks, insurance companies
or other financial institutions ("Participation Certificates"). Dividends paid
by the Fund are exempt-interest dividends by virtue of being properly designated
by the Fund as derived from Municipal Obligations and Participation
Certificates. They will be exempt from regular Federal income tax provided the
Fund qualifies as a regulated investment company under Subchapter M of the Code
and the Fund complies with Section 852(b)(5) of the Code. Although the Supreme
Court has determined that Congress has the authority to subject the interest on
bonds such as the Municipal Obligations to regular Federal income taxation,
existing law excludes such interest from regular Federal income tax. However,
such interest, including exempt-interest dividends, may be subject to the
Federal alternative minimum tax.
Securities, the interest income on which may be subject to the Federal
alternative minimum tax (including Participation Certificates), may be purchased
by the Fund without limit. Securities, the interest income on which is subject
to regular Federal, state and local income tax, will not exceed 20% of the value
of the Fund's total assets. (See "Federal Income Taxes" herein.) Exempt-interest
dividends paid by the Fund that are correctly identified by the Fund as derived
from obligations issued by or on behalf of the State of New York or any New York
local governments, or their instrumentalities, authorities or districts ("New
York Municipal Obligations") will be exempt from the New York State and New York
City income taxes. Exempt-interest dividends correctly identified by the Fund as
derived from obligations of Puerto Rico and the Virgin Islands, as well as any
other types of obligations that New York is prohibited from taxing under the
Constitution, the laws of the United States of America or the New York
Constitution ("Territorial Municipal Obligations"), also should be exempt from
New York State and New York City personal income taxes provided the Fund
complies with applicable New York laws. [See "New York Income Taxes" herein.] To
the extent that 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 dividends on these will
be designated by the Fund as derived from interest income which will be, in the
opinion of bond counsel to the issuer at the date of issuance, exempt from
regular Federal income tax but will be subject to the New York State and New
York City personal income taxes. Except as a temporary defensive measure during
periods of adverse market conditions as determined by the Manager, the Fund will
invest at least 65% of its assets in 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 $1.00 per share of
each Class. There can be no assurance that this value will be maintained.
The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in Municipal Obligations and in Participation
Certificates, the Fund reserves the right to invest up to 20% of the value of
its total assets in securities, the interest income on which is subject to
regular Federal, state and local income tax. The Fund will invest more than 25%
of its assets in Participation Certificates purchased from banks in industrial
revenue bonds and other 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 the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
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Securities means: (i) securities which have or are deemed to have 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") or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities. 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 "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
Subsequent to its purchase by the Fund, a rated security 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 (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the 1940 Act, or (iii) is determined to
no longer present minimal credit risks, or an event of insolvency occurs with
respect to the issues 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. Disposal of the security shall
occur 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.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. However, the Fund shall not invest more than 5% of
its total assets in Municipal Obligations or Participation Certificates issued
by a single issuer unless Municipal Obligations are First Tier Securities.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the 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, regulated investment company
securities and other securities which are limited in respect of any one issuer
to not more than 5% in value of the total assets of the Fund and to not more
than 10% of the outstanding voting securities of such issuer. In addition, at
the close of each quarter of its taxable year, not more than 25% in value of the
Fund's total assets may be invested in securities of one issuer (or two or more
issuers that the Fund controls) other than Government securities or regulated
investment company 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 herein, "Municipal Obligations" include the following as well as
"Variable Rate Demand Instruments and Participation Certificates".
1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities"). They
generally have a maturity at the time of issue of one year or more and 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.
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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 IRBs is generally exempt, with certain exceptions,
from regular Federal income tax pursuant to Section 103(a) of the Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Federal Income Taxes" herein.) IRBs are, in most cases,
revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the facilities
financed by the bonds or other guarantor to meet its financial obligations
and, in certain instances, the pledge of real and personal property as
security for payment. If there is no established secondary market for the
IRBs, the IRBs or the Participation Certificates in IRBs purchased by the
Fund will be supported by letters of credit, guarantees or insurance that
meet the definition of Eligible Securities at the time of acquisition and
provide the demand feature which may be exercised by the Fund at any time
to provide liquidity. Shareholders should note that the Fund may invest in
IRBs acquired in transactions involving a Participating Organization. In
accordance with Investment Restriction 6 herein, the Fund is permitted to
invest up to 10% of the portfolio in high quality, short-term Municipal
Obligations (including IRBs) meeting the definition of Eligible Securities
at the time of acquisition that may not be readily marketable or have a
liquidity feature.
2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes
are issued by local agencies and are guaranteed by the United States
Department of Housing and Urban Development. Project notes are also secured
by the full faith and credit of the United States. The Fund's investments
may be concentrated in Municipal Notes of New York issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing. They 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, 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. These clauses 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. The Fund has no intention to invest in Municipal Leases in the
foreseeable future and will amend this Statement of Additional Information
in the event that such an intention should develop in the future.
5. Any other Federal tax-exempt, and to the extent possible, New York State
and New York 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 described herein and permissible under Rule 2a-7 under the 1940 Act.
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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 promptly
reassess 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 (i) is in default, (ii)
ceases to be an Eligible Security under Rule 2a-7 of the 1940 Act, or (iii) is
determined to no longer present minimal credit risks, or an event of insolvency
occurs with respect to the issues 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. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
Variable Rate Demand Instruments and Participation Certificates
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations. They provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than 30 calendar days' notice and may be exercised at any
time or at specified intervals not exceeding 397 days depending upon the terms
of the instrument. Variable rate demand instruments that can not be disposed of
properly within seven days in the ordinary course of business are illiquid
securities. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to 397 days. 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 decides
which variable rate demand instruments it will purchase in accordance with
procedures prescribed by its Board of Directors to minimize credit risks. A fund
utilizing the amortized cost method of valuation under Rule 2a-7 of the 1940 Act
may purchase variable rate demand instruments only if (i) the instrument is
subject to an unconditional demand feature, exercisable by the Fund in the event
of a default in the payment of principal or interest on the underlying
securities, that is an Eligible Security or (ii) the instrument is not subject
to an unconditional demand feature but does qualify as an Eligible Security and
has a long-term rating by the Requisite NRSROs in one of the two highest rating
categories, or if unrated, is determined to be of comparable quality by the
Fund's Board of Directors. The Fund's Board of Directors may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase Participation Certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A Participation Certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be the bank issuing the Participation Certificate, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
certificate of participation) or insurance policy of an insurance company that
the Board of Directors of the Fund has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the Participation
Certificate back to the institution. Where applicable, the Fund can draw on the
letter of credit or insurance after no more than 30 days' notice either at any
time or at specified intervals not exceeding 397 days (depending on the terms of
the participation), for all or any part of the full principal amount of the
Fund's participation interest in the security plus accrued interest. The Fund
intends to exercise the demand only (i) upon a default under the terms of the
bond documents, (ii) as needed to provide liquidity to the Fund in order to make
redemptions of Fund shares, or (iii) to maintain a high quality investment
portfolio. The institutions issuing the Participation Certificates will retain a
_______________________________
* The prime rate is generally the rate charged by a bank to its most
creditworthy customers for short-term loans. The prime rate of a particular
bank may differ from other banks and will be the rate announced by each
bank on a particular day. Changes in the prime rate may occur with great
frequency and generally become effective on the date announced.
5
<PAGE>
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. However, the Fund retains the option to purchase
insurance if necessary, in which case the cost of insurance will be an expense
of the Fund subject to the expense limitation (see "Expense Limitation" herein).
The Manager has been instructed by the Fund's Board of Directors to continually
monitor the pricing, quality and liquidity of the variable rate demand
instruments held by the Fund, including the Participation Certificates, on the
basis of published financial information and reports of the rating agencies and
other bank analytical services to which the Fund may subscribe. Although these
instruments may be sold by the Fund, the Fund intends to hold them until
maturity, except under the circumstances stated above (see "Federal Income
Taxes" herein).
In view of the "concentration" of the Fund in Participation Certificates in 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. 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. This
includes, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The portfolio may contain variable maximum rates set by state law,
which limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent state law contains such limits,
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
increase so that the variable rate exceeds the fixed rate on the Municipal
Obligations, the Municipal Obligations can 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 (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) 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 these 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
6
<PAGE>
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. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at the Fund's option a
specified Municipal Obligation at a specified price with same day settlement. A
stand-by commitment is the equivalent of a "put" option acquired by the Fund
with respect to a particular Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (i) 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 (ii) 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 stand-by commitments to generally 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 will not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after the
acquisition of each stand-by commitment.
The Fund will enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks. If the issuer of the Municipal Obligation does not meet the eligibility
criteria, the issuer of the stand-by commitment will have received a rating
which meets the eligibility criteria or, if not rated, will present 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 will 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 tax
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 will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will 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 the Fund may enter into are subject to certain risks.
These 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
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interest on Municipal Obligations subject to stand-by commitments will be exempt
from Federal income taxation (see "Federal Income Taxes" herein). In the absence
of a favorable tax ruling or opinion of counsel, the Fund will not engage in the
purchase of securities subject to stand-by commitments.
Taxable Securities
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its total
assets in securities of the kind described below. The interest income from such
securities is subject to regular Federal or New York income tax, under any one
or more of the following circumstances: (i) pending investment of proceeds of
sales of Fund shares or of portfolio securities, (ii) pending settlement of
purchases of portfolio securities, and (iii) 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): (i) obligations of the United States Government or its agencies,
instrumentalities or authorities, (ii) commercial paper meeting the definition
of Eligible Securities at the time of acquisition, (iii) certificates of deposit
of domestic banks with assets of $1 billion or more, and (iv) repurchase
agreements with respect to any Municipal Obligations or other securities which
the Fund is permitted to own.
(See "Federal Income Taxes" herein.)
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund will 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.
Additionally, 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, exceeds 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.
New York Risk Factors
This summary is included for the purpose of providing a general description of
New York State's (the "State") and New York City's (the "City") credit and
financial condition. The information set forth below is derived from the
official statements and/or preliminary drafts of official statements prepared in
connection with the issuance of State and City municipal bonds. The Fund has not
independently verified this information.
Economic Trends. Over the long term, the State of New York (the "State") and the
City of New York (the "City") face serious 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 not locate within,
the State.
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Notwithstanding the numerous initiatives that the State and its localities may
take to encourage economic growth and achieve balanced budgets, reductions in
Federal spending could materially and adversely affect the financial condition
and budget projections of the State and its localities.
New York City. The City, with a population of approximately 7.4 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 printing.
For each of the 1981 through 1998 fiscal years, the City had an operating
surplus, before discretionary transfers, and achieved balanced operating results
as 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.
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 the 1999 fiscal year, before discretionary transfers, and
budget 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 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.
The Mayor is responsible for preparing the City's financial plan, including the
City's current financial plan for the 1999 through 2002 fiscal years (the
"1999-2002 Financial Plan" or "Financial Plan"). The City's projections set
forth in the Financial Plan are based on various assumptions and contingencies
which are uncertain and which may not materialize. Such assumptions and
contingencies include the condition of the regional and local economies, the
provision of State and Federal aid and the impact on City revenues and
expenditures of any future Federal or State policies affecting the City.
Implementation of the Financial Plan is dependent upon the City's ability to
market its securities successfully. The City's financing program for fiscal
years 1999 through 2002 contemplates the issuance of $5.2 billion of general
obligation bonds and $5.4 billion of bonds to be issued by the New York City
Transitional Finance Authority (the "Finance Authority") to finance City capital
projects. The Finance Authority was created as part of the City's effort to
assist in keeping the City's indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is authorized to
incur. In addition, the City issues revenue and tax anticipation notes to
finance its seasonal working capital requirements. The success of projected
public sales of City bonds and notes, New York City Municipal Water Finance
Authority ("Water Authority") bonds and Finance Authority bonds will be subject
to prevailing market conditions. The City's planned capital and operating
expenditures are dependent upon the sale of its general obligation bonds and
notes, and the Water Authority and Finance Authority bonds. Future developments
concerning the City and public discussion of such developments, as well as
prevailing market conditions, may affect the market for outstanding City general
obligation bonds and notes.
For the 1998 fiscal year, the City had an operating surplus, before
discretionary and other transfers, and achieved balanced operating results,
after discretionary and other transfers, in accordance with GAAP. The 1998
fiscal year is the eighteenth year that the City has achieved an operating
surplus, before discretionary and other transfers, and balanced operating
results, after discretionary and other transfers.
On November 18, 1998, the City released the Financial Plan for the 1999 through
2002 fiscal years, which relates to the City and certain entities which receive
funds from the City. The Financial Plan is a modification to the financial plan
submitted to the Control Board on June 26, 1998 (the "June Financial Plan"). The
Financial Plan projects revenues and expenditures for the 1999 fiscal year
balanced in accordance with GAAP, and projects gaps of $2.2 billion, $2.9
billion and $2.4 billion for the 2000 through 2002 fiscal years, respectively,
after implementation of a gap closing program to reduce agency expenditures by
$200 million in the 1999 fiscal year and approximately $80 million in each of
fiscal years 2000 through 2002.
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Changes since the June Financial Plan include: (i) an increase in projected tax
revenues of $288 million and $8 million in fiscal years 1999 and 2000,
respectively, and a decrease in projected tax revenues of $23 million and $66
million in fiscal years 2001 and 2002, respectively; (ii) an increase in planned
expenditures for health insurance of approximately $60 million in each of fiscal
years 1999 through 2002; (iii) a decrease in projected pension expenditures due
to higher than planned increases in the value of the assets of the retirement
systems of $67 million, $171 million, $264 million and $372 million in the
fiscal years 1999 through 2002, respectively; (iv) other agency spending
increases of $76 million, $101 million, $78 million, and $70 million in fiscal
years 1999 through 2002, respectively; and (v) an increase in agency
expenditures of $227 million, $295 million, $295 million and $294 million in
fiscal years 1999 through 2002, respectively, due to a reduction in the agency
gap closing program.
The 1999-2002 Financial Plan includes a proposed discretionary transfer in the
1999 fiscal year of $465 million to pay debt service due in fiscal year 2000. In
addition, the Financial Plan reflects enacted and proposed tax reduction
programs totaling $429 million, $604 million and $606 million in fiscal years
2000 through 2002, respectively, including the elimination of the City sales tax
on all clothing as of December 1, 1999, the extension of current tax reductions
for owners of cooperative and condominium apartments starting in fiscal year
2000 and a personal income tax credit for child care and for resident holders of
Subchapter S corporations starting in fiscal year 2000, which are subject to
State legislative approval, and reduction of the commercial rent tax commencing
in fiscal year 2000.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1999, and which is projected to provide
revenue of $183 million, $524 million and $544 million in the 2000, 2001 and
2002 fiscal years, respectively; and (ii) collection of the projected rent
payments for the City's airports, totaling $6 million, $365 million, $155
million and $185 million in the 1999 through 2002 fiscal years, respectively, a
substantial portion of which may depend on the successful completion of
negotiations with The Port Authority of New York and New Jersey (the "Port
Authority") or the enforcement of the City's rights under the existing leases
through pending legal actions. The Financial Plan provides no additional wage
increases for City employees after their contracts expire in fiscal years 2000
and 2001. In addition, the economic and financial condition of the City may be
affected by various financial, social, economic and political factors which
could have a material effect on the City.
In January, the Mayor is expected to publish a Modification (the "January
Modification") to the Financial Plan for the City's 1999 through 2003 fiscal
years and a preliminary budget for the City's fiscal year 2000. The January
Modification will include changes since the Financial Plan and the City's
program to address the currently forecast $2.2 billion gap in fiscal year 2000.
As in prior years, the City's gap-closing program could include a program to
substantially reduce projected agency spending and City proposals for increased
Federal and State aid and other non-tax revenues.
The 1998 modification of the City's financial plan and the 1999-2002 Financial
Plan include a proposed discretionary transfer in the 1998 fiscal year of
approximately $2.0 billion to pay debt service due in the 1999 fiscal year, and
a proposed discretionary transfer in the 1999 fiscal year of $416 million to pay
debt service due in fiscal year 2000, included in the Budget Stabilization
Accounts for the 1998 and 1999 fiscal years, respectively. In addition, the
Financial Plan reflects proposed tax reduction programs totaling $237 million,
$537 million, $657 million and $666 million in fiscal years 1999 through 2002,
respectively, including the elimination of the City sales tax on all clothing as
of December 1, 1999, a City-funded acceleration of the State funded personal
income tax reduction for the 1999 through 2001 fiscal years, the extension of
current tax reductions for owners of cooperative and condominium apartments
starting in fiscal year 2000 and a personal income tax credit for child care and
for resident holders of Subchapter S corporations, which are subject to State
legislative approval, and reduction of the commercial rent tax commencing in
fiscal year 2000.
On June 5, 1998, the City Council adopted a budget which re-allocated
expenditures from those provided in the Executive Budget in the amount of $409
million. The re-allocated expenditures, which include $116 million from the
Budget Stabilization Account, $82 million from debt service, $45 million from
pension contributions, $54 million from social services spending and $112
million from other spending, were re-allocated to uses set forth in the City
Council's adopted budget. Such uses include a revised tax reduction program at a
revenue cost in the 1999 fiscal year of $45 million, additional expenditures for
various programs of $199 million and provision of $165 million to retire high
interest debt. The revised tax reduction program in the City Council's adopted
budget assumes the expiration of the 12.5% personal income tax surcharge, rather
than the implementation of the personal income tax reduction program proposed in
the Executive budget. The changes reflected in the City Council's adopted budget
would increase the gaps forecast between revenues and expenditures in the future
years of the Financial Plan.
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On June 5, 1998, in accordance with the City Charter, the Mayor certified to the
City Council revised estimates of the City's revenues (other than property tax)
for fiscal year 1999. Consistent with this certification, the property tax levy
was estimated by the Mayor to require an increase to realize sufficient revenue
from this source to produce a balanced budget within generally accepted
accounting principles. On June 8, 1998, the City Council adopted a property tax
levy that was $237.7 million lower than the levy estimated to be required by the
Mayor. The City Council, however, maintained that the revenue to be derived from
the levy it adopted would be sufficient to achieve a balanced budget because the
property tax reserve for uncollectibles could be reduced. Property tax bills for
fiscal year 1999 are expected to be mailed in the near future by the City's
Department of Finance at the rates adopted by the City Council for fiscal year
1998, subject to later adjustment.
On July 16, 1998, Standard & Poor's revised its rating of City bonds upward from
BBB+ to A-. Moody's rating of City bonds was revised in February 1998 to A3 from
Baa1. Moody's, Standard & Poor's and Fitch currently rate the City's outstanding
general obligations bonds A3, A- and A-, respectively.
New York State and its Authorities. The State Financial Plan for the 1998-1999
fiscal year projects balance on a cash basis for the 1998-1999 fiscal year, as
modified on July 30, 1998, with a closing balance in the General Fund of $1.67
billion. The State Financial Plan contains projections of a potential imbalance
in the 1999-2000 fiscal year of $1.3 billion, assuming implementation of
unspecified efficiency actions, the receipt of funds from the tobacco settlement
and the application of certain reserves established in the 1998-1999 State
Financial Plan. The Executive Budget submitted in February 1998 contained
projections at that time of a potential imbalance in the 2000-2001 fiscal year
of $3.72 billion, assuming implementation of unspecified efficiency initiatives
and other actions in the 2000-2001 fiscal year.
The 1999-2002 Financial Plan is based on numerous assumptions, including the
condition of the City's and the region's economy and a modest employment
recovery and the concomitant receipt of economically sensitive tax revenues in
the amounts projected. The 1999-2002 Financial Plan is subject to various other
uncertainties and contingencies relating to, among other factors, the extent, if
any, to which wage increases for City employees exceed the annual wage costs
assumed for the 1999 through 2002 fiscal years; continuation of projected
interest earnings assumptions for pension fund assets and current assumptions
with respect to wages for City employees affecting the City's required pension
fund contributions; the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions to assist
the City; the ability of State agencies to maintain balanced budgets; the
willingness of the Federal government to provide the amount of Federal aid
contemplated in the Financial Plan; the impact on City revenues and expenditures
of Federal and State welfare reform and any future legislation affecting
Medicare or other entitlement programs; adoption of the City's budgets by the
City Council in substantially the forms submitted by the Mayor; the ability of
the City to implement cost reduction initiatives, and the success with which the
City controls expenditures; the impact of conditions in the real estate market
on real estate tax revenues; the City's ability to market its securities
successfully in the public credit markets; and unanticipated expenditures that
may be incurred as a result of the need to maintain the City's infrastructure.
Certain of these assumptions have been questioned by the City Comptroller and
other public officials.
The Legislature passed a State budget for the 1998-1999 fiscal year on April 18,
1998, and on April 26, 1998 the Governor vetoed certain of the increased
spending in the State budget passed by the Legislature. The Legislature did not
override any of the Governor's vetoes. The State Financial Plan for the
1998-1999 fiscal year, as modified on July 30, 1998, projects balance on a cash
basis for the 1998-1999 fiscal year, with a closing balance in the General Fund
of $1.67 billion. The State Financial Plan contains projections of a potential
imbalance in the 1999-2000 fiscal year of $1.3 billion, assuming implementation
of $600 million of unspecified efficiency actions, the receipt of $250 million
in funds from the tobacco settlement and the application of certain reserves
established in the 1998-1999 State Financial Plan. The Executive Budget
submitted in February 1998 contained projections at that time of a potential
imbalance in the 2000-2001 fiscal year of $3.72 billion, assuming implementation
of $800 million of unspecified efficiency initiatives in the 2000-2001 fiscal
year and $250 million in funds from the tobacco settlement. The State Financial
Plan for the 1998-1999 fiscal year includes multi-year tax reductions and
significant increases in spending which will affect the 2000-2001 fiscal year.
The various elements of the State and local tax and assessment reductions
enacted during the last several fiscal years will reduce projected revenues by
more than $4 billion in the 2002-2003 fiscal year as measured from the current
1998-1999 base.
On July 23, 1998, the New York State Comptroller 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 $1.8 billion
and $5.5 billion, respectively, after excluding the uncertain receipt by the
State of $250 million of funds from the tobacco settlement assumed for each of
such fiscal years, as well as the unspecified actions assumed in the State's
projections. The State Comptroller also stated that if the securities industry
or economy slows, the size of the gaps would increase.
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. A number of court actions have been brought involving State
finances. The court actions in which the State is a defendant generally involve
State programs and miscellaneous tort, real property, and contract claims. While
the ultimate
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outcome and fiscal impact, if any, on the State of those proceedings and claims
are not currently predictable, 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 City has estimated that its potential future
liability on account of outstanding claims against it as of June 30, 1998
amounted to approximately $3.5 billion.
Investment Restrictions
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios. They 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 term "majority of the outstanding shares" of the
Fund means 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 not:
1. Make portfolio investments other than as described under "Description of
the Fund and Its Investments and Risks." Any other form of Federal
tax-exempt investment must meet the Fund's high quality criteria, as
determined by the Board of Directors, and be 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. This includes 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. However, securities subject to a demand obligation and
stand-by commitments may be purchased as set forth under "Description of
the Fund and Its Investments and Risks."
5. Underwrite the securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand feature.
The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment together with securities that are not
readily marketable held by the Fund exceed 10% of the Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests. 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 "Description of the
Fund and Its Investments and Risks."
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. The Fund may invest more than 25% of its assets in
Participation Certificates and there shall be no limitation on the purchase
of those Municipal Obligations and other obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities. When
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the issuing entity and a security is backed only by the 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-government user,
then such non-government user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity, such
as an insurance company or other corporate obligor, guarantees a security
or a bank issues a letter of credit, such a guarantee or letter of credit
would be considered a separate security and would be treated as an issue of
such government, other entity or bank. Immediately after the acquisition of
any securities subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the 1940 Act), with respect to 75% of the total
assets of the Fund, not more than 10% of the Fund's assets may be invested
in securities that are subject to a Guarantee or Demand Feature from the
same institution. However, the Fund may only invest more than 10% of its
assets in securities subject to a Guarantee or Demand Feature issued by a
Non-Controlled Person (as such term is defined in Rule 2a-7 of the 1940
Act).
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11. Invest in securities of other investment companies. The Fund may purchase
(i) 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) securities as permitted by section 12(a)
of the 1940 Act..
12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with a permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
III. 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 their full-time to the affairs of the Fund.
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.
Steven W. Duff, 45 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank with which he was
associated from June 1981 to August 1994. Mr. Duff is also President and a
Director/Trustee of 14 other funds in the Reich & Tang Fund Complex, President
of Back Bay Funds, 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.
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 from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 17
other funds in the Reich & Tang Fund Complex.
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 from April 1973 to September 1993. Ms. Jones is also a Vice President
of 13 other funds in the Reich & Tang Fund Complex.
Dana E. Messina, 42 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated from December
1980 to September 1993. Ms. Messina is also Vice President of 14 other funds in
the Reich & Tang Fund Complex.
Bernadette N. Finn, 51 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. with which she was
associated from September 1970 to September 1993. Ms. Finn is also Secretary of
13 other funds in the Reich & Tang Fund Complex, and a Vice President and
Secretary of 5 funds in the Reich & Tang Fund Complex.
Richard De Sanctis, 42 - Treasurer of the Fund, has been Vice President and
Treasurer of the Manager since September 1993. Mr. De Sanctis was formerly
Controller of Reich & Tang, Inc. from January 1991 to September 1993. Mr. De
Sanctis is also Treasurer of 17 other funds in the Reich & Tang Fund Complex,
and is 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 from June 1986. Ms. Holtzer is also Assistant Treasurer of 18 other
funds in the Reich & Tang Fund
13
<PAGE>
Complex.
The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the period ended April 30, 1999, all of which consisted of aggregate
directors' fees paid to the four disinterested directors, pursuant to the terms
of the Investment Management Contract. (See "Investment Advisor and Other
Services" that follows.)
Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $ and a fee of $ for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund. See Compensation Table.
COMPENSATION TABLE
<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, $ 0 0 $ (1 Fund)
Director
Caroline E. Newell,
Director $ 0 0 $ (1 Fund)
John P. Steines $ 0 0 $ (1 Fund)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending April 30, 1999 and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ending April
30, 1999. The total number of Funds in the same Fund complex from which the
Directors receive compensation is listed in parenthesis. A Fund is considered to
be the same Fund complex if, among other things, it shares a common investment
adviser with the Fund.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On July 30,1999 there were _______________ shares of Class A common stock
outstanding ___________, shares of Class B common stock outstanding no shares of
Victory common stock outstanding, and no shares of Evergreen common stock
outstanding. As of July 30, 1999, the amount of shares owned by all officers and
directors of the Fund as a group was less than 1% of the outstanding shares of
the Fund. Set forth below is certain information as to persons who owned 5% or
more of the Fund's outstanding common stock as of July 30, 1999:
% of Nature of
Name and Address Class Ownership
CLASS A
CLASS B
V. INVESTMENT ADVISORY AND OTHER SERVICES
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, as of May 31, 1999, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $13.4
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of fifteen 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
14
<PAGE>
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies"), due to a change in name of NEICOP, replaces
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"). MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
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 Partnerships; 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 recent name change did not result in a change of 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 continuance is specifically approved
annually by a majority vote of the Fund's outstanding voting securities or 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.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The Investment Management Contract 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.
Under the Investment Management Contract, the Manager receives from the Fund a
fee equal to .40% per annum of the Fund's average daily net assets. The fees are
accrued daily and paid monthly. The Manager at its discretion may voluntarily
waive all or a portion of the management fee.
Pursuant to the Administrative Services Contract with the Fund, 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 accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities and (iii) perform such other services as the
Fund may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee equal to .21% per annum of the Fund's
average daily net assets. For the Funds' fiscal years ended April 30, 1999, 1998
and 1997, the Manager received a fee of $957,652, $770,441 and $605,532.
For the Funds fiscal year ended April 30, 1999, 1998 and 1997, the fees payable
to the Manager under the Investment Management Contract were $1,368,074,
$1,100,638 and $865,046, respectively. The Fund's net assets at the close of
business on April 30, 1999 totaled $481,341,831. The Manager may waive its
rights to any portion of the management fee
15
<PAGE>
and may use any portion of the Management fee for purposes of shareholder and
administrative services and distribution of the Fund's shares.
The Manager at its discretion may waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of the
management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares. There can be no assurance that such fees will
be waived in the future (see "Distribution and Service Plan" herein).
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.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract (see
"Distribution and Service Plan" herein) to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses) that in any
year exceed the limits on investment company expenses prescribed by any state in
which the Fund's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the Fund
for its excess expenses as described above, the Fund has, under the Investment
Management Contract, confirmed its obligation for payment of all its other
expenses. This includes all operating expenses, taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, SEC 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, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
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. 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.
Distribution And Service Plan
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. 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 and a Shareholder Servicing Agreement (with respect to Class
A, Evergreen and Victory shares) with Reich & Tang Distributors, Inc.
(the "Distributor"), as distributor of the Fund's shares.
The Class A, Evergreen and Victory 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, the Distributor
receives from the Fund a fee equal to .20% per annum of the Fund's average daily
net assets of the Class A, Evergreen and Victory shares of the Fund (the
"Shareholder Servicing Fee"). The fee is accrued daily and paid monthly and any
portion of the fee may be deemed to be used by the Distributor for purposes of
distribution of the Fund's Class A, Evergreen and Victory shares and for
payments to Participating Organizations with respect to servicing their clients
or customers who are Class A, Evergreen and Victory 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 Agreements 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
16
<PAGE>
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 years ended April 30, 1999, 1998 and 1997, 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
$903,834, $732,056 and $576,689, of which $11,034, $13,524 and $12,996 was spent
on sales personnel and related expenses, $4,899, $5,364 and $2,885 was spent on
travel and entertainment, $22,290, $9,733 and $15,581 was spent on prospectus,
application and miscellaneous printing and $1,156, $364 and $232 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 $1,798,598,
$1,315,608 and $974,724.
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that the Distributor
will pay for (i) telecommunications expenses, including the cost of dedicated
lines and CRT terminals, incurred by the Participating Organizations and
Distributor in carrying out their obligations under the Shareholder Servicing
Agreement with respect to the Class A shares and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from 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, Evergreen, and Victory shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Fund's shares; and (iii) to pay the
costs of printing and distributing the Fund's prospectus to prospective
investors, and to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee and past profits for
the purpose enumerated in (i) above. The Distributor will determine the amount
of such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager or the
Distributor for any fiscal year under the Investment Management Contract, the
Administrative Services Contract or the Shareholder Servicing Agreement in
effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the 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 will remain in effect until April 30, 1999. Thereafter
it may continue in effect for successive annual periods commencing October 1,
provided it is approved by the Class A, Evergreen, and Victory shareholders or
by the Board of Directors. This includes 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 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, Evergreen, and Victory shareholder approval, and the other material
amendments must be approved by the directors in the manner described in the
preceding sentence. The Plan may be terminated at any time by a vote of a
majority of the disinterested directors of the Fund or the Fund's Class A
Evergreen and Victory shareholders.
Custodian And Transfer Agent
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105
is custodian for the Fund's cash and securities. Reich & Tang Services, Inc.,
600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend agent
for the shares of the Fund. 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.
Counsel and Auditors
17
<PAGE>
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, New York 10022.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, has been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities are usually 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. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade 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. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
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 shares into separate series of
stock, one for each of the portfolios that may be created. Each share of any
series of shares when issued will have equal dividend, distribution and
liquidation rights within the series for which it was issued and each fractional
share has those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares of all series have identical voting rights,
except where, by law, certain matters must be approved by a majority of the
shares of the unaffected series. Shares will be voted in the aggregate. There
are no conversion or preemptive rights in connection with any shares of the
Fund. All shares, when issued in accordance with the terms of the offering, will
be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder. The Fund is subdivided into four classes of
common stock: Class A, Class B, Evergreen Class and Victory Class. 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, Class B,
Evergreen Class and Victory Class shares will have different class designations;
(ii) only the Class A, Evergreen, and Victory shares will be assessed a service
fee pursuant to the Rule 12b-1 Distribution and Service Plan of the Fund of .20%
of each Class shares' average daily net assets; (iii) only the holders of the
Class A Evergreen and Victory shares will be entitled to vote on matters
pertaining to the Plan and any related agreements in accordance with provisions
of Rule 12b-1; and (iv) the exchange privilege will permit stockholders to
exchange their shares only for shares of the same class of an investment company
that participates in an exchange privilege program with the Fund (except for the
Evergreen Class which does not offer an Exchange Privilege. Payments that are
made under the Plan will be calculated and charged daily to the appropriate
class prior to determining daily net asset value per share and
dividends/distributions.
Under its amended 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.
18
<PAGE>
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. 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, the Fund will not issue certificates evidencing Fund shares.
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
or special meetings only (i) for the election (or re-election) of directors,
(ii) for approval of the revised investment advisory contracts with respect to a
particular class or series of stock, (iii) for approval of the Fund's
distribution agreement with respect to a particular class or series of stock,
and (iv) upon the written request of shareholders 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, 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 his successor is elected or qualified, or
until such Director sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to the purchase and redemption of shares is located under
"Shareholder Information" in each of the Prospectuses and is incorporated herein
by reference.
Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. The net asset value of a Class is computed
by dividing the value of the Fund's net assets for such Class (i.e., the value
of its securities and other assets less its liabilities, including expenses
payable or accrued but excluding capital stock and surplus) by the total number
of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. 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
Trustees 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 Trustees 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 Trustees determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Description of the Fund
and its Investments and Risks" herein.)
IX. TAXATION OF THE FUND
Federal Income Taxes
The Fund has elected and intends to qualify under the Code and under New York
law as a regulated investment company that distributes exempt-interest
dividends. It intends to continue to qualify as long as qualification is in the
best interests of its shareholders, because 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 net tax-exempt interest income. Exempt-interest dividends
are 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
19
<PAGE>
will be the same for all shareholders receiving dividends during the year.
Exempt-interest dividends are excludable from the Fund's shareholders gross
income under Section 103(a) of the Code although the amount of that interest
must be disclosed on the shareholders Federal income tax returns. A shareholder
should consult its tax advisor 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. If a shareholder receives an exempt-interest dividend with respect
to any share and such share has been held for six months or less, then any loss
on the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend. The Code provides that interest on
indebtedness incurred or continued to purchase or carry tax exempt securities,
such as shares of the Fund, is not deductible. Therefore, among other
consequences, a certain portion of interest on margin indebtedness may not be
deductible during the period an investor holds shares of the Fund. 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 and Railroad Retirement benefits includable in gross income. 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 qualified
Section 501(c)(3) bonds) issued after August 7, 1986 less any deductions (not
allowable in competing Federal income tax) which would have been allowable if
such interest were includable in gross income. Thus, this provision will apply
to any exempt-interest dividends from the Fund's assets attributable to any
private activity bonds acquired by the Fund. Corporations are required to
increase their alternative minimum taxable income 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 provision). In addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years are subject to a
minimum tax on excess passive investment income which includes tax-exempt
interest.
Although it is not intended, it is possible that the Fund may realize marked
discount income, short-term or long-term capital gains or losses from its
portfolio transactions. The Fund may also realize market discount income,
short-term or long-term capital gains upon the maturity or disposition of
securities acquired at discounts resulting from market fluctuations. Accrued
marked discount income, short-term capital gains will be taxable to shareholders
as ordinary income when they are distributed. Any net capital gains (the excess
of net realized long-term capital gain over net realized short-term capital
loss) will be distributed annually to the Fund's shareholders. The Fund will
have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held Fund shares. However, Fund
shareholders who at the time of such a net capital gain distribution have not
held their Fund shares for more than six 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 such net capital gain distribution. Distributions
of net capital gain will be designated as a capital gain dividend in a written
notice mailed to the Fund's shareholders not later than 60 days after the close
of the Fund's taxable year. Capital gains realized by corporations are generally
taxed at the same rate as ordinary income. However, long-term capital gains are
taxable at a maximum rate of 20% to non-corporate shareholders. Corresponding
maximum rate and holding period rules apply with respect to capital gains
realized by a holder on the disposition of shares.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
net long-term capital gain over net short-term capital loss) for each taxable
year. These distributions will be taxable to shareholders ordinary income. The
Fund will be subject to Federal income tax on any undistributed investment
company taxable 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 during the calendar year at
least 98% of its ordinary income determined on a calendar year basis and 98% of
its capital gain net income (generally determined on a October year end), the
Fund will be subject to a 4% excise tax on the excess of such amounts over the
amounts actually distributed.
If a shareholder (other than a corporation) fails to provide the Fund with a
current taxpayer identification number, the Fund is generally required to
withhold 31% of taxable interest or dividend payments proceeds from the
redemption of shares of the Fund.
Dividends and distributions to shareholders will be treated in the same manner
for Federal and New York income tax purposes whether received in cash or
reinvested in additional shares of the Fund.
With respect to the variable rate demand instruments, including Participation
Certificates therein, the Fund has obtained and is relying on the opinion of
Battle Fowler LLP, counsel to the Fund, that it will be treated for Federal
income tax purposes as the owner of an interest in the underlying Municipal
Obligations and the interest thereon will be exempt from regular Federal income
taxes to the Fund and its shareholders to the same extent as interest on the
underlying municipal obligations. Battle Fowler LLP 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
20
<PAGE>
a result could reach a conclusion different from that reached by counsel.
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and
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 the interest earned on 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.
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 objective and policies and
consider changes in the structure.
The exemption for Federal income tax purposes of dividends derived from interest
on Municipal Obligations does not necessary 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.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. 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 ad dealers pursuant to
state law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. 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 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). This is multiplied by (365/7) with the resulting
annualized figure carried to the nearest hundredth of one percent. For purposes
of the foregoing computation, the determination of the net change in account
value during the seven-day period reflects (i) dividends declared on the
original share and on any additional shares, including the value of any
additional shares purchased with dividends paid on the original share, and (ii)
fees charged to all shareholder accounts. Realized capital gains or losses and
unrealized appreciation or depreciation of the Fund's portfolio securities are
not included in the computation. Therefore, annualized yields may be different
from effective yields quoted for the same period.
The Fund's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for
21
<PAGE>
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 tax equivalent current yield. The
tax equivalent yield for each Class is computed based upon a 30-day (or one
month) period ended on the date of the most recent balance sheet included in
this Statement of Additional Information. It is 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 quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
The Fund may from time to time advertise a tax equivalent effective 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. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt. See "Taxable Equivalent
Yield Table" herein.
The Fund's Class A shares yield for the seven-day period ended April 30, 1999
was 2.88% which is equivalent to an effective yield of 2.92%. The Fund's Class B
shares yield for the seven-day period ended April 30, 1999 was 3.09% which is
equivalent to an effective yield of 3.13%. There is no seven-day yield available
for the Evergreen and Victory shares since these shares were not yet in
existence on April 30, 1999.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended April
30, 1999 and the report therein 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.
22
<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. ( c ) 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 (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) 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 to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
- -----------------------------------
* As described by the rating agencies.
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELD TABLE
- ----------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- ----------------------------------------------------------------------------------------------------------------------
Single $0- $25,001 - $25,751 - $50,001- $62,451- $130,251- $283,151
Return 25,000 25,750 50,000 62,451 130,250 283,150 and over
- --------------- ------------ ------------- -------------- --------------- --------------- ---------------- -----------
Joint $0- $43,051- $45,001 - $90,001- $104,051- $158,551- $283,151-
Return 43,050 45,000 90,000 104,050 158,550 $283,150 and over
- ----------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- ----------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate 15.00% 15.00% 28.00% 28.00% 28.00% 31.00% 36.00% 39.60%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------ ------------ -----------
State
Tax Rate 6.850% 6.850% 6.850% 6.850% 6.850% 6.850% 6.850% 6.850%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------ ------------ -----------
City Tax Rate 3.258% 3.308% 3.258% 3.308% 3.375% 3.375% 3.375% 3.375%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------ ------------ -----------
Combined
Marginal 23.591% 23.634% 35.277% 35.313% 35.362% 38.055% 42.544% 45.776%
Tax Rate
- ----------------------------------------------------------------------------------------------------------------------
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
- ------------------ ----------------------------------------------------------------------------------------------------
2.00% 2.62% 2.62% 3.09% 3.09% 3.09% 3.23% 3.48% 3.69%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
2.50% 3.27% 3.27% 3.86% 3.86% 3.87% 4.04% 4.35% 4.61%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
3.00% 3.93% 3.93% 4.64% 4.64% 4.64% 4.84% 5.22% 5.53%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
3.50% 4.58% 4.58% 5.41% 5.41% 5.41% 5.65% 6.09% 6.45%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
4.00% 5.24% 5.24% 6.18% 6.18% 6.19% 6.46% 6.96% 7.38%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
4.50% 5.89% 5.89% 6.95% 6.96% 6.96% 7.26% 7.83% 8.30%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
5.00% 6.54% 6.55% 7.73% 7.73% 7.74% 8.07% 8.70% 9.22%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
5.50% 7.20% 7.20% 8.50% 8.50% 8.51% 8.88% 9.57% 10.16%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
6.00% 7.85% 7.86% 9.27% 9.28% 9.28% 9.69% 10,44% 11.07%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
6.50% 8.51% 8.51% 10.04% 10.05% 10.06% 10.49% 11.31% 11.99%
- --------------- ----------- ----------- ------------ ----------- --------------- ------------- ------------ -----------
7.00% 9.16% 9.17% 10.82% 10.82% 10.83% 11.30% 12.18% 12.91%
</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, to section three, to see the equivalent taxable
yields for each of the tax free income yields given.
- --------------------------------------------------------------------------------
-24-
<PAGE>
PART C
OTHER INFORMATION
*(a) Articles of Incorporation, as amended, of the Registrant.
*(b) By-Laws of the Registrant.
**(c) Form of certificate for shares of Common Stock, par value $.001 per
share, of the Registrant.
++(d) Form of Investment Management Contract between the Registrant and
Reich & Tang Asset Management L.P.
++(e) Form of Distribution Agreement between the Registrant and Reich &
Tang Distributors, Inc.
(f) Not applicable.
***(g) Custody Agreement between the Registrant and Investors Fiduciary
Trust Company.
+(h) Administrative Services Contract between Registrant and Reich & Tang
Asset Management L.P.
**(i) Opinion of 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 headings "Federal
Income Taxes" and "Counsel and Auditors" in the Prospectus.
** (j) Consent of Independent Auditors.
(k) Audited Financial Statements, for fiscal year ended April 30, 1999.
**(l) Written assurance of Reich & Tang, Inc. that its purchase of shares
of the registrant was for investment purposes without any present
intention of redeeming or reselling.
(m) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
(m.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 with respect to the Evergreen
Class of Shares.
(m.2) Form of Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 with respect to the Victory Class
of Shares.
***(m.3) Shareholder Servicing Agreement between the Registrant and Reich &
Tang Distributors, Inc.
(m.4) Form of Shareholder Servicing Agreement between the Registrant and
Reich & Tang Distributors, Inc. with respect to the Evergreen Class of
Shares.
(m.5) Form of Shareholder Servicing Agreement between the Registrant and
Reich & Tang Distributors, Inc. with respect to the Victory Class of
Shares.
***(m.6) Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. filed herein as Exhibit e.
- -----------------
+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement
on May 8, 1984 and incorporated herein by reference.
++ Filed with Post-Effective Amendment No. 9 to said Registration Statement
on August 30, 1990 and incorporated herein by reference.
* Filed with Post-Effective Amendment No. 3 to said Registration Statement
on August 25, 1986 and incorporated herein by reference.
** Filed with Post-Effective Amendment No. 2 to said Registration Statement
on July 13, 1985 and incorporated herein by reference.
*** Filed with Post-Effective Amendment No. 17 to said Registration Statement
on June 30, 1984 and incorporated herein by reference.
C-1
<PAGE>
(m.7) Form of Distribution Agreement between the Registrant and Reich &
Tang Distributors, Inc. with respect to the Evergreen Class of Shares.
(m.8) Form of Distribution Agreement between the Registrant and Reich &
Tang Distributors, Inc. with respect to the Victory Class of Shares.
(n) Financial Data Schedule (for Edgar filing only).
(o) Form of Amendment No. 1 to Rule 18f-3 Multi-Class Plan.
*(p) Power of Attorney of Principal Officers and Directors of New York
Daily Tax Free Income Fund, Inc.
- -----------------
+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement
on May 8, 1984 and incorporated herein by reference.
++ Filed with Post-Effective Amendment No. 9 to said Registration Statement
on August 30, 1990 and incorporated herein by reference.
* Filed with Post-Effective Amendment No. 3 to said Registration Statement
on August 25, 1986 and incorporated herein by reference.
** Filed with Post-Effective Amendment No. 2 to said Registration Statement
on July 13, 1985 and incorporated herein by reference.
*** Filed with Post-Effective Amendment No. 17 to said Registration Statement
on June 30, 1984 and incorporated herein by reference.
C-2
Item 24. Persons Controlled by or under common Control with the Fund.
None.
Item 25. Indemnification.
Registrant incorporates herein by reference the response to Item 27
of Pre-Effective Amendment No. 2 of this Registration Statement filed with the
Commission on July 3, 1985.
Item 26. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. and Thornburg
Management Co. under the caption "Management of the Fund" in the Prospectus and
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 advisor, Reich & Tang Asset Management
L.P., is a registered investment advisor. 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., Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, North Carolina Daily Municipal Income
Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc., registered investment companies
whose addresses are 600 Fifth Avenue, New York, New York 10020, which invest
principally in money market instruments; Delafield Fund, Inc. and Reich & Tang
Equity Fund, Inc., registered investment companies whose addresses are 600 Fifth
Avenue, New York, New York 10020, which invest principally in equity securities.
In addition, Reich & Tang Asset Management L.P. is the sole general partner of
Alpha Associates L.P., August Associates, Reich & Tang Minutus L.P., Reich &
Tang Minutus II L.P. Reich and 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 NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of NEIC's subsidiaries
other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay Advisors, L.P.
("Back Bay"), where he serves as a Director, and Chairman of the Board of
Trustees of all of the mutual funds in the TNE Fund Group and the Zenith Funds.
G. Neil Ryland, Executive Vice President, Treasurer and Chief Financial Officer
NEIC since July 1993, Executive Vice President and Chief Financial Officer of
The Boston Company, a diversified financial services company, from March 1989
until July 1993, from September 1985 to December 1988, Mr. Ryland was employed
by Kenner Parker Toys, Inc. as Senior Vice President and Chief Financial
Officer. Edward N. Wadsworth, Executive Vice President, General Counsel, Clerk
and Secretary of NEIC since December 1989, Senior Vice President and Associate
General Counsel of The New England from 1984 until December 1992, and Secretary
of Westpeak and Draycott and the Treasurer of NEIC. Lorraine C. Hysler has been
Secretary of Reich & Tang Asset Management Inc. since July 1994, Assistant
Secretary of NEIC since September 1993, Vice President of the Mutual Funds Group
of New England Investment Companies, L.P. from September 1993 until July 1994,
and Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler
joined Reich & Tang, Inc. in May 1977 and served as Secretary from April 1987
until September 1993. Richard E. Smith, III has been a Director of Reich & Tang
Asset Management Inc. since July 1994, President and Chief Operating Officer of
the Capital Management Group of New England Investment Companies, L.P. from May
1994 until July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994, Executive Vice President and Director
of Rhode Island Hospital Trust from March 1993 to May 1994, President, Chief
Executive Officer and Director of USF&G Review Management Corp. from January
1988 until September 1992. Steven W. Duff has been a Director of Reich & Tang
C-3
<PAGE>
Asset Management Inc. since October 1994, President and Chief Executive Officer
of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of 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., Short Term Income Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc., President and Trustee of Florida Daily Municipal
Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., Executive Vice President of
Reich & Tang Equity Fund, Inc. Bernadette N. Finn has been Vice President -
Compliance of Reich & Tang Asset Management Inc. since July 1994, Vice President
of Mutual Funds division of Reich & Tang Asset Management Inc. 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., Daily Tax Free Income Fund,
Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc., a Vice President and Secretary of
Delafield Fund, Inc., Reich & Tang Equity Fund, Inc. and Short Term Income Fund,
Inc. Richard De Sanctis has been Vice President and Treasurer of Reich & Tang
Asset Management Inc. since July 1994, Assistant Treasurer of NEIC since
September 1993 and Treasurer of the Mutual Funds Group of New England Investment
Companies, L.P. from September 1993 until July 1994. Mr De Sanctis joined Reich
& Tang, Inc. in December 1990 and served as Controller of Reich & Tang, Inc.,
from January 1991 to September 1993. Mr De Sanctis was Vice President and
Treasurer of Cortland Financial Group, Inc. and Vice President of Cortland
Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer
of Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Tax Exempt Proceeds Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily
Municipal Income Fund, Inc. and is Vice President and Treasurer of Cortland
Trust, Inc.
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc. is also distributor for California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, 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.,
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.
C-4
<PAGE>
(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
With Positions and Offices
Name the Distributor With 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
Peter DeMarco Executive Vice President 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 28. 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 600 Fifth
Avenue, New York, New York 10020, the Registrant's Manager at Investors
Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City, Missouri, 64105,
the Registrant's custodian and at Reich & Tang Services L.P., 600 Fifth Avenue,
New York, New York 10020, the Registrant's Transfer Agent and Dividend
Disbursing Agent.
Item 29. Management Services.
Not applicable
Item 30. Undertakings.
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to its Registration Statement pursuant to Rule 485(a) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 29th day of
June, 1999.
NEW YORK DAILY TAX FREE INCOME FUND, INC.
By:
Steven W. Duff
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
(1) Principal Executive Officer
/s/Steven W. Duff
Steven W. Duff President and Director June 29, 1999
(2) Principal Financial and
Accounting Officer
/s/Richard De Sanctis
Richard De Sanctis Treasurer June 29, 1999
(3) Majority of The Board of Directors
Edward A. Kuczmarski (Director )
Caroline E. Newell (Director )
John P. Steines (Director )
By: /s/Bernadette N. Finn
Bernadette N. Finn
Attorney-in-Fact June 29, 1999
McGLADREY & PULLEN, L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated May 25, 1999, on the financial
statements of New York Daily Tax Free Income Fund, Inc. referred to therein,
which is incorporated by reference in Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A, File No. 2-89264 , of New York Daily Tax
Free Income Fund, Inc. 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 captions "Counsel and Auditors" and "Financial
Statements".
/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
June 29, 1999
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
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<CIK> 0000740372
<NAME> New York Daily Tax Free Income Fund, Inc.
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<NUMBER> 1
<NAME> Class A
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<PERIOD-END> APR-30-1999
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<PER-SHARE-NAV-BEGIN> 1.00
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<EXPENSE-RATIO> 0.85
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<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
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statements.
</LEGEND>
<CIK> 0000740372
<NAME> New York Daily Tax Free Income Fund, Inc.
<SERIES>
<NUMBER> 2
<NAME> Class B
<S> <C>
<PERIOD-TYPE> 12-mos
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<PERIOD-START> MAY-01-1998
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NEW YORK DAILY TAX FREE INCOME FUND, INC.
EVERGREEN CLASS OF SHARES
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"), on behalf of the
Evergreen Class of Shares of 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 Evergreen Class of Shares. Pursuant to the
Distribution Agreement with respect to the Evergreen Class of Shares, the
Distributor, as agent of the Fund, will solicit orders for the purchase of the
Fund's Evergreen Class of Shares, provided that any subscriptions and orders for
the purchase of the Fund's Evergreen Class of 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 Evergreen Class of Shares of
the Fund, in a form satisfactory to the Fund's Board of Directors, which
provides that the Distributor will be
<PAGE>
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.
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 Evergreen Class 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 Evergreen Class of 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
Evergreen Class of Shares.
2
<PAGE>
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 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 Evergreen Class of 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
3
<PAGE>
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, 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 Evergreen Class of Shares of 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)'
4
<PAGE>
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 in clause (i) of paragraph 7 hereof (with each class of the Fund voting
separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
5
NEW YORK DAILY TAX FREE INCOME FUND, INC.
VICTORY CLASS OF SHARES
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"), on behalf of the Victory
Class of Shares of 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 Victory Class of Shares. Pursuant to the
Distribution Agreement with respect to the Victory Class of Shares, the
Distributor, as agent of the Fund, will solicit orders for the purchase of the
Fund's Victory Class of Shares, provided that any subscriptions and orders for
the purchase of the Fund's Victory Class of 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 Victory Class of Shares of
the Fund, in a form satisfactory to the Fund's Board of Directors, which
provides that the Distributor will be paid a
<PAGE>
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.
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 Victory Class 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 Victory Class of 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
Victory Class of Shares.
2
<PAGE>
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 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 Victory Class of 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
3
<PAGE>
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, 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 Victory Class of Shares 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)
4
<PAGE>
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 in clause (i) of paragraph 7 hereof (with each class of the Fund voting
separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
5
SHAREHOLDER SERVICING
AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
EVERGREEN CLASS OF SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
, 1999
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 Evergreen Class of 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 Evergreen Class of 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
<PAGE>
Shareholder Services to the Evergreen Class of Shareholders of the Fund.
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 Evergreen
Class of 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
2
<PAGE>
or in any agreement related to the Plan, or (ii) by vote of a majority
of the outstanding voting securities of the Fund's Evergreen Class of 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.
EVERGREEN CLASS OF SHARES
By:
ACCEPTED: , 1999
REICH & TANG DISTRIBUTORS, INC.
By:
3
DISTRIBUTION AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
(the "Fund")
VICTORY SHARES
600 Fifth Avenue
New York, New York 10020
________________, 1999
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
<PAGE>
other distributions or any other offering by us of securities to our
stockholders.
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 Victory Class of 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 with respect to the Victory Class of
Shares, you may make payments to Participating Organizations for performing
shareholder servicing and related administrative functions with respect to the
Victory Class of 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 Victory Class of 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").
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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.
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
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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 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
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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 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
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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:
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.
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or
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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.
VICTORY CLASS OF SHARES
By
Accepted: ___________________, 1999
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________
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SHAREHOLDER SERVICING
AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
VICTORY CLASS OF SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
, 1999
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 Victory Class of 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 Victory Class of 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 Victory
Class of Shareholders of the
<PAGE>
Fund. 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 Victory Class
of 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
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a majority of the outstanding voting securities of the Fund's Victory Class of
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.
VICTORY CLASS OF SHARES
By:
ACCEPTED: , 1999
REICH & TANG DISTRIBUTORS, INC.
By:
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DISTRIBUTION AGREEMENT
NEW YORK DAILY TAX FREE INCOME FUND, INC.
(the "Fund")
EVERGREEN SHARES
600 Fifth Avenue
New York, New York 10020
________________, 1999
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
<PAGE>
other distributions or any other offering by us of securities to our
stockholders.
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 Evergreen Class of 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 with respect to the Evergreen Class of
Shares you may make payments to Participating Organizations for performing
shareholder servicing and related administrative functions with respect to the
Evergreen Class of 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 Evergreen Class of 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").
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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.
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
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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 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
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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 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
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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:
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.
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or
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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.
EVERGREEN CLASS OF SHARES
By
Accepted: ___________________, 1999
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________
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NEW YORK DAILY TAX FREE INCOME FUND, INC.
AMENDMENT NO. 1
TO
RULE 18f-3 MULTI-CLASS PLAN
Dated: August ___, 1999
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of New York Daily Tax
Free Income Fund, Inc. (the "Fund"). In addition, this Rule 18f-3 Multi-Class
Plan (the "Plan") sets forth the shareholder servicing arrangements,
distribution arrangements, exchange privileges and other shareholder services of
each class of shares of the Fund.
The Fund is a non-diversified, open-end, management investment
company registered under the 1940 Act and the shares of which are registered on
Form N-1A under the Securities Act of 1933, as amended and the 1940 Act. Upon
the effective date of Amendment No. 1 to this Plan, the Fund hereby elects to
create two additional classes of shares that will be offered by the Fund: (i)
the Evergreen Class of shares for the purposes of accommodating clients of
Evergreen Funds, and (ii) the Victory Class of shares for the purpose of
accomodating clients of Key Trust.
These new classes of shares are being offered in addition to
the multiple classes of shares already offered pursuant to the provisions of
Rule 18f-3 and this Plan. This Plan does not make any material changes in the
class arrangements and fee and expenses allocations previously approved by the
Board of Directors of the Fund pursuant to the existing Exemptive Order issued
by the Securities and Exchange Commission to California Daily Tax Free Income
Fund, Inc., et. al. under Section 6(c) of the 1940 Act on November 18, 1992
(1940 Act Release No. 812-7852), except to permit the issuance of additional
classes of shares.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Fund shall
allocate to each class (i) any fees and expenses incurred by the Fund in
connection with the distribution of each class of shares under a distribution
and service plan adopted for such class of shares pursuant to Rule 12b-1, and
(ii) any fees and expenses incurred by the Fund under a shareholder servicing
plan in connection with the provision of shareholder services to the holders of
each class of shares. In addition, pursuant to Rule 18f-3, the Fund may allocate
the following fees and expenses to a particular class of shares:
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(i) transfer agent fees and related expenses
identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports, prospectuses, reports,
and proxies to current shareholders of such
class of shares or to regulatory agencies
with respect to such class of shares;
(iii) blue sky registration or qualification fees
incurred by such class of shares;
(iv) Securities and Exchange Commission
registration fees incurred by such class of
shares;
(v) the expense of administrative personnel and
services (including, but not limited to,
those of a fund accountant, [custodian]1 or
dividend paying agent charged with
calculating net asset values or determining
or paying dividends) as required to support
the shareholders of such class of shares;
(vi) litigation or other legal expenses relating
solely to such class of shares;
(vii) fees of the Fund's Directors incurred as a
result of issues relating to such class of
shares; and
(viii) independent accountants' fees relating
solely to such class of shares.
The initial determination of the class expenses that will be
allocated by the Fund to a particular class of shares and any subsequent changes
thereto will be reviewed by the Board of Directors and approved by a vote of the
Directors of the Company, including a majority of the Directors who are not
interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular class pursuant to this
Plan shall be allocated to each class
____________________
1. Rule 18f-3 requires that services related to management of the portfolio's
assets, such as custodial fees, be borne by the Fund and not by class.
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of the Fund on the basis of the net assets of that class in relation to the
total net assets of the Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution and
shareholder servicing fees, exchange privilege and other shareholder services
applicable to each class of shares of the Fund. Additional details regarding
such fees and services, as well as any other services offered to shareholders,
are set forth in the Fund's current Prospectus and Statement of Additional
Information.
A. Class A Shares
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fee: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: 0.20%
per annum of the average daily net assets of
the Class.
6. Exchange Privilege: No fee; Subject to
restrictions and conditions set forth in the
Prospectus, Class A shares may be exchanged
for Class A shares of any other Fund in the
Reich & Tang Fund Complex.
7. Conversion Features: None.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
B. Class B Shares
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fee: None.
4. Rule 12b-1 Distribution Fees: None.
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5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Exchange Privilege: No fee; Subject to
restrictions and conditions set forth in the
Prospectus, Class B shares may be exchanged
for Class B shares of any other Fund in the
Reich & Tang Fund Complex.
7. Conversion Features: None.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
C. Evergreen Class (created for all funds that are
purchased by clients of Evergreen Funds)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fee: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: 0.20%
per annum of the average daily net assets of
the Class.
6. Exchange Privilege: Subject to
restrictions and conditions set forth
in the Prospectus, Evergreen shares may be
exchanged for Evergreen shares of any
other Fund.
7. Conversion Features: None.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
D. Victory Class (created for all funds that are
purcahsed by clients of Key Trust)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fee: None.
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4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: 0.20%
per annum of the average daily net assets of
the Class.
6. Exchange Privilege: No fee; Subject to
restrictions and conditions set forth in the
Prospectus, Victory shares may be exchanged
for shares of The Victory Funds.
7. Conversion Features: None.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
IV. Board Review.
The Board of Directors of the Fund shall review this Plan as
frequently as it deems necessary. Prior to any material amendments to this Plan,
the Fund's Board of Directors, including a majority of the Directors that are
not interested persons of the Fund, shall find that the Plan, as proposed to be
amended (including any proposed amendments to the method of allocating class
and/or fund expenses, is in the best interest of each class of shares of the
Fund individually and the Fund as a whole. In considering whether to approve any
proposed amendments(s) to the Plan, the Directors of the Fund shall request and
evaluate such information as they consider reasonably necessary to evaluate the
proposed amendments(s) to the Plan.
In making its determination to approve Amendment No. 1 to the
Plan, the Board has focused on, among other things, the relationship between or
among the classes and has examined potential conflicts of interest between
classes regarding the allocation of fees, services, waivers and reimbursement of
expenses, voting rights and exchange privileges. The Board has evaluated the
level of services provided to each class and the cost of those services to
ensure that the services are appropriate and the allocation of expenses is
reasonable. In approving any subsequent amendments to this Plan, the Board shall
focus on and evaluate such factors as well as any others deemed necessary by the
Board.
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