As filed with the Securities and Exchange Commission on July 28, 1995
Securities Act File No. 2-94935
Investment Company File No. 811-4179
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. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 20
CORTLAND TRUST, INC.
(Exact Name of Registrant as Specified in Charter)
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5220
BERNADETTE N. FINN
c/o Cortland Trust, Inc.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: Jules Buchwald, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, N.Y. 10022
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on (August 1) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940, as amended, and Rule 24f-2 thereunder, and the Registrant filed a
Rule 24f-2 Notice for its fiscal year ended March 31, 1995 on May 26, 1995.
<PAGE>
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
[as required by Rule 404 (c)]
PART A Location in Prospectus
Item No. (Caption)
CORTLAND TRUST, INC. PROSPECTUS
Cortland General Money Market Fund
U.S. Government Fund
Municipal Money Market Fund
1. Cover Page Cover Page
2. Synopsis Table of Fees and
Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Programs;
General Information
5. Management of the Fund Management
5a. Management Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities Dividends and Taxes;
General Information
7. Purchase of Securities Being Offered How to Purchase
Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART A Location in Prospectus
Item No. (Caption)
PILGRIM AMERICA GENERAL MONEY MARKET SHARES
class of the Cortland General Money Market Fund
1. Cover Page Cover Page
2. Synopsis Summary; Table of
Fees and Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Program;
General Information
5. Management of the Fund Management
5a. Management Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities Distribution and Taxes;
General Information
7. Purchase of Securities Being Offered Shareholder's Guide -
How to Buy Pilgrim
America Shares
8. Redemption or Repurchase Shareholder's Guide -
How to Redeem Pilgrim
America Shares
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B Caption in Statement of
Item No. Additional Information
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History General Information
about the Company
13. Investment Objectives and Policies Investment Programs
and Restrictions
14. Management of the Fund Manager and
Investment Advisor
15. Control Persons and Holder of Securities Distributor and
Plans of Distribution
16. Investment Advisory and Other Services Manager and
Investment Advisor
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities General Information
about the Company
19. Purchase, Redemption and Pricing
of Securities Being Offered Share Purchases and
Redemptions
20. Tax Status Dividends and Tax
Matters
21. Underwriters Distributor and
Plans of Distribution
22. Calculation of Performance Data Yield Information
23. Financial Statements Independent
Auditor's Report;
Financial Statements
<PAGE>
===============================================================================
CORTLAND 600 FIFTH AVENUE
TRUST, INC. NEW YORK, NY 10020
PROSPECTUS (212) 830-5280
===============================================================================
August 1, 1995
Cortland Trust, Inc. ("Cortland") is an open-end, diversified money market fund
designed as a cash management service for institutional customers and
individuals. Cortland consists of three portfolios (collectively the "Funds").
The Cortland General Money Market Fund and the U.S. Government Fund seek to
provide as high a level of current income as is consistent with the preservation
of capital and liquidity. The Municipal Money Market Fund seeks to provide as
high a level of current income exempt from federal income taxes as is consistent
with the preservation of capital and liquidity. Each Fund invests in high
quality debt obligations with relatively short maturities. Each Fund seeks to
achieve its objective by investing in different types of securities. Investors
may purchase shares of any or all of Cortland's three Funds:
CORTLAND GENERAL MONEY MARKET FUND ("CORTLAND GENERAL FUND"): a
portfolio of securities and instruments issued or guaranteed by the
United States Government, its agencies or instrumentalities, bank
instruments and corporate commercial instruments.
U.S. GOVERNMENT FUND ("GOVERNMENT FUND"): a portfolio of securities
and instruments issued or backed by the full faith and credit of the
United States Government and repurchase agreements collateralized by
U.S. Government obligations.
MUNICIPAL MONEY MARKET FUND ("MUNICIPAL FUND"): a portfolio of
obligations issued by states, territories and possessions of the
United States and their political subdivisions, public authorities and
other entities authorized to issue debt, the interest on which is
exempt from federal income taxes.
SHARES OF THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT EACH FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE OR THAT EACH FUND'S INVESTMENT
OBJECTIVE WILL BE ACHIEVED. SEE "INVESTMENT PROGRAMS."
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
Shares of the Funds are part of an integrated cash management service, the
Convenience Account. A description of the Convenience Account features and
certain information concerning the component parts of the Convenience Account
program may be obtained from Reich & Tang Distributors L.P. at the address set
forth below.
This Prospectus sets forth basic information that investors should know
about Cortland prior to investing and should be read and retained for future
reference. A Statement of Additional Information relating to Cortland dated
August 1, 1995 has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference. It is available upon request and without
charge by writing to Reich & Tang Distributors L.P., 600 Fifth Avenue, New York,
New York 10020.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_______________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES
<S> <C> <C> <C>
Cortland
General Government Municipal
Fund Fund Fund
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase (as a percentage of
offering price)............................................... None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................ None None None
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, as applicable)........................ None None None
Redemption Fees (as a percentage of amount redeemed, if
applicable)................................................... None None None
Exchange Fee....................................................... None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after fee waiver)................................. 0.76% 0.77% 0.78%
12b-1 Fees (after fee waiver)...................................... 0.25% 0.25% 0.19%
Other Expenses..................................................... 0.02% 0.02% 0.02%
Total Fund Operating Expenses (after fee waivers).................. 1.03% 1.04% 0.99%
Example
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return:
1 year............................................................. $ 11 $ 11 $ 10
3 years............................................................ $ 33 $ 33 $ 32
5 years............................................................ $ 57 $ 57 $ 55
10 years........................................................... $ 126 $ 127 $ 121
The above table of fees and expenses is provided to assist you in understanding
the various costs and expenses that you will bear directly and indirectly. (For
more complete descriptions of the various costs and expenses, including fees
waived by Cortland's Manager, see "Management" and the Financial Statements
included at the end of Cortland's Statement of Additional Information.) The
expenses and example appearing in the preceding table have been restated to
reflect current fees (including fee waivers) and operating expenses. Absent fees
waived by Cortland's Manager and Distributor, Total Fund Operating Expenses
would be 1.05% of the General Fund's average net assets, 1.05% of the Government
Fund's average net assets and 1.05% of the Municipal Funds' average net assets.
Such fee waivers may be rescinded at any time without notice to investors. THE
EXAMPLE SHOWN IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
_______________________________________________________________________________
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
The following information has been audited by Ernst & Young LLP, Cortland's
independent auditor's, whose report thereon for each of the five years in the
period ended March 31, 1995 appears in the Statement of Additional Information.
The data applies to one share outstanding from the commencement of operations
for each Fund to March 31, 1986, and for the fiscal years ended March 31, 1987,
1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995. Further financial data and
related notes are included in the Statement of Additional Information.
Cortland General Money Market Fund
For the Year Ended March 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $.9999 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------ ------- ------ ------ ------- -------
Income from investment operations:
Net investment income.............. 0.0384 0.0250 0.0284 0.0470 0.0706 0.0809 0.0755 0.0617 0.0567 0.0644
Net realized and unrealized
gain/(loss) on investments... (0.0026) 0.0001 -- -- 0.0001 (0.0001) -- 0.0001 -- --
--------- -------- ----- ---- ------- ------- ---- ------- ---- ------
Total from investment operations... 0.0358 0.0251 0.0284 0.0470 0.0707 0.0808 0.0755 0.0618 0.0567 0.0644
Less distributions:
Dividends from net investment income (0.0384) (0.0250) (0.0284) (0.0470) (0.0706) (0.0809)(0.0755)(0.0617)(0.0567)(0.0644)
Dividends from net realized gain
on investments.............. -- (0.0001) -- -- -- -- -- 0.0001 -- --
----- -------- ---- ---- ---- ---- ---- ------- ---- ----
Total distributions................ (0.0384) (0.0251) (0.0284)(0.0470) (0.0706) (0.0809)(0.0755) (0.0618) (0.0567) (0.0644)
Net asset value, end of period $0.9974 $1.0000 $1.0000 $1.0000 $1.0000 $0.9999 $1.0000 $1.0000 $1.0000 $1.0000
Total Return....................... 3.91%+ 2.53% 2.88% 4.81% 7.42% 8.42% 7.55% 6.22% 5.67% 6.44%
Ratios/Supplemental Data
Net assets,end of year(000's omitted) $993,854 $926,400 $904,735 $906,662 $805,993 $970,560 $706,985 $420,063 $261,055 $147,106
Ratios to average net assets:
Expenses**......................... 1.03% 1.02% 1.00% 1.01% 1.01% 1.00% 1.00% 1.00% 1.00% 0.98%
Net investment income.............. 3.84% 2.48% 2.84% 4.67% 7.06% 8.00% 7.40% 6.04% 5.48% 7.06%
</TABLE>
_________________
* For the period of May 9, 1985, commencement of operations, to March 31,
1986.
* * Management and distribution support and service fees of .027% of average
net assets were waived for the year ended March 31, 1986. For the years
ended March 31, 1995 to 1990, Management and distribution support and
service fees of .02%, .02%, .04%, .04%, .04% and .04% of average net
assets, respectively, were waived.
+ Includes the effect of a capital contribution from the Manager.
Without a capital contribution the net realized loss on investments would
have been $.0070 per share and the total return would have been 2.89%.
3
<PAGE>
SELECTED FINANCIAL INFORMATION
The following information has been audited by Ernst & Young LLP, Cortland's
independent auditor's, whose report thereon for each of the five years in the
period ended March 31, 1995 appears in the Statement of Additional
Information. The data applies to one share outstanding from the commencement
of operations for each Fund to March 31, 1986, and for the fiscal years ended
March 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995. Further
financial data and related notes are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
U.S. Government Fund
For the Year Ended March 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $ 0.9998 $0.9995 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income.............. 0.0377 0.0250 0.0290 0.0466 0.0676 0.0775 0.0717 0.0559 0.0518 0.0513
Net realized and unrealized
gain/(loss) on investments... (0.0031) 0.0002 -- 0.0004 0.0002 0.0003 (0.0005) 0.0009 0.0010 (0.0008)
------- -------- ----- ------- ------- ------ ------- ------- ------ ------
Total from investment operations... 0.0346 0.0252 0.0290 0.0470 0.0678 0.0778 0.0712 0.0568 0.0528 0.0521
Less distributions:
Dividends from net investment income (0.0377) (0.0250) (0.0290) (0.0466) (0.0676)(0.0775)(0.0717) (0.0559) (0.0518) (0.0513)
Dividends from net realized gain
on investments.............. -- (0.0002) -- (0.0004) -- -- -- (0.0009) (0.0010) (0.0008)
----- ------- ---- ------- ---- ---- ----- ------ ----- ------
Total distributions................ (0.0377) (0.0252) (0.0290) (0.0470) (0.0676) (0.0775) (0.0717) (0.0568) (0.0528) (0.0521)
Net asset value, end of period..... $0.9969 $1.0000 $1.0000 $1.0000 $1.0000 $0.9998 $0.9995 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return....................... 3.84%+ 2.55% 2.94% 4.77% 6.94% 8.05% 7.13% 5.71% 5.28% 5.21%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $218,307 $234,082 $242,199 $230,778 $188,419 $141,738 $84,014 $54,129 $47,721 $33,094
Ratios to average net assets:
Expenses**......................... 1.04% 1.04% 1.01% 1.00% 1.01% 1.01% 1.00% 1.01% 1.03% 1.03%
Net investment income.............. 3.74% 2.47% 2.89% 4.63% 6.66% 7.68% 6.95% 5.49% 5.02% 6.32%
___________________
* For the period of May 9, 1985, commencement of operations, to March 31, 1986.
** Management and distribution support and services fees of .003% of average net
assets were waived for the year ended March 31, 1986. For the year ended March
31, 1995 to 1990, Management and distribution support and service fees of .01%,
.01%, .04%, .045%, .045% and .045% of average net assets, respectively, were
waived.
+ Includes the effect of a capital contribution from the Manager. Without a
capital contribution the net realized loss on investments would have been $.0094
per share and the total return would have been 2.81%.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
The following information has been audited by Ernst & Young LLP, Cortland's
independent auditor's, whose report thereon for each of the five years in the
period ended March 31, 1995 appears in the Statement of Additional
Information. The data applies to one share outstanding from the commencement
of operations for each Fund to March 31, 1986, and for the fiscal years ended
March 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995. Further
financial data and related notes are included in the Statement of Additional
Information.
Municipal Money Market Fund
For the Year Ended March 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $0.9999 $0.9999 $1.0000 $0.9999 $0.9999 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income.............. 0.0255 0.0180 0.0224 0.0374 0.0502 0.0556 0.0520 0.0414 0.0394 0.0338
Net realized and unrealized
gain/(loss) on investments... -- -- (0.0001) 0.0001 -- (0.0001) -- -- -- --
----- ----- ------ ------- ----- ------ ---- ---- ---- ----
Total from investment operations... 0.0255 0.0180 0.0223 0.0375 0.0502 0.0555 0.0520 0.0414 0.0394 0.0338
Less distributions:
Dividends from net investment income (0.0255) (0.0180) (0.0224)(0.0374) (0.0502) (0.0556)(0.0520) (0.0414) (0.0518) (0.0338)
Dividends from net realized gain
on investments.............. -- -- -- -- -- -- -- -- -- --
----- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions................ ( 0.0255) (0.0180) (0.0224) (0.0374) (0.0502) (0.0556)(0.0520) (0.0414) (0.0394) (0.0338)
Net asset value, end of period..... $0.9999 $0.9999 $0.9999 $1.0000 $0.9999 $0.9999 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return....................... 2.58% 1.82% 2.26% 3.81% 5.22% 5.25% 5.20% 4.16% 3.94% 3.38%
Ratios/Supplemental Data
Net assets, end of year (000's omitted)
$224,041 $240,570 $210,521 $210,948 $166,770 $203,781 $149,875 $89,926 $85,267 $27,506
Ratios to average net assets:
Expenses**......................... .99% .98% .92% .92% .89% 0.86% 0.72% 0.71% 0.59% 1.03%
Net investment income.............. 2.54% 1.79% 2.22% 3.70% 5.00% 5.53% 5.20% 4.07% 3.82% 4.05%
_________________
* For the period of May 9, 1995, commencement of operations, to March 31, 1986.
** Management and distribution support and service fees of .004%, .424%, .30%,
.28%, .07%, .13%, .13%, .13%, .07% and .06% of average net assets, respectively,
were waived for the years March 31, 1986 to 1995.
</TABLE>
5
<PAGE>
HOW TO PURCHASE SHARES
General Information on Purchases
Shares of each Fund may be purchased from Cortland or through securities dealers
which have entered into dealer agreements with Reich & Tang Distributors L.P.
(the "Distributor"), 600 Fifth Avenue, New York, New York 10020, or by
institutions which maintain accounts with Cortland on behalf of their customers.
Orders for purchase of shares are accepted only on a "business day of Cortland"
which means any day on which both the New York Stock Exchange and Investors
Fiduciary Trust Company (the "Custodian"), Cortland's custodian, are open for
business. It is expected that the New York Stock Exchange and/or the Custodian
will be closed on Saturdays and Sundays, New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas. The
minimum initial purchase made directly through Cortland may be as low as $1,000
and subsequent purchases will be accepted in any amount. Participating brokers
may impose different initial and/or subsequent minimum investment requirements.
For further information, contact the Distributor or your participating broker.
An order to purchase Fund shares is effective only when it is received in proper
form and payment in the form of Federal funds (member bank deposits with the
Federal Reserve Bank) is received by Cortland for investment. Cortland reserves
the right to reject any order for the purchase of shares. Fund shares are
purchased or exchanged at the net asset value next determined after acceptance
of the order. Net asset value is normally determined at 12 noon and 4:15 p.m.
Eastern time on each business day of Cortland. Because Cortland uses the
amortized cost method of valuing the securities held by each Fund and rounds
each Fund's per share net asset value to the nearest whole cent, it is
anticipated that the net asset value of the shares of each Fund will remain
constant at $1.00 per share. However, Cortland makes no assurance that it can
maintain a $1.00 net asset value per share. In order to earn dividends the next
day, purchase orders must be received before 4:15 p.m. Eastern time; otherwise,
the purchase of shares will occur the following business day. Payments
transmitted by check are normally converted into federal funds within two
business days and are accepted subject to collection at full face amount.
Cortland will not issue share certificates but will record investor holdings on
the books of Cortland in noncertificate form and regularly advise the
shareholder of his ownership position.
There is no sales charge to the investor on purchases placed directly with
Cortland. However, the costs of distributing Fund shares are borne in part by
Cortland and in part by Reich & Tang Asset Management L.P. (the "Manager").
Purchases may be made by following the procedures specified below. If these
purchase procedures are not followed, the processing of orders may be delayed.
PURCHASES THROUGH SECURITIES DEALERS
Investors may submit their initial and subsequent investments directly through
participating securities dealers. For an initial investment, investors should
submit payment and, if required, a completed Investor Application to their
participating securities dealer, who will transmit such payment to Cortland on
behalf of the investor and supply Cortland with required account information.
Some securities dealers may charge a fee for this service. For customers of
securities dealers who offer the service, investors may have their "free-credit"
cash balances automatically invested in Cortland shares on a daily basis
depending upon which Fund has been designated by the investor as the primary
Fund for his account. Automatic purchases and redemptions of Cortland shares are
treated on the same basis as direct purchases and redemptions from Cortland.
"Free-credit" cash balances begin to earn dividends on the first day following
the date that the share purchase or exchange order is effected and through the
date that a redemption order is effected. For further information and for
details concerning the automatic purchase and redemption of Cortland shares,
contact your participating securities dealer or the Distributor. Cortland is not
responsible for any delay caused by securities dealers in forwarding an order to
Cortland. Securities dealers have a responsibility to transmit orders promptly.
6
<PAGE>
PURCHASES FROM CORTLAND
You may purchase shares of Cortland by wire and by mail. Cortland will only
accept direct orders from investors through the Distributor or through
securities dealers that have entered into dealer agreements with the Distributor
and are registered to sell securities in such state. The initial purchase must
be accompanied by a completed Investor Application available from the
Distributor.
INITIAL PURCHASE OF SHARES
MAIL
Investors may send a check made payable to "Cortland" along with a
completed subscriptio order form to :
Mutual Funds Group
P.O. Box 16815
Newark, NJ 07101-6815
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member bank 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 nonmember bank may take
substantially longer to convert into Federal Funds and to be invested in Fund
shares. An investor's subscription will not be accepted until the Fund receives
Federal Funds.
BANK WIRE
To purchase shares of the Fund using the wire system for transmittal of
money among banks, an investor should first obtain a new account number by
telephoning the Fund at either (212) 830-5280(within New York State) or at (800)
221-3079 (outside New York State) and then instruct a member commercial bank to
wire money immediately to:
Investors Fiduciary Trust Company
ABA# 101003621
Fundtech Services
DDA# 890752-954-6
The investor should then promptly complete and mail the subscription order form.
An investor planning to wire funds should instruct his bank to wire 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 "Cortland" along with a completed
subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
SUBSEQUENT PURCHASES OF SHARES
There is a $50 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription order form on file with the Fund is still applicable, a
shareholder may reopen an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
Subsequent purchases can be made either by bank wire or by personal
delivery, as indicated above or by mailing a check to the Fund's transfer agent
at:
Mutual Funds Group
P.O. Box 16815
Newark, New Jersey 07101-6815
7
<PAGE>
ELECTRONIC FUNDS TRANSFERS (EFT) AND DIRECT DEPOSIT PRIVILEGE
You may purchase shares of Cortland (minimum of $50) by having salary,
dividend payments, interest payments or any other payments designated by you, or
by having federal salary, social security, or certain veteran's, military or
other payments from the federal government, automatically deposited into your
Cortland account. You may deposit as much of such payments as you elect. To
enroll in this program, you must file with Cortland a completed EFT Application
and/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 Cortland. Death or legal incapacity will terminate your participation in the
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate depositing entity and/or federal agency.
Further, Cortland may terminate your participation upon 30 days' notice to you.
HOW TO REDEEM SHARES
You may redeem your shares, in whole or in part, on any day on which the Fund's
net asset value is calculated. Shares are redeemed at the net asset value next
determined after receipt of proper notice of redemption. If you redeem all of
your shares, you will receive payment of all dividends declared but unpaid
through the date of redemption. If you redeem only a portion of the shares in
your account, the dividends declared but unpaid on the shares redeemed will not
be distributed to you until the next regular dividend payment date. If your
redemption order is received prior to 12 noon Eastern time, the redemption will
be effective on that day and Cortland will endeavor to transmit payment that
same business day. If the notice of redemption is received after 12 noon and
prior to 4:15 p.m. Eastern time, the redemption will be at the 4:15 p.m.net
asset value and payment will be made on the next business day.
Some of the redemption procedures described below may require you to complete
and file an authorization form in advance. If purchases are made by check,
redemption of those shares by wire, by check redemption or by telephone are
restricted for fifteen calendar days following the purchase of shares. Under
certain circumstances Cortland may redeem accounts of less than $500 or impose a
monthly service charge of not more than $10 on such accounts.
REDEMPTIONS THROUGH SECURITIES DEALERS
Shareholders may redeem shares by instructing their securities dealer to effect
their redemption transactions. The securities dealer will transmit the required
redemption information to Cortland and the proceeds from that redemption will be
transmitted to the securities dealer for the account of the shareholder.
Securities dealers, including participants in the plan of distribution described
under the heading "Distributor," may impose redemption minimums, service fees or
other requirements. Securities dealers have a responsibility to transmit
redemption requests promptly.
REDEMPTIONS BY CHECK
Shareholders may use checks to effect redemptions. The standard checking allows
checks to be drawn in any amount of $500 or more. Checks drawn in amounts of
less than $500 may be returned to the payee or a $15 fee will be imposed for
such checks paid.
Shareholders may elect to establish a Convenience Account. A Convenience
Account provides draft checking services which is part of a range of cash
management services provided by the Manager and/or its affiliates. The account
entitles shareholders to write checks in any amount that will clear through an
agent bank. SHAREHOLDERS WHO ARE INTERESTED IN PARTICIPATING IN THE CONVENIENCE
ACCOUNT PROGRAM SHOULD CONSIDER THE INFORMATION AVAILABLE FROM THE DISTRIBUTOR
WITH RESPECT TO THE CONVENIENCE ACCOUNT, INCLUDING THE FEES RELATED THERETO.
The payee of a check may cash or deposit it in the same way as an ordinary
bank check. When a check is presented to the agent bank for payment, the agent
bank will cause Cortland to redeem a sufficient number of shares to cover the
amount of the check. Shareholders are entitled to dividends on the shares
redeemed up until the day on which the check is presented to the agent bank for
payment. Checks drawn on insufficient funds will be returned to the payee and a
fee (currently $16) will be imposed. Additionally, a fee (currently $20) will be
imposed for stop payment orders.
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PREAUTHORIZED REDEMPTIONS
Shareholders may make preauthorized redemptions by contacting Cortland by:
(a) calling (212) 830-5280 if calling from New Jersey, Alaska or Hawaii or
(b) calling toll free at (800) 433-1918 if calling from elsewhere in the
continental United States or
(c) sending a telegram or letter to Cortland Operations Center, 600 Fifth
Avenue, New York, New York 10020
and have the proceeds mailed or wired only to a previously designated
broker or bank account if (a) shares were paid for in federal funds or were
purchased by check and have been on Cortland's books at least fifteen calendar
days and (b) a telephone redemption authorization included in the Investor
Application is on file with Cortland before the redemption request is placed.
This authorization requires designation of a brokerage or bank account to which
the redemption payment is to be sent. The proceeds will not be mailed or wired
to other than the designated account. Redemptions of $10,000 or more will be
sent by bank wire if requested. Smaller amounts will normally be mailed to the
designated account.
Cortland will employ procedures to confirm that telephone redemption
instructions are genuine, and will require that shareholders electing such
option provide a form of personal identification. The failure by Cortland to
employ such procedures may cause Cortland to be liable for any losses incurred
by investors due to telephone redemptions based upon unauthorized or fraudulent
instructions.
REDEMPTIONS BY LETTER OF INSTRUCTION
Shareholders may redeem shares by a letter of instruction sent directly to
Cortland Operations Center, 600 Fifth Avenue, New York, New York 10020
containing:
(a) your Cortland account number
(b) your redemption Fund choice
(c) your name and telephone number
(d) the dollar amount or number of shares to be redeemed or a
statement that all shares in the account are to be redeemed
(e) payment instructions (normally redemption proceeds will be mailed
to the shareholder's address as registered with Cortland)
(f) signature(s) of the registered shareholder(s)
(g) signature(s) guaranteed stamped under the 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 Cortland's
standards and procedures.
The proceeds of redemption are sent to the shareholder's bank or the
shareholder's address as it appears in Cortland's records. In order to change
such designation, the shareholder must submit a written notification to Cortland
with the signature guarantee(s) described above.
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EXCHANGES
Shares of each Fund may be exchanged at net asset value for shares of any of the
other Funds without charge by instructions to a shareholder's securities dealer
or by mail. The value of the shares being exchanged must meet the minimum
initial investment requirements of the Fund or the participating securities
dealer. Mail exchange orders should be addressed and sent as shown under the
heading "Redemptions by Letter of Instruction" and must contain:
your Cortland account number
your name and telephone number
the amount of shares to be exchanged (or, if all shares are to be
exchanged, a statement to this effect)
the Fund shares to be exchanged
the Fund shares to be acquired
any change in dividend election
INVESTMENT PROGRAMS
INVESTMENT OBJECTIVES
The Cortland General Fund and the Government Fund seek to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. The Municipal Fund seeks to provide as high a level of current income
exempt from federal income taxes as is consistent with the preservation of
capital and liquidity. For purposes of this Prospectus and the Statement of
Additional Information, interest which is "tax-exempt" or "exempt" from federal
income tax means interest which is excluded from gross income for federal income
tax purposes, but which may constitute an item of tax preference and which may
therefore give rise to a federal alternative minimum tax liability for
individual shareholders. The investment objectives of each Fund are fundamental
policies, which may not be changed without the approval of the shareholders of
the respective Funds.
INVESTMENT POLICIES
Each Fund invests only in U.S. dollar-denominated securities which are rated in
one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO
if the instrument was rated by only one such organization) or, if unrated, are
of comparable quality as determined in accordance with procedures established by
the Board of Directors. The NRSROs currently rating instruments of the type one
or more of the Funds may purchase are Moody's Investors Service, Inc., Standard
& Poor's Corporation, Duff and Phelps, Inc., Fitch Investors Service, Inc., IBCA
Limited and IBCA Inc. (See the Statement of Additional Information for
information with respect to rating criteria for each NRSRO.)
Investments in rated securities not rated in the highest category by at
least two NRSROs (or one NRSRO if the instrument was rated by only one such
organization), and unrated securities not determined by the Board of Directors
to be comparable to those rated in the highest category, will be limited to 5%
of a Fund's total assets, with the investment in any such issuer being limited
to not more than the greater of 1% of a Fund's total assets or $1 million. A
Fund may invest in obligations issued or guaranteed by the U.S. Government
without any such limitation.
Each Fund invests in such high quality debt obligations with
relatively short maturities. Each Fund seeks to achieve its objective by
investing in different types of securities, as described below. Unless otherwise
stated, the investment policies and restrictions set forth below and in the
Statement of Additional Information are not fundamental policies, and may be
changed by the Board of Directors, with notice to shareholders.
GOVERNMENT FUND
The Government Fund endeavors to achieve its objective by investing at least 65%
of its assets in short-term "U.S. Government Obligations." U.S. Government
Obligations consist of marketable securities and instruments issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities.
Direct obligations are issued by the U.S. Treasury and include bills,
certificates of indebtedness, notes and bonds. Obligations of U.S. Government
agencies and instrumentalities ("Agencies") are issued by government-sponsored
agencies and enterprises acting under authority of Congress. Although
obligations of federal agencies and instrumentalities are not debts of the U.S.
Treasury, in some cases payment of interest and principal on such obligations is
guaranteed by the U.S. Government, e.g., obligations of the Federal Housing
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association, the General
Services Administration and the Maritime Administration; in other cases payment
of interest and principal is not guaranteed, e.g., obligations of the Federal
Home Loan Bank System and the Federal Farm Credit Bank. The Government Fund will
invest in Agencies which are not guaranteed or backed by the full faith and
credit of the U.S. Government only when the Fund's Board of Directors is
satisfied that the credit risk with respect to a particular agency or
instrumentality is minimal.
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CORTLAND GENERAL FUND
The Cortland General Fund seeks to achieve its objective by investing at least
80% of its assets in U.S. Government Obligations, as defined above, in bank
instruments, in trust instruments, in corporate commercial instruments and in
other corporate instruments maturing in thirteen months or less (collectively,
"Money Market Obligations").
The Cortland General Fund may invest in bank instruments, which consist
mainly of certificates of deposit, bankers' acceptances and time deposits. The
Cortland General Fund may also invest in corporate instruments supported by bank
letters of credit. The Cortland General Fund generally limits investments in
bank instruments to (a) those which are fully insured as to principal by the
FDIC or (b) those issued by banks which at the date of their latest public
reporting have total assets in excess of $1.5 billion. However, the total assets
of a bank will not be the sole factor determining the Fund's investment
decisions, and the Fund may invest in bank instruments issued by institutions
which the Board of Directors believes present minimal credit risk.
The Cortland General Fund may invest up to 100% of its assets in
obligations issued by banks, and up to 10% of its assets in obligations issued
by any one bank, subject to the provisions of Rule 2a-7 of the Investment
Company Act of 1940 (the "1940 Act"). If the bank is a domestic bank, it must be
a member of the FDIC. The Cortland General Fund may invest in U.S.
dollar-denominated obligations issued by foreign branches of domestic banks or
foreign branches of foreign banks ("Eurodollar" obligations) and domestic
branches of foreign banks ("Yankee dollar" obligations). The Cortland General
Fund will limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets
at the time of purchase, provided that there is no limitation upon the Cortland
General Fund investments in (a) Eurodollar obligations, if the domestic parent
of the foreign branch issuing the obligation is unconditionally liable in the
event that the foreign branch fails to pay on the Eurodollar obligation for any
reason; and (b) Yankee dollar obligations, if the U.S. branch of the foreign
bank is subject to the same regulation as U.S. banks. Eurodollar, Yankee dollar
and other foreign bank obligations include time deposits, which are
non-negotiable deposits maintained in a bank for a specified period of time at a
stated interest rate. The Cortland General Fund will limit its purchases of time
deposits to those which mature in seven days or less, and will limit its
purchases of time deposits maturing in two to seven days to 10% of such Fund's
total assets at the time of purchase.
Eurodollar, Yankee dollar and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, that the obligations may
be less marketable than comparable domestic obligations of domestic issuers,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted which
might adversely affect the payment of principal of and interest on those
obligations, that the selection of foreign obligations may be more difficult
because there may be less information publicly available concerning foreign
issuers, that there may be difficulties in enforcing a judgment against a
foreign issuer or that the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign issuers may differ
from those applicable to domestic issuers. In addition, foreign banks are not
subject to examination by United States Government agencies or
instrumentalities.
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The Cortland General Fund may invest in short-term corporate obligations
and instruments, including but not limited to corporate commercial paper, notes,
bonds and debentures. Corporate commercial instruments generally consist of
short-term unsecured promissory notes issued by corporations. The Cortland
General Fund may also purchase variable amount master demand notes, which are
unsecured demand notes that permit investment of fluctuating amounts of money at
variable rates of interest pursuant to arrangements with issuers who meet the
foregoing quality criteria. The interest rate on a variable amount master demand
note is periodically redetermined according to a prescribed formula. Although
there is no secondary market in master demand notes, the payee may demand
payment of the principal and interest upon notice not exceeding five business or
seven calendar days. The Cortland General Fund may also purchase participation
interests in loans extended by banks to companies, provided that both such banks
and such companies meet the quality standards set forth above. (See the
Statement of Additional Information for information with respect to corporate
commercial instruments and bond ratings.) The Cortland General Fund may also
invest in fixed or variable rate debt units representing an undivided interest
in a trust's distributions of principal and interest that a trust receives from
an underlying portfolio of bonds issued by a highly rated corporate or U.S.
Government agency issuer and/or payments from re-characterized distributions
made possible by the swap of certain payments due on the underlying bonds. The
Cortland General Fund's investment will be limited solely to the debt units and
in each case, must meet the credit quality standards under Rule 2a-7 of the 1940
Act. Debt units will be purchased by the Cortland General Fund as an
institutional accredited investor pursuant to a private placement memorandum.
Sale of debt units will be effected pursuant to Rule 144A or other exemptions
from registration under the Securities Act of 1933, subject to the eligibility
of the purchaser and compliance with trust agreement requirements. The Manager
will monitor the liquidity of the debt units under the supervision of Cortland's
Board of Directors.
MUNICIPAL FUND
The Municipal Fund seeks to provide as high a level of current income that is
exempt from federal income taxes as is consistent with the preservation of
capital and liquidity by investing at least 80% of its assets in a diversified
portfolio of high quality, short-term municipal obligations ("Municipal
Securities").
The Municipal Fund will invest in the following securities. The Municipal
Fund will invest in Municipal Securities which include debt obligations issued
to obtain funds for various public purposes, including the construction of a
wide range of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses and lending such funds to
other public institutions and facilities. In addition, certain types of private
activity bonds or industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated facilities. Such obligations are
considered to be Municipal Securities provided that the interest paid thereon
generally qualifies as exempt from federal income tax in the opinion of bond
counsel. However, interest on Municipal Securities may give rise to federal
alternative minimum tax liability and may have other collateral federal income
tax consequences.
The Municipal Fund also may purchase any Municipal Security which depends
on the credit of the U.S. Government and may invest in Municipal Securities
which are not rated if, in the opinion of Cortland's investment advisor, and in
accordance with procedures established by the Board of Directors, such
securities possess creditworthiness comparable to those rated obligations in
which the Municipal Fund may invest. The Municipal Fund may, from time to time,
on a temporary or defensive basis, invest in short-term, high quality U.S.
Government Obligations, Money Market Obligations and repurchase agreements.
Income from any such temporary investments would be taxable to shareholders as
ordinary income. It is the present policy of the Municipal Fund to invest only
in securities the interest on which is tax-exempt. The Fund will endeavor to be
invested at all times in Municipal Securities. It is a fundamental policy of the
Municipal Fund that its assets will be invested so that at least 80% of its
income will be exempt from federal income taxes. The Municipal Fund may from
time to time hold cash reserves.
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ALL FUNDS
The securities in which the Funds invest may not yield as high a level of
current income as longer term or lower grade securities, which generally have
less liquidity and greater fluctuation in value. There can be no assurance that
the Funds will achieve their objectives. The values of the securities in which
the Funds invest fluctuate based upon interest rates, the financial stability of
the issuers and market factors.
Cortland may enter into the following arrangements with respect to all
three Funds. Repurchase Agreements: under a repurchase agreement, the purchaser
(for example, one of the Funds) acquires ownership of an obligation and the
seller agrees, at the time of the sale, to repurchase the obligation at a
mutually agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This arrangement results in a fixed rate of return
insulated from market fluctuations during such period. Although the underlying
collateral for repurchase agreements may have maturities exceeding one year, a
Fund will not enter into a repurchase agreement if as a result of such
investment more than 10% of such Fund's total assets would be invested in
illiquid securities, including repurchase agreements which expire in more than
seven days. A Fund may, however, enter into "continuing contract" or "open"
repurchase agreements under which the seller is under a continuing obligation to
repurchase the underlying obligation from that Fund on demand and the effective
interest rate is negotiated on a daily basis.
In general, a Fund will enter into repurchase agreements only with domestic
banks with total assets of at least $1.5 billion or with primary dealers in U.S.
Government securities. However, the total assets of a bank will not be the sole
factor determining the Fund's investment decisions, and the Fund may enter into
repurchase agreements with other institutions which the Board of Directors
believes present minimal credit risk. Nevertheless, if the seller of a
repurchase agreement fails to repurchase the obligation in accordance with the
terms of the agreement, the Fund which entered into the repurchase agreement may
incur a loss to the extent that the proceeds it realized on the sale of the
underlying obligation are less than the repurchase price. Repurchase agreements
may be considered loans to the seller of the underlying security. Income with
respect to repurchase agreements is not tax-exempt.
Securities purchased pursuant to a repurchase agreement are held by the
Fund's custodian and (i) are recorded in the name of the Fund with the Federal
Reserve Book-Entry System, or (ii) the Fund receives daily written confirmation
of each purchase of a security and a receipt from the custodian. The Funds
purchase securities subject to a repurchase agreement only when the purchase
price of the security acquired is equal to or less than its market price at the
time of purchase.
A Fund may also enter into reverse repurchase agreements which involve the
sale by a Fund of a portfolio security at an agreed upon price, date and
interest payment. A Fund will enter into reverse repurchase agreements for
temporary or defensive purposes to facilitate the orderly sale of portfolio
securities to accommodate abnormally heavy redemption requests should they
occur, or in some cases as a technique to enhance income. A Fund will use
reverse repurchase agreements when the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. A Fund will enter into reverse
repurchase agreements only in amounts up to 10% of the value of its total assets
at the time of entering into such agreements. Reverse repurchase agreements
involve the risk that the market value of securities retained by a Fund in lieu
of liquidation may decline below the repurchase price of the securities sold by
the Fund which it is obligated to repurchase. This risk, if encountered, could
cause a reduction in the net asset value of a Fund's shares. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act. See "Investment
Restrictions" in the Statement of Additional Information for percentage
limitations on borrowings.
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Delayed delivery agreements are commitments by any of the Funds to dealers
or issuers to acquire securities beyond the customary same-day settlement for
money market instruments. These commitments fix the payment price and interest
rate to be received on the investment. Delayed delivery agreements will not be
used as a speculative or leverage technique. Rather, from time to time, the
Funds' investment advisor can anticipate that cash for investment purposes will
result from scheduled maturities of existing portfolio instruments or from net
sales of shares of a Fund; therefore, to assure that a Fund will be as fully
invested as possible in instruments meeting that Fund's investment objective, a
Fund may enter into delayed delivery agreements, but only to the extent of
anticipated funds available for investment during a period of not more than five
business days.
Money Market Obligations and Municipal Securities are sometimes offered on
a "when-issued" basis, that is, the date for delivery of and payment for the
securities is not fixed at the date of purchase, but is set after the securities
are issued (normally within forty-five days after the date of the transaction).
The payment obligation and the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such Money Market Instruments or
Municipal Securities with the intention of actually acquiring such securities,
but a Fund may sell these securities before the settlement date if it is deemed
advisable.
If a Fund enters into a delayed delivery agreement or purchases a
when-issued security, that Fund will direct Cortland's custodian bank to place
cash or other high grade securities (including Money Market Obligations and
Municipal Securities) in a segregated account of such Fund in an amount equal to
its delayed delivery agreements or when-issued commitments. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of such Fund's delayed delivery agreements and when-issued commitments.
To the extent that funds are in a segregated account, they will not be available
for new investment or to meet redemptions. Investment in securities on a
when-issued basis and use of delayed delivery agreements may increase a Fund's
exposure to market fluctuation; may increase the possibility that the Municipal
Fund will incur a short-term gain subject to federal taxation; or may increase
the possibility that a Fund will incur a short-term loss, if the Fund must
engage in portfolio transactions in order to honor a when-issued commitment or
accept delivery of a security under a delayed delivery agreement. The Funds will
employ techniques designed to minimize these risks.
No additional delayed delivery agreements or when-issued commitments will
be made if more than 25% of a Fund's net assets would become so committed. The
Funds will enter into when-issued and delayed delivery transactions only when
the time period between trade date and settlement date is at least 30 days and
not more than 120 days.
The Municipal Fund may attempt to improve its portfolio liquidity by
assuring same-day settlements on portfolio sales (and thus facilitate the
same-day payment of redemption proceeds) through the acquisition of "Stand-by
Commitments." A Stand-by Commitment is a right of the Municipal Fund, when it
purchases Municipal Securities for its portfolio from a broker, dealer or other
financial institution, to sell the same principal amount of such securities back
to the seller, at the Municipal Fund's option, at a specified price. Stand-by
Commitments are also sometimes known as "puts." The Municipal Fund will acquire
Stand-by Commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes. The acquisition
or exercisability of a Stand-by Commitment by the Municipal Fund will not affect
the valuation or the average weighted maturity of its underlying portfolio
securities. See "Investment Programs and Restrictions - Stand-by Commitments" in
the Statement of Additional Information for additional information with respect
to Stand-by Commitments.
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INVESTMENT RESTRICTIONS
The Funds' investment programs are subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. The most significant of these restrictions provide that
each Fund will not: (1) purchase securities of any issuer (other than
obligations of the U.S. Government, its agencies or instrumentalities,
repurchase agreements fully secured by such obligations and any Municipal
Securities guaranteed by the U.S. Government) if as a result more than 5% of a
Fund's total assets would be invested in the securities of such issuer, except
that in the case of certificates of deposit and bankers' acceptances, up to 25%
of the value of a Fund's total assets may be invested without regard to such 5%
limitation, but shall instead be subject to a 10% limitation (in each case,
subject to the provisions of Rule 2a-7 of the 1940 Act); (2) purchase any
corporate commercial instruments which would cause 25% of the value of the
Cortland General Fund's total assets at the time of such purchase to be invested
in securities of one or more issuers conducting their principal business
activities in the same industry; (3) borrow money or pledge, mortgage or
hypothecate its assets except for temporary or emergency purposes (except to
secure reverse repurchase agreements and then only in an amount not exceeding
15% of the value of a Fund's total assets) except that each Fund may purchase
delayed delivery and when-issued securities consistent with its investment
objective and policies (such Fund will not make additional investments while
borrowings other than when-issued and delayed delivery purchases and reverse
repurchase agreements are outstanding); or (4) lend money or securities except
to the extent that the investments of a Fund may be considered loans.
Additionally, the Municipal Fund will not: (1) purchase any securities which
would cause more than 25% of the value of the Municipal Fund's net assets at the
time of such purchase to be invested in (i) securities of one or more issuers
conducting their principal activities in the same state, (ii) securities, the
interest upon which is paid from revenues of projects with similar
characteristics, or (iii) industrial development bonds issued by issuers in the
same industry; provided that there is no limitation with respect to investments
in U.S. Treasury Bills, other obligations issued or guaranteed by the U. S.
Government and its agencies or instrumentalities, certificates of deposit of and
guarantees of Municipal Securities by domestic branches of U.S. banks; or (2)
purchase or sell puts, calls, straddles, spreads or combinations thereof, except
that the Municipal Fund may purchase Stand-by Commitments.
The foregoing restrictions are matters of fundamental policy and may not be
changed without the affirmative vote of a majority of the outstanding shares of
each Fund affected by such change.
MATURITIES
Consistent with the objective of stability of principal, each Fund attempts to
maintain a constant net asset value per share of $1.00 and, to this end, values
its assets by the amortized cost method and rounds its per share net asset value
to the nearest whole cent in compliance with applicable rules and regulations.
Accordingly, the Funds invest in Money Market Obligations and Municipal
Securities having remaining maturities of thirteen months or less and maintain a
weighted average maturity for each Fund of 90 days or less. However, there can
be no assurance that a Fund's net asset value per share of $1.00 will be
maintained.
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DIVIDENDS AND TAXES
Qualification as Regulated
Investment Company
Dividends
It is the policy of Cortland, with respect to each Fund, to declare dividends
from the net investment income earned by each Fund daily; such dividends are
distributed to each Fund's shareholders in the form of additional Fund shares on
the subsequent business day. Dividends from net realized capital gain, offset by
capital loss carryovers, if any, are generally declared and paid when realized.
However, to the extent that a net realized capital gain is deemed necessary to
offset future capital losses, such gain will not be distributed at that time. A
shareholder may, by letter to Cortland, elect to have dividends paid by check.
Any such election or revocation thereof must be made in writing to Cortland
Operations Center, 600 Fifth Avenue, New York, New York 10020. Shareholders
whose dividends are being reinvested will receive a summary of their accounts at
least quarterly indicating the reinvestment of dividends.
TAXES
Each Fund is treated as a separate taxable entity for federal income tax
purposes. Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). It is each Fund's policy to distribute to shareholders all of its net
investment income and any capital gains (net of capital losses) in accordance
with the timing requirements imposed by the Code, so that each Fund will satisfy
the distribution requirement of Subchapter M and not be subject to federal
income taxes or the 4% excise tax. So long as the Funds qualify for this tax
treatment, the Funds will not be subject to federal income tax on amounts
distributed to shareholders.
If the Funds fail to satisfy any of the Code requirements for qualification
as a regulated investment company, they will be taxed at regular corporate tax
rates on all of their taxable income (including capital gains) without any
deduction for distributions to shareholders, and distributions will be taxable
to shareholders as ordinary dividends (even if derived from the Funds' net
long-term capital gains) to the extent of the Funds' current and accumulated
earnings and profits.
Shareholders of the Municipal Fund will not be required to include the
"exempt-interest" portion of dividends paid by the Fund in their gross income
for federal income tax purposes. However, shareholders will be required to
report the receipt of exempt-interest dividends and other tax-exempt interest on
their federal income tax returns. Moreover, exempt-interest dividends may be
subject to state income taxes, may give rise to a federal alternative minimum
tax liability, may affect the amount of social security benefits subject to
federal income tax, may affect the deductibility of interest on certain
indebtedness of the shareholder and may have other collateral federal income tax
consequences. The Municipal Fund may purchase without limitation Municipal
Securities the interest on which constitutes an item of tax preference and which
may therefore give rise to a federal alternative minimum tax liability for
individual shareholders. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statement of Additional Information.
The Municipal Fund may invest in securities the interest on which is (and
the dividends paid by the Fund derived from such interest are) subject to
federal income tax, but such taxable securities will not exceed 20% of the value
of the Municipal Fund's total assets. The percentage of dividends which
constitute exempt-interest dividends, and the percentage thereof (if any) which
constitutes an item of tax preference, will be determined annually and will be
applied uniformly to all dividends of the Municipal Fund declared during that
year. These percentages may differ from the actual percentages for any
particular day.
Shareholders of the Government Fund and the Cortland General Fund will be
subject to federal income taxes and any applicable state income taxes on amounts
distributed as dividends unless such shareholders are otherwise exempt. It is
not expected that any portion of taxable dividends paid by the Funds will
qualify for the federal dividends-received deduction for corporations.
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Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether the shareholder elects to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, shareholders are
required to treat certain distributions made during January as having been paid
and received on December 31 of the preceding year. A statement setting forth the
federal income tax status of all distributions made (or deemed made) during the
year, will be sent to shareholders promptly after the end of each year.
To avoid being subject to a 31% federal backup withholding on taxable
dividends and redemption payments, shareholders must furnish Cortland with their
taxpayer identification number and certify, under penalties of perjury, that it
is correct and that they are not subject to backup withholding for any reason.
The foregoing discussion of federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislation or administrative action. As the foregoing discussion is
for general information only, shareholders should also review the more detailed
discussion of federal income tax considerations relevant to the Funds that is
contained in the Funds' Statement of Additional Information. Shareholders are
advised to consult with their tax advisors concerning the application of state,
local and foreign taxes on investments in Cortland which may differ from the
federal income tax consequences described above.
MANAGEMENT
Board of Directors
The overall management of the business and affairs of Cortland is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Funds and persons or companies furnishing services to the
Funds, including the Funds' agreements with the manager, the investment advisor,
the distributor, and the custodian. The day-to-day operations of each Fund are
delegated to Cortland's officers, and the manager, subject always to the
objective and policies of each Fund and to the general supervision of Cortland's
Board of Directors. The manager also furnishes or procures on behalf of Cortland
at the manager's expense all services necessary for the proper conduct of each
Fund's business. Some of Cortland's officers and directors are officers or
employees of the manager. A majority of the members of the Board of Directors of
Cortland have no affiliation with the manager.
Manager and Investment Advisor
Reich & Tang Asset Management L.P. is a Delaware limited partnership, with its
principal offices at 600 Fifth Avenue, New York, New York 10020, serves as the
manager and investment advisor of Cortland and its three Funds pursuant to
agreements with the Funds dated October 1, 1994 (the "Management/Investment
Advisory Agreements"). Under the re-executed Management/Investment Advisory
Agreements, Reich & Tang Asset Management L.P. (the "Manager") provides, either
directly or indirectly through contracts with others, all services required for
the management of Cortland. The Manager bears all ordinary operating expenses
associated with Cortland's operation except: (a) the fees of the Directors who
are not "interested persons" of Cortland, as defined by the 1940 Act, and the
travel and related expenses of the Directors incident to their attending
shareholders', directors' and committee meetings, (b) interest, taxes and
brokerage commissions (which are expected to be insignificant), (c)
extraordinary expenses, if any, including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto, (d)
shareholder service or distribution fees payable by Cortland under the plans of
distribution described under the heading "Distributor" below, and (e) membership
dues of any industry association. Additionally, the Manager has assumed all
expenses associated with organizing Cortland and all expenses of registering or
qualifying Cortland's shares under federal and state securities laws.
17
<PAGE>
The Funds pay the Manager an annual fee, calculated daily and paid monthly,
of .80% of the first $500 million of Cortland's average daily net assets, plus
.775% of the next $500 million of Cortland's average daily net assets, plus
.750% of the next $500 million of Cortland's average daily net assets, plus
.725% of Cortland's average daily net assets in excess of $1.5 billion.
Cortland's comprehensive fee is higher than most other money market mutual funds
which do not offer services that Cortland offers. However, most other funds bear
expenses that are being borne for Cortland by the Manager. During the fiscal
year ended March 31, 1995, Cortland paid the Manager fees which represented
0.76% of the Cortland General Fund's average daily net assets, 0.77% of the
Government Fund's average daily net assets and 0.78% of the Municipal Fund's
average daily net assets, respectively, on an annualized basis. During such
year, expenses borne by each of the Funds, including fees paid to the Manager,
amounted to 1.03% of the Cortland General Fund's average daily net assets, 1.04%
of the Government Fund's average daily net assets and 0.99% of the Municipal
Fund's average daily net assets, respectively, on an annualized basis.
The Manager was at May 31, 1995 investment manager, advisor or supervisor
with respect to assets aggregating in excess of $7.4 billion. The Manager
currently acts as investment manager or administrator of eighteen other
investment companies and also advises pension trusts, profit sharing trusts and
endowments. Effective October 1, 1994, the Board of Directors of the Fund
approved the re-execution of the Management/Investment Advisory Agreements with
the Manager. The Manager's predecessor, New England Investment Companies, L.P.
("NEICLP") is the limited partner and owner of a 99.5% interest in the newly
created limited partnership, Reich & Tang Asset Management L.P., the Manager.
Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of NEICLP) is the
general partner and owner of the remaining .5% interest of the Manager. Reich &
Tang Asset Management L.P. has succeeded NEICLP as the Manager of the Fund. The
re-execution of the Management/Investment Advisory Agreements did not result in
an "assignment" of the Management/Investment Advisory Agreements contract with
NEICLP under the 1940 Act, since there is no change in actual control or
management of the Manager caused by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts
corporation, serves as the sole general partner of NEICLP. The New England
Mutual Life Insurance Company ("The New England") owns approximately 68.1% of
the total partnership units outstanding of NEICLP, and Reich & Tang, Inc. owns
approximately 22.8% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through eight
investment advisory/management affiliates and three distribution subsidiaries.
These include, in addition to the Manager, Loomis, Sayles & Company, L.P.;
Copley Real Estate Advisors, Inc.; Back Bay Advisors, L.P.; Marlborough Capital
Advisors, L.P.; Westpeak Investment Advisors, L.P.; Draycott Partners, Ltd,; TNE
Investment Services, L.P.; New England Investment Associates, Inc.; and an
affiliate, Capital Growth Management Limited Partnership. These affiliates in
the aggregate are investment advisors or managers to 57 other registered
investment companies.
The re-executed Management/Investment Advisory Agreements are the same in
all material respects as the relevant terms and conditions governing the
Manager's management and investment advisory responsibilities under each Fund's
previous Management and Investment Advisory Agreements with Reich & Tang Asset
Management L.P. except for (i) the dates of execution and (ii) the identity of
the Manager.
18
<PAGE>
Pursuant to the terms of the Management/Investment Advisory Agreements, the
Manager manages the investments of each of the Funds, subject at all times to
the policies and control of Cortland's Board of Directors. The Manager obtains
and evaluates economic, statistical and financial information to formulate and
implement investment policies for the Funds. The Manager shall not be liable to
the Funds or to their shareholders except in the case of the Manager's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
FEE WAIVERS
In order to increase the yield to investors, the Manager may, from time to time,
waive or reduce its fees on assets held by each of the Funds. When instituted,
the Manager will continue these fee waivers in effect or charge reduced fees
until further notice to the Board of Directors. Fee waivers or reductions, other
than those set forth in the Management/Investment Advisory Agreements, may be
rescinded, however, at any time without further notice to investors.
DISTRIBUTOR
Each of the Funds has entered into a distribution agreement dated September 15,
1993 (the "Distribution Agreements") with Reich & Tang Distributors L.P. (the
"Distributor"), 600 Fifth Avenue, New York, New York 10020. Reich & Tang Asset
Management L.P. is the sole general partner of the Distributor. The Distributor,
which was organized on January 4, 1991, has the exclusive right to enter into
dealer agreements with securities dealers who sell shares of the Funds and with
financial institutions which may furnish services to shareholders on behalf of
Cortland. Pursuant to plans of distribution (the "Plans") approved by the Funds'
shareholders on July 31, 1989, each of the Funds may make distribution related
payments in an amount not to exceed on an annualized basis .25% of the value of
the Fund's assets. Securities dealers and other financial institutions may
receive distribution payments directly or indirectly from the Funds for services
that may include payments for opening shareholder accounts, processing investor
purchase and redemption orders, responding to inquiries from shareholders
concerning the status of their accounts and operations of their Fund and
communications with Cortland on behalf of Fund shareholders. Additionally, the
Distributor may pay for advertisements, promotional materials, sales literature
and printing and mailing of prospectuses to other than Fund shareholders and
other services to support distribution pursuant to the Plans. The Distributor
may also make payments to securities dealers and financial institutions, such as
banks, out of the investment management fee the Manager receives from the Funds,
out of its past profits or from any other source available to the Distributor.
The Plans will only make payments for expenses actually incurred by the
Distributor.
The Plans will not carry over expenses from year to year and if a Plan is
terminated in accordance with its terms, the obligations of a Fund to make
payments to the Distributor pursuant to the Plan will cease and the Fund will
not be required to make any payments past the date the Plan terminates.
As a result of 12b-1 fees, a long-term shareholder in a Fund may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
the Rules of the National Association of Securities Dealers, Inc.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities for the
Funds, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Funds are usually principal
transactions, the Funds incur little or no net brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Funds may also
purchase securities from underwriters at prices which include a concession paid
by the issuer to the underwriter.
Allocation of transactions, including their frequency, to various dealers
is determined by the Manager in its best judgment and in a manner deemed to be
in the best interest of shareholders of the Funds rather than by any formula.
The primary consideration is prompt execution of orders in an effective manner
at the most favorable price.
19
<PAGE>
YIELD INFORMATION
Each Fund will provide yield quotations based on its daily dividends. Yield is
computed in accordance with a standardized formula described in the Statement of
Additional Information and can be expected to fluctuate substantially over time.
Comparative performance information may be used from time to time in advertising
or marketing the Funds' shares, including data from industry publications.
For the seven-day period ended July 10, 1995, the current yield for the
Cortland General Fund was 5.03%, the current yield for the Government Fund was
4.88% and the current yield for the Municipal Fund was 2.57%, which is
equivalent to an effective yield of 5.16% for the Cortland General Fund, 5.00%
for the Government Fund and 2.61% for the Municipal Fund.
GENERAL INFORMATION
Organization of Cortland and
Description of Shares
Cortland is an open-end, diversified investment company. Cortland was
organized as a Massachusetts business trust on October 31, 1984, but had no
operations prior to May 9, 1985. On July 31, 1989, Cortland reorganized and
became a Maryland corporation. The shares of Cortland are divided into three
Funds, each of which represent shares of common stock of the par value of $.001.
Shares of Cortland have equal rights with respect to voting, except that the
holders of shares of a particular Fund will have the exclusive right to vote on
matters affecting only the rights of the holders of such Fund. For example,
holders of a particular Fund will have the exclusive right to vote on any
investment advisory agreement or investment restriction that relates only to
such Fund. The holders of each Fund have distinctive rights with respect to
dividends and redemptions which are more fully described in this Prospectus and
the Statement of Additional Information. In the event of dissolution or
liquidation, holders of each Fund will receive pro rata, subject to the rights
of creditors, (a) the proceeds of the sale of the assets held in the respective
portfolio to which the shares of the Fund relate, less (b) the liabilities of
Cortland attributable to the respective portfolio or allocated between the
portfolios based on the respective liquidation value of each portfolio. There
will not normally be annual shareholders' meetings. Shareholders may remove
directors from office by a majority of votes entitled to be cast at a meeting of
shareholders. Shareholders holding 10% or more of Cortland's outstanding stock
may call a special meeting of shareholders.
There are no preemptive or conversion rights (other than the exchange
privileges set forth in this Prospectus) applicable to any of Cortland's shares.
Cortland's shares when issued, will be fully paid, non-assessable and
transferrable. The Board of Directors may increase the number of authorized
shares or create additional series or classes of Cortland shares without
shareholder approval.
LEGAL MATTERS
The law firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third
Avenue, New York, New York 10022, serves as counsel to Cortland and has passed
upon the legality of the shares offered pursuant to this Prospectus.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, acts as custodian for each Fund's portfolio securities and cash. Cortland
acts as its own transfer agent for Cortland's shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be directed to
your securities dealer or to Cortland at (212) 830-5280 or toll free at (800)
433-1918.
20
<PAGE>
CORTLAND
TRUST, INC.
PROSPECTUS
August 1, 1995
TABLE OF CONTENTS
Table of Fees and Expenses..........................2
Selected Financial Information......................2
Introduction........................................3
Investment Objectives,
Policies and Risks.............................4
Cortland Risk Factors...............................7
Management of the Fund..............................7
Description of Common Stock.........................9
Dividends and Distributions.........................9
How to Purchase and Redeem Shares...................9
Investments Through
Participating Organizations.....................11
Direct Purchase and
Redemption Procedures...........................12
Initial Purchases of Shares.....................12
Subsequent Purchases of Shares..................13
Redemption of Shares............................13
Exchange Privilege..............................15
Specified Amount Automatic
Withdrawal Plan.........................15
Distribution and Service Plan......................16
Federal Income Taxes...............................17
Cortland Income Taxes..............................18
General Information................................18
Net Asset Value....................................19
Custodian and Transfer Agent.......................19
<PAGE>
_______________________________________________________________________________
PROSPECTUS
PILGRIM AMERICA GENERAL MONEY MARKET SHARES
(SHARES OF CORTLAND TRUST, INC.)
TWO RENAISSANCE SQUARE, 40 NORTH CENTRAL AVE., SUITE 1200, PHOENIX, AZ
85004-4424 (800) 331-1080
- -------------------------------------------------------------------------------
Cortland Trust, Inc. (the "Company") is an open-end, diversified money market
fund. The Company consists of three separate money market fund series--the
Cortland General Money Market Fund, the U.S. Government Fund and the Municipal
Money Market Fund. This Prospectus relates exclusively to the Pilgrim America
General Money Market Shares class (the "Pilgrim America Shares") of the Cortland
General Money Market Fund (the "Fund"). The Fund seeks to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. The Fund invests in high quality debt obligations with relatively
short maturities. The Fund seeks to achieve its objective by investing in a
portfolio of securities and instruments issued or guaranteed by the United
States Government, its agencies or instrumentalities, bank instruments and
corporate commercial instruments.
SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE OR THAT THE FUND'S INVESTMENT
OBJECTIVE WILL BE ACHIEVED. SEE "INVESTMENT PROGRAM."
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth basic information about the Company and the Fund that
prospective investors should know prior to investing. It should be read and
retained for future reference. A Statement of Additional Information ("SAI")
dated August 1, 1995, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The SAI is available upon request and
without charge by writing or calling Pilgrim America Securities, Inc., Two
Renaissance Square, 40 North Central Ave., Suite 1200, Phoenix, AZ 85004-4424,
telephone (800) 331-1080.
Investors should be aware that the Pilgrim America Shares may not be purchased
other than through certain securities dealers with whom Pilgrim America
Securities, Inc. ("PASI") has entered into agreements for this purpose, or
directly from PASI. Pilgrim America Shares have been created for the primary
purpose of providing an alternative money market fund product for shareholders
of certain funds distributed by PASI. Shares of the Company other than the
Pilgrim America Shares are offered pursuant to a separate prospectus.
<TABLE>
<CAPTION>
Table of Contents
<C> <C>
Page
Summary 2
The Fund 4
Table of Fees and Expenses 4
Financial Highlights 5
Investment Program 6
Performance 9
Management 9
Shareholder's Guide 12
How to Buy Pilgrim America Shares 12
How to Redeem Pilgrim America Shares 15
Distributions and Taxes 17
Retirement Plans 18
General Information 19
New Account Application 21
Additional Account Privileges 23
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Dated: August 1, 1995
<PAGE>
SUMMARY
THE COMPANY AND THE FUND
- ------------------------------------
The Company is an open-end, diversified investment company of the type commonly
known as a money market fund. The Company consists of three investment
portfolios. Shares of the Company other than the Pilgrim America Shares are
offered pursuant to a separate prospectus. The Fund seeks to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. The Fund invests in high quality debt obligations with relatively
short maturities. This Prospectus relates to the Pilgrim America Shares. No
assurance can be given that the Fund's investment objective will be achieved.
See "Investment Program."
Pilgrim Shares
- --------------------------------------
Pilgrim America Shares have been created for the primary purpose of providing an
alternative money market fund product for investors who purchase shares directly
from PASI, or through dealers with whom PASI has entered into agreements for
this purpose, or who acquire Pilgrim America Shares through the exchange of
shares of certain other investment companies as hereinafter described. Pilgrim
America Shares are identical to other shares of the Fund, which are offered
pursuant to a separate prospectus, with respect to investment objective and
yield, but differ with respect to certain other matters. For example,
shareholders who hold other shares of the Fund may not participate in the
exchange privilege described herein and have different arrangements for
redemptions by check.
PURCHASING SHARES
- --------------------------------------
Pilgrim America Shares may be purchased directly from PASI and through certain
securities dealers with whom PASI has entered into agreements for this purpose
at net asset value without payment of any sales charge. However, securities
dealers processing purchase orders may charge a reasonable processing fee.
Initial investments must be at least $1,000 and subsequent purchases must be at
least $100. The minimum investment requirements may be waived for investments in
connection with tax-sheltered retirement plans or in connection with
reinvestment of distributions from another "Pilgrim America Fund." Purchases
made by check or bank wire will not become effective until converted into
Federal funds. See "How to Buy Pilgrim America Shares" and "Retirement Plans."
EXCHANGE PRIVILEGE
- --------------------------------------
Shareholders of Pilgrim America Shares may purchase shares of certain other
Pilgrim America Funds via an Exchange Privilege without a sales charge under
certain conditions hereinafter described. See "Exchange Privilege."
REDEEMING SHARES
- ----------------------------
Shareholders may at any time redeem all or a portion of their shares at
the net asset value of the Fund, without payment of a charge. See "How to Redeem
Pilgrim America Shares."
2
<PAGE>
DIVIDENDS
- ----------------------------
Dividends from net investment income are declared daily and distributed
in the form of additional Pilgrim America Shares on the subsequent business day.
At the option of the shareholders, dividends may be paid monthly by check. See
"Distributions and Taxes."
NET ASSET VALUE
- ----------------------------------------------
The net asset value of the Pilgrim America Shares will normally remain constant
at $1.00 per share. However, there can be no assurance that such net asset value
per share can be maintained at all times. See "How to Buy Pilgrim America
Shares" herein, and "Net Asset Value Determination" in the SAI.
MANAGER AND INVESTMENT ADVISOR
- ----------------------------------------------
Reich & Tang Asset Management L.P., 600 Fifth Avenue, New York, New
York 10020, acts as the Manager and Investment Advisor of the Company. Reich &
Tang Asset Management L.P. acts as investment manager or administrator of
eighteen other investment companies and also advises pension trusts and
endowments. See "Management."
SPECIAL CONSIDERATION
- --------------------------------------------
Subject to certain restrictions designed to reduce any associated risks, the
Fund may invest in securities such as commercial instruments which are not
rated, certain repurchase agreements, delayed delivery or when-issued securities
and in U.S. Dollar denominated obligations issued by foreign banks. Accordingly,
an investment in the Fund may entail somewhat different risks from an investment
in an investment company which does not engage in such investment practices. See
"Investment Program."
3
<PAGE>
<TABLE>
<CAPTION>
THE FUND
- ------------------------------
TABLE OF FEES AND EXPENSES
<S> <C>
Pilgrim General
Money Market
Shares
-------------------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)...........................................................................
None
Deferred Sales Load (as a percentage of original price or redemption proceeds,
as applicable)................................................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)............ None
Exchange Fee................................................................... None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees................................................................ 0.76%
12b-1 Fees (after fee waiver).................................................. 0.25%
Other Expenses................................................................. 0.02%
Total Fund Operating Expenses (after fee waivers).............................. 1.03%
Example
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return:
<S> <C>
1 year......................................................................... $ 11
3 years........................................................................ $ 33
5 years........................................................................ $ 57
10 years....................................................................... $126
The above table of fees and expenses is provided to assist an investor in
understanding the various costs and expenses that an investor will bear, both
directly and indirectly. (For more complete descriptions of the various costs
and expenses, including fee waivers, see "Management" and the Financial
Statements included at the end of the SAI). The expenses and example appearing
in the preceding table have been restated to reflect current fees (including fee
waivers) and operating expenses. Absent 12b-1 fee waivers, Total Fund Operating
Expenses would be 1.05% of average net assets. Such fee waivers may be rescinded
at any time without notice to investors. The example shown in the table should
not be considered a representation of past or future expenses, and actual
expenses may be greater or lesser than those shown.
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------
The following information has been audited by Ernst & Young LLP, the Company's
independent auditors, whose report thereon for each of the five years in the
period ended March 31, 1995 appears in the SAI. The data applies to one share
outstanding from the commencement of operations of the Fund to March 31, 1986,
and for the fiscal years ended March 31, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994 and 1995. Further financial data and related notes are included in
the SAI.
<TABLE>
<CAPTION>
Cortland General Money Market Fund
-----------------------------------------------------------------------
For the Year Ended March 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $ .9999 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income.............. 0.0384 0.0250 0.0284 0.0470 0.0706 0.0809 0.0755 0.0617 0.0567 0.0644
Net realized and unrealized
gain/(loss) on investments... (0.0026) 0.0001 -- -- 0.0001 (0.0001) -- 0.0001 -- --
------ -------- ----- ---- ------- ------- ---- ------- ---- ------
Total from investment operations... 0.0358 0.0251 0.0284 0.0470 0.0707 0.0808 0.0755 0.0618 0.0567 0.0644
Less distributions:
Dividends from net investment income (0.0384) (0 0250) (0.0284) (0.0470) (0.0706) (0.0809) (0.0755) (0.0618) (0.0567) (0.0644)
Dividends from net realized gain
on investments.............. -- (0.0001) -- -- -- -- -- 0.0001 -- --
----- -------- ---- ---- ---- ---- ---- ------- ---- ----
Total distributions................ (0.0384) (0.0251) (0.0284) (0.0470) (0.0706) (0.0809) (0.0755) (0.0618) (0.0567) (0.0644)
------- ------- ------- ------- ------- ------- ------ ------ ------ -------
Net asset value, end of period..... $0.9974 $1.0000 $1.0000 $1.0000 $1.0000 $0.9999 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return....................... 3.91% 2.53% 2.88% 4.81% 7.42% 8.42% 7.55% 6.22% 5.67% 6.44%
Ratios/Supplemental Data
Net assets, end of year (000's omitted)
$993,854 $926,400 $904,735 $906,662 $805,993 $970,560 $706,985 $420,063 $261,055 $147,106
Ratios to average net assets:
Expenses**........................ 1.03% 1.02% 1.00% 1.01% 1.01% 1.00% 1.00% 1.00% 1.00% 0.98%
Net investment income.............. 3.84% 2.48% 2.84% 4.67% 7.06% 8.00% 7.40% 6.04% 5.48% 7.06%
- ---------------------
* For the period of May 9, 1985, commencement of operations, to March 31,
1986.
* * Per share expenses and expense ratios reflect waiver by the Manager of a
portion of its management fees from the commencement of operations of the Fund
to March 31, 1986. The per share value of such fee waiver amounted to less than
$0.0001.
+ Includes the effect of a capital contribution from the Manager. Without a
capital contribution the net realized loss on investments would have been
$.0070 per share and the total return would have been 2.89%.
</TABLE>
5
<PAGE>
INVESTMENT PROGRAM
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------
The Fund seeks to provide as high a level of current income as is consistent
with the preservation of capital and liquidity. The investment objective of the
Fund is a fundamental policy, which may not be changed without the approval of
the shareholders of the Fund.
The Fund invests only in U.S. dollar-denominated securities which are rated in
one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO
if the instrument was rated by only one such organization) or, if unrated, are
of comparable quality as determined in accordance with procedures established by
the Board of Directors. The NRSROs currently rating instruments of the type the
Fund may purchase are Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff and Phelps, Inc., Fitch Investors Service, Inc., IBCA Limited
and IBCA Inc. (See the SAI for information with respect to rating criteria for
each NRSRO.)
Investments in rated securities not rated in the highest category by at least
two NRSROs (or one NRSRO if the instrument was rated by only one such
organization), and unrated securities not determined by the Board of Directors
to be comparable to those rated in the highest category, will be limited to 5%
of the Fund's total assets, with the investment in any such issuer being limited
to not more than the greater of 1% of the Fund's total assets or $1 million. The
Fund may invest in obligations issued or guaranteed by the U.S. Government
without any such limitation.
The Fund invests in such high quality debt obligations with relatively short
maturities. Unless otherwise stated, the investment policies and restrictions
set forth below and in the SAI are not fundamental policies, and may be changed
by the Board of Directors, with notice to shareholders.
The Fund seeks to achieve its objective by investing at least 80% of its assets
in U.S. Government Obligations (which consist of marketable securities and
instruments issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities), in bank instruments, in corporate commercial instruments and
in other corporate instruments which mature in thirteen months or less
(collectively, "Money Market Obligations").
The Fund seeks to achieve its objective by investing at least 80% of its assets
in U.S. Government Obligations (which consists of marketable securities and
instruments issued or guaranteed by the United States Government or by its
agencies or instrumentalities), in bank instruments, in trust instruments, in
corporate commercial instruments and in other corporate instruments maturing in
thirteen months or less (collectively, "Money Market Obligations").
The Fund may invest up to 100% of its assets in obligations issued by banks, and
up to 10% of its assets in obligations issued by any one bank, subject to the
provisions of Rule 2a-7 of the Investment Company Act of 1940 (the "1940 Act").
If the bank is a domestic bank, it must be a member of the FDIC. The Fund may
invest in U.S. dollar-denominated obligations issued by foreign branches of
domestic banks or foreign branches of foreign banks ("Eurodollar" obligations)
and domestic branches of foreign banks ("Yankee dollar" obligations). The Fund
will limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets
at the time of purchase, provided that there is no limitation upon the Fund's
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligation is unconditionally liable in the event that the
foreign branch fails to pay on the Eurodollar obligation for any reason; and (b)
Yankee dollar obligations, if the United States branch of the foreign bank is
subject to the same regulation as the United States banks. Eurodollar, Yankee
dollar and other foreign bank obligations include time deposits, which are
non-negotiable deposits maintained in a bank for a specified period of time at a
stated interest rate. The Fund will limit its purchases of time deposits to
those which mature in seven days or less, and will limit its purchases of time
deposits maturing in
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two to seven days to 10% of theFund's total assets at the time of purchase.
Eurodollar, Yankee dollar and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, that the obligations may
be less marketable than comparable domestic obligations of domestic issuers,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted which
might adversely affect the payment of principal and interest on those
obligations, that the selection of foreign obligations may be more difficult
because there may be less information publicly available concerning foreign
issuers, that there may be difficulties in enforcing a judgment against a
foreign issuer or that the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign issuers may differ
from those applicable to domestic issuers. In addition, foreign banks are not
subject to examination by United States Government agencies or
instrumentalities.
The Fund may invest in short-term corporate obligations and instruments,
including but not limited to corporate commercial paper, notes, bonds and
debentures. Corporate commercial instruments generally consist of short-term
unsecured promissory notes issued by corporations. The Fund may also purchase
variable amount master demand notes, which are unsecured demand notes that
permit investment of fluctuating amounts of money at variable rates of interest
pursuant to arrangements with issuers who meet the foregoing quality criteria.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal and
interest upon notice not exceeding five business or seven calendar days. The
Fund may also invest in participation interests in loans extended by banks to
companies, provided that both such banks and such companies meet the quality
standards set forth above. (See the SAI for information with respect to
corporate commercial instruments and bond ratings.) The Fund may also invest in
fixed or variable rate debt units representing an undivided interest in a
trust's distributions of principal and interest that the trust receives from an
underlying portfolio of bonds issued by a highly rated corporate or U.S.
Government agency issuer and/or payments from re-characterized distributions
made possible by the swap of certain payments due on the underlying bonds. The
Fund's investment will be limited solely to the debt units and in each case,
must meet the credit quality standards under Rule 2a-7 of the 1940 Act. Debt
units will be purchased by the Fund as an institutional accredited investor
pursuant to a private placement memorandum. Sale of debt units will be effected
pursuant to Rule 144A or other exemptions from registration under the Securities
Act of 1933, subject to the eligibility of the transferee and compliance with
trust agreement requirements. The Manager will monitor the liquidity of the debt
units under the supervision of Cortland's Board of Directors.
CERTAIN INVESTMENT STRATEGIES
In the pursuit of its objective and policies, from time to time the Fund may
engage in the following strategies:
REPURCHASE AGREEMENTS. Under a repurchase agreement, the Fund acquires ownership
of an obligation and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return insulated from market fluctuations during such period. Although the
underlying collateral for repurchase agreements may have maturities exceeding
one year, the Fund will not enter into a repurchase agreement if as a result of
such investment more than 10% of the Fund's total assets would be invested in
illiquid securities, including repurchase agreements which expire in more than
seven days. The Fund may, however, enter into a "continuing contract" or "open"
repurchase agreement under which the seller is under a continuing obligation to
repurchase the underlying obligation from the Fund on demand and the effective
interest rate is negotiated on a daily basis. In general, the Fund will enter
into repurchase agreements only with domestic banks with total assets of at
least $1.5 billion or with primary dealers in U.S. Government securities.
However, the total assets of a bank will not be the sole factor determining the
Fund's investment decisions, and the Fund may enter into repurchase agreements
with other institutions which the Board of Directors believes present minimal
credit risk. Nevertheless, if the seller of a repurchase agreement fails to
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repurchase the obligation in accordance with the terms of the agreement, the
Fund may incur a loss to the extent that the proceeds realized on the sale of
the underlying obligation are less than the repurchase price. Repurchase
agreements may be considered loans to the seller of the underlying security.
Securities purchased pursuant to a repurchase agreement are held by the Fund's
custodian, Investors Fiduciary Trust Company (the "Custodian") and (i) are
recorded in the name of the Fund with the Federal Reserve Book-Entry System, or
(ii) the Fund receives daily written confirmation of each purchase of a security
and a receipt from the Custodian. The Fund purchases securities subject to a
repurchase agreement only when the purchase price of the security acquired is
equal to or less than its market price at the time of purchased.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements, which involve the sale by the Fund of a portfolio security at an
agreed upon price, date and interest payment. The Fund will enter into reverse
repurchase agreements for temporary or defensive purposes to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy redemption
requests should they occur, or in some cases as a technique to enhance income.
The Fund will use reverse repurchase agreements when the interest income to be
earned from the investment of the proceeds is greater than the interest expense
of the reverse repurchase transaction. The Fund will enter into reverse
repurchase agreements only in amounts up to 10% of the value of its total assets
at the time of entering into such agreements. Reverse repurchase agreements
involve the risk that the market value of securities retained by the Fund in
lieu of liquidation may decline below the repurchase price of the securities
sold by the Fund which it is obligated to repurchase. The risk, if encountered,
could cause a reduction in the net asset value of the Fund's shares. Reverse
repurchase agreements are considered to be borrowings under the 1940 Act. (See
"Investment Restrictions" in the SAI for percentage limitations on borrowings.)
DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES. Delayed delivery
agreements are commitments by the Fund to dealers or issuers to acquire
securities beyond the customary same-day settlement for money market
instruments. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as a
speculative or leverage technique. Rather, from time to time, the Fund's
investment advisor can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales of
shares of the Fund; therefore, to assure that the Fund will be as fully invested
as possible in instruments meeting its investment objective, the Fund may enter
into delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business days.
The Fund will enter into when-issued and delayed delivery transactions only when
the time period between trade date and settlement date is at least 30 days and
not more than 120 days. Money Market Obligations are sometimes offered on a
"when-issued" basis; that is, the date for delivery of and payment for the
securities is not fixed at the date of purchase, but is set after the securities
are issued (normally within forty-five days after the date of the transaction).
The payment obligation and the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. The Fund
will only make commitments to purchase such Money Market Obligations with the
intention of actually acquiring such securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable.
If the Fund enters into a delayed delivery agreement or purchases a when-issued
security, the Fund will direct its custodian bank to place cash or other high
grade securities (including Money Market Obligations) in a separate account of
the Fund in an amount equal to its delayed delivery agreements or when-issued
commitments. If the market value of such securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of such Fund's delayed agreements and
when-issued commitments. To the extent that funds are in a separate account,
they will not be available for new investment or to meet redemptions.
Investments in securities on a when-issued basis and use of delayed delivery
agreements may increase the Fund's exposure to market fluctuation, or may
increase the possibility that the Fund will incur a short-term loss, if the Fund
must engage in portfolio transactions in order to honor a when-issued commitment
or accept delivery of a security under a delayed delivery agreement. The Fund
will employ techniques designed to minimize these risks. No additional delayed
delivery agreements or when-issued commitments will be made if, as a result,
more than 25% of the Fund's net assets would become so committed.
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INVESTMENT RESTRICTIONS
The Fund's investment programs are subject to a number of investment
restrictions which reflect self-imposed standards as well as Federal and state
regulatory limitations. The most significant of these restrictions provide that
the Fund will not: (1) purchase securities of any issuer (other than obligations
of the U.S. Government, its agencies or instrumentalities and repurchase
agreements fully secured by such obligations) if as a result more than 5% of the
Fund's total assets would be invested in the securities of such issuer, except
that in the case of certificates of deposit and bankers' acceptances, up to 25%
of the value of the Fund's total assets may be invested without regard to such
5% limitation, but shall instead be subject to a 10% limitation (in each case,
subject to the provisions of Rule 2a-7 of the 1940 Act); (2) purchase any
corporate commercial instruments which would cause 25% of the value of the
Fund's total assets at the time of such purchase to be invested in securities of
one or more issuers conducting their principal business activities in the same
industry; (3) borrow money or pledge, mortgage or hypothecate its assets except
for temporary or emergency purposes and then only in an amount not exceeding 15%
of the value of the Fund's total assets, except that the Fund may enter into
delayed delivery or reverse repurchase agreements and may make commitments to
purchase when-issued securities consistent with its investment objective and
policies (and the Fund will not make additional investments while borrowings
other than when-issued and delayed delivery purchases and reverse repurchase
agreements are outstanding); or (4) lend money or securities except to the
extent that the investments of the Fund may be considered loans.
MATURITIES
Consistent with its objective of stability of principal, the Fund attempts to
maintain a constant net asset value of $1.00 per share and, to this end, values
its assets by the amortized cost method and rounds the per share net asset value
to the nearest whole cent in compliance with applicable rules and regulations.
Accordingly, the Fund invests in Money Market Obligations having remaining
maturities of thirteen months or less and maintains a weighted average maturity
for the Fund of 90 days or less. However, there can be no assurance that the
Fund's net asset value per share of $1.00 will be maintained.
PERFORMANCE
- ----------------------------
Yield information for the Pilgrim America Shares may be obtained by calling PASI
at (800) 992-0180. Yield is computed in accordance with a standardized formula
described in the SAI and can be expected to fluctuate from time to time and is
not necessarily indicative of future results. Accordingly, the yield information
may not provide a basis for comparison with investments which pay a fixed rate
of interest for a stated period of time. Yield is a function of the type and
quality of the Fund's investments, the Fund's maturity and the operating expense
ratio of the Fund. A shareholder's investment in the Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in the Fund. For the seven-day period ended July 10, 1995,
the Fund's current yield and effective yield were 5.03% and 5.16%, respectively.
MANAGEMENT
- ----------------------------
BOARD OF DIRECTORS
The overall management of the business and affairs of the Company is vested with
its Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including the Company's agreements with the manager, the investment
advisor, the distributor, the transfer agent and the custodian. The day-to-day
operations of the Company are delegated to the Company's officers and Reich &
Tang Asset Management L.P., (the "Manager" and/or "Investment Advisor"), subject
always to the objective and policies of each portfolio, including the Fund and
to the general supervision of the Company's Board of Directors. The Manager
furnishes or procures on behalf of the Company, and at the Manager's expense,
all services necessary for the proper conduct of the Company's business. Some of
the Company's officers and directors are officers or employees of the Manager. A
majority of the members of the Board of Directors of the Company have no
affiliation with the Manager.
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MANAGER
Reich & Tang Asset Management L.P., a Delaware limited partnership, with its
principal offices at 600 Fifth Avenue, New York, New York 10022, serves as the
Manager of the Company and its three portfolios, including the Fund, pursuant to
re-executed agreements with the Company dated October 1, 1994 (the "Management
Agreements"). Under the Management Agreement, the Manager provides all services
required for the management of the Company and the Fund, either directly or
indirectly through contracts with others. The Manager bears all ordinary
operating expenses associated with the Company's and the Fund's operations
except: (a) the fees of the directors who are not "interested persons" of the
Company, as defined by the 1940 Act, and the travel and related expenses of the
directors incident to their attending shareholders', directors' and committee
meetings, (b) interest, taxes and any brokerage commissions (which are expected
to be insignificant), (c) extraordinary expenses, if any, including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto, (d) shareholder service or distribution fees
payable by the Fund under the plan of distribution described under the heading
"Distribution Plan" below, and (e) membership dues of any industry association.
The Company pays the Manager an annual fee, calculated daily and paid monthly,
of 0.80% of the first $500 million of the Company's average daily net assets,
plus 0.775% of the next $500 million of the Company's average daily net assets,
plus 0.75% of the next $500 million of the Company's average daily net assets,
plus 0.725% of the Company's average daily net assets in excess of $1.5 billion.
A portion of such fees is allocated to the Fund based upon its pro rata share of
the Company's total net assets. The comprehensive fee paid by the Company is
higher than the fees paid by most other money market mutual funds, many of which
do not offer services that the Company offers. Also, most other mutual funds
bear expenses that are being borne for the Company by the Manager. During the
fiscal year ended March 31, 1995, the Company paid the Manager fees which
represented 0.77% of the Fund's average daily net assets on an annualized basis.
During such year, expenses of the Fund, including fees paid to the Manager,
amounted to 1.03% of the Fund's average daily net assets on an annualized basis.
INVESTMENT ADVISOR
Reich & Tang Asset Management L.P. also serves as the Fund's Investment Advisor.
Reich & Tang Asset Management L.P. is a registered investment advisor. As of May
31, 1995, the Manager was at the investment manager, advisor or supervisor with
respect to assets aggregating approximately $7.4 billion. The Manager currently
acts as investment manager or administrator of eighteen other investment
companies and also advises pension trusts, profit sharing trusts and endowments.
Effective October 1, 1994 the Board of Directors of the Fund approved the
re-execution of the Management/Investment Advisory Agreement with the Manager.
The Manager's predecessor, New England Investment Companies, L.P. ("NEICLP") is
the limited partner and owner of a 99.5% interest in the newly created limited
partnership, Reich & Tang Asset Management L.P., the Manager. Reich & Tang Asset
Management, Inc. (a wholly-owned subsidiary of NEICLP) is the general partner
and owner of the remaining .5% interest of the Manager. Reich & Tang Asset
Management L.P. has succeeded NEICLP as the Manager of the Fund. There-execution
of the Management/Investment Advisory Agreement did not result in "assignment"
of the Management/Investment Advisory Agreement with NEICLP under the 1940 Act,
since there is no change in actual control or management of the Manager caused
by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 68.1% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc. Owns
approximately 22.8% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through eight
investment advisory/management affiliates and three distribution subsidiaries.
These include, in addition to the Manager, Loomis, Sayles & Company, L.P.;
Copley Real Estate Advisors, Inc.; Back Bay Advisors, L.P.; Marlborough Capital
Advisors, L.P.; Westpeak Investment Advisors, L.P.; Draycott Partners, Ltd.; TNE
Investment Services, L.P.; New England Investment Associates, Inc.; and an
affiliate, Capital Growth Management Limited Partnership. These affiliates in
the aggregate are investment advisors or managers to 57 other registered
investment companies.
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The re-executed Management/Investment Advisory Agreement are the same in all
material respects as the relevent terms and conditions governing the Manager's
management and investment advisory responsibilities under the Fund's previous
Management and Investment Advisory Agreement with Reich & Tang L.P. except for
(i) the dates of execution and (ii) the identity of the Manager.
Pursuant to the terms of the re-executed Management/Investment Advisory
Agreement, the Manager manages the investments of the Fund, subject at all times
to the policies and control of the Company's Board of Directors. The Manager
obtains and evaluates economic, statistical and financial information to
formulate and implement investment policies for the Fund. The Manager shall not
be liable to the Fund or the shareholders thereof except in the case of the
Manager's willful misfeasance, bad faith, gross negligence or reckless disregard
of duty.
FEE WAIVERS
In order to increase the yield to investors, the Manager may, from time to time,
waive or reduce its fees on assets held by the Fund. When instituted, the
Manager will continue these fee waivers in effect or charge reduced fees until
further notice to the Board of Directors. Fee waivers or reductions, other than
those set forth in the Management Agreement, may be rescinded at any time
without further notice to investors.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Fund are usually principal
transactions, the Fund incurs little or no net brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Fund may also
purchase securities from underwriters at prices which include a concession paid
by the issuer to the underwriter.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed to be 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.
DISTRIBUTION PLAN
The Fund has entered into a Distribution Agreement dated September 15, 1993 (the
"Distribution Agreement"), with Reich & Tang Distributors L.P. (the
"Distributor"), 600 Fifth Avenue, New York, New York 10020. The Distributor,
which was organized on January 4, 1991, has the exclusive right to enter into
agreements with registered broker-dealers who sell the Company's shares and with
financial institutions which may furnish services to shareholders on behalf of
the Company. On April 7, 1995, the Distributor entered into a Primary Dealer
Agreement with PASI in order to provide for the offer and sale of the Pilgrim
America Shares. Pursuant to a plan of distribution (the "Plan") approved by the
Fund's shareholders on July 31, 1989, the Fund may make distribution-related
payments in an amount not to exceed on an annualized basis 0.25% of the value of
the Fund's assets. Securities dealers and financial institutions (including
PASI) may receive distribution payments directly or indirectly from the Fund for
services that may be used to pay the costs of opening shareholder accounts,
processing investor purchase and redemption orders, responding to inquiries from
shareholders concerning the status of their accounts and the operations of the
Fund and communications with the Company on behalf of Fund shareholders. The
full amount of such payments made with respect to the Pilgrim America Shares
will be paid to PASI, which will use such amounts to defray in part its costs
associated with providing the foregoing services to holders of the Pilgrim
America Shares. In addition, the Distributor may pay for advertisements,
promotional materials, sales literature and the printing and mailing of
prospectuses to prospective shareholders and other services to support
distribution pursuant to the Plan. The Distributor may also make payments to
securities dealers (including PASI) and financial institutions, such as banks,
out of the investment management fee which the Manager receives from the Fund,
out of its profits or from any other source available to the Distributor.
Expenses payable under the Plan will not be carried over from year to year and,
if the Plan is terminated in accordance with its terms, the obligations of the
Fund to make payments to the Distributor, PASI or other securities dealers
pursuant to the Plan will cease and the Fund will not be required to make any
payments after such termination date.
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As a result of 12b-1 fees, a long-term shareholder in the Fund may pay more than
the economic equivalent of the maximum front-end sales charges permitted by the
Rules of the National Association of Securities Dealers, Inc.
SHAREHOLDER'S GUIDE
PILGRIM AMERICA PURCHASE OPTIONSTM
- ----------------------
Pilgrim America Shares are offered continuously for purchase on each day which
the New York Stock Exchange and the Company's Custodian are open for business.
All shares are purchased at the net asset value (expected to be constant at
$1.00 per share--see "Timing of Purchase Orders" below) next determined after
funds are received in payment for shares by the transfer agent of the Pilgrim
America Shares, Investors Fiduciary Trust Company (the "Transfer Agent"). There
is no sales charge. The minimum initial investment is $1,000 and $250 for IRAs
and the minimum subsequent investment is $100, but such minimum amounts may be
waived or changed at any time at management's discretion. The Fund will waive
the minimum for purchases by employees of PASI or its affiliates, and employees
of the Transfer Agent and its affiliates. An investor wishing to open an account
should use the New Account Application included in this Prospectus.
Many of the types of instruments in which the Fund is permitted to invest are
paid for in Federal funds which are monies held by the Custodian on deposit at a
Federal Reserve Bank. Since the monies paid for shares of the Fund generally
cannot be invested by the Fund until they are converted into, and are available
to the Fund in Federal funds, which may take up to three days, payment of
dividends on the Fund's shares purchased will not commence until such conversion
and availability is achieved.
You will become a shareholder of record as of the close of business on the day
after payment is received by the Transfer Agent. Shares purchased by Federal
funds wire sent directly to the Transfer Agent (see "Purchases by Wire," below)
will be purchased at the close of business on the day on which your order is
received and you will be entitled to dividends on the next business day.
However, Federal funds wires received by the Transfer Agent after 4:00 p.m. New
York time on any business day will be deemed received by the Fund and credited
to an account on the next business day.
Although no sales charge is imposed by the Fund on purchases of its shares, a
selling agent may charge a commission or sales fee. PASI does not currently
impose any such fee. You may also purchase shares of the Fund initially by
sending a check accompanied by an application. Subsequent investments by check
must include account information including the account number. All checks must
be drawn on U.S. banks in U.S. funds to avoid delays and fees. Purchases made by
check are normally converted into Federal funds within two business days and are
accepted subject to collection at face value.
A charge may be imposed if a check submitted for investment does not clear.
PURCHASES BY WIRE
Pilgrim America Shares may be purchased by wire transfer in the form of Federal
funds. If payment is wired, it should be directed to Investors Fiduciary Trust
Company ABA #101003621 for credit to Pilgrim America General Money Market Shares
A/C #752-4854, For Further Credit to: Shareholder A/C # __________ , Shareholder
Name: ______________________ ."
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For initial purchase by Federal funds wire, you must first obtain an account
number by telephoning the Fund at ###-##-####. You may then instruct your bank
to wire funds as described above. After you have received an account number and
have wired funds, you must complete the Application in its entirety and send it
to:
Pilgrim America Order Department
P.O. Box 419368
Kansas City, MO 64141
Your completed Application must be received in order to properly register your
account. Any requests to exchange, transfer, or redeem will not be honored until
such Application is received. See the Fund's Application included in this
Prospectus.
For subsequent investments by wire, first telephone the Fund to obtain a wire
reference number prior to transmission. This helps the Fund ensure the proper
credit to your account.
PURCHASES BY CHECK
An initial investment made by check must be accompanied by the Fund's
Application completed in its entirety. Additional shares of the Fund may also be
purchased by sending a check payable to the Fund, along with information
regarding your account, including the account number, to the Transfer Agent. All
checks should be drawn only on U.S. banks in U.S. funds, in order to avoid fees
and delays. A charge may be imposed if any check submitted for investment does
not clear.
Orders for the purchase of Pilgrim America Shares are accepted only on a
"business day of the Company," which means any day on which the New York Stock
Exchange and the Custodian are open for business. It is expected that the New
York Stock Exchange and/or the Custodian will be closed during the next twelve
months on Saturday and Sundays and on July 4 (Independence Day), September 4
(Labor Day), October 9 (Columbus Day), November 11 (Veterans' Day), November 23
(Thanksgiving Day), December 25 (Christmas), 1995 and January 1 (New Year's
Day), January 15 (Martin Luther King, Jr.'s Birthday), February 19 (Presidents'
Day), April 5 (Good Friday) and May 30 (Memorial Day), 1996. For further
information, investors should contact PASI or any participating broker.
An order to purchase Pilgrim America Shares is effected only when it is received
in proper form and payment in the form of Federal funds (member bank deposits
with the Federal Reserve Bank) is received by the Company for investment. The
Company reserves the right to reject any order for the purchase of shares.
Pilgrim America Shares are purchased or exchanged at the net asset value next
determined after acceptance of the order. Net asset value is normally determined
at 12:00 noon and 4:00 p.m. New York time on each business day of the Company.
It is anticipated that the net asset value of the shares of the Fund will remain
constant at $1.00 per share, because the Fund uses the amortized cost method of
valuing the securities held by the Fund and rounds the Fund's per share net
asset value to the nearest whole cent. The Company, however, makes no assurance
that the Fund can maintain a $1.00 net asset value per share. The Fund will not
issue share certificates but will record investor holdings on the books of the
Company in non-certificate form and regularly advise the shareholder of his
ownership position. There is no sales charge to the investor on purchases of
Pilgrim America Shares. The costs of distributing Pilgrim America Shares are
borne in part by the Company and in part by the Manager, the Distributor, and/or
PASI. See "Management--Distribution Plan."
CHOOSING A DISTRIBUTION OPTION
When you buy shares of the Fund you may choose one of the following distribution
options:
1) The Share Option reinvests your income dividends and capital gains
distributions, if any, in additional shares daily. You are assigned this
automatically if no selection is indicated. Income dividends and capital
gains will be distributed in the form of additional shares on the next
business day.
2) With the Cash Option, you receive both income dividends and capital gains
distributions in cash. If you select this option and the U.S. Postal Service
cannot deliver your checks, or if your checks remain uncashed for six
months, your money will be reinvested in your account at the then-current
net asset value and your election will be converted to the Share Option.
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3) If you are also a shareholder of any of the other Pilgrim America Group
Funds, distributed by PASI, the Transfer Option permits you to have income
dividends and capital gains distributions of the Fund automatically invested
inshares of any one of those funds of which you are a shareholder at the
applicable net asset value. If you select this option, the minimum
investment requirements for additions to an existing account will be waived.
Once again, you must specify which option you desire when you place your order
or submit your application. Tax consequences of distributions (described below
under "Distributions and Taxes") are the same whether you choose to receive them
in cash or to reinvest them in additional shares of the Fund or another Pilgrim
America Fund.
EXCHANGE PRIVILEGE
Shareholders of the Pilgrim America Shares who acquired their shares directly
(or indirectly as a result of the reorganization with the Pilgrim Money Market
Fund) by using all or a portion of the proceeds from the exchange or redemption
of shares of certain other Pilgrim America Group Funds may exchange those fund
shares (plus any shares acquired via dividend reinvestment) for shares of the
other open-end Pilgrim America Group Funds which offer such privileges at
relative net asset value (without a sales charge).
Shares of the Fund acquired directly may be exchanged for shares of such other
Pilgrim America Funds at their current offering price.
The prospectuses of the other funds should be reviewed before effecting any
exchange. You should note that any such exchange, which may only be made in
states where shares of the other funds are qualified for sale, may create a gain
or loss to be recognized for Federal income tax purposes. Exchanges may be
authorized by telephone. You will automatically be assigned this privilege
unless you check the box on the Application which indicates that you do not wish
to have the privilege. See "Telephone Privileges." In addition, if a shareholder
exchanges by mail, the exchange will be effected upon receipt of written
instructions signed by all account owners into an indentically registered
account. The exchange privilege may be modified any time, at management's
discretion or discontinued upon 60 days' written notice to shareholders.
PRE-AUTHORIZED INVESTMENT PLAN
For your convenience, a pre-authorized investment program (see "Pre-Authorized
Investment Plan" on the account Application) may be established whereby your
personal bank account is automatically debited and your Fund Account is
automatically credited with additional full and fractional shares ($100
subsequent minimum investment). For further information on pre-authorized
investment plans, please contact the Fund's Shareholder Servicing Agent.
14
<PAGE>
The minimum investment requirements may be waived by PASI for purchases made
pursuant to certain programs such as payroll deduction plans and retirement
plans.
HOW TO REDEEM PILGRIM AMERICA SHARES
- ---------------------
Shares of the Fund will be redeemed at the net asset value next determined after
receipt of a redemption request in good form by the Fund's Transfer Agent on any
day on which the Fund's net asset value is calculated. If all of your shares are
redeemed, all dividends accrued through the day of withdrawal will be remitted
to you.
TYPES OF REDEMPTIONS
- ---------------------
REDEMPTION BY CHECK
The Transfer Agent will provide, upon your request, checks to be drawn on your
account that will clear through the Transfer Agent. These may be made payable to
the order of any person for an amount of $100 or more. When a check is presented
to the Transfer Agent for payment, the Transfer Agent will redeem a sufficient
number of full and fractional shares in your account to cover the amount of the
check. This enables you to continue earning daily income dividends until the
check has cleared. Cancelled checks will be returned to you by the Transfer
Agent. IF YOU ELECT TO USE THIS METHOD OF REDEMPTION, PLEASE SO SIGNIFY ON THE
APPLICATION.
You will be subject to the Transfer Agent's rules and regulations governing such
checks, including the right of the Transfer Agent not to honor checks in amounts
exceeding the value of the account at the time they are presented for payment.
The Fund and the Transfer Agent reserve the right to modify or terminate this
service at any time after notification to the Fund's shareholders.
REDEMPTION BY MAIL
A written request for redemption must be received by the Fund's Transfer Agent
in order to constitute a valid tender for redemption. The Transfer Agent may
also require a signature guarantee by an "Eligible Institution" as that term is
defined under the Securities Exchange Act of 1934. It will also be necessary for
corporate investors and other associations to have an appropriate certification
on file authorizing redemptions by a corporation or an association before a
redemption request will be considered in proper form. A suggested form of such
certification is provided on the Application included in this Prospectus. To
determine whether a signature guarantee or other documentation is required,
shareholders may call the Fund's Shareholder Servicing Agent at (800) 331-1080.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to have regular monthly or quarterly payments in any
fixed amount in excess of $100 made to him or her, or to anyone else properly
designated as long as the account has a value of at least $10,000. During the
withdrawal period, a shareholder may purchase additional shares for deposit to
his or her account if the additional purchases are equal to at least one year's
scheduled withdrawals or $1,200, whichever is greater.
15
<PAGE>
There are no separate charges to a shareholder under this plan. The number of
full and fractional shares equal in value to the amount of the payment will be
redeemed at net asset value. Such redemptions are normally processed on the
first day prior to the end of the month or quarter. Checks are then mailed on or
about the first of the following month. Shareholders who elect to have a
Systematic Withdrawal Plan must have all dividends and capital gains reinvested.
To establish a Systematic Withdrawal Plan, please complete the section entitled
"Systematic Withdrawal Plan" on the "Additional Account Privileges" section of
the Application.
You may change the amount, frequency, and payee, or terminate this plan by
giving written notice to the Fund's Transfer Agent. The Fund reserves the right
to terminate this service at any time upon written notice to you by the Fund.
EXPEDITED REDEMPTION
The Expedited Redemption privilege allows you to effect a liquidation from your
account via a telephone call and have the proceeds (maximum of $50,000) mailed
to your address of record. This privilege is automatically assigned to you
unless you check the box on the application which signifies that you do not wish
to utilize such option.
The Expedited Redemption Privilege additionally allows you to effect a
liquidation from your account and have the proceeds (minimum $5,000) wired to
your pre-designated bank account. This privilege will NOT automatically assigned
to you. If you want to take advantage of this privilege, please check the
appropriate box and attach a voided check to the New Account Application. Under
normal circumstances, proceeds will be transmitted to your bank on the first
business day following receipt of your instructions, provided redemptions may be
made.
To effect an Expedited Redemption, please call the Transfer Agent at (800)
992-0180.
TIMING AND PRICING OF REDEMPTION ORDERS
Pilgrim America Shares are redeemed at their net asset value next computed after
a request for redemption in proper form (including signature guarantees and
other required documentation) is received by the Transfer Agent or PASI. Orders
for the redemption of shares received in proper form by PASI in its Phoenix,
Arizona office prior to 4:00 p.m. New York time will be confirmed as of the
close of that day. Orders received after 4:00 p.m. New York time will be
confirmed on the next business day of the Fund. The Fund will not accept
requests which specify a particular date for redemption or which specify any
special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven days
following the redemption date. A charge for special handling (such as wiring of
funds) may be made by the Transfer Agent. The right of redemption may not be
suspended or the date of payment upon redemption postponed except under unusual
circumstances such as when trading on the New York Stock Exchange is restricted
or suspended. Payment of the proceeds of redemptions relating to shares for
which checks sent in payment have not yet cleared will be delayed until it is
determined that the check has cleared, which may take up to 15 days from the
date that the check is received.
A signature guarantee is designed to protect the investor, the Fund, PASI, and
their agents by verifying the signature of each investor seeking to redeem or
transfer shares of the Fund. Signature guarantees are required in the following
circumstances: (1) redemptions by mail of $50,000 or more; (2) redemptions by
mail if the proceeds are to be paid to someone other than the name(s) in which
the account is registered; (3) written redemptions requesting proceeds to be
sent by wire; (4) written redemptions requesting proceeds to be sent to an
address other than the address of record or to an address that has been changed
within six months; (5) requests to transfer the registration of shares to
another owner; and (6) requests for telephone exchange or redemption
authorization. These requirements may be waived or modified at the discretion of
management. Other documentation may be required under certaincircumstances and
it is suggested that you contact PASI at (800) 331-1080 if you have any
questions.
16
<PAGE>
EXPEDITED REDEMPTION AND TELEPHONE EXCHANGE INFORMATION
The Fund and its Transfer Agent will not be responsible for the authenticity of
telephone instructions or losses, if any, resulting from unauthorized
shareholder transactions if the Fund or its Transfer Agent reasonably believe
that such instructions were genuine. The Fund and its Transfer Agent have
established procedures that the Fund believes are reasonably appropriate to
confirm that instructions communicated by telephone are genuine. These
procedures include: (i) recording telephone instructions for exchanges and
expedited redemptions; (ii) requiring the caller to give certain specific
identifying information; and (iii) providing written confirmations to
shareholders of record not later than five days following any such telephone
transaction. If the Fund and its Transfer Agent do not employ these procedures,
they may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
MINIMUM ACCOUNT BALANCE
Due to the relatively high cost of handling small investments, the Fund reserves
the right upon 60 days' written notice to involuntarily redeem, at net asset
value, the shares of any account if the balance falls to less than $1,000 due to
shareholder withdrawal.
DISTRIBUTIONS AND TAXES
- -----------------------
It is the policy of the Company to declare dividends from the net investment
income earned by the Fund daily; such dividends are distributed to the Fund's
shareholders in the form of additional shares on the subsequent business day.
Dividends from net realized capital gain, offset by capital loss carryovers, if
any, are generally declared and paid when realized. However, to the extent that
a net realized capital gain is deemed necessary to offset future capital losses,
such gain will not be distributed.
TAXES
Each Fund comprising the Company is treated as a separate taxable entity for
Federal income tax purposes. The Fund has elected to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). It is the Fund's policy to distribute to shareholders all
of its net investment income and any capital gains (net of capital losses) in
accordance with the timing requirements imposed by the Code, so that the Fund
will satisfy the distribution requirement of Subchapter M and not be subject to
Federal income taxes or the 4% excise tax. As long as the Fund qualifies for
this tax treatment, the Fund will not be subject to Federal income tax on
amounts distributed to shareholders. If the Fund fails to satisfy any of the
Code requirements for qualification as a regulated investment company, it will
be taxed at regular corporate tax rates on all of its taxable income
(includingcapital gains) without any deduction for distributions to
shareholders, and distributions will be taxable to shareholders as ordinary
dividends (even if derived from the Fund's net long-term capital gains) to the
extent of the Fund's current and accumulated earnings and profits. In addition,
the Fund intends to meet the distribution requirements of the Code to avoid the
imposition of a 4% Federal excise tax.
Shareholders of the Fund will be subject to Federal income taxes and any
applicable state income taxes on amounts distributed as dividends unless such
shareholders are otherwise exempt. It is not expected that any portion of
dividends paid by the Fund will qualify for the Federal dividends-received
deduction for corporations.
17
<PAGE>
Distributions to shareholders will be treated in the same manner for Federal
income tax purposes whether the shareholder elects to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, shareholders are
required to treat certain distributions made during January as having been paid
and received on December 31 of the preceding year. A statement setting forth the
Federal income tax status of all distributions made (or deemed made) during the
year, will be sent to shareholders promptly after the end of each year. To avoid
being subject to a 31% Federal backup withholding on dividends and redemption
payments, shareholders must certify that the tax-payer identification number
("TIN") provided to the Fund is correct and that they are not subject to backup
withholding for any reason.
The Fund reserves the right to involuntarily close all accounts which fail to
provide a certified TIN by redeeming such accounts in full at the current net
asset value.
If the Fund receives notice from the IRS that a previously certified TIN is
incorrect, the Fund will immediately impose backup withholding and such account
may be involuntarily redeemed as mentioned above.
The Fund also reserves the right to reject any account which does not furnish a
certified TIN, or does not indicate that a TIN has been applied for by checking
the "Awaiting TIN" box on the Application.
If a TIN has been applied for and the "Awaiting TIN" box is checked on the
Application, the Fund will begin backup withholding on dividends and other
reportable payments immediately and will continue such withholding for at least
60 days. If, at the end of the 60-day period, a TIN has not been received and
certified on the IRS Form W-9, the Fund reserves the right to involuntarily
redeem all shares in the account at the current net asset value.
The foregoing discussion of Federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislation or administrative action. As the foregoing discussion is
for general information only, shareholders should also review the more detailed
discussion of Federal income tax considerations relevant to the Fund that is
contained in the Fund's SAI. Shareholders are advised to consult with their tax
advisors concerning the application of state, local and foreign taxes to
investments in the Company, which may differ from the Federal income tax
consequences described above.
RETIREMENT PLANS
- --------------------
The Fund has available prototype qualified retirement plans for both
corporations and self-employed individuals. The Fund also has available
prototype Individual Retirement Account ("IRA") plans (for both individuals and
employers), Simplified Employee Pension ("SEP") plans, pension and profit
sharing plans and 403(b)(7) Tax-Sheltered Retirement Plans which are designed
for employees of public educational institutions and certain non-profit,
Tax-exempt organizations. Investors Fiduciary Trust Company, Kansas City,
Missouri, acts as the custodian for these plans. For information, including the
custodian's fees and forms necessary to adopt the plans, call or write PASI.
18
<PAGE>
GENERAL INFORMATION
- ---------------------
The Company is a no-load, open-end, diversified investment company. The Company
was initially organized as a Massachusetts business trust, under the name
"Cortland Trust," pursuant to an Agreement and Declaration of Trust dated
October 31, 1984, but had no operations prior to May 9, 1985. As of July 31,
1989, pursuant to an Agreement and Plan of Reorganization, Cortland Trust was
reorganized into a Maryland corporation, under the name "Cortland Trust, Inc."
The shares of the Company are divided into three separate portfolios
constituting separate series. The assets of each series are invested in separate
investment portfolios with differing investment objectives and policies. The
Pilgrim America Shares is a class of the Fund and share the same investment
portfolio with the Fund. Shares of each series of the Company are entitled to
one vote per share on all matters submitted to a vote of shareholders, except
that the holders of shares of a particular series will have the exclusive right
to vote on matters affecting only the rights of the holders of such series. For
example, holders of shares of a particular series will have the exclusive right
to vote on any investment advisory agreement or investment restriction that
relates solely to such series. Each share of a series bears equally the expenses
of the series. In the event of dissolution or liquidation, holders of a series
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective series to which the shares of the
portfolio relate, less (b) the liabilities of the Company attributable to the
series or allocated among the series based on the respective liquidation value
of each series. There will not normally be annual shareholders' meetings.
Shareholders may remove directors from office by votes cast at a meeting of
shareholders. Shareholders holding 10% or more of the Company's outstanding
stock may call a special meeting of shareholders. There are no preemptive or
conversion rights (other than the exchange privileges set forth in the Company's
Prospectuses) applicable to any of the Company's shares. The Company's shares,
when issued, will be fully paid, non-assessable and transferable. The Board of
Directors may create additional series or classes of shares of common stock
without shareholder approval.
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, acts as custodian for the Company's portfolio securities and cash.
Investors Fiduciary Trust Company, c/o DST Systems, Inc., P.O. Box 419368,
Kansas City, Missouri 64141, acts as Transfer Agent and dividend paying agent
with respect to the Pilgrim America Shares. Except for certain fees applicable
only to the Pilgrim America Shares and paid directly by investors, all fees and
costs of the Transfer Agent for the Pilgrim America Shares are borne by PASI.
The law firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third
Avenue, New York, New York 10022, serves as counsel to the Company and has
passed upon the legality of the shares offered pursuant to this Prospectus.
Inquiries by shareholders concerning their accounts should be directed to the
Shareholder Servicing Agent at (800) 331-1080 or by writing to The Pilgrim
America Group, Inc. at the address shown on the cover of this Prospectus.
This Prospectus sets forth basic information that investors should know about
the Fund prior to investing. A SAI has been filed with the SEC and is available
upon request and without charge by writing or calling PASI. This Prospectus
omits certain information contained in the registration statement filed with the
SEC. Copies of the registration statement, including items omitted from this
Prospectus, may be obtained from the SEC by paying the charges prescribed under
its rules and regulations.
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No salesman, dealer or other person
is authorized to give any information or make any representations other than
those contained in this Prospectus or the Statement of Additional Information.
19
<PAGE>
PILGRIM AMERICA GENERAL
MONEY MARKET SHARES
Two Renaissance Square
40 North Central PILGRIM AMERICA GENERAL MONEY MARKET SHARES
12th Floor A CLASS OF THE
Phoenix, AZ 85004 CORTLAND GENERAL MONEY MARKET FUND SERIES OF
(800) 331-1080 CORTLAND TRUST, INC.
MANAGER AND INVESTMENT ADVISOR
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
PRINCIPAL UNDERWRITER
Reich & Tang
Distributors L.P.
600 Fifth Avenue
New York, New York 10020
SHAREHOLDER SERVICING AGENT
Pilgrim America Group Inc.
Two Renaissance Square
40 North Central
12th Floor
Phoenix, AZ 85004
(800) 331-1080
TRANSFER AGENT
Investors Fiduciary Trust Company
c/o DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141
CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
LEGAL COUNSEL
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, NY 10022
AUDITORS
Ernst & Young LLP
787 Seventh Avenue,
New York, New York 10019
PROSPECTUS AUGUST 1, 1995
<PAGE>
==============================================================================
CORTLAND 600 FIFTH AVENUE, NEW YORK, NY 10020
FUND, INC. (212) 830-5280
==============================================================================
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1995
Relating to the Cortland Trust Fund, Inc. Prospectus
Dated August 1, 1995 and the
Pilgrim America Shares Prospectus
dated August 1, 1995
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with a Prospectus which may be obtained from your securities
dealer or by writing to Reich & Tang Distributors L.P., 600 Fifth Avenue, New
York, New York 10020, or toll free at (800) 433-1918.
If you wish to invest in shares of the Pilgrim America General Money Market
Shares you should obtain a separate Prospectus by writing to Pilgrim America
Securities, Inc., Two Renaissance Square, 40 North Central Ave., Suite 1200,
Phoenix, AZ 85004-4424 or by calling (800) 872-2882.
<TABLE>
<CAPTION>
Table of Contents
<C> <C>
Introduction Qualification as a Regulated
General Information....................... Investment Company..............
about the Company...................... Excise Tax on Regulated
The Company and its Shares.................. Investment Companies............
Directors and Officers.................. Fund Distributions..............
Manager and Investment Advisor.............. Sale or Redemption of Fund Shares
Expenses.................................... Foreign Shareholders.............
Distributor and Plans of Distribution....... Effect of Future Legislation and
Custodian............................... Local Tax Considerations.......
Transfer Agent.......................... Yield Information...................
Sub-Accounting.......................... Investment Programs and Restrictions
Principal Holders of Securities......... Investment Programs...............
Reports................................. When-Issued Securities............
Share Purchases and Redemptions............. Stand-by Commitments..............
Purchases and Redemption................ Municipal Participations..........
Net Asset Value Determination........... Investment Restrictions...........
Dividends and Tax Matters................... Portfolio Transactions..............
Dividends............................... Investment Ratings..................
Tax Matters............................. Financial Statements................
</TABLE>
<PAGE>
Introduction
Cortland Trust, Inc. (the "Company") is a money market mutual fund, formerly
known as "Cortland Trust." The rules and regulations of the United States
Securities and Exchange Commission (the "SEC") require all mutual funds to
furnish prospective investors certain information concerning the activities of
the company being considered for investment. This information is included in a
Prospectus dated August 1, 1995, relating to each of the three money market
portfolios comprising the Company: the Cortland General Money Market Fund, the
U.S. Government Fund and the Municipal Money Market Fund, which may be obtained
without charge from Reich & Tang Distributors L.P. (the "Distributor"), and in a
Prospectus dated August 1, 1995 relating to the Pilgrim America General Money
Market Shares (the "Pilgrim America Shares"), class of the Cortland General
Money Market series of the Company which may be obtained without charge from
Pilgrim America Securities, Inc., Two Renaissance Square, 40 North Central Ave.,
Suite 1200, Phoenix, AZ 85004-4424. Investors may also contact securities
dealers authorized by the Distributor to distribute the Company's shares in
order to obtain a Prospectus. Some of the information required to be in this
Statement of Additional Information is also included in each current Prospectus
of the Company; and, in order to avoid repetition, reference will be made to
sections of each Prospectus. Additionally, each Prospectus and this Statement of
Additional Information omit certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted from each Prospectus and this Statement of Additional Information,
may be obtained from the SEC by paying the charges prescribed under its rules
and regulations.
GENERAL INFORMATION ABOUT THE COMPANY
The Company and Its Shares
The Company is a no-load, open-end diversified investment company. The Company
was initially organized as a Massachusetts business trust pursuant to an
Agreement and Declaration of Trust dated October 31, 1984, but had no operations
prior to May 9, 1985. On July 31, 1989, the Company was reorganized from a
Massachusetts business trust into a Maryland corporation, pursuant to an
Agreement and Plan of Reorganization approved by the shareholders on July 31,
1989. The shares of the Company are divided into three series constituting
separate portfolios of investments, with various investment objectives and
policies (each such series is referred to herein as a "Fund" and collectively as
the "Funds"):
Cortland General Money Market Fund
U.S. Government Fund
Municipal Money Market Fund
The Cortland General Money Market Fund offers its shares, (the "Cortland General
Money Market Fund Shares") and the Pilgrim America General Money Market Shares
(the "Pilgrim America Shares"). Each Fund issues shares of common stock in the
Company. Shares of the Company have equal rights with respect to voting, except
that the holders of shares of a particular Fund will have the exclusive right to
vote on matters affecting only the rights of the holders of such Fund. Each
share of a Fund bears equally the expenses of such Fund.
As used in each Prospectus of the Company, the term "majority of the outstanding
shares" of the Company or of a particular Fund means, respectively, the vote of
the lesser of (i) 67% or more of the shares of the Company or such Fund present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Company or such Fund are present or represented by proxy or (ii) more than 50%
of the outstanding shares of the Company or such Fund.
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Company voting
together for the election of directors may elect all of the members of the Board
of Directors. In such event, the remaining holders cannot elect any members of
the Board of Directors.
The Board of Directors may classify or reclassify any unissued shares to create
a new class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
2
<PAGE>
The Articles of Incorporation permit the Directors to issue the following number
of full and fractional shares, par value $.001, of the Funds: 1,600,000,000
shares of the Cortland General Money Market Fund (of which 100,000,000 shares
are classified as the Pilgrim America Shares); 500,000,000 shares of the U.S.
Government Fund; and 500,000,000 shares of the Municipal Money Market Fund. Each
Fund share is entitled to participate pro rata in the dividends and
distributions from that Fund. Additional information concerning the rights of
share ownership is set forth in each Prospectus.
The assets received by the Company for the issue or sale of shares of each Fund
and all income, earnings, profits, losses and proceeds therefrom, subject only
to the rights of creditors, are allocated to that Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund are
segregated and are charged with the expenses with respect to that Fund and with
a share of the general expenses of the Company as described below under
"Expenses." While the expenses of the Company are allocated to the separate
books of account of each Fund, certain expenses may be legally chargeable
against the assets of all three Funds. Also, certain expenses may be allocated
to a particular class of a Fund. See "Expenses."
The Articles of Incorporation provide that to the fullest extent that
limitations on the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the Company shall
have any liability to the Company or to its shareholders for damages.
The Articles of Incorporation further provide that the Company shall indemnify
and advance expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the Maryland
General Corporation Law; that the Company shall indemnify and advance expenses
to its officers to the same extent as its directors and to such further extent
as is consistent with law and that the Board of Directors may through By-law,
resolution or agreement make further provisions for indemnification of
directors, officers, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law. However, nothing in the Articles of
Incorporation protects any director or officer of the Company against any
liability to the Company or to its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
As described in each Prospectus, the Company will not normally hold annual
shareholders' meetings. Under Maryland law and the Company's By-laws, an annual
meeting is not required to be held in any year in which the election of
directors is not required to be acted upon under the 1940 Act. At such time as
less than a majority of the directors have been elected by the shareholders, the
directors then in office will call a shareholders' meeting for the election of
directors.
Except as otherwise disclosed in each Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
Directors and Officers
The directors and executive officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
noted, the address of each director and officer is 600 Fifth Avenue, New York,
New York 10020.
Kenneth C. Ebbitt, Jr.*, 54 - Chairman and Director, Executive Vice
President of the Reich & Tang Mutual Funds Division of the Manager since
September 1993. Mr. Ebbitt was formerly Executive Vice President of Reich &
Tang, Inc. which he was associated with from January 1991 to September 1993
and formerly Chairman, Chief Executive Officer and Director of Cortland
Financial Group, Inc. and President and Director of Cortland Distributors,
Inc.
Owen Daly II, 71 - Director, Six Blythewood Road, Baltimore, Maryland
21210. Director, CF&I Steel Corporation and Director/Trustee of the AIM
Group of Mutual Funds, formerly Chairman of the Board of the Equitable
Bancorporation.
3
<PAGE>
Albert R. Dowden, 54 - Director, Volvo North America Corporation, 535
Madison Avenue, New York, NY 10022. President of Volvo North America
Corporation.
David C. Melnicoff,76 - Director, 1919 Chestnut Street Philadelphia,
Pennsylvania 19103. President, Samuel S. Fels Fund and Lecturer in Finance,
Temple University. Formerly, Executive Vice President, Investment Division,
Philadelphia Savings Fund Society. Prior thereto, Managing Director for
Operations and Supervision of the Board of Governors of the Federal Reserve
System.
James L. Schultz, 59 - Director, Cherrington Corporate Center, Bldg. One,
1700 Beaver Grade Road, Coraopolis, Pennsylvania 15108. President,
Treasurer and Director of Computer Research, Inc.
Dennis C. Borecki, 48 - President, Executive Vice President of the Reich &
Tang Mutual Funds Division of the Manager. Mr. Borecki was formerly
Executive Vice President of Reich & Tang, Inc. which he was associated
with from January 1991 to September 1993 and formerly President and
Director of Cortland Financial Group, Inc.
Richard De Sanctis,38 - Vice President and Treasurer, 600 Fifth Avenue, New
York, NY 10020. Assistant Treasurer of NEIC since September 1993. Mr. De
Sanctis was formerly Controller of Reich & Tang, Inc. from January 1991 to
September 1993 and Vice President and Treasurer of Cortland Financial
Group, Inc. and Vice President of Cortland Distributors, Inc. from 1989 to
December 1990 and Treasurer of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, 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.
and Short Term Income Fund, Inc.
Ronda Feldman, 49 - Senior Vice President of Fundtech Services, L.P. since
March 31, 1992. Previously Director of Client Relations, Supervised Service
Company 1987-1992.
Molly Flewharty, 44 - Vice President, 600 Fifth Avenue, New York, NY 10020.
Vice President of the Reich & Tang Mutual Funds Division of the Manager
since September 1993. Ms. Flewharty was formerly Vice President of Reich &
Tang, Inc. which she was associated with from December 1977 to September
1993. Ms. Flewharty is also Vice President of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Inc., Lebenthal Funds, 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.
and Tax Exempt Proceeds Fund, Inc.
Dana E. Messina, 38 - Vice President, 600 Fifth Avenue, New York, NY 10020.
Executive Vice President of the Reich & Tang Mutual Funds Division of the
Manager since September 1993. Ms. Messina was formerly Vice President of
Reich & Tang, Inc. which she was associated with from December 1980 to
September 1993. Ms. Messina is also Vice President of California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily
Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity
Fund, Inc. and Short Term Income Fund, Inc.; Vice President and Treasurer
of Lebenthal Funds, Inc. and is Treasurer, Chief Accounting Officer and
Chief Financial Officer of Tax Exempt Proceeds Fund, Inc.
Ruben Torres, 46 - Vice President, formerly Vice President and Assistant
Treasurer of Cortland Financial Group, Inc.
Bernadette N. Finn, 47 - Secretary, 600 Fifth Avenue, New York, NY 10020.
Vice President and Assistant Secretary of the Reich & Tang Mutual Funds
Division of the Manager since September 1993. Ms. Finn was formerly Vice
President and Assistant Secretary of Reich & Tang, Inc. which she was
associated with from September 1970 to September 1993. Ms. Finn is also
Secretary of California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Lebenthal Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania
Daily Municipal Income Fund and Tax Exempt Proceeds Fund, Inc.; Vice
President and Secretary of Reich & Tang Equity Fund, Inc. and Short Term
Income Fund, Inc.
4
<PAGE>
Each director who is not an "interested person" receives an annual fee from the
Company of $5,000 for his services as a director and a fee of $1,250 for each
Board meeting attended, and all directors are reimbursed by the Company for
expenses incurred in connection with attendance at meetings of the Board of
Directors.
________________________________________________________________________________
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Annual Total Compensation from
Person, Compensation from Retirement Benefits Benefits upon Fund and Fund Complex
Position Registrant for Fiscal Accrued as Part of Retirement Paid to Directors
- -------- Year Fund Expenses --------- ---------------
---- -------------
Owen Daly II, $10,000.00 0 0 $10,000 (1 Fund)
Director
Albert R.
Dowden, $10,000.00 0 0 $10,000 (1 Fund)
Director
David C. $10,000.00 0 0 $10,000 (1 Fund)
Melnicoff,
Director
James L. $10,000.00 0 0 $10,000 (1 Fund)
Schultz
Director
_______________________________________________________________________________
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending March 31, 1995 and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ending March
31, 1995. The parenthetical number represents the number of investment
companies (including the Fund) from which such person receives compensation that
are considered part of the same Fund complex as the Fund, because, among other
things, they have a common investment advisor.
MANAGER AND INVESTMENT ADVISOR
Reich & Tang Asset Management L.P., with its principal offices at 600 Fifth
Avenue, New York, New York 10020 (the "Manager"), serves as the Manager and
Investment Advisor of the Company pursuant to Management/Investment Advisory
Agreements with respect to each of the Funds between the Company and the Manager
dated October 1, 1994.
Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Management/Investment Advisory Agreements with the Manager.
The Manager's predecessor, New England Investment Companies, L.P. ("NEICLP") is
the limited partner and owner of a 99.5% interest in the newly created limited
partnership, Reich & Tang Asset Management L.P., the Manager. Reich & Tang Asset
Management, Inc. (a wholly-owned subsidiary of NEICLP) is the general partner
and owner of the remaining .5% interest of the Manager. Reich & Tang Asset
Management L.P. has succeeded NEICLP as the Manager of the Fund. The
re-execution of the Management/Investment Management Contract did not result in
"assignment" of the Management/Investment Management Contract with NEICLP under
the 1940 Act, since there is no change in actual control or management of the
Manager caused by the re-execution.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 68.1% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc. owns
approximately 22.8% of the outstanding partnership units of NEICLP.. In
addition, NEIC is a wholly-owned subsidiary of The New England which may be
deemed a "controlling person" of the Manager. NEIC is a holding company offering
a broad array of investment styles across a wide range of asset categories
through seven investment advisory/management affiliates and two distribution
subsidiaries. These include Loomis, Sayles & Company, L.P.; Copley Real Estate
Advisors, Inc.; Back Bay Advisors, L.P.; Marlborough Capital Advisors, L.P.;
Westpeak Investment Advisors, L.P.; Draycott Partners, Ltd.; TNE Investment
Services, L.P.; New England Investment Associates, Inc., and an affiliate,
Capital Growth Management Limited Partnership. These affiliates in the aggregate
are investment advisors or managers to 57 other registered investment companies.
5
<PAGE>
The Management/Investment Advisory Agreements are the same in all material
respects as the relevant terms and conditions governing the Manager's management
and investment advisory responsibilities under each Fund's previous Management
and Investment Advisory Agreements with Reich & Tang L.P. except for (i) the
dates of execution and (ii) the identity of the Manager.
Under the Management/Investment Advisory Agreements, the Manager: (a) supervises
and manages all aspects of the Company's operations and the operations of each
of the Company's three Funds; (b) furnishes the Company with such office space,
heat, light, utilities, equipment and personnel as may be necessary for the
proper operation of the Funds and the Company's principal executive office; (c)
monitors the performance by all other persons furnishing services to the Company
on behalf of each Fund and the shareholders thereof and periodically reports on
such performance to the Board of Directors; (d) investigates, selects and
conducts relationships on behalf of the Company with custodians, depositories,
accountants, attorneys, underwriters, brokers and dealers, insurers, banks,
printers and other service providers and entities performing services to the
Funds and their shareholders; (e) furnishes the Funds with all necessary
accounting services; and (f) reviews and supervises the preparation of all
financial, tax and other reports and regulatory filings. The expenses of
furnishing the foregoing are borne by the Manager. See "Expenses" below.
In consideration of the services to be provided by the Manager and the expenses
to be borne by the Manager under the Management/Investment Advisory Agreements,
the Manager receives annual fees from each of the Funds, calculated daily and
paid monthly, of 0.800% of the first $500 million of the Company's average daily
net assets, 0.775% of the average daily net assets of the Company in excess of
$500 million but less than $1 billion, 0.750% of the average daily net assets of
the Company in excess of $1 billion but less than $1.5 billion, plus 0.725% of
the Company's average daily net assets in excess of $1.5 billion. During the
fiscal years ended March 31, 1995, March 31, 1994 and March 31, 1993 the Company
made payable to the Manager $7,188,114, $7,117,006 and $6,877,635; $1,704,092,
$1,862,259, and $1,770,111; $1,755,183, $1,776,734 and $1,676,054, respectively,
under the Management/Investment Advisory Agreements with the Cortland General
Money Market Fund, the U.S. Government Fund and the Municipal Money Market Fund.
For the year ended March 31, 1995, the manager voluntarily waived $124,695,
$17,874 and $0, respectively with the Cortland General Money Market Fund, the
U.S. Government Fund and the Municipal Money Market Fund. For the year ended
March 31, 1994 and March 31, 1993 the manager voluntarily waived $6,388 and
$60,875 respectively with the Municipal Money Market Fund. For the years ended
March 31, 1995, March 31, 1994 and March 31, 1993 the Funds' paid $7,063,419,
$7,117,006 and $6,877,635; $1,686,218, $1,862,259 and $1,770,111; $1,755,183,
$1,770,346 and $1,615,179, respectively for the Cortland General Money Market
Fund, the U.S. Government Fund and the Municipal Money Market Fund to the
Manager in fees under the Management/Investment Advisory Agreements. The
Company's comprehensive fee is higher than most other money market mutual funds
which do not offer services that the Company offers. However, most other funds
bear certain expenses that are borne by the Manager.
The re-executed Management/Investment Advisory Agreements were approved by
the Board of Directors, including a majority of directors who are not interested
persons (as defined in the 1940 Act), of the Funds or the Manager, effective
October 1, 1994. The new Management/Investment Advisory Agreements will continue
in effect until September 15, 1995 and from year to year thereafter if it is
specifically approved at least annually by the Board of Directors and by the
affirmative vote of a majority of the directors who are not parties to such
Management/Investment Advisory Agreements or "interested persons" of any such
party by votes cast in person at a meeting called for such purpose. The Funds or
the Manager may terminate the Management/Investment Advisory Agreements on 60
days' written notice without penalty. Each Management/Investment Advisory
Agreements terminates automatically in the event of its "assignment," as defined
in the 1940 Act. The Manager shall not be liable to the Funds or to their
shareholders for any act or omission by the Manager or for any loss sustained by
a Fund or its shareholders except in the case of the Manager's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Company's (Funds') right to use the name "Cortland" in its name in any form or
combination may terminate upon termination of the Manager as the Company's
(Funds') investment manager.
The Manager also serves as the Funds' investment advisor. The Manager was at May
31, 1995 investment manager, advisor or supervisor with respect to assets
aggregating approximately $7.4 billion. In addition to the Funds, the Manager
acts as investment manager or administrator of eighteen other investment
companies and also advises pension trusts, profit sharing trusts and endowments.
6
<PAGE>
Pursuant to the terms of the Management/Investment Advisory Agreements, the
Manager: (a) provides the Company with certain executive, administrative and
clerical services as are deemed advisable by the Board of Directors; (b)
arranges, but does not pay for, the periodic updating of prospectuses and
statements of additional information and supplements thereto, proxy materials,
tax returns, reports to each Fund's shareholders and reports to and filings with
the SEC and state Blue Sky authorities; (c) provides the Board of Directors on a
regular basis with financial reports and analyses of the Funds' operations and
the operation of comparable investment companies; (d) obtains and evaluates
pertinent information about significant developments and economic, statistical
and financial data, domestic, foreign or otherwise, whether affecting the
economy generally or any of the Funds and whether concerning the individual
issuers whose securities are included in the portfolios of the Company's three
Funds; (e) determines which issuers and securities shall be represented in the
Funds' portfolios and regularly reports thereon to the Company's Board of
Directors; (f) formulates and implements continuing programs for the purchases
and sales of securities for the Funds; and (g) takes, on behalf of the Funds,
all actions which appear to be necessary to carry into effect such purchase and
sale programs, including the placing of orders for the purchase and sale of
portfolio securities. Any investment program undertaken by the Manager will at
all times be subject to the policies and control of the Board of Directors. The
Manager shall not be liable to the Funds or to their shareholders for any act or
omission by the Manager or for any loss sustained by a Fund or its shareholders
except in the case of the Manager's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
EXPENSES
Pursuant to the Management/Investment Advisory Agreements, the Manager
furnishes, without cost to the Company, the services of the President, Secretary
and one or more Vice Presidents of the Company and such other personnel as are
required for the proper conduct of the Funds' affairs and to carry out their
obligations under the Management/Investment Advisory Agreements. Pursuant to the
Management/Investment Advisory Agreements, the Manager maintains, at its expense
and without cost to the Funds, a trading function in order to carry out its
obligations to place orders for the purchase and sale of portfolio securities
for the Funds. The Manager, on behalf of its affiliate, Reich & Tang
Distributors L.P. (the "Distributor"), pays out of the management fees from each
of the Funds and payments under a Plan of Distribution (see "Distributor and
Plans of Distribution") the expenses of printing and distributing prospectuses
and statements of additional information and any other promotional or sales
literature used by the Distributor or furnished by the Distributor to purchasers
or dealers in connection with the public offering of the Funds' shares, the
expenses of advertising in connection with such public offering and all legal
expenses in connection with the foregoing.
Except as set forth below, the Manager pays all expenses of the Funds,
including, without limitation: the charges and expenses of any registrar, any
custodian or depository appointed by the Company for the safekeeping of its
cash, portfolio securities and other property, and any stock transfer, dividend
or accounting agent or agents appointed by the Company; all fees payable by the
Company to federal, state or other governmental agencies; the costs and expenses
of engraving or printing certificates representing shares of the Company (the
Company does not issue share certificates at the present time); all costs and
expenses in connection with the registration and maintenance of registration of
the Funds and their shares with the SEC and various states and other
jurisdictions (including filing fees, legal fees and disbursements of counsel);
the costs and expenses of printing, including typesetting, and distributing
prospectuses and statements of additional information of the Company and
supplements thereto to the Company's shareholders and to potential shareholders
of the Funds; all expenses of shareholders' meetings and of preparing, printing
and mailing of proxy statements and reports to shareholders; all expenses
incident to the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside service used
for pricing of the Funds' shares; routine fees and expenses of legal counsel and
of independent accountants, in connection with any matter relating to the
Company; postage; insurance premiums on property or personnel (including
officers and directors) of the Company which inure to its benefit; and all other
charges and costs of the Funds' operations unless otherwise explicitly assumed
by the Company. The Company is responsible for payment of the following expenses
not borne by the Manager: (a) the fees of the directors who are not "interested
persons" of the Company, as defined by the 1940 Act, and travel and related
expenses of the directors for attendance at meetings, (b) interest, taxes and
brokerage commissions (which can be expected to be insignificant), (c)
extraordinary expenses, if any, including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto, (d)
any shareholder service or distribution fee payable by the Company under the
plan of distribution described below, and (e) membership dues of any industry
association.
Expenses which are attributable to any of the Company's Funds are charged
against the income of such Fund in determining net income for dividend purposes.
Expenses of the Company which are not directly attributable to the operations of
any single Fund are allocated among the Funds based upon the relative net assets
of each Fund.
7
<PAGE>
The Manager has agreed to reduce its aggregate fees for any fiscal year, or to
reimburse each Fund, to the extent required so that the amount of the ordinary
expenses of each Fund (excluding brokerage commissions, interest, taxes and
extraordinary expenses such as litigation costs) paid or incurred by any of the
Funds do not exceed the expense limitations applicable to the Funds imposed by
the securities laws or regulations of those states or jurisdictions in which
such Fund's shares are registered or qualified for sale. Currently, the most
restrictive of such expense limitations would require the Manager to reduce its
respective fees to the extent required so that ordinary expenses of a Fund
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
for any fiscal year do not exceed 2 1/2% of the first $30 million of the Fund's
average daily net assets, plus 2% of the next $70 million of the Fund's average
daily net assets, plus 1 1/2% of the Fund's average daily net assets in excess
of $100 million. Expense reductions under state securities laws are unlikely
because most of the expenses of the Company can be expected to be borne by the
Manager.
DISTRIBUTOR AND PLANS OF DISTRIBUTION
The Distributor serves as the principal underwriter of the Company's shares
pursuant to Distribution Agreements dated September 15, 1993. The Distributor
has an office located at 600 Fifth Avenue, New York, New York 10020.
Pursuant to the Distribution Agreements, the Distributor: (a) solicits and
receives orders for the purchase of shares of the Funds, accepts or rejects such
orders on behalf of the Company in accordance with the Company's currently
effective Prospectuses and transmits such orders as are accepted to the Company
as promptly as possible; (b) receives requests for redemptions and transmits
such redemption requests to the Company as promptly as possible; (c) responds to
inquiries from shareholders concerning the status of their accounts and the
operation of the Company; and (d) provides daily information concerning yields
and dividend rates to shareholders. The Distributor shall not be liable to the
Company or to its shareholders for any act or omission or any loss sustained by
the Company or its shareholders except in the case of the Distributor's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Distributor receives no compensation from the Company for its services.
On April 7, 1995, the Distributor entered into a Primary Dealer Agreement with
Pilgrim America Securities, Inc.. ("Pilgrim America Distributors") in order to
provide for the offer and sale of the Pilgrim America Shares pursuant to a
separate Prospectus applicable to such shares.
The Funds have adopted plans of distribution under Rule 12b-1 of the 1940 Act
(the "Plans"). Pursuant to the Plans, the Distributor may pay certain
promotional and advertising expenses and may compensate certain registered
securities dealers (including Pilgrim America Securities, Inc.) and financial
institutions for services provided in connection with the processing of orders
for purchase or redemption of the shares of the Company and furnishing other
shareholder services. Payments by the Distributor are paid out of the management
fees and distribution plan payments received by the Manager and/or its
affiliates from each of the Funds, out of past profits or from any other source
available to the Distributor. The Distributor may enter into shareholder
processing and service agreements (the "Shareholder Service Agreements") with
any securities dealer who is registered under the Securities Exchange Act of
1934 and a member in good standing of the National Association of Securities
Dealers, Inc., and with banks and other financial institutions which may wish to
establish accounts or sub-accounts on behalf of their customers ("Shareholder
Service Agents"). For processing investor purchase and redemption orders,
responding to inquiries from Company shareholders concerning the status of their
accounts and operations of the Funds and communicating with the Company and the
Distributor, the Company may pay each such Shareholder Service Agent (or if no
Shareholder Service Agent provides services, the Distributor, to cover
expenditures for advertising, sales literature and other promotional materials
on behalf of the Company) an amount not to exceed on an annual basis 0.25% of
the aggregate average daily net assets that such Shareholder Service Agent's
customers maintain with the Company during the term of any Shareholder Service
Agreement. During the fiscal year ended March 31, 1995, the Company paid
$2,311,650, $548,036 and $564,594 for expenses incurred pursuant to the Plans on
behalf of the Cortland General Money Market Fund, the U.S. Government Fund and
the Municipal Money Market Fund, respectively, all of which amounts were spent
in payment to financial intermediaries in connection with the distribution of
the Funds' shares. During the fiscal year ended March 31, 1994, the Company paid
$2,289,622, $599,100 and $571,601 on behalf of the Cortland General Money Market
Fund, the U.S. Government Fund and the Municipal Money Market Fund,
respectively, under the Plans. The Manager reduced its fees to the Cortland
General Money Market Fund, the U.S. Government Fund and the Municipal Money
Market Fund by $27,907, $204,880 and $0, $25,293 and $127,620, $159,990,
respectively, for the fiscal years ended March 31, 1995 and March 31, 1994.
During the fiscal year ended March 31, 1993, the Company paid $90,471, $159,990
and $215,357 on behalf of the Cortland General Money Market Fund, the U.S.
Government Fund and the Municipal Money Market Fund, respectively, under the
Plans.
8
<PAGE>
The Distributor, under the Plans, may also make payments to Shareholder Service
Agents out of the investment management fees received by the Manager from each
of the Funds, out of its past profits or from any other source available to the
Distributor. During the fiscal years ended March 31, 1995, the Distributor paid
Shareholder Service Agents $2,790,360 and $624,053 and $735,586, on behalf of
the Cortland General Money Market Fund, the U.S. Government Fund and the
Municipal Money Market Fund, respectively, under the Plans.
The fees payable to Shareholder Service Agents under Shareholder Service
Agreements are negotiated by the Distributor. The Distributor will report
quarterly to the Board of Directors on the rate to be paid under each such
agreement and the amounts paid or payable under such agreements. The rate of
payment will be based upon the Distributor's analysis of: (1) the contribution
that the Shareholder Service Agent makes to each of the Funds by increasing
assets under management and reducing expense ratios; (2) the nature, quality and
scope of services being provided by the Shareholder Service Agent; (3) the cost
to the Company if shareholder services were provided directly by the Company or
other authorized persons; (4) the costs incurred by the Shareholder Service
Agent in connection with providing services to shareholders; and (5) the need to
respond to competitive offers of others, which could result in assets being
withdrawn from a Fund and an increase in the expense ratio for any of the Funds.
The Distribution Agreements for each of the Funds were approved by the Board of
Directors on June 15, 1995, to provide for the distribution of the shares of
each of the Funds. The Distribution Agreements will continue in effect for an
initial two-year term ending June 30, 1996 and from year to year thereafter
if specifically approved at least annually by the Board of Directors and the
affirmative vote of a majority of the directors who are not parties to the
Distribution Agreements or any Shareholder Service Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. In approving the Plans, the directors determined, in the exercise of
their business judgment and in light of their fiduciary duties as directors of
the Company, that there was a reasonable likelihood that the Plans would benefit
the Funds and their shareholders. The Plans may only be renewed if the directors
make a similar determination for each subsequent year. On June 15, 1995 the
Plans were renewed by the Company's Board of Directors and by the directors who
have no direct or indirect financial interest in the Plans to continue in effect
for an additional year. The Plans may not be amended to increase the maximum
amount of payments by the Company or the Manager to its Shareholder Service
Agents without shareholder approval, and all material amendments to the
provisions of the Plans must be approved by the Board of Directors and by the
directors who have no direct or indirect financial interest in the Plans, by
votes cast in person at a meeting called for the purpose of such vote. Each Fund
or the Distributor may terminate the Distribution Agreements on 60 days' written
notice without penalty. The Distribution Agreements terminate automatically in
the event of their "assignment," as defined in the 1940 Act. The services of the
Distributor to the Funds are not exclusive, and it is free to render similar
services to others. The Plans may also be terminated by each of the Funds or by
the Manager or in the event of their "assignment," as defined in the 1940 Act,
on the same basis as the Distribution Agreements.
Although it is a primary objective of the Plans to reduce expenses of the Funds
by fostering growth in the Funds' net assets, there can be no assurance that
this objective of the Plans will be achieved; however, based on the data and
information presented to the Board of Directors by the Manager and the
Distributor, the Board of Directors determined that there is a reasonable
likelihood that the benefits of growth in the size of the Funds can be
accomplished under the Plans.
When the Board of Directors approved the Distribution Agreements, the Primary
Dealer Agreement, the forms of Shareholder Service Agreement and the Plans, the
Board of Directors requested and evaluated such information as they deemed
reasonably necessary to make an informed determination that the Distribution
Agreements, Plans and related agreements should be approved. They considered and
gave appropriate weight to all pertinent factors necessary to reach the good
faith judgment that the Distribution Agreements, Plans and related agreements
would benefit the Funds and their respective shareholders.
9
<PAGE>
The Board of Directors reviewed, among other things, (1) the nature and extent
of the services to be provided by the Manager, the Distributor and the
Shareholder Service Agents, (2) the value of all benefits received by the
Manager, (3) the overhead expenses incurred by the Manager attributable to
services provided to the Company's shareholders, and (4) expenses of the Company
being assumed by the Manager.
In connection with the approval of the Plans, the Board of Directors also
determined that the Funds would be expected to receive at least the following
benefits:
1) The Distributor and Shareholder Service Agents will furnish rapid access by
a shareholder to his Fund account for the purpose of effecting executions
of purchase and redemption orders.
2) The Distributor and Shareholder Service Agents will provide prompt,
efficient and reliable responses to inquiries of a shareholder concerning
his account status.
3) The Company's ability to sustain a relatively predictable flow of cash for
investment purposes and to meet redemptions facilitates more successful,
efficient portfolio management and the achievement of each of the Funds'
fundamental policies and objectives of providing stability of principal,
liquidity, and, consistent with the foregoing, the highest possible current
income, is enhanced by a stable network of distribution.
4) A successful distribution effort will assist the Manager in maintaining and
increasing the organizational strength needed to serve the Company.
5) The establishment of an orderly system for processing sales and redemptions
is also important to the Company's goal of maintaining the constant net
asset value of each Fund's shares, which most shareholders depend upon. By
identifying potential investors whose needs are served by the objectives of
the Fund, a well-developed, dependable network of Shareholder Service
Agents may help to curb sharp fluctuations in rates of redemptions and
sales, thereby reducing the chance that an unanticipated increase in net
redemptions could adversely affect the ability of the Funds to stabilize
their net asset values per share.
6) The Company expects to share in the benefits of growth in the Funds' net
assets by achieving certain economies of scale based on a reduction in the
management fees, although the Manager will receive a larger fee if net
assets grow.
The Plans will only make payments for expenses actually incurred by the
Distributor. The Plans will not carry over expenses from year to year and if a
Plan is terminated in accordance with its terms, the obligations of a Fund to
make payments to the Distributor pursuant to the Plan will cease and the Fund
will not be required to make any payments past the date the Plan terminates.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting, selling or distributing securities. Accordingly, the
Distributor will engage banks as shareholder service agents only to perform
administrative and shareholder servicing functions. While the matter is not free
from doubt, the management of Cortland believes that such laws should not
preclude a bank from acting as a shareholder service agent. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, shareholder clients of such bank would be
permitted to remain Cortland shareholders and alternate means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of Cortland might occur and shareholders serviced by such bank might
no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of these
occurrences.
State law may, in some jurisdictions, differ from the foregoing discussion of
the Glass-Steagall Act and from other applicable federal law. Prior to entering
into shareholder servicing agreements with banks in Texas, Cortland will obtain
a representation from such banks that they are either registered as dealers in
Texas, or that they will not engage in activities that would constitute acting
as dealers under Texas State law.
10
<PAGE>
Custodian
Investors Fiduciary Trust Company, acts as custodian for the Company's portfolio
securities and cash. Investors Fiduciary Trust Company receives such
compensation from the Manager for its services in such capacity as is agreed to
from time to time by Investors Fiduciary Trust Company and the Manager. The
address of Investors Fiduciary Trust Company is 127 West 10th Street, Kansas
City, Missouri 64105.
Transfer Agent
The Company acts as its own transfer agent except with respect to the Pilgrim
America Shares. All costs associated with performing such services are borne by
the Manager.
Investors Fiduciary Trust Company, Inc. acts as transfer agent with respect
to the Pilgrim America Shares. All costs associated with performing such
services are borne by Pilgrim America Securities, Inc. The address of Investors
Fiduciary Trust Company is c/o DST Systems, Inc., P.O. Box 419368, Kansas City,
Missouri 64141.
Sub-Accounting
The Manager, at its expense, will provide sub-accounting services to all
shareholders, except those shareholders of the Pilgrim Shares, and maintain
information with respect to underlying owners. Investors, such as bank trust
departments, investment counselors and brokers, who purchase shares for the
account of others, can make arrangements through the Manager for these
sub-accounting services.
Principal Holders of Securities
On June 30, 1995 there were 1,639,763,080 shares of the Funds outstanding. As of
June 30, 1995 the amount of shares owned by all officers and directors of the
Funds as a group was less than 1% of the outstanding shares of the Fund. To the
best of the knowledge of the company, no person or entity held 5% or more of the
outstanding voting securities of any of the Funds.
Reports
The Company furnishes shareholders with semi-annual reports containing
information about the Funds and their operations, including a schedule of
investments held in the Funds' portfolios and the financial statements for each
Fund. The annual financial statements are audited by the Company's independent
auditors. The Board of Directors has selected Ernst & Young LLP, 787 Seventh
Avenue, New York, NY 10019, as the Company's independent auditors to audit the
Funds' financial statements and to review the Funds' tax returns.
SHARE PURCHASES AND REDEMPTIONS
Purchases and Redemptions
A complete description of the manner in which the Company's shares may be
purchased, redeemed or exchanged appears in the Prospectus under the captions
"How to Purchase Shares," "How to Redeem Shares," and "Exchange Privilege"
(under the captions "How to Buy Pilgrim America Shares" and "How to Redeem
Pilgrim America Shares" in the Prospectus relating to the Pilgrim America
Shares).
The possibility that shareholders who maintain accounts of less than $500 in
value ($1,000 in value for Pilgrim America Shares) will be subject to mandatory
redemption is also described under the caption "How to Redeem Shares" (under the
caption "How to Redeem Pilgrim America Shares" with respect to the Pilgrim
America Shares). If the Board of Directors authorizes mandatory redemption of
such small accounts, the holders of shares with a value of less than $500 (less
than $1,000 for Pilgrim America Shares) will be notified that they must increase
their investment to $500 ($1,000 for Pilgrim America Shares) or their shares
will be redeemed on or after the 60th day following such notice or pay a fee.
The minimum account balance of $1,000 with respect to Pilgrim America Shares is
not applicable to IRA accounts. Involuntary redemptions will not be made if the
decline in value of the account results from a decline in the net asset value of
a share of any of the Funds. The Company does not presently redeem such small
accounts and does not currently intend to do so.
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The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange is restricted, as determined by
applicable rules and regulations of the SEC, (b) the New York Stock Exchange is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposal of portfolio securities or the valuation of the net
assets of a Fund not reasonably practicable.
Net Asset Value Determination
The net asset values of the Funds are determined twice daily as of 12 noon and
4:00 p.m. Eastern time on each day the New York Stock Exchange and the Company's
custodian are open for business.
For the purpose of determining the price at which shares of the Funds are issued
and redeemed, the net asset value per share is calculated immediately after the
daily dividend declaration by: (a) valuing all securities and instruments of a
Fund as set forth below; (b) deducting such Fund's liabilities; (c) dividing the
resulting amount by the number of shares outstanding of such Fund; and (d)
rounding the per share net asset value to the nearest whole cent. As discussed
below, it is the intention of the Company to maintain a net asset value per
share of $1.00 for each of the Funds.
The debt instruments held in each of the Fund's portfolios are valued on the
basis of amortized cost. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the entire
portfolio. During periods of declining interest rates, the daily yield for a
Fund, computed as described under the caption "Dividends and Tax Matters" below,
may be higher than a similar computation made by a fund with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio instruments. Thus, if the
use of amortized cost by a Fund results in a lower aggregate portfolio value for
such Fund on a particular day, a prospective investor in the Fund would be able
to obtain a somewhat higher yield than would result from an investment in a fund
utilizing solely market values, and existing investors in such Fund would
receive less investment income. The converse would apply in a period of rising
interest rates.
As it is difficult to evaluate the likelihood of exercise or potential benefit
of a Stand-by Commitment, described under the caption "Investment Program -
Stand-by Commitments," such commitments will be considered to have no value,
regardless of whether any direct or indirect consideration is paid for such
commitments. Where the Municipal Money Market Fund has paid for a Stand-by
Commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held.
The valuation of the portfolio instruments based upon their amortized cost, the
calculation of each Fund's per share net asset value to the nearest whole cent
and the concomitant maintenance of the net asset value per share of $1.00 for
each of the Funds is permitted in accordance with applicable rules and
regulations of the SEC, which require the Funds to adhere to certain conditions.
Each Fund maintains a dollar-weighted average portfolio maturity of 90 days or
less, purchases only instruments having remaining maturities of thirteen months
or less and invests only in securities determined by the Manager to be of high
quality with minimal credit risk. The Board of Directors is required to
establish procedures designed to stabilize, to the extent reasonably possible,
each Fund's price per share at $1.00 as computed for the purpose of sales and
redemptions. Such procedures include review of a Fund's portfolio holdings by
the Board of Directors, at such intervals as they may deem appropriate, to
determine whether the net asset value calculated by using available market
quotations or other reputable sources for a Fund deviates from $1.00 per share
and, if so, whether such deviation may result in material dilution or is
otherwise unfair to existing holders of the shares of the Fund. In the event the
Board of Directors determines that such a deviation exists for a Fund, it will
take such corrective action as the Board of Directors deems necessary and
appropriate, including the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten the average portfolio maturity;
the withholding of dividends; redemption of shares in kind; or the establishment
of a net asset value per share by using available market quotations.
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DIVIDENDS AND TAX MATTERS
Dividends
All of the net income earned by each Fund is declared daily as dividends to the
respective holders of record of each Fund. Net income for each of the Funds for
dividend purposes (from the time of the immediately preceding determination
thereof) consists of (a) interest accrued and discount earned, if any, on the
assets of each Fund and any general income of the Company prorated to such Fund
based on the relative net assets of such Fund, less (b) amortization of premium
and accrued expenses for the applicable dividend period attributable directly to
such Fund and general expenses of the Company prorated to such Fund based on the
relative net assets of such Fund. The amount of discount or premium on
instruments in each Fund's portfolio is fixed at the time of purchase of the
instruments. See "Net Asset Value Determination" above. Realized gains and
losses on portfolio securities held by each Fund will be reflected in the net
asset value of such Fund. Each Fund expects to distribute any net realized
short-term gains of such Fund at least once each year, although it may
distribute them more frequently if necessary in order to maintain such Fund's
net asset value at $1.00 per share. The Funds do not expect to realize net
long-term capital gains.
Should any of the Funds incur or anticipate any unusual expense, loss or
depreciation which would adversely affect the net asset value per share or net
income per share of a Fund for a particular period, the Board of Directors would
at that time consider whether to adhere to the present dividend policy described
above or to revise it in light of then prevailing circumstances. For example, if
the net asset value per share of a Fund were reduced, or was anticipated to be
reduced, below $1.00, the Board of Directors may suspend further dividend
payments with respect to that Fund until the net asset value per share returns
to $1.00. Thus, such expense or loss or depreciation might result in a
shareholder receiving no dividends for the period during which he held shares of
the Fund and/or in his receiving upon redemption a price per share lower than
the price which he paid.
Dividends on a Fund's shares are normally payable on the first day following the
date that a share purchase or exchange order is effective and on the date that a
redemption order is effective. The net income of a Fund for dividend purposes is
determined as of 12:00 noon Eastern time on each "business day" of the Company,
as defined in the Prospectus and immediately prior to the determination of each
Fund's net asset value on that day. Dividends are declared daily and reinvested
in the form of additional full and fractional shares of each Fund at net asset
value. A shareholder may elect to have the aggregate dividends declared and paid
monthly to him by check.
Tax Matters
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, each Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. Distributions by a Fund made during the taxable
year or, under specified circumstances, within twelve months after the close of
the taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must: (1) derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement"); and (2) derive less than 30% of its gross
income (exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the sale
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or other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). For purposes of these calculations, gross income of
the Municipal Money Market Fund includes tax-exempt income. However, foreign
currency gains, including those derived from options, futures and forwards, will
not in any event be characterized as Short-Short Gain if they are directly
related to the regulated investment company's investments in stock or securities
(or options or futures thereon). Because of the Short-Short Gain Test, a Fund
may have to limit the sale of appreciated securities that it has held for less
than three months. However, the Short-Short Gain Test will not prevent a Fund
from disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded for this
purpose. Interest (including original issue discount) received by a Fund at
maturity or upon the disposition of a security held for less than three months
will not be treated as gross income derived from the sale or other disposition
of such security within the meaning of the Short-Short Gain Test. However,
income that is attributable to realized market appreciation will be treated as
gross income from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (including municipal obligations) purchased by
a Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of each Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. For purposes of asset
diversification testing, obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government such as the Federal Agricultural
Mortgage Corporation, the Farm Credit System Financial Assistance Corporation, a
Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Government National Mortgage Corporation, and
the Student Loan Marketing Association are treated as U.S. Government
securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to at least the sum of
98% of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
(Tax-exempt interest on municipal obligations is not subject to the excise tax.)
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
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For purposes of the excise tax, a regulated investment company shall: (1) reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year; and (2) exclude foreign currency
gains and losses incurred after October 31 of any year (or after the end of its
taxable year if it has made a taxable year election) in determining the amount
of ordinary taxable income for the current calendar year (and, instead, include
such gains and losses in determining ordinary taxable income for the succeeding
calendar year).
Each Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that a Fund may in certain circumstances be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income tax
purposes, but they will not qualify for the 70% dividends-received deduction for
corporate shareholders.
Each Fund may either retain or distribute to shareholders its net capital gain
for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carryovers) at
the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it
is expected that the Fund also will elect to have shareholders of record on the
last day of its taxable year treated as if each received a distribution of his
pro rata share of such gain, with the result that each shareholder will be
required to report his pro rata share of such gain on his tax return as
long-term capital gain, will receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain, and will increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.
The Municipal Money Market Fund intends to qualify to pay exempt-interest
dividends by satisfying the requirement that at the close of each quarter of the
Municipal Money Market Fund's taxable year at least 50% of the Fund's total
assets consists of tax-exempt municipal obligations. Distributions from the
Municipal Money Market Fund will constitute exempt-interest dividends to the
extent of the Fund's tax-exempt interest income (net of expenses and amortized
bond premium). Exempt-interest dividends distributed to shareholders of the
Municipal Money Market Fund are excluded from gross income for federal income
tax purposes. However, shareholders required to file a federal income tax return
will be required to report the receipt of exempt-interest dividends on their
returns. Moreover, while exempt-interest dividends are excluded from gross
income for federal income tax purposes, they may be subject to alternative
minimum tax ("AMT") in certain circumstances and may have other collateral tax
consequences as discussed below. Distributions by the Municipal Money Market
Fund of any investment company taxable income or of any net capital gain will be
taxable to shareholders as discussed above.
AMT is imposed in addition to, but only to the extent it exceeds, the regular
tax and is computed at a maximum marginal rate of 28% for noncorporate taxpayers
and 20% for corporate taxpayers on the excess of the taxpayer's alternative
minimum taxable income ("AMTI") over an exemption amount. In addition, under the
Superfund Amendments and Reauthorization Act of 1986, a tax is imposed for
taxable years beginning after 1986 and before 1996 at the rate of 0.12% on the
excess of a corporate taxpayer's AMTI (determined without regard to the
deduction for this tax and the AMT net operating loss deduction) over $2
million. Exempt-interest dividends derived from certain "private activity"
municipal obligations issued after August 7, 1986 will generally constitute an
item of tax preference includable in AMTI for both corporate and noncorporate
taxpayers. In addition, exempt-interest dividends derived from all municipal
obligations, regardless of the date of issue, must be included in adjusted
current earnings, which are used in computing an additional corporate preference
item (i.e., 75% of the excess of a corporate taxpayer's adjusted current
earnings over its AMTI (determined without regard to this item and the AMT net
operating loss deduction)) includable in AMTI.
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Exempt-interest dividends must be taken into account in computing the portion,
if any, of social security or railroad retirement benefits that must be included
in an individual shareholder's gross income and subject to federal income tax.
Further, a shareholder of the Municipal Money Market Fund is denied a deduction
for interest on indebtedness incurred or continued to purchase or carry shares
of the Municipal Money Market Fund. Moreover, a shareholder who is (or is
related to) a "substantial user" of a facility financed by industrial
development bonds held by the Municipal Money Market Fund will likely be subject
to tax on dividends paid by the Municipal Money Market Fund which are derived
from interest on such bonds. Receipt of exempt-interest dividends may result in
other collateral federal income tax consequences to certain taxpayers, including
financial institutions, property and casualty insurance companies and foreign
corporations engaged in a trade or business in the United States. Prospective
investors should consult their own tax advisers as to such consequences.
Investment income that may be received by the Cortland General Money Market Fund
from sources within foreign countries may be subject to foreign taxes withheld
at the source. The United States has entered into tax treaties with many foreign
countries which entitle the Cortland General Money Market Fund to a reduced rate
of, or exemption from, taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the Cortland
General Money Market Fund's assets to be invested in various countries is not
known.
Distributions by a Fund that do not constitute ordinary income dividends,
exempt-interest dividends or capital gain dividends will be treated as a return
of capital to the extent of (and in reduction of) the shareholder's tax basis in
his shares; any excess will be treated as gain from the sale of his shares, as
discussed below.
Distributions by a Fund will be treated in the manner described above regardless
of whether such distributions are paid in cash or reinvested in additional
shares of the Fund (or of another fund). Shareholders receiving a distribution
in the form of additional shares will be treated as receiving a distribution in
an amount equal to the fair market value of the shares received, determined as
of the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of the Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding by the IRS for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
Sale or Redemption of Fund Shares
Each Fund seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that the Funds will do this. In such a case,
a shareholder will recognize gain or loss on the sale or redemption of shares of
a Fund in an amount equal to the difference between the proceeds of the sale or
redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder purchases
other shares of a Fund within 30 days before or after the sale or redemption. In
general, any gain or loss arising from (or treated as arising from) the sale or
redemption of shares of a Fund will be considered capital gain or loss and will
be long-term capital gain or loss if the shares were held for longer than one
year. However, any capital loss arising from the sale or redemption of shares
held for six months or less will be disallowed to the extent of the amount of
exempt-interest dividends received on such shares and (to the extent not
disallowed) will be treated as a long-term capital loss to the extent of the
amount of capital gain dividends received on such shares. For this purpose, the
special holding period rules of Code Section 246(c)(3) and (4) generally will
apply in determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
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Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from a Fund is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of a Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income dividends, capital
gain dividends, and any gains realized upon the sale of shares of the Fund will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund, including the
applicability of foreign taxes.
Effect of Future Legislation and Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends, exempt-interest
dividends and capital gain dividends from regulated investment companies often
differ from the rules for U.S. federal income taxation described above.
Shareholders are urged to consult their tax advisers as to the consequences of
these and other state and local tax rules affecting investment in a Fund.
YIELD INFORMATION
The yield for each Fund can be obtained by calling your securities dealer or the
Distributor at (212) 830-5280 if calling from New Jersey, Alaska or Hawaii, or
by calling toll free at (800) 433-1918 if calling from elsewhere in the
continental U.S. The yield for the Pilgrim America Shares can be obtained by
calling Pilgrim America Securities, Inc. at (800) 872-2882. Quotations of yield
on the Funds may also appear from time to time in the financial press and in
advertisements.
The current yields quoted will be the net average annualized yield for an
identified period, usually seven consecutive calendar days. Yield for a Fund
will be computed by assuming that an account was established with a single share
of such Fund (the "Single Share Account") on the first day of the period. To
arrive at the quoted yield, the net change in the value of that Single Share
Account for the period (which would include dividends accrued with respect to
the share, and dividends declared on shares purchased with dividends accrued and
paid, if any, but would not include realized gains and losses or unrealized
appreciation or depreciation) will be multiplied by 365 and then divided by the
number of days in the period, with the resulting figure carried to the nearest
hundredth of 1%. The Company may also furnish a quotation of effective yield for
each Fund that assumes the reinvestment of dividends for a 365 day year and a
return for the entire year equal to the average annualized yield for the period,
which will be computed by compounding the unannualized current yield for the
period by adding 1 to the unannualized current yield, raising the sum to a power
equal to 365 divided by the number of days in the period, and then subtracting 1
from the result. Historical yields are not necessarily indicative of future
yields. Rates of return will vary as interest rates and other conditions
affecting money market instruments change. Yields also depend on the quality,
length of maturity and type of instruments in each Fund's portfolio and each
Fund's operating expenses. Quotations of yields will be accompanied by
information concerning the average weighted maturity of the Funds. Comparison of
the quoted yields of various investments is valid only if yields are calculated
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in the same manner and for identical limited periods. When comparing the yield
for one of the Funds with yields quoted with respect to other investments,
shareholders should consider (a) possible differences in time periods, (b) the
effect of the methods used to calculate quoted yields, (c) the quality and
average-weighted maturity of portfolio investments, expenses, convenience,
liquidity and other important factors, and (d) the taxable or tax-exempt
character of all or part of dividends received.
INVESTMENT PROGRAMS AND RESTRICTIONS
Investment Programs
Information concerning the fundamental investment objectives of the Company and
each Fund is set forth in each Prospectus, respectively, under the captions
"Investment Programs" or "Investment Program." The principal features of the
investment programs and the primary risks associated with those investment
programs of the Company and the Funds are discussed in each Prospectus under the
aforementioned captions.
The following is a more detailed description of the portfolio instruments
eligible for purchase by the Funds which augments the summary of the Company's
and the Funds' investment programs which appears in each Prospectus, under the
aforementioned captions. The Company seeks to achieve its objectives by
investing in portfolios of short-term instruments rated high quality by a major
rating service or determined to be of high quality by Reich & Tang under the
supervision of the Board of Directors.
Subsequent to its purchase by a Fund, a particular issue of Money Market
Obligations or Municipal Securities, as defined in each Prospectus under the
aforementioned captions may cease to be rated, or its rating may be reduced
below the minimum required for purchase by the Funds. Neither event requires the
elimination of such obligation from a Fund's portfolio, but Reich & Tang will
consider such an event to be relevant in its determination of whether the Fund
should continue to hold such obligation in its portfolio. To the extent that the
ratings accorded by a nationally recognized statistical rating organization
("NRSRO") for Money Market Obligations or Municipal Securities may change as a
result of changes in these rating systems, the Company will attempt to use
comparable ratings as standards for its investments in Money Market Obligations
and Municipal Securities in accordance with the investment policies contained
herein.
The Municipal Money Market Fund may, from time to time, on a temporary or
defensive basis, invest in U.S. Government Obligations, Money Market Obligations
and repurchase agreements. The Municipal Money Market Fund may invest in these
temporary investments, for example, due to market conditions or pending
investment of proceeds from sales of shares or proceeds from the sale of
portfolio securities or in anticipation of redemptions. Although interest earned
from such temporary investments will be taxable as ordinary income, the
Municipal Money Market Fund intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities, which may
include shares of investment companies whose dividends are tax-exempt. (See
"Investment Programs and Restrictions - Investment Restrictions" for limitations
on the Municipal Money Market Fund's investment in repurchase agreements and
shares of other investment companies.) It is a fundamental policy of the
Municipal Money Market Fund that the Municipal Money Market Fund's assets will
be invested so that at least eighty percent (80%) of the Municipal Money Market
Fund's income will be exempt from federal income taxes. However, there is no
limitation on the percentage of such income which may constitute an item of tax
preference and which may therefore give use to an alternative minimum tax
liability for individual shareholders. The Municipal Money Market Fund may hold
cash reserves pending the investment of such reserves in Municipal Securities or
short-term tax-exempt securities.
The investment objectives and policies of the Company are "fundamental" only
where noted. Fundamental policies may only be changed by a vote of the majority
of the outstanding shares of the affected Funds. (See "General Information About
the Company - The Company and its Shares.") There can be no assurance that the
Funds' objectives will be achieved.
The following is a more detailed description of the portfolio instruments
eligible for purchase by the Company's three Funds which augments the summary of
each Fund's investment program which appears in the Prospectus for the Company
and Prospectus for the Pilgrim America Shares under the captions "Investment
Programs" or "Investment Program," respectively. The Company seeks to achieve
the objectives of its Portfolios by investing in portfolios of money market
instruments.
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The U.S. Government Fund limits investments to U.S. Government Obligations
consisting of marketable securities and instruments issued or guaranteed by the
U.S. Government or by certain of its agencies or instrumentalities. Direct
obligations are issued by the U.S. Treasury and include bills, certificates of
indebtedness, notes and bonds. Obligations of U.S. Government agencies and
instrumentalities ("Agencies") are issued by government-sponsored agencies and
enterprises acting under authority of Congress. Certain Agencies are backed by
the full faith and credit of the U.S. Government, and others are not.
The Cortland General Money Market Fund portfolio may include, in addition to
direct U.S. Government Obligations, the following investments:
Agencies that are not backed by the full faith and credit of the U.S.
Government, such as obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank.
Bank Instruments which consist mainly of certificates of deposit, bankers'
acceptances and time deposits. Certificates of deposit represent short-term
interest-bearing deposits of commercial banks and against which certificates
bearing fixed rates of interest are issued. Bankers' acceptances are short-term
negotiable drafts endorsed by commercial banks, which arise primarily from
international commercial transactions. Time deposits are non-negotiable deposits
maintained in a bank for a specified period of time at a stated interest rate.
The Cortland General Money Market Fund limits investments to bank instruments
described in each Prospectus under the captions "Investment Programs" and
"Investment Program."
Corporate Commercial Instruments consisting of short-term unsecured promissory
notes issued by corporations to finance short-term credit needs. (See
"Investment Program and Restrictions - Investment Ratings" in this Statement of
Additional Information for information with respect to commercial paper
ratings.) Among the instruments that the Cortland General Money Market Fund may
purchase are variable amount master demand notes, which are unsecured demand
notes that permit investment of fluctuating amounts of money at variable rates
of interest pursuant to arrangements between the issuer and the payee or its
agent whereby the indebtedness on the notes may vary and the interest rate is
periodically redetermined.
In addition, the Cortland General Money Market Fund may purchase loan
participations, which consist of interests in loans made by banks to
corporations, where both the bank and the corporation meet the Company's credit
standards. The Cortland General Money Market Fund generally purchases loan
participation certificates maturing in seven days or less.
The Municipal Money Market Fund endeavors to achieve its objective by investing
in the following securities. Municipal Securities in which the Municipal Money
Market Fund may invest include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Securities may be issued include the refunding of
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, airport, mass
transit, industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal. The interest paid on such bonds may be exempt
from federal income tax, although current federal tax laws place substantial
limitations on the purposes and size of such issues. Such obligations are
considered to be Municipal Securities, provided that the interest paid thereon
qualifies as exempt from federal income tax in the opinion of bond counsel.
However, interest on Municipal Securities may give rise to a federal alternative
minimum tax liability and may have other collateral federal income tax
consequences. (See "Dividends and Tax Matters - Tax Matters" herein).
The two major classifications of Municipal Securities are bonds and notes. Bonds
may be further categorized as "general obligation" or "revenue" issues. General
obligation bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax-exempt
industrial development bonds are in most cases revenue bonds and do not
generally carry the pledge of the credit of the issuing municipality. Notes are
short-term instruments which usually mature in less than two years. Most notes
are general obligations of the issuing municipalities or agencies and are sold
in anticipation of a bond sale, collection of taxes or receipt of other
revenues. There are, of course, variations in the risks associated with
Municipal Securities, both within a particular classification and between
classifications. The Municipal Money Market Fund's assets may consist of any
combination of general obligation bonds, revenue bonds, industrial revenue bonds
and notes. The percentage of such securities in the Municipal Money Market
Fund's portfolio will vary from time to time.
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For the purpose of diversification, the identification of the issuer of
Municipal Securities depends on the terms and conditions of the security. When
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision and the security is backed only by the assets and revenues of the
subdivision, such subdivision would be deemed to be the sole issuer. Similarly,
in the case of an industrial development bond, if that bond is backed only by
the assets and revenues of the non-governmental user, then such non-governmental
user would be deemed to be the sole issuer. If, however, in either case, the
creating government or some other entity guarantees a security, such a guarantee
would be considered a separate security and will be treated as an issue of such
government or other agency. Certain Municipal Securities may be secured by the
guarantee or irrevocable letter of credit of a major banking institution. In
such case, the Municipal Money Market Fund reserves the right to invest up to
10% of its total assets in Municipal Securities guaranteed or secured by the
credit of a single bank. Furthermore, if the primary issuer of a Municipal
Security or some other non-governmental user which guarantees the payment of
interest on and principal of a Municipal Security possesses credit
characteristics which qualify an issue of Municipal Securities for a high
quality rating from a major rating service (or a determination of high quality
by Reich & Tang and the Board of Directors of the Company) without reference to
the guarantee or letter of credit of a banking institution, the banking
institution will not be deemed to be an issuer for the purpose of applying the
foregoing 10% limitation.
From time to time, various proposals to restrict or eliminate the federal income
tax exemption for interest on Municipal Securities have been introduced before
Congress. Similar proposals may be introduced in the future, and if enacted, the
availability of Municipal Securities for investment by the Municipal Money
Market Fund could be adversely affected. In such event, the Board of Directors
would reevaluate the investment objective and policies and submit possible
changes in the structure of the Municipal Money Market Fund for the
consideration of shareholders.
The Company may enter into the following arrangements with respect to all three
Funds:
1) Repurchase Agreements under which the purchaser (for example, one of the
Funds) acquires ownership of an obligation (e.g., a debt instrument or time
deposit) and the seller agrees, at the time of the sale, to repurchase the
obligation at a mutually agreed upon time and price, thereby determining
the yield during the purchaser's holding period. This arrangement results
in a fixed rate of return insulated from market fluctuations during such
period. Although the underlying collateral for repurchase agreements may
have maturities exceeding one year, a Fund will not enter into a repurchase
agreement if as a result of such transaction more than 10% of a Fund's
total assets would be invested in illiquid securities, including repurchase
agreements expiring in more than seven days. A Fund may, however, enter
into a "continuing contract" or "open" repurchase agreement under which the
seller is under a continuing obligation to repurchase the underlying
obligation from the Fund on demand and the effective interest rate is
negotiated on a daily basis. In general, the Funds will enter into
repurchase agreements only with domestic banks with total assets of at
least $1.5 billion or with primary dealers in U.S. Government securities,
but total assets will not be the sole determinative factor, and the Funds
may enter into repurchase agreements with other institutions which the
Board of Directors believes present minimal credit risks. Nevertheless, if
the seller of a repurchase agreement fails to repurchase the debt
instrument in accordance with the terms of the agreement, the Fund which
entered into the repurchase agreement may incur a loss to the extent that
the proceeds it realizes on the sale of the underlying obligation are less
than the repurchase price. Repurchase agreements are considered to be loans
by the Company under the 1940 Act.
2) Reverse Repurchase Agreements involving the sale of money market
instruments held by a Fund, with an agreement that the Fund will repurchase
the instruments at an agreed upon price and date. A Fund will employ
reverse repurchase agreements when necessary to meet unanticipated net
redemptions so as to avoid liquidating other money market instruments
during unfavorable market conditions, or in some cases as a technique to
enhance income, and only in amounts up to 10% of the value of a Fund's
total assets at the time it enters into a reverse repurchase agreement. At
the time it enters into a reverse repurchase agreement, the Fund will place
in a segregated custodial account high-quality debt securities having a
dollar value equal to the repurchase price. A Fund will utilize reverse
repurchase agreements when the interest income to be earned from portfolio
investments which would otherwise have to be liquidated to meet redemptions
is greater than the interest expense incurred as a result of the reverse
repurchase transactions.
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3) Delayed Delivery Agreements involving commitments by a Fund to dealers or
issuers to acquire securities or instruments at a specified future date
beyond the customary same-day settlement for money market instruments.
These commitments may fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements will not be used as
a speculative or leverage technique. Rather, from time to time, the Manager
can anticipate that cash for investment purposes will result from scheduled
maturities of existing portfolio instruments or from net sales of shares of
the Fund. To assure that a Fund will be as fully invested as possible in
instruments meeting that Fund's investment objective, a Fund may enter into
delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business
days. Until the settlement date, that Fund will set aside in a segregated
account high-quality debt securities of a dollar value sufficient at all
times to make payment for the delayed delivery securities. Not more than
25% of a Fund's total assets will be committed to delayed delivery
agreements and when-issued securities, as described below. The delayed
delivery securities, which will not begin to accrue interest until the
settlement date, will be recorded as an asset of the Fund and will be
subject to the risks of market fluctuation. The purchase price of the
delayed delivery securities is a liability of the Fund until settlement.
Absent extraordinary circumstances, the Fund will not sell or otherwise
transfer the delayed delivery securities prior to settlement. If cash is
not available to the Fund at the time of settlement, the Fund may be
required to dispose of portfolio securities that it would otherwise hold to
maturity in order to meet its obligation to accept delivery under a delayed
delivery agreement. The Board of Directors has determined that entering
into delayed delivery agreements does not present a materially increased
risk of loss to shareholders, but the Board of Directors may restrict the
use of delayed delivery agreements if the risk of loss is determined to be
material or if it affects the constant net asset value of any of the Funds.
When-Issued Securities
Many new issues of Money Market Obligations and Municipal Securities are
offered on a "when-issued" basis, that is, the date for delivery of and payment
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). The payment obligation and the interest rate that will be received
on the securities are fixed at the time the buyer enters into the commitment. A
Fund will only make commitments to purchase such Money Market Obligations and
Municipal Securities with the intention of actually acquiring such securities,
but such Fund may sell these securities before the settlement date if it is
deemed advisable. No additional when-issued commitments will be made if as a
result more than 25% of such Fund's net assets would become committed to
purchases of when-issued securities and delayed delivery agreements.
If one of the Funds purchases a when-issued security, it will direct its
custodian bank to collateralize the when-issued commitment by establishing a
segregated account in the same fashion as required for a Delayed Delivery
Agreement. The special custody account will likewise be marked-to-market, and
the amount in the special custody account will be increased if necessary to
maintain adequate coverage of the when-issued commitments.
Securities purchased on a when-issued basis and the securities held in a
Fund's portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates (which will generally result in all of those securities changing
in value in the same way, i.e., all those securities experiencing appreciation
when interest rates rise). Therefore, if, in order to achieve higher interest
income, a Fund is to remain substantially fully invested at the same time that
it has purchased securities on a when-issued basis, there will be a possibility
that the market value of such Fund's assets will fluctuate to a greater degree.
Furthermore, when the time comes for such Fund to meet its obligations under
when-issued commitments, the Fund will do so by using then-available cash flow,
by sale of the securities held in the separate account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the when-issued securities themselves (which may have a market value
greater or less than the Fund's payment obligation).
A sale of securities to meet such obligations carries with it a greater
potential for the realization of net short-term capital gains, which are not
exempt from federal income taxes. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
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Stand-by Commitments
The Municipal Money Market Fund may attempt to improve its portfolio liquidity
by assuring same-day settlements on portfolio sales (and thus facilitate the
same-day payment of redemption proceeds) through the acquisition of "Stand-by
Commitments." A Stand-by Commitment is a right of the Municipal Money Market
Fund, when it purchases Municipal Securities for its portfolio from a broker,
dealer or other financial institution, to sell the same principal amount of such
securities back to the seller, at the Municipal Money Market Fund's option, at a
specified price. The Municipal Money Market Fund will acquire Stand-by
Commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes, and the acquisition or
exercisability of a Stand-by Commitment will not affect the valuation of its
underlying portfolio securities, which will continue to be valued in accordance
with the method described under "Share Purchases and Redemptions - Net Asset
Value Determination." The weighted average maturity of the Municipal Money
Market Fund's portfolio will not be affected by the acquisition of a Stand-by
Commitment.
The Stand-by Commitments acquired by the Municipal Money Market Fund will
generally have the following features: (1) they will be in writing and will be
physically held by the Municipal Money Market Fund's custodian; (2) they may be
exercised by the Municipal Money Market Fund at any time prior to the underlying
security's maturity; (3) they will be entered into only with dealers, banks and
broker-dealers who in the Manager's opinion present a minimal risk of default;
(4) the Municipal Money Market Fund's right to exercise them will be
unconditional and unqualified; (5) although the Stand-by Commitments will not be
transferable, Municipal Securities purchased subject to such commitments could
be sold to a third party at any time, even though the commitment was
outstanding; and (6) their exercise price will be (i) the Municipal Money Market
Fund's acquisition cost of the Municipal Securities which are subject to the
commitment (excluding any accrued interest which the Municipal Money Market Fund
paid on their acquisition), less any amortized market premium or plus amortized
market or original issue discount during the period the securities were owned by
the Municipal Money Market Fund, plus (ii) all interest accrued on the
securities since the last interest payment date. Since the Municipal Money
Market Fund values its portfolio securities on the amortized cost basis, the
amount payable under a Stand-by Commitment will be substantially the same as the
value of the underlying security.
The Company expects that Stand-by Commitments generally will be available
without the payment of any direct or indirect compensation. However, if
necessary and advisable, the Municipal Money Market Fund will pay for Stand-by
Commitments, either separately in cash or by paying higher prices for portfolio
securities which are acquired subject to the commitments. As a matter of policy,
the total amount "paid" in either manner for outstanding Stand-by Commitments
held by the Municipal Money Market Fund will not exceed 1/2 of 1% of the value
of its total assets calculated immediately after any Stand-by Commitment is
acquired. The Municipal Money Market Fund expects to refrain from exercising
Stand-by Commitments to avoid imposing a loss on a dealer and jeopardizing the
Company's business relationship with that dealer, except when necessary to
provide liquidity. The Municipal Money Market Fund will not acquire a Stand-by
Commitment unless immediately after the acquisition, with respect to 75% of the
total amortized cost value of its assets, not more than 5% of such Fund's total
amortized cost value of its assets will be invested in Stand-by Commitments with
the same institution.
The acquisition of a Stand-by Commitment would not affect the valuation or
assumed maturity of the underlying Municipal Securities which, as noted, would
continue to be valued in accordance with the amortized cost method. Stand-by
Commitments acquired by the Municipal Money Market Fund would be valued at zero
in determining net asset value. Where the Municipal Money Market Fund paid any
consideration directly or indirectly for a Stand-by Commitment, its cost would
be reflected as unrealized depreciation for the period during which the Stand-by
Commitment was held by such Fund.
Municipal Participations
The Municipal Money Market Fund may invest in participation agreements with
respect to Municipal Securities under which the Municipal Money Market Fund
acquires an undivided interest in the Municipal Security and pays a bank which
sells the participation a servicing fee. The participation agreement will have a
variable rate of interest and may be terminated by the Municipal Money Market
Fund on seven days' notice, in which event such Fund receives from the issuer of
the participation the par value of the participation plus accrued interest as of
the date of termination. Before entering into purchases of participations the
Company will obtain an opinion of counsel (generally, counsel to the issuer of
the participation) or a letter ruling from the Internal Revenue Service to the
effect that interest earned with respect to municipal participations qualifies
as exempt-interest income under the Code. The Company has been advised that it
is the present policy of the Internal Revenue Service not to issue private
letter rulings relating to municipal participations. In the absence of an
opinion of counsel or a letter ruling from the Internal Revenue Service, the
Municipal Money Market Fund will refrain from investing in participation
agreements.
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Investment Restrictions
The most significant investment restrictions applicable to the Company's
investment programs are set forth in the Prospectus under the caption "Three
Investment Programs - Investment Restrictions" (under the caption "Investment
Program - Investment Restrictions" for the Pilgrim America Shares).
Additionally, as a matter of fundamental policy which may not be changed without
a majority vote of shareholders (as that term is defined in each Prospectus
under the caption "General Information - Organization of the Trust and
Description of Shares"), none of the Funds will:
1) purchase any Money Market Obligation or Municipal Security, if, as a result
of such purchase, more than 5% of a Fund's total assets would be invested
in securities of issuers, which, with their predecessors, have been in
business for less than three years;
2) invest in shares of any other investment company, other than in connection
with a merger, consolidation, reorganization or acquisition of assets;
except that the Municipal Money Market Fund may invest up to 10% of its
assets in securities of other investment companies (which also charge
investment advisory fees) and then only for temporary purposes in
investment companies whose dividends are tax-exempt, provided that the
Municipal Money Market Fund will not invest more than 5% of its assets in
securities of any one investment company nor purchase more than 3% of the
outstanding voting stock of any investment company;
3) invest more than 10% of the value of a Fund's total assets in illiquid
securities, including variable amount master demand notes (if such notes
provide for prepayment penalties) and repurchase agreements with remaining
maturities in excess of seven days;
4) invest in companies for the purpose of exercising control;
5) underwrite any issue of securities, except to the extent that the purchase
of securities, either directly from the issuer or from an underwriter for
an issuer, and the later disposition of such securities in accordance with
the Funds' investment programs, may be deemed an underwriting;
6) purchase or sell real estate, but this shall not prevent investments in
securities secured by real estate or interests therein;
7) sell securities short or purchase any securities on margin, except for such
short-term credits as are necessary for the clearance of transactions;
8) purchase or retain securities of an issuer if, to the knowledge of the
Company, the directors and officers of the Company and the Manager, each of
whom owns more than 1/2 of 1% of such securities, together own more than 5%
of the securities of such issuer;
9) mortgage, pledge or hypothecate any assets except to secure permitted
borrowings and reverse repurchase agreements and then only in an amount up
to 15% of the value of any Fund's total assets at the time of borrowing or
entering into a reverse repurchase agreement; or
10) purchase or sell commodities or commodity futures contracts or interests in
oil, gas or other mineral exploration or development program (a Fund may,
however, purchase and sell securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals).
In order to permit the sale of the Funds' shares in certain states, the Company
may make commitments more restrictive than the restrictions described above.
Should the Company determine that any such commitment is no longer in the best
interest of the Funds and their shareholders it will revoke the commitment by
terminating sales of its shares in the state(s) involved. Pursuant to one such
commitment, the Company has agreed that the Cortland General Money Market Fund
will not invest in: (i) warrants; (ii) real estate limited partnerships; or
(iii) oil, gas or mineral leases.
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If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of such restriction.
PORTFOLIO TRANSACTIONS
The Manager is responsible for decisions to buy and sell securities for the
Company, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Company are usually principal
transactions, the Funds incur little or no brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Company may
also purchase securities from underwriters at prices which include a commission
paid by the issuer to the underwriter.
The Company does not seek to profit from short-term trading, and will generally
(but not always) hold portfolio securities to maturity. However, the Manager may
seek to enhance the yield of the Funds by taking advantage of yield disparities
or other factors that occur in the money market. For example, market conditions
frequently result in similar securities trading at different prices. The Manager
may dispose of any portfolio security prior to its maturity if such disposition
and reinvestment of proceeds are expected to enhance yield consistent with the
Manager's judgment as to desirable portfolio maturity structure or if such
disposition is believed to be advisable due to other circumstances or
conditions. Each Fund is required to maintain an average weighted portfolio
maturity of 90 days or less and purchase only instruments having remaining
maturities of 13 months or less. Both may result in relatively high portfolio
turnover, but since brokerage commissions are not normally paid on U.S.
Government Obligations, Agencies, Money Market Obligations and Municipal
Securities, the high rate of portfolio turnover is not expected to have a
material effect on the Funds' net income or expenses.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed to be in
the best interest of shareholders of the Company rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.
The Manager and its affiliates manage several other investment accounts, some of
which may have objectives similar to the Funds'. It is possible that at times,
identical securities will be acceptable for one or more of such investment
accounts. However, the position of each account in the securities of the same
issue may vary and the length of time that each account may choose to hold its
investment in the securities of the same issue may likewise vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities consistent with the investment policies of
the Funds and one or more of these accounts is considered at or about the same
time, transactions in such securities will be allocated in good faith among the
Funds and such accounts in a manner deemed equitable by the Manager. The Manager
may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable execution.
The allocation and combination of simultaneous securities purchases on behalf of
the three Funds will be made in the same way that such purchases are allocated
among or combined with those of other Reich & Tang accounts. Simultaneous
transactions could adversely affect the ability of a Fund to obtain or dispose
of the full amount of a security which it seeks to purchase or sell.
Provisions of the 1940 Act and rules and regulations thereunder have also been
construed to prohibit the Funds' purchasing securities or instruments from or
selling securities or instruments to, any holder of 5% or more of the voting
securities of any investment company managed by the Manager. The Funds have
obtained an order of exemption from the SEC which would permit the Funds to
engage in transactions with such a 5% holder, if the 5% holder is one of the 50
largest U.S. banks measured by deposits. Purchases from these 5% holders will be
subject to quarterly review by the Board of Directors including those directors
who are not "interested persons" of the Company. Additionally, such purchases
and sales will be subject to the following conditions: (1) the Company will
maintain and preserve a written copy of the internal control procedures for the
monitoring of such transactions, together with a written record of any such
transactions setting forth a description of the security purchased or sold, the
identity of the purchaser or seller, the terms of the purchase or sale
transaction and the information or materials upon which the determinations to
purchase or sell each security were made; (2) each security to be purchased or
sold by a Fund will be: (i) consistent with such Fund's investment policies and
objectives; (ii) consistent with the interests of shareholders of such Fund; and
(iii) comparable in terms of quality, yield, and maturity to similar securities
purchased or sold during a comparable period of time; (3) the terms of each
transaction will be reasonable and fair to shareholders of the Funds and will
not involve overreaching on the part of any person; and (4) each commission,
fee, spread or other remuneration received by a 5% holder will be reasonable and
fair compared to the commission, fee, spread or other remuneration received by
other brokers or dealers in connection with comparable transactions involving
similar securities purchased or sold during a comparable period of time and will
not exceed the limitations set forth in Section 17(e)(2) of the 1940 Act.
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INVESTMENT RATINGS
The following is a description of the two highest commercial paper, bond,
municipal bond and other short- and long-term categories assigned by Standard &
Poor's Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff"), and IBCA Inc. and
IBCA Limited ("IBCA"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest grade obligations and
possess an extremely strong capacity to pay principal and interest. Bonds rated
AA by S&P are judged by S&P to have a very strong capacity to pay principal and
interest, and in the majority of instances, differ only in small degrees from
issues rated AAA.
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are general referred to as "gilt edge."
Bonds Rated Aa by Moody's are judged by Moody's 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 Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2
and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions and
are liable to but slight market fluctuation other than through changes in the
money rate. The prime feature of an AAA bond is a showing of earnings several
times or many times interest requirements, with such stability of applicable
earnings that safety is beyond reasonable question whatever changes occur in
conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
market.
25
<PAGE>
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated
Duff-2, 3 and 4 are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly.
Municipal Bond Ratings
S&P's Municipal Bond Ratings cover obligations of states and political
subdivisions. Ratings are assigned to general obligation and revenue bonds.
General obligation bonds are usually secured by all resources available to the
municipality and the factors outlined in the rating definitions below are
weighed in determining the rating. Because revenue bonds in general are payable
from specifically pledged revenues, the essential element in the security for a
revenue bond is the quantity of the pledged revenues available to pay debt
service.
Although an appraisal of most of the same factors that bear on the quality of
general obligation bond credit is usually appropriate in the rating analysis of
a revenue bond, other facts are also important, including particularly the
competitive position of the municipal enterprise under review and the basic
security covenants. Although a rating reflects S&P's judgment as to the issuer's
capacity for the timely payment of debt service, in certain circumstances it may
also reflect a mechanism or procedure for an assured and prompt cure of a
default, should one occur, i.e., an insurance program, federal or state
guaranty, or the automatic withholding and use of state aid to pay the default
debt service.
AAA
These are obligations of the highest quality. They have the strongest capacity
for timely payment of debt service.
General Obligation Bonds - In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds - Debt service coverage has been, and is expected to remain,
substantial. Stability of the pledged revenues is also exceptionally strong, due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenants, earning tests for
issuance of additional bonds, and debt service reserve requirements) are
rigorous. There is evidence of superior management.
AA
The investment characteristics of general obligation and revenue bonds in this
group are only slightly less marked than those of the AAA category. Bonds rated
"AA" have the second strongest capacity for payment of debt service.
S&P's bond letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign which designates a bond's relative quality within the major
rating categories, except in the AAA category.
S&P Tax-Exempt Demand Bonds Ratings
S&P assigns "dual" ratings to all long-term debt issues that have as part of
their provisions a demand feature.
26
<PAGE>
The first rating addresses the likelihood of repayment of principal and interest
as due, and the second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term maturity, and the
commercial paper rating symbols are used to denote the put option (e.g.,
"AAA/A-1+").
Moody's Municipal Bond Ratings
Aaa
Bonds which are judged to be of the highest quality are rated "Aaa." 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 anticipated 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 Aaa bonds because margins of
protection may not be as large as the Aaa securities or the fluctuation of
protective elements may be of greater amplitude, or other elements may be
present which make the long-term risks appear somewhat larger than in Aaa
securities.
Moody's State and Municipal Short-Term Ratings
Moody's assigns state and municipal notes, as well as other short-term
obligations, a Moody's Investment Grade ("MIG") rating. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in evaluating bond
risk may be less important over the short run.
MIG 1
Notes bearing this designation are of the best quality. The notes enjoy strong
"protection" by established cash flows, superior liquidity support or a
demonstrated broad-based access to the market for refinancing.
MIG 2
Notes bearing this designation are of high quality. Margins of protection are
ample although not as large as in the preceding group.
Moody's Tax-Exempt Demand Ratings
Moody's assigns issues which have demand features (i.e., variable rate demand
obligations) a VMIG symbol. This symbol reflects such characteristics as payment
upon periodic demand rather than fixed maturity, and payment relying on external
liquidity. The VMIG rating is modified by the numbers 1, 2 or 3. VMIG1
represents the best quality in the VMIG category and VMIG2 represents high
quality.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
27
<PAGE>
28
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
CORTLAND GENERAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
--------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
-----------
DOMESTIC SECURITIES (73.12%)
Commercial Paper (20.00%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$33,900,000 American Home Products, Inc. (b) 04/10/95 6.06% $ 33,848,896 P1
10,400,000 American Home Products, Inc. (b) 04/20/95 6.05 10,366,957 P1
40,000,000 Ford Motor Credit Company 05/02/95 6.08 39,792,644 P1 A1
10,000,000 General Motors Acceptance Corp. (b) 04/04/95 6.03 9,995,000
30,000,000 General Motors Acceptance Corp. (b) 04/24/95 6.10 29,883,658
20,000,000 Pitney Bowes Credit Corp. 06/08/95 6.17 19,770,689 P1 A1+
10,000,000 Ranger Funding Corp. 04/05/95 6.03 9,993,333 P1 A1
10,000,000 Receivables Capital Corp. 04/10/95 6.07 9,984,900
25,228,000 Receivables Capital Corp. 04/13/95 6.04 25,177,460
10,000,000 Receivables Capital Corp. 05/01/95 6.08 9,949,582
- ----------- ------------
199,528,000 Total Commercial Paper 198,763,119
- ----------- ------------
<CAPTION>
Certificates of Deposit (3.82%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$13,000,000 American Express Centurian Bank 04/06/95 6.05% $ 13,000,000
25,000,000 American Express Centurian Bank 04/18/95 6.03 24,999,883
- ----------- ------------
38,000,000 Total Certificates of Deposit 37,999,883
- ----------- ------------
<CAPTION>
Letter of Credit Commercial Paper (12.15%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$10,000,000 Enterprise Funding
LOC Bayerische Vereinsbank, A.G 04/18/95 6.06% $ 9,971,572 P1 A1
25,500,000 James River Cogeneration Energy Co.
LOC Banque Paribas 04/11/95 6.03 25,457,500 P1 A1
10,000,000 Konica U.S.A. Corporation
LOC Mitsubishi Bank, Ltd. 04/10/95 6.06 9,984,925 P1 A1+
23,500,000 Multibanco Commermex Co.
LOC Societe Generale 04/21/95 6.24 23,418,794 P1 A1+
20,000,000 Pemex Capital, Inc.
LOC Credit Suisse 05/15/95 6.27 19,849,178 P1 A1+
20,000,000 Queensland Alumina Ltd.
LOC Credit Suisse 04/13/95 6.03 19,960,000 P1 A1+
12,100,000 Vehicle Services of America
LOC NCNB 04/17/95 6.16 12,067,196 P1 A1
- ----------- ------------
121,100,000 Total Letter of Credit Commercial Paper 120,709,165
- ----------- ------------
<CAPTION>
U.S. Government Agencies (2.16%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Federal Home Loan Bank (c) 09/01/95 6.10% $ 1,980,199
2,000,000 Federal Home Loan Bank (c) 09/11/95 6.42 1,978,027
5,000,000 Federal Home Loan Bank (d) 11/18/97 6.50 5,000,000
12,500,000 Federal National Mortgage Association 07/19/95 5.55 12,500,000
- ----------- ------------
21,500,000 Total U.S. Government Agencies 21,458,226
- ----------- ------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
29
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
-----------
Master Notes (8.05%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 40,000,000 Donaldson, Lufkin & Jenrette, Inc. (e) 06/23/95 6.35% $ 40,000,000
40,000,000 J.P. Morgan Securities Inc. (f) 08/18/95 6.60 40,000,000
----------- -----------
80,000,000 Total Master Notes 80,000,000
----------- -----------
<CAPTION>
Medium Term Note (2.51%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 25,000,000 Bank One, Columbus (g) 03/20/96 6.23% $ 25,000,000 P1 A1+
----------- -----------
25,000,000 Total Medium Term Note 25,000,000
----------- -----------
<CAPTION>
Repurchase Agreement, Overnight (17.68%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$175,701,000 Donaldson, Lufkin & Jennette, Inc., dated 3/31/95
(Collateralized by :
$ 26,594,000 U.S. Treasury Notes, 5.875%, due 5/11/95
$ 28,570,000 U.S Treasury Bill, due 6/8/95
$105,407,000 U.S Treasury Bonds, 7.125% - 11.625%,
due 11/15/04 - 2/15/23) 04/03/95 6.15% $ 175,701,000
----------- -----------
175,701,000 Total Repurchase Agreement, Overnight 175,701,000
----------- -----------
<CAPTION>
Short Term Bank Note (3.12%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 31,000,000 Boatman's National Bank of St. Louis (h) 08/17/95 6.12% $ 31,000,000 P1 A1
----------- -----------
31,000,000 Total Short Term Bank Note 31,000,000
----------- -----------
<CAPTION>
U.S. Government Obligations (3.63%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,166,635 Small Business Administration Variable Loan (i) 08/25/99 6.63% $ 1,166,635
426,639 Small Business Administration Variable Loan (i) 09/25/99 7.13 426,639
2,792,749 Small Business Administration Variable Loan (i) 09/25/02 6.63 2,792,749
920,519 Small Business Administration Variable Loan (i) 10/25/02 7.13 920,519
3,719,543 Small Business Administration Variable Loan (i) 12/25/09 6.63 3,719,543
18,624,423 Small Business Administration Variable Loan (i) 03/25/17 6.47 18,840,764
8,143,957 Small Business Administration Variable Loan (i) 09/25/17 6.58 8,162,268
- ----------- -----------
35,794,465 Total U.S. Government Obligations 36,029,117
- ----------- -----------
Total Domestic Securities 726,660,510
-----------
<CAPTION>
FOREIGN SECURITIES (27.68%)
Foreign Commercial Paper (15.60%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$10,000,000 Barclay's Bank of Canada 05/10/95 6.10% $ 9,934,567 P1 A1+
15,000,000 Caisse Centrale Desjardin de Quebec 06/06/95 6.22 14,831,700 P1 A1+
10,000,000 Canadian Imperial Bank of Commerce 04/17/95 6.01 9,973,422 P1 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
30
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
CORTLAND GENERAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
Foreign Commercial Paper (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 20,000,000 Canadian Imperial Bank of Commerce 04/25/95 6.02% $ 19,920,133 P1 A1+
20,000,000 Compagnie Bancaire USA Funding Corp. 04/20/95 6.03 19,936,667 P1 A1
7,250,000 Compagnie Bancaire USA Funding Corp. 05/15/95 6.12 7,196,302 P1 A1
20,000,000 Compagnie Bancaire USA Funding Corp. 07/05/95 6.20 19,678,056 P1 A1
7,640,000 Kredietbank 04/18/95 6.22 7,617,632 P1 A1+
46,000,000 Union Bank of Switzerland 04/03/95 6.34 45,983,900 P1 A1+
----------- ------------
155,890,000 Total Foreign Commercial Paper 155,072,379
----------- ------------
<CAPTION>
Japanese Eurodollar Certificate of Deposit (1.01%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 10,000,000 Sumitomo Bank 05/02/95 6.11% $ 10,000,376 P1 A1
----------- ------------
10,000,000 Total Japanese Eurodollar Certificate of Deposit 10,000,376
----------- ------------
<CAPTION>
Japanese Yankee Certificates of Deposit (3.02%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 10,000,000 Mitsubishi Bank Ltd. 04/03/95 6.05% $ 10,000,000 P1 A1+
10,000,000 Sumitomo Bank 04/03/95 6.06 10,000,006 P1 A1
10,000,000 Fuji Bank, Ltd. 04/17/95 6.07 10,000,083 P1 A1
----------- -----------
30,000,000 Total Japanese Yankee Certificates of Deposit 30,000,089
----------- -----------
<CAPTION>
Yankee Certificates of Deposit (8.05%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 20,000,000 Bank of Montreal 04/06/95 6.01% $ 20,000,028 P1 A1+
10,000,000 Banque Indosuez 04/12/95 6.12 10,000,080 P1 A1
10,000,000 Banque Nationale de Paris 05/02/95 6.04 10,000,086 P1 A1+
10,000,000 Banque Nationale de Paris 05/08/95 6.10 10,000,304 P1 A1+
20,000,000 Banque Nationale de Paris 05/09/95 6.08 20,000,750 P1 A1+
10,000,000 Canadian Imperial Bank of Commerce 04/04/95 6.02 10,000,000 P1 A1+
----------- --------------
80,000,000 Total Yankee Certificates of Deposit 80,001,248
----------- --------------
Total Foreign Securities 275,074,092
--------------
Total Investments(100.80%) (Cost $1,001,734,602+) 1,001,734,602
Liabilities, in Excess of Cash and Other Assets (.80%) ( 7,880,641)
--------------
Net Assets (100.00%) $ 993,853,961
==============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
31
- -------------------------------------------------------------------------------
===============================================================================
FOOTNOTES:
(a) The ratings noted for instruments secured by a letter of credit are those of
the holding company of the bank whose letter of credit secures such
instruments. P1 and A1+ are the highest ratings for commercial paper.
Securities that are not rated have been determined by the Fund's Board of
Directors to be of comparable quality to those rated securities in which the
Fund may invest.
(b) These are split rated securities, given the highest ratings by at least two
of the four nationally recognized rating agencies.
(c) This is a variable rate Federal Home Loan Bank Note. The interest rate is
adjusted monthly based upon the 11th district COFFI index.
(d) This is a variable rate Federal Home Loan Bank Note. The interest rate is
adjusted daily based upon the prime rate minus a fixed number of basis
points.
(e) This is a Master Note. The interest rate is adjusted weekly based upon the
one week LIBOR rate.
(f) This is a Master Note. The interest rate is adjusted daily based upon the
federal funds rate.
(g) This is a Medium Term Note. The interest rate is adjusted daily based upon
the prime rate minus 2.77%.
(h) This is a Short Term Bank Note. The interest rate is adjusted weekly based
upon the federal funds rate.
(i) This is a Small Business Administration variable pool certificate. The
interest rate is adjusted periodically based upon the prime rate.
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
32
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
U.S. GOVERNMENT FUND
STATEMENT OF INVESTMENTS
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 2)
------ ---- ----- --------
U.S. Government Agencies (93.77%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 5,000,000 Federal Farm Credit Bank 04/05/95 5.93% $ 4,996,722
5,000,000 Federal Home Loan Bank 04/06/95 5.95 4,995,903
5,000,000 Federal Home Loan Bank 04/14/95 5.99 4,989,293
5,000,000 Federal Home Loan Bank 04/24/95 5.94 4,981,217
5,000,000 Federal Home Loan Mortgage Corp. 04/03/95 5.94 4,998,355
10,000,000 Federal Home Loan Mortgage Corp. 04/04/95 5.95 9,995,083
5,000,000 Federal Home Loan Mortgage Corp. 04/04/95 5.96 4,997,538
5,000,000 Federal Home Loan Mortgage Corp. 05/02/95 6.08 4,974,210
5,000,000 Federal Home Loan Mortgage Corp. 09/07/95 5.60 4,996,211
5,000,000 Federal Home Loan Mortgage Corp. 04/05/95 5.91 4,996,728
5,000,000 Federal Home Loan Mortgage Corp. 04/20/95 5.94 4,984,404
5,000,000 Federal Home Loan Mortgage Corp. 04/24/95 5.96 4,981,057
5,000,000 Federal National Mortgage Association 04/07/95 5.93 4,995,083
5,000,000 Federal National Mortgage Association 04/18/95 5.94 4,986,046
5,000,000 Federal National Mortgage Association 06/12/95 6.10 4,940,000
100,000,000 Student Loan Marketing Association Discount Note 04/03/95 6.17 99,965,722
5,000,000 Student Loan Marketing Association Discount Note 05/15/95 5.99 4,963,822
5,000,000 Student Loan Marketing Association Medium Term Note 06/30/95 5.32 5,000,000
5,000,000 Student Loan Marketing Association Short Term Note (a) 09/14/95 6.00 5,000,000
5,000,000 Student Loan Marketing Association Short Term Note (a) 08/20/98 6.01 5,000,000
5,000,000 Tennessee Valley Authority 05/10/95 6.02 4,967,771
----------- -----------
205,000,000 Total U.S. Government Agencies 204,705,165
----------- -----------
<CAPTION>
Repurchase Agreement, Overnight (6.37%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 13,902,000 Morgan (J. P.) Securities, Inc., dated 3/31/95
(Collateralized by $13,524,000
U.S. Treasury Note, 11.25%, due 5/15/95) 04/03/95 6.10% $ 13,902,000
----------- -----------
13,902,000 Total Repurchase Agreement, Overnight 13,902,000
----------- -----------
Total Investments (100.14%) (Cost $218,607,165+) 218,607,165
Liabilities, in Excess of Cash and Other Assets(.14%) ( 300,030)
-----------
Net Assets (100.00%) $ 218,307,135
===========
+ Aggregate cost for federal income tax purposes is identical.
FOOTNOTES:
(a) This is a variable rate Student Loan Marketing Association Short Term Note.
The Interest rate is adjusted weekly based upon the 3-month Treasury Bill
auction.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
33
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
-----------
Tax Exempt Commercial Paper (c) (5.22%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Beaver County, PA IDA PCRB (Duquesne Light Co.)
Series 1990C
LOC Barclays Bank PLC 06/06/95 3.90% $ 1,000,000 P1 A1+
2,000,000 Beaver County, PA IDA PCRB (Duquesne Light Co.)
LOC Union Bank of Switzerland 04/11/95 4.40 2,000,000 VMIG-1 A1+
1,500,000 Burke County, GA (Oglethorpe Power Corp.)
LOC Credit Suisse 05/10/95 4.20 1,500,000 VMIG-1 A1+
2,200,000 Business Finance Authority, New Hampshire (NEPCO) 04/04/95 4.30 2,200,000 VMIG-1 A1
3,000,000 Tooele County, UT
Hazardous Waste Treatment RB (Union Pacific) 04/10/95 4.20 3,000,000 P1 A1
2,000,000 Venango County, PA IDA Resource Recovery RB
(Scrubgrass Project) 1990B
LOC National Westminster Bank PLC 04/05/95 4.15 2,000,000 P1 A1+
- ----------- -----------
11,700,000 Total Tax Exempt Commercial Paper 11,700,000
- ----------- -----------
<CAPTION>
Other Tax Exempt Investments (15.34%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 4,000,000 Central Blair County, PA Sanitary Authority
Sewer Project Revenue Notes 05/15/95 4.19% $ 4,003,004
3,000,000 City of Jersey City, Hudson County, NJ, BAN 11/17/95 4.59 3,010,824 SP-1
1,710,000 City of Wichita, Kansas GO Airport
Renewal and Improvement Note (Series B94) 11/30/95 4.73 1,714,785 VMIG-1 SP-1+
3,670,000 County of Stark, Ohio GO Series 1994-3 10/19/95 4.34 3,675,795
2,000,000 Indiana Bond Bank Advanced Funding Program Notes 07/10/95 4.60 2,003,535 SP-1+
2,000,000 Kenosha County, WI, Unified School District 08/25/95 4.34 2,004,615
7,418,000 Kokomo Center Township Consolidated
School Corp. Howard County, IN 12/29/95 4.93 7,425,812
2,000,000 Los Angeles County, CA, TAN 06/30/95 3.80 2,003,086 MIG-1 SP-1+
3,000,000 State of California RAN 06/28/95 4.13 3,005,673 MIG-1 A1+
2,500,000 State of Maine General Obligation TAN 06/30/95 3.65 2,504,753 MIG-1 SP-1+
3,000,000 State of Michigan General Obligation Notes 09/29/95 4.02 3,013,010 MIG-1 SP-1+
- ----------- -----------
34,298,000 Total Other Tax Exempt Investments 34,364,892
- ----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Participations (b) (2.30%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 626,258 Massachusetts State IDRB (Foil Properties Project)
LOC Chemical Bank 12/01/00 5.85% $ 626,258 P1 A1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
34
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-------------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
-----------
Variable Rate Demand Instruments - Participations (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 New Jersey State EDA IDRB (Harrison Riverside Project)
LOC Chemical Bank 01/01/02 5.85% $ 1,000,000 P1 A1
1,000,000 New Jersey State EDA IDRB
(Hartz Mountain Industries Project)
LOC Chemical Bank 01/01/02 5.85 1,000,000 P1 A1
483,374 Northhampton County, PA IDA IDRB (Easton Ind. Affiliates)
LOC Chemical Bank 01/01/00 5.85 483,374 P1 A1
2,048,000 Pima County, AZ IDRB
(Apex Microtechnology Expansion Project) - Series B
LOC Citibank 11/01/09 6.03 2,048,000 P1 A1+
---------- ----------
5,157,632 Total Variable Rate Demand Instruments - Participations 5,157,632
---------- ----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (4.03%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 4,185,000 El Paso Housing Finance Corporation (c)
Multifamily Housing Revenue Bonds 1993
LOC GE Capital Corp. 09/01/95 4.38% $ 4,185,000 A1+
1,170,000 Jefferson County, MO IDA IDRB (Holley Partnership)
LOC Chemical Bank 12/01/04 5.85 1,170,000 P1 A1
1,211,832 New Jersey State EDA IDRB (Heary Modelle & Co.)
LOC Chemical Bank 09/01/00 5.85 1,211,832 P1 A1
2,460,000 York County, PA IDA IDRB
(Manor Care of Kingston Court Inc.)
LOC Chemical Bank 12/01/08 5.85 2,460,000 P1 A1
---------- ----------
9,026,832 Total Variable Rate Demand Instruments - Private Placements 9,026,832
---------- ----------
<CAPTION>
Put Bonds (c) (11.19%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Buffalo County, NE Sisters of Charity Health Care Systems
MBIA Insured 05/01/95 3.60% $ 2,000,000 VMIG-1 SP-1+
3,000,000 California Higher Education Loan Authority
LOC Student Loan Marketing Association 07/01/95 4.00 3,000,000 VMIG-1 A1+
1,285,000 California Housing Finance Agency Home Mortgage
Revenue Bonds II 1994 Series 2 (AMT)
GIC - Bayerische Landesbank 05/01/95 4.30 1,285,000 MIG-1 SP-1+
2,000,000 City of Dayton, Kentucky Industrial Building
Revenue Bonds, Series 1994 (RADAC Corporation)
LOC Fifth Third Bank 04/01/95 4.30 2,000,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
35
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- ------
(Unaudited)
-----------
Put Bonds (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,500,000 Greater East Texas Higher Education
Student Loan Authority - Series 93B
LOC Student Loan Marketing Association 06/01/95 3.85% $ 2,500,000 VMIG-1
6,500,000 Harford County, MD IDRB (A.O. Smith)
LOC Bank One Milwaukee, N.A. 09/01/95 4.60 6,500,000
1,200,000 Ohio Water Development Pollution
LOC Barclays Bank PLC 09/01/95 4.25 1,200,000 P1 A1+
1,500,000 Pennsylvania Higher Education Facility Agency
Carnegie-Mellon 05/01/95 3.50 1,500,000 A1+
2,000,000 Pierce County EDC Series 1984
(Sea-Land Corporation Project)
LOC Deutsche Bank A.G. 11/01/95 4.55 2,000,000
3,080,000 Vermont State Educational &
Health Building Finance Agency (Middlebury College) 11/01/95 4.15 3,080,000 A1+
---------- ----------
25,065,000 Total Put Bonds 25,065,000
---------- ----------
<CAPTION>
Revenue Bond (c) (1.34%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 3,000,000 California Housing Finance Agency
Home Mortgage Revenue Bonds 1995 Series E
FGIC Insured 02/01/96 4.60% $ 3,000,000 MIG-1 SP-1+
---------- ----------
3,000,000 Total Revenue Bond 3,000,000
---------- ----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (59.51%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 5,400,000 Arlington County, VA IDA (Air Force Assoc. Project)
LOC Central Fidelity Bank 07/01/98 4.35% $ 5,400,000
1,330,000 Auburn, IN EDRB (R.J. Tower Corp.)
LOC Old Kent Bank & Trust Co. 09/01/00 4.60 1,330,000 A1
900,000 Buncombe County, NC PCRB (Ashville Inc. Project)
LOC Nationsbank 06/01/07 4.45 900,000 P1 A1
1,000,000 Carthage, MO Legget Platt
LOC National Westminster Bank PLC 09/01/30 4.50 1,000,000
1,000,000 Chesapeake, VA Development Authority IDRB
(Volvo Project)
LOC Union Bank of Switzerland 12/01/06 4.25 1,000,000
3,000,000 City of Akron, Ohio Sanitary Sewer System
(Revenue Bonds Series 1994)
LOC Credit Suisse 12/01/14 4.15 3,000,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
36
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- -------
(Unaudited)
---------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 4,000,000 City of Selma, AL, IDA Revenue Bonds
(Specialty Minerals, Inc. Project)
LOC Wachovia Bank & Trust Co., N.A. 11/01/09 4.55% $ 4,000,000 P1
5,750,000 Columbus, IN EDRB (Rock-Tenn Co., Mill Division Inc.)
LOC Trust Co. Bank of Atlanta 10/01/98 4.35 5,750,000 P1 A1+
2,000,000 County of Alameda, CA IDA
(Scientific Technology Inc. Project)
LOC Banque Nationale de Paris 08/01/24 4.20 2,000,000 A1+
1,500,000 Cullman, AL Industrial Development Board IDRB
(Pressac Project)
LOC National Bank of Detroit 06/01/02 4.35 1,500,000 A1+
200,000 DeKalb County, GA Developemt Authority IDRB
(Joyce International Project)
LOC Chemical Bank 11/01/00 4.00 200,000 P1 A1
1,755,000 Elkhart, IN EDRB (Burger Diary Co. Project)
LOC Old Kent Bank & Trust Co. 12/01/11 4.80 1,755,000 A1
1,000,000 Forsyth, MT Rosebud County PCRB (Pacificorp)
LOC Deutsche Bank A.G. 12/01/16 4.55 1,000,000
3,400,000 Franklin County, GA Industrial Building Authority(Ross)
LOC Comerica Bank 01/01/07 4.60 3,400,000
1,555,000 Fulton County GA Development Authority Revenue Bond
(Darby Printing Co.)
LOC Wachovia Bank & Trust Co., N.A. 04/01/11 4.50 1,555,000
3,500,000 Graves County, KY IDRB (Seaboard Farms)
LOC Bank of New York 12/01/12 4.35 3,500,000 A1
3,000,000 Greater East Texas Higher Education
Student Loan Authority - Series 92B
LOC Student Loan Marketing Association 05/01/42 4.25 3,000,000 VMIG-1 A1+
1,000,000 Greensville County, VA Development Authority IDRB
(Perdue Farms Inc. Project)
LOC Trust Co. Bank of Atlanta 10/01/06 4.35 1,000,000
4,120,000 Hamilton County, OH EDRB (Berman Printing Co.)
LOC Fifth Third Bank 12/01/08 4.40 4,120,000
1,000,000 Harris County, TX IDRB
(Yokohama Tire Corp. Project) - Series 86
LOC Industrial Bank of Japan, Ltd. 12/01/96 4.60 1,000,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
37
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- -------
(Unaudited)
---------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,005,000 Indiana Health Facility Finance Authority RB
(Community Mental Health)
LOC Toronto-Dominion Bank 11/01/20 4.35% $ 2,005,000
1,600,000 Indiana State EDC (Fischer Ent. Ltd. Project)
LOC Citizen's Fidelity Bank & Trust Company 12/01/04 4.35 1,600,000
558,000 Jefferson County, KY IDRB (Belknap Inc.)
LOC Chemical Bank 12/01/14 4.00 558,000 P1 A1
6,500,000 Kentucky State Pollution Abatement & Water Resources
Finance Authority RB (Toyota Motor Manufacturing)
LOC Toyota Motor Credit 08/13/06 4.55 6,500,000
9,900,000 Lexington - Fayette Urban County Airport Corporation
LOC Credit Locale de France 04/01/24 4.60 9,900,000 P1 A1+
3,000,000 Lockport, IL IDRB (Panduit Corp. Project)
LOC Commerzbank A.G. 04/01/25 4.60 3,000,000 VMIG-1 A1+
3,600,000 Massachusetts IFA (890 Commonwealth Realty Trust)
LOC Bank of New York 12/01/11 4.45 3,600,000 P1 A1
400,000 Meridian, MI EDC
(Hannah Research & Technology Center)
LOC Barclays Bank PLC 11/15/14 3.85 400,000 A1+
920,000 Michigan State Strategic Fund (260 Brown Street)
LOC Comerica Bank 10/01/15 3.75 920,000
4,000,000 Mississippi Business Finance Corp.
Revenue Bonds (ED Smith Gem Inc. Project)
LOC Amsouth Bank N.A. 06/01/04 4.60 4,000,000 P1
4,400,000 New Lenox, IL (Panduit Corp.)
LOC Commerzbank A.G. 07/01/15 4.60 4,400,000 VMIG-1
2,500,000 Ocean Highway & Port Authority, FL Revenue
(Port, Airport & Marina Improvement)
LOC ABN AMRO Bank N.V. 12/01/20 4.55 2,500,000 VMIG-1 A1+
1,200,000 Orange County, FL IDRB
(Orlando Int'l Drive Project)
LOC PNC Bank 12/01/03 4.00 1,200,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
38
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- -------
(Unaudited)
---------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,115,000 Orrington, ME Resource Recovery RB
(Penobscot Energy Recovery)
LOC Banker's Trust/Canadian Imperial Bank of Commerce
Bank of Nova Scotia/
Toronto Dominion/Long Term Credit Bank 05/01/03 5.25% $ 2,115,000 VMIG-1
4,000,000 Palm Beach County, FL IDRB (Qo Chemicals Inc.)
LOC Sanwa Bank, Ltd. 03/01/02 4.50 4,000,000
1,020,000 Portland, OR IDRB (Oregon Transfer Company)
LOC US National Bank of Oregon 11/01/01 4.75 1,020,000 A1
2,400,000 Portsmouth, VA Redevelopment & Housing Authority
(Chowan Partners)
LOC Central Fidelity Bank 11/01/05 4.35 2,400,000
3,200,000 Prentice, WI IDA Revenue Bonds
(Blount Inc. Project)
LOC Nationsbank 09/01/04 4.50 3,200,000 A1
2,450,000 Redmond, WA IDRB (Integrated Circuits Project)
LOC Bank of America 07/01/03 4.20 2,450,000 VMIG-1
4,000,000 Richmond, VA Redevelopment & Housing Authority
(Tobacco Row)
GIC Bayerische Landesbank Girozentrale 10/01/24 4.85 4,000,000 VMIG-1
3,000,000 Sacramento County, CA Multi-Family Housing RB
(Shadowood Apartments Project)
LOC GE Capital Corp. 12/01/22 4.30 3,000,000 A1
2,100,000 Savannah, GA Multi-Family HRB (Somerset Place)
LOC Amsouth Bank N.A. 10/01/13 4.25 2,100,000 A1+
500,000 Shelby County, TN Health Educational & Housing
(Rhodes College)
LOC National Westminster Bank PLC 08/01/10 4.05 500,000 A1+
7,400,000 St. Lucie County, FL Solid Waste Disposal Revenue Bonds
(FL Power & Light Co. Project) Series 1993 01/01/27 4.75 7,400,000 VMIG-1 A1
2,200,000 State of Alabama IDA (Sunshine Homes)
LOC Amsouth Bank N.A. 09/01/04 4.60 2,200,000 P1 A1
955,000 Sterling Heights, MI EDC (Sterling Shopping Center)
LOC National Bank of Detroit 12/01/10 4.40 955,000 A1+
1,000,000 Texas Capital Health Facilities Development Corp.
(Island of Lake Travis)
LOC Credit Suisse 12/01/16 4.30 1,000,000 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
39
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 2) Moody's & Poor's
------ ---- ----- -------- ------- -------
(Unaudited)
---------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,500,000 Town of Parish, AL PCRB
Alabama Power Co. Project 06/01/15 4.45% $ 3,500,000 VMIG-1 SP-1
3,000,000 Vermont State IDA IDRB (Reygate Project)
LOC ABN AMRO Bank N.V. 12/01/15 4.35 3,000,000 VMIG-1
1,500,000 Village of Bolingbrook, IL, (Amberton Apartments)
LOC LaSalle National Bank 11/01/19 4.35 1,500,000 P1 A1+
2,000,000 Yakima County, WA, Public Corporation (Longview Fibre)
LOC ABN AMRO Bank N.V. 01/01/18 4.50 2,000,000
- ------------ -------------
133,333,000 Total Other Variable Rate Demand Instruments 133,333,000
- ------------ -------------
Total Investment (98.93%)(Cost $221,647,356+) 221,647,356
Cash and Other Assets, Net of Liabilities (1.07%) 2,393,604
-------------
Net Assets (100.00%) $ 224,040,960
=============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings noted are the highest ratings assigned for tax exempt
commercial paper. Securities that are not rated have been determined by the
Fund's Board of Directors to be of comparable quality to those rated
securities in which the Fund invests.
(b) Securities payable on demand at par including accrued interest (usually
with seven days notice) and where indicated are unconditionally secured as
to principal and interest by a bank letter of credit. The interest rates
are adjustable and are based on bank prime rates or other interest rate
adjustment indices. The rate shown is the rate in effect at the date of
this statement.
(c) Maturity dates of these securities are the next available put dates.
<TABLE>
<CAPTION>
KEY:
<S> <C><C> <C> <C><C>
BAN = Bond Anticipation Note IDRB = Industrial Development Revenue Bond
EDA = Economic Development Authority IFA = Industrial Finance Agency
EDC = Economic Development Corporation LOC = Letter of Credit
EDRB = Economic Development Revenue Bond MBIA = Municipal Bond Insurance Association
FGIC = Financial Guaranteed Insurance Company CRB = Pollution Control Revenue Bond
GIC = Guaranteed Investment Contract RAN = Revenue Anticipation Note
GO = General Obligation RB = Revenue Bond
HRB = Hospital Revenue Bond TAN = Tax Anticipation Note
IDA = Industrial Development Authority
</TABLE>
- -------------------------------------------------------------------------------
See Notes To Financial Statements.
<PAGE>
40
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Cortland General U.S. Government Municipal Money
Money Market Fund Fund Market Fund
----------------- --------------- ---------------
ASSETS:
<S> <C> <C> <C>
Investments in securities*......... $ 1,001,734,602 $ 218,607,165 $ 221,647,356
Cash............................... 24,311 -- 911,765
Interest receivable................ 2,397,918 140,738 1,759,525
Receivable for principal paydown... 832,155 -- --
--------------- ------------- -------------
Total Assets................... 1,004,988,986 218,747,903 224,318,646
<CAPTION>
LIABILITIES:
<S> <C> <C> <C>
Dividends payable.................. 140,964 30,334 20,756
Management fee payable............. 641,826 145,582 146,749
Payable for securities purchased... 10,005,509 -- --
Other accounts payable............. 346,726 264,852 110,181
--------------- ------------- -------------
Total Liabilities.............. 11,135,025 440,768 277,686
--------------- ------------- -------------
<CAPTION>
<S> <C> <C> <C>
NET ASSETS....................... $ 993,853,961 $ 218,307,135 $224,040,960
<CAPTION>
=============== ============= ============
NET ASSET VALUE:
Offering and Redemption price per share:
<S> <C> <C> <C>
($ 993,853,961 / 996,409,993 shares) $ 1.00
========
($ 218,307,135 / 218,984,180 shares) $ 1.00
========
($ 224,040,960 / 224,068,398 shares) $ 1.00
========
* Including repurchase agreements amounting to $175,701,000 and $13,902,000
for the Cortland General Money Market Fund and U.S. Government Fund,
respectively.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
41
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Cortland General U.S. Government Municipal Money
Money Market Fund Fund Market Fund
----------------- --------------- -----------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest Income.................. $ 45,166,079 $10,486,729 $ 7,982,225
------------ ---------- ------------
Expenses:
Management fee--Note 3(a)...... 7,188,114 1,704,092 1,755,183
Distribution support and services
----Note 3(c)................ 2,311,650 548,036 564,594
Directors' fees and expenses
----Note 3(b)................ 14,787 14,787 14,786
Other expenses................. 160,143 38,394 38,489
------------ ---------- ------------
Total Expenses............. 9,674,694 2,305,309 2,373,052
Expenses waived by
Manager--Note 3(a) and (c)..... ( 152,602) ( 17,874) ( 127,620)
------------ ---------- ------------
Net Expenses............... 9,522,092 2,287,435 2,245,432
------------ ---------- ------------
Net Investment Income............ 35,643,987 8,199,294 5,736,793
<CAPTION>
NET REALIZED GAIN (LOSS)
ON INVESTMENTS
<S> <C> <C> <C>
Net realized gain (loss) on investments ( 7,013,370) ( 2,047,537) ( 754)
------------ ------------ -----------
Increase in net assets from operations $28,630,617 $ 6,151,757 $5,736,039
============ ============ ===========
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
42
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<CAPTION>
Cortland General U.S. Government Municipal Money
Money Market Fund Fund Market Fund
----------------- ---- -----------
For the Year Ended March 31, For the Year Ended March 31, For the Year Ended March 31,
1995 1994 1995 1994 1995 1994
----------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $35,643,987 $22,719,178 $8,199,294 $5,912,775 $5,736,793 $4,096,762
Net realized gain (loss) on
investments...... ( 7,013,370) 188,433 ( 2,047,537) 127,714 ( 754) ( 14,143)
---------- ----------- ---------- --------- --------- ---------
Increase in net assets
from operations.. 28,630,617 22,907,611 6,151,757 6,040,489 5,736,039 4,082,619
Distributions
to shareholders from:
Net investment income ( 35,628,040) ( 22,719,178) ( 8,199,294) ( 5,912,775) ( 5,736,793) ( 4,096,762)
Net realized gain
on investments. -- ( 188,433) -- ( 127,714) -- --
Capital share
transactions net (Note 4) 70,010,177 21,665,243 (15,098,141) ( 8,116,951) (16,528,510) 30,062,963
Contribution of capital from
investment manager (Note 3d) 4,441,391 -- 1,370,492 -- -- --
----------- ----------- ------------ ----------- ------------ -----------
Total increase (decrease) 67,454,145 21,665,243 (15,775,186) ( 8,116,951) (16,529,264) 30,048,820
Net assets:
Beginning of year.... 926,399,816 904,734,573 234,082,321 242,199,272 240,570,224 210,521,404
----------- ----------- ----------- ----------- ----------- -----------
End of year*......... $993,853,961 $926,399,816 $218,307,135 $234,082,321 $224,040,960 $240,570,224
=========== =========== =========== =========== =========== ===========
*Includes undistributed net investment income of $15,947 in Cortland General
Money Market Fund at March 31, 1995.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
43
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
Note 1-General:
Cortland Trust, Inc. (the "Company") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a no-load, diversified, open-end
management company. The Company consists of three money market funds: the
Cortland General Money Market Fund ("Cortland General Fund"), the U.S.
Government Fund, and the Municipal Money Market Fund ("Municipal Fund"). The
Company accounts separately for the assets, liabilities and operations of each
Fund. Each Fund's fiscal year ends March 31.
It is the Company's policy to maintain a continuous net asset value per share of
$1.00 for each Fund; the Company has adopted certain investment, portfolio
valuation and dividend and distribution policies to enable it to do so.
The Cortland General Fund includes the Pilgrim Money Market Class of Shares (
the "Pilgrim Shares"). Pilgrim Shares are identical to the other shares of the
Cortland General Fund with respect to investment objectives, voting rights and
yield, but differ with respect to certain other matters relating primarily to
exchange privileges. At March 31, 1995, there were 12,197,880 Pilgrim Shares
outstanding.
Note 2-Significant Accounting Policies:
(a) Valuation of investments: Investments are valued at amortized cost, which
approximates market value and has been determined by the Company's Board of
Directors to represent the fair value of each Fund's investments.
(b) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Interest income is
recognized on the accrual basis.
The Cortland General and U.S. Government Funds may enter into repurchase
agreements for securities held by these Funds with financial institutions
deemed to be creditworthy by the Funds' Advisor, subject to the seller's
agreement to repurchase and the Funds' agreement to resell such securities at
a mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with the Funds' custodian and must have an aggregate
market value greater than or equal to the repurchase price plus accrued
interest at all times. In the event that the seller of the agreement defaults
on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value.
(c) Dividends to Shareholders: It is the policy of the Company, with respect
to each Fund, to declare dividends from the net investment income earned by
each Fund daily; such dividends are distributed to each Fund's shareholders
on the subsequent business day. Dividends from net realized capital gains,
offset by capital loss carryovers, if any, are generally declared and paid
when realized.
(d) Federal income taxes: It is the policy of each Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders by complying with the applicable sections
of the Internal Revenue Code, and to make distributions of income (including
net realized capital gains) sufficient to relieve it from all Federal income
taxes. Accordingly, no provision for Federal income taxes is required. At
March 31, 1995, Cortland General Fund, U.S. Government Fund and Municipal
Fund had unused capital loss carryforwards of approximately $784,749,
$270,309 and $34,910, respectively, available for Federal Income Tax purposes
to be applied against future securities profit, if any.
- -------------------------------------------------------------------------------
<PAGE>
44
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
Note 3-Management Fee and Other Transactions With Affiliates:
(a) Reich & Tang Asset Management, L.P. (the "Manager") serves as the manager of
the Company and its three Funds pursuant to agreements with the Funds dated
September 14, 1993 ("Agreements"). Under the Agreements, the Manager provides
directly, or indirectly through contracts with others, all services required for
the management of the Company. The Manager bears all ordinary operating expenses
associated with the Company's operation except: (a) the fees of the directors
who are not "interested persons" of the Company, as defined by the Act, and the
travel and related expenses of the directors incident to their attending
shareholder's, director's and committee meetings, (b) interest, taxes and
brokerage commissions, (c) extraordinary expenses, (d) shareholder service or
distribution fees which together can represent up to 0.25% of the net assets of
each Fund on an annualized basis, and (e) membership dues of any industry
association. Additionally, the Manager has assumed all expenses associated with
organizing the Company and all expenses of registering or qualifying the
Company's shares under Federal and state securities laws. The Funds pay the
Manager an annual fee, calculated daily and paid monthly, of .80% of the first
$500 million of the Company's average daily net assets, plus .775% of the next
$500 million of the Company's average daily net assets, plus .75% of the next
$500 million of the Company's average daily net assets, plus .725% of the
Company's average daily net assets in excess of $1.5 billion. The management
fees are allocated pro-rata to each Fund based on their average daily net
assets. The Manager has voluntarily waived $124,695 and $17,874 of the
management fee charged to the Cortland General Fund and the U.S. Government
Fund, respectively, for the year ended March 31, 1995.
The Manager has agreed to reduce its aggregate fees for any fiscal year, or
reimburse each of the Funds, to the extent required, so that the amount of the
ordinary expenses incurred by each of the Funds (excluding brokerage
commissions, interest, taxes, distribution support and service expenses and
extraordinary expenses) do not exceed the expense limitations imposed by the
securities laws or regulations of those states or jurisdictions in which the
Funds' shares are registered or qualified for sale. Currently, the only such
expense limitation requires that ordinary Fund expenses (excluding brokerage
commissions, interest, taxes, distribution support and service expenses and
extraordinary expenses) for any fiscal year do not exceed 2.5% of the first $30
million of each Fund's average daily net assets, plus 2% of the next $70 million
of each Fund's average daily net assets, plus 1.5% of each Fund's average daily
net assets in excess of $100 million. No reimbursement was required pursuant to
the expense limitation for the year ended March 31, 1995.
(b) Certain officers and directors of the Company are "affiliated persons", as
defined in the Act, of the Manager. Each director who is not an "affiliated
person" receives from the Company an annual fee of $5,000 for services as a
director and a fee of $1,250 for each Board of Directors' meeting attended. All
directors fees and expenses are allocated equally to each Fund.
(c) Pursuant to a Distribution Plan ("Plan") dated July 31, 1989, subject to
each Fund's expense limitation, each Fund can make payments of up to 0.25% per
annum of it's average daily net assets for assistance in distributing its
shares. The Manager and/or its affiliates have the ability to make additional
payments for distribution assistance. The Manager and/or affiliates have
voluntarily waived $27,907 and $127,620 of the distribution support and services
fee charged to Cortland General and Municipal Funds, respectively, for the year
ended March 31, 1995. The Manager and/or its affiliates bear all other expenses
related to the distribution of the Company's shares.
- -------------------------------------------------------------------------------
<PAGE>
45
- -------------------------------------------------------------------------------
===============================================================================
(d) On November 4,1994, in order to maintain the net asset value of the Cortland
General Fund and U.S. Government Fund at $1.00 per share, the Manager purchased
U.S. Government Agency Securities, from the Cortland General Fund and U.S.
Government Fund for $67,861,655 and $22,920,464, respectively, which was equal
to the respective Portfolio's amortized cost or carrying value on that date. The
securities had a fair value of $63,420,264 and $21,549,972 for the Cortland
General Fund and U.S. Government Fund, respectively, on this date. The excess
over the fair value ($4,441,391 and $1,370,492 for the Cortland General Fund and
U.S. Government Fund, respectively) that was paid by the Manager has been
classified by the Cortland General Fund and U.S. Government Fund as a realized
loss in the Statements of Operations and capital contribution in the Statements
of Changes in Net Assets. These amounts also were reclassified from accumulated
net realized loss to paid in capital due to a permanent book and tax difference.
Note 4-Capital Share Transactions:
At March 31, 1995, 3 billion shares of $.001 par value shares of the Company
were authorized. Transactions in the shares of each fund were all at $1.00 per
share and are summarized for the period as follows:
<TABLE>
<CAPTION>
Cortland General Money Municipal Money
Market Fund U.S. Government Fund Market Fund
---------------------- -------------------- -----------
For the Year Ended March 31, For the Year Ended March 31, For the Year Ended March 31,
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold......... 3,635,190,794 3,433,411,553 896,820,365 893,714,453 885,996,924 937,271,323
Dividends reinvested 35,554,748 22,917,577 8,185,929 6,039,977 5,728,150 4,095,993
------------- ------------- ----------- ----------- ----------- -----------
3,670,745,541 3,456,329,130 905,006,294 899,754,430 891,725,074 941,367,316
Shares redeemed..... (3,600,735,365) (3,434,663,887) (920,104,435) (907,871,381) (908,253,584) (911,304,353)
------------- ------------- ----------- ----------- ----------- -----------
Net increase (decrease) 70,010,177 21,665,243 ( 15,098,141) ( 8,116,951) ( 16,528,510) 30,062,963
============= ============= =========== =========== =========== ===========
</TABLE>
The components of net assets for the years ended March 31, are as follows:
<TABLE>
<CAPTION>
Cortland General Money Municipal Money
Market Fund U.S. Government Fund Market Fund
---------------------- ----------------------- ------------------------
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital ......... 996,409,993 926,399,816 218,984,180 234,082,321 224,068,398 240,596,908
Undistributed realized
capital losses ....... ( 2,571,979) -- ( 677,045) -- ( 27,438) ( 26,684)
Undistributed net
investment income .... 15,947 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total net assets ........ 993,853,961 926,399,816 218,307,135 234,082,321 224,040,960 240,570,224
=========== =========== =========== =========== =========== ===========
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
46
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
Note 5-Financial Highlights:
<TABLE>
<CAPTION>
Cortland General Money Market Fund
----------------------------------------------------------------------------
For the Year Ended March 31,
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year........... $1.0000 $1.0000 $1.0000 $1.0000 $ .9999
------- ------- ------- ------- -------
Income from investment operations:
Net investment income...................... .0384 .0250 0.0284 0.0470 0.0706
Net realized and unrealized
gain/(loss) on investments............... ( .0026)+ .0001 -- -- 0.0001
--------- --------- --------- --------- ---------
Total from investment operations .0358 .0251 0.0284 0.0470 0.0707
Less distributions:
Dividends from net investment income ( .0384) ( .0250) ( 0.0284) ( 0.0470) ( 0.0706)
Dividends from net realized gain
on investments........................... -- ( .0001) -- -- --
--------- --------- --------- --------- ---------
Total distributions.......................... ( .0384) ( .0251) ( 0.0284) ( 0.0470) ( 0.0706)
--------- --------- --------- --------- ---------
Net asset value, end of year................. $0.9974 $1.0000 $1.0000 $1.0000 $1.0000
========= ========= ========= ========= =========
Total Return................................. 3.91%+ 2.53% 2.88% 4.81% 7.42%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $993,854 $926,400 $904,735 $906,662 $805,993
Ratios to average net assets:
Expenses*.................................. 1.03% 1.02% 1.00% 1.01% 1.01%
Net investment income...................... 3.84% 2.48% 2.84% 4.67% 7.06%
* Management and distribution support and services fee of .02%, .02%, .04%, .04%
and .04% of average net assets, respectively, were waived during the year.
+ Includes the effect of a capital contribution from the Manager (see Note 3).
Without a capital contribution the net realized loss on investments would have
been $.0070 per share and the total return would have been 2.89%.
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
47
- -------------------------------------------------------------------------------
Note 5-Financial Highlights: (Continued)
<TABLE>
<CAPTION>
U.S. Government Fund
----------------------------------------------------------------------------
For the Year Ended March 31,
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year........... $1.0000 $1.0000 $1.0000 $1.0000 $0.9998
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income...................... .0377 .0250 0.0290 0.0466 0.0676
Net realized and unrealized
gain/(loss) on investments............... ( .0031)+ .0002 -- 0.0004 0.0002
-------- ------- -------- ------- -------
Total from investment operations .0346 .0252 0.0290 0.0470 0.0678
Less distributions:
Dividends from net investment income ( .0377) ( .0250) ( 0.0290) ( 0.0466) ( 0.0676)
Dividends from net realized gain
on investments........................... -- ( .0002) -- ( 0.0004) --
-------- -------- -------- -------- --------
Total distributions.......................... ( .0377) ( .0252) ( 0.0290) ( 0.0470) ( 0.0676)
-------- -------- -------- -------- --------
Net asset value, end of year................. $0.9969 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======== ========
Total Return................................. 3.84%+ 2.55% 2.94% 4.77% 6.94%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $218,307 $234,082 $242,199 $230,778 $188,419
Ratios to average net assets:
Expenses*.................................. 1.04% 1.04% 1.01% 1.00% 1.01%
Net investment income...................... 3.74% 2.47% 2.89% 4.63% 6.66%
* Management and distribution support and services fees of .01%, .01%, .04%,
.045% and .045% of average net assets, respectively, were waived during the
year.
+ Includes the effect of a capital contribution from the Manager (see Note
3). Without a capital contribution the net realized loss on investments
would have been $.0094 per share and the total return would have been
2.81%.
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
48
- -------------------------------------------------------------------------------
CORTLAND TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
Note 5-Financial Highlights: (Continued)
<TABLE>
<CAPTION>
Municipal Money Market Fund
----------------------------------------------------------------------------
For the Year Ended March 31,
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year........... $ .9999 $0.9999 $1.0000 $0.9999 $0.9999
------- ------- ------- ------- -------
Income from investment operations:
Net investment income...................... .0255 .0180 0.0224 0.0374 0.0502
Net realized and unrealized
gain/(loss) on investments............... -- -- ( 0.0001) 0.0001 --
------- ------- ------- ------- -------
Total from investment operations .0255 .0180 0.0223 0.0375 0.0502
Less distributions:
Dividends from net investment income ( .0255) ( .0180) ( 0.0224) ( 0.0374) (0.0502)
Dividends from net realized gain
on investments ............................ -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ........................... ( .0255) ( .0180) (0.0224) (0.0374) (0.0502)
------- ------- ------- ------- -------
Net asset value, end of year $0.9999 $0.9999 $0.9999 $1.0000 $0.9999
======= ======= ======= ======= =======
Total Return .................................. 2.58% 1.82% 2.26% 3.81% 5.22%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $224,041 $240,570 $210,521 $210,948 $166,770
Ratios to average net assets:
Expenses*.................................. .99% .98% .92% .92% .89%
Net investment income...................... 2.54% 1.79% 2.22% 3.70% 5.00%
* Management and distribution support and services fees of .06%, .07%, .13%,
.13% and .13% of average net assets, respectively, were waived during the
year.
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
49
- -------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
===============================================================================
Shareholders and Board of Directors
Cortland Trust, Inc.
New York, NY
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of Cortland Trust, Inc. (comprising,
respectively, the Cortland General Money Market Fund, the U.S. Government Fund
and the Municipal Money Market Fund) as of March 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights (Note 5) for each of the years indicated therein. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting Cortland Trust, Inc. at March 31, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights (Note 5) for each of the indicated years, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
May 8, 1995
New York, New York
- -------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
*(A) Financial Statements
Included in Prospectus Part A:
Financial Highlights for the nine years in the period ended March 31,
1995, and for the period from May 9, 1985 (commencement of operations)
to March 31, 1986.
Included in Statement of Additional Information Part B:
(1) Report of Independent Auditors, dated May 8, 1995.
(2) Statements of Investments as of March 31, 1995.
(3) Statements of Assets and Liabilities as of March 31, 1995.
(4) Statements of Operations for year ended March 31, 1995.
(5) Statements of Changes in Net Assets for the years ended March
31, 1994 and 1995.
(6) Notes to Financial Statements.
(B) Exhibits
(1) Articles of Incorporation of Registrant [filed as an Exhibit to
Post-Effective Amendment No. 7 on June 29, 1989 and is hereby
incorporated by reference].
(2) By Laws of Registrant [filed as an Exhibit to Post-Effective Amendment
No. 7 on June 29, 1989 and is hereby incorporated by reference].
(3) None.
(4) None.
(5) Management/Investment Advisory Agreements between the Registrant and
Reich & Tang Asset Management L.P.[filed as an Exhibit to
Post-Effective Amendment No.16 on August 1, 1994 and is hereby
incorporated by reference].
(6) Form of Distribution Agreements between the Registrant and Reich &
Tang Distributors L.P. [filed as an Exhibit to Post-Effective
Amendment No.16 on August 1, 1994 and is hereby incorporated by
reference].
(7) None.
(8) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company [filed as an Exhibit to Post-Effective Amendment No. 7 on June
29, 1989 and is hereby incorporated by reference].
- --------------------
* Filed herewith.
C-1
<PAGE>
(9) Transfer Agency Agreement between Registrant and The Shareholder
Services Group, Inc.
(10) Opinion and Consent of Messrs. Spengler Carlson Gubar Brodsky &
Frischling [filed as an Exhibit to Post-Effective Amendment No. 7 on
June 29, 1989 and is hereby incorporated by reference].
* (11)(a) Consent of Ernst & Young LLP.
* (b) Consent of Messrs. Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
(c) Opinion of Counsel to the effect that shares of the U.S.
Government Fund are permissible investment for federal
credit unions [filed as an Exhibit to Post-Effective
Amendment No. 6 on July 29, 1988 and is hereby incorporated
by reference].
(d) Opinion of Counsel to the effect that the Tax-Free
Money Market Fund will be considered the owner of
Municipal Securities subject to Stand-by Commitments
for federal income tax purposes [filed as an Exhibit
to Pre-Effective Amendment No. 2 on May 31, 1985 and
is hereby incorporated by reference].
(12) None.
(13) Letter agreement concerning initial subscription of $100,000 of shares
[filed as an Exhibit to Pre-Effective Amendment No. 1 on April 22,
1985 and is hereby incorporated by reference].
(14) (a) Pilgrim America Section 403(b)(7) Tax Sheltered Retirement Plan
[filed as an Exhibit to Registrant's Registration Statement on Form
N-14 (File No. 33-41322) on June 21, 1991 and is hereby incorporated
by reference].
(b) Pilgrim America Individual Retirement Account [filed as an Exhibit to
Registrant's Registration Statement on Form N-14 (File No. 33-41322)
on June 21, 1991 and is hereby incorporated by reference].
(c) Form of the Pilgrim America Group Retirement Plan including the Money
Purchase Pension Plan and Profit Sharing Plan [filed as an Exhibit to
Registrant's Registration Statement on Form N-14 (File No. 33-41322)
on June 21, 1991 and is hereby incorporated by reference].
(15) Form of Amended Plans of Distribution and Forms of Related Service
Agreements [filed as Exhibits to Registrant's Registration Statement
on Form N-14 (File No. 33-41322) on June 21, 1991 and is hereby
incorporated by reference].
* (a) Form of Primary Dealer Agreement.
*(17) Financial Data Schedule.
- --------------------
* Filed herewith.
C-2
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
No such persons.
Item 26. Number of Holders of Securities
Number of Record Holders
Title/Class As of June 30, 1995
Cortland General Money Market Fund 157,216
Pilgrim America General Money Market Shares 108
U.S. Government Money Market Fund 18,978
Municipal Money Market Fund 11,357
Item 27. Indemnification
Registrant incorporates herein by reference the response to Item 27 in Post
Effective Amendment No. 12 to the Registration Statement filed with the
Commission on August 1, 1991.
Item 28. Business and Other Connections of Investment Advisor
See Statement of Additional Information, Part B under headings "General
Information about the Company - Directors and Officers," "General Information
about the Company - Investment Advisor" and "General Information about the
Company - Manager" for information concerning Reich & Tang Asset Management L.P.
New England Mutual Life Insurance Company, ("The New England") of which New
England Investment Companies, Inc. ("NEIC") is an indirect wholly-owned
subsidiary, owns approximately 65.2% of the outstanding partnership units of
NEICLP. NEICLP is the limited partner and owner of a 99.5% interest in Reich &
Tang Asset Management L.P. Reich & Tang Asset Management, Inc. Serves as the
sole general partner and owner of the remaining .5% interest of Reich & Tang
Asset Management L.P. and serves as the sole general partner of Reich & Tang
Distributors L.P. Reich & Tang Asset Management L.P. serves as the sole limited
partner of the Distributor.
Registrant's investment adviser, Reich & Tang Asset Management L.P., is a
registered investment adviser. Reich & Tang Asset Management L.P.'s investment
advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc. Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc.,
registered investment companies investing primarily in money market instruments,
whose addresses are 600 Fifth Avenue, New York, New York 10020, Lebenthal Funds,
Inc. {Lebenthal New York Tax Free Money Fund}, a registered investment company
which invests principally in money market instruments, whose address is 25
Broadway, New York, New York 10004, Reich & Tang Equity Fund, Inc., a registered
investment company investing primarily in equity securities, whose address is
600 Fifth Avenue,New York, New York 10020, pension trusts, profit-sharing
trusts, endowments and others.
C-3
<PAGE>
In addition, Reich & Tang Asset Management L.P. is the sole general partner
of Alpha Associates, August Associates, Reich & Tang Minutus 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 NEIM. Lorraine C. Hysler has been
Secretary of Reich & Tang Asset Management Inc. since July 1994, Assistant
Secretary of NEIC since September 1993, Vice President of the Mutual Funds Group
of New England Investment Companies, L.P. from September 1993 until July 1994,
and Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler
joined Reich & Tang, Inc. in May 1977 and served as Secretary from April 1987
until September 1993. Richard E. Smith, III has been a Director of Reich & Tang
Asset Management Inc. since July 1994, President and Chief Operating Officer of
the Capital Management Group of New England Investment Companies, L.P. from May
1994 until July 1994, President and Chief Operating Officer of the Reich & Tang
C-4
<PAGE>
Capital Management Group since July 1994, Executive Vice President and
Director of Rhode Island Hospital Trust from March 1993 to May 1994, President,
Chief Executive Officer and Director of USF&G Review Management Corp. from
January 1988 until September 1992. Steven W. Duff has been a Director of Reich &
Tang Asset Management Inc. since October 1994, President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc. and Short Term Income Fund, Inc., President and Chairman of Reich & Tang
Government Securities Trust, President and Trustee of Florida Daily Municipal
Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., Executive Vice President of
Reich & Tang Equity Fund, Inc., and Senior Vice President of Lebenthal Funds,
Inc. Bernadette N. Finn has been Vice President - Compliance of Reich & Tang
Asset Management Inc. since July 1994, Vice President of Mutual Funds Division
of New England Investment Companies, L.P. from September 1993 until July 1994,
Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Finn joined
Reich & Tang, Inc. in September 1970 and served as Vice President from September
1982 until May 1987 and as Vice President and Assistant Secretary from May 1987
until September 1993. Ms. Finn is also Secretary of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Delafield Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily
Municipal Income Fund, Lebenthal Funds, Inc., Michigan Daily Tax Free Income
Funds, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund and Tax Exempt Proceeds Fund, Inc., a
Vice President and Secretary of Reich & Tang Equity Fund, Inc., Reich & Tang
Government Securities Trust and Short Term Income Fund, Inc. Richard De Sanctis
has been Treasurer of Reich & Tang Asset Management Inc. since July 1994,
Assistant Treasurer of NEIC since September 1993 and Treasurer of the Mutual
Funds Group of New England Investment Companies, L.P. from September 1993 until
July 1994, Treasurer of the Reich & Tang Mutual Funds since July 1994. Mr De
Sanctis joined Reich & Tang, Inc. in December 1990 and served as Controller of
Reich & Tang, Inc., from January 1991 to September 1993. Mr De Sanctis was Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also
Treasurer of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government
Securities Trust, Tax Exempt Proceeds Fund, Inc. and Short Term Income Fund,
Inc. and is Vice President and Treasurer of Cortland Trust, Inc.
Item 29. Principal Underwriters
C-5
<PAGE>
(a) Reich & Tang Distributors L.P., the Registrant's
Distributor, is also distributor for California Daily Tax Free Income Fund,
Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., 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. and Tax
Exempt Proceeds Fund, Inc.
(b) The following are the directors and officers of Reich & Tang Asset
Management Inc., the general partner of Reich & Tang Distributors L.P. Reich &
Tang Distributors L.P. does not have any officers. The principal business
address of each of these persons is 399 Boylston Street, Boston, Massachusetts
02116.
Positions and Offices Positions and
with General Partner Offices With
Name of the Distributor Registrant
Peter S. Voss President and None
Director
G. Neal Ryland Director None
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director President
and Trustee
Bernadette N. Finn Vice President Vice President
and Secretary
Lorraine C. Hylsler Secretary None
Richard De Sanctis Vice President and Treasurer Treasurer
C-6
<PAGE>
(c) Not applicable.
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of the Registrant at Reich
& Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020, the
Registrant's manager, at Bank One Trust Company, N.A., 100 East Broad Street,
Columbus, Ohio 43271-0181, the Registrant's custodian , and at Investors
Fiduciary Trust Company c/o DST Systems, Inc., P.O. Box 419368, Kansas City,
Missouri, 64141, the transfer agent for the Pilgrim General Money Market Shares
class.
Item 31. Management Services
None.
Item 32. Undertakings
(1) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provisions of
the 1940 Act were applicable to the Registrant, except that
the request referred to in the third full paragraph thereof
may only be made by shareholders who hold in the aggregate at
least 1 per centum of the outstanding shares of the
Registrant, regardless of the net asset value of the shares
held by such requesting shareholders.
(2) The Registrant undertakes to call a meeting of stockholders
for the purpose of voting upon the question of removal of one
or more of the Registrant's directors when requested in
writing to do so by the holders of at least 10% of the
Registrant's outstanding shares of common stock and, in
connection with such meeting, to comply with the provisions of
Section 16(c) of the 1940 Act relating to shareholder
communications.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 24th day of July, 1995.
CORTLAND TRUST, INC.
By: /s/Kenneth C. Ebbitt, Jr.
Kenneth C. Ebbitt
Chairman and Director
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities indicated below on July 24, 1995.
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/Kenneth C. Ebbitt
Kenneth C. Ebbitt Chairman and Director
(2) Principal Financial and
Accounting Officer:
/s/Richard De Sanctis
Richard De Sanctis Treasurer
(3) Majority of Directors:
* Owen Daly II (Director)
* Albert R. Dowden (Director)
David C. Melnicoff (Director)
* James L. Schultz (Director)
By: /s/Jules Buchwald
Jules Buchwald
Attorney-in-fact*
* An executed copy of the power of attorney was filed as an exhibit to
Post-Effective Amendment No. 10 to the Registration Statement on March 4, 1991.
EXHIBIT 11a
ERNST & YOUNG L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Reports" and to the use of our report dated May 8, 1995, in
this Registration Statement (Form N-1A No. 2-94935) of Cortland Trust, Inc.
/s/ Ernst & Young LLP
Ernst & Young LLP
New York, New York
July 25, 1995
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, N.Y. 10022-3852
(212)715-9100
July 26, 1995
Cortland Trust, Inc.
600 Fifth Avenue
New York, New York 10022
Re: Cortland Trust, Inc. Registration No. 2-94935
Gentlemen:
We hereby consent to the reference to our firm as Counsel in Registration
Statement No. 2-94935.
Very truly yours,
/s/Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
EXHIBIT 15 (a)
REICH & TANG DISTRIBUTORS L.P.
600 Fifth Avenue
New York, New York 10020
(212) 830-5200
PRIMARY DEALER AGREEMENT
Pilgrim America Securities, Inc.
10100 Santa Monica Boulevard
Los Angeles, California 90067
Gentlemen:
Reich & Tang Distributors L.P. ("Cortland") serves as distributor of the
Cortland General Money Market Fund (the "Fund"), a series of Cortland Trust,
Inc., a Maryland corporation (the "Trust"). The Trust is a diversified open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Fund offers a class of shares of the
Fund, $.001 par value, to the public in accordance with the terms and conditions
contained in a separate Prospectus and Statement of Additional Information (the
"SAI") of the Trust. The separate Prospectus and SAI pertain to the Pilgrim
General Money Market Shares class of the Cortland General Money Market series of
the Trust ("Pilgrim Shares") offered to the public through Pilgrim America
Securities, Inc. ("PAS") and through securities dealers who have a dealer
agreement with PAS. Reich & Tang Asset Management L.P. (the "Manager") serves as
manager for the Fund. Investors Fiduciary Trust Company ("IFTC") has been
engaged by the Trust to act as the Fund's transfer agent for Pilgrim Shares
distributed by PAS and by securities dealers who have a dealer agreement with
PAS (the "Dealers"). The terms "Prospectus" and "SAI" as used herein refer to
the separate prospectus or statement of additional information on file with the
Securities and Exchange Commission which is part of the most recent registration
statement effective from time to time under the Securities Act of 1933, as
amended (the "Securities Act").
In connection with the offering of Pilgrim Shares to the public, PAS may place
or facilitate the placement of orders for purchase and redemption of Pilgrim
Shares for and on behalf of customers of PAS or the Dealers on the following
terms and conditions:
<PAGE>
1. PAS and the Dealers are hereby authorized to (i) place orders through
IFTC for purchases of Pilgrim Shares and (ii) tender Pilgrim Shares through IFTC
for redemption, in each case subject to the terms and conditions set forth in
the Prospectus and SAI.
2. No person is authorized to make any representations concerning the Fund
or the Pilgrim Shares except those contained in the Prospectus and SAI and in
such printed information as Cortland may subsequently prepare. No person is
authorized to distribute any sales material relating to the Fund without the
prior written approval of Cortland.
3. PAS agrees to undertake from time to time certain shareholder servicing
activities for customers of PAS and certain customers of broker-dealers who have
dealer agreements with PAS (the "Customers") who have purchased Pilgrim Shares
and who use PAS's facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Pilgrim Shares. In consideration of
the services and facilities provided by PAS hereunder, the Fund and Cortland
will pay to PAS the fee set forth in the attached Schedule based upon the
average daily net asset value of the Pilgrim Shares held from time to time by or
on behalf of the Customers (the "Customers' Fund Shares"). The fee for such
services will be computed daily and payable monthly. For purposes of determining
the fees payable under this computation, the average daily net asset value of
the Customers' Fund Shares will be computed in the manner specified in the
Fund's registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Pilgrim Shares for
purposes of purchases and redemptions. Cortland or the Trust may , in its
discretion and without notice, suspend or withdraw the sale of Pilgrim Shares,
including the sale of such Pilgrim Shares to PAS for the account of any customer
or customers. Cortland represents to PAS that this Agreement and the payment of
such service fee by Cortland and the Fund has been authorized and approved by
the Trust.
<PAGE>
4. PAS agrees that it will cause the Dealers to comply and PAS itself will
comply with the provisions contained in the Securities Act governing the
distribution of Prospectuses to persons to whom PAS or the Dealers offer Pilgrim
Shares, and, if requested, will deliver SAI's. PAS further agrees that it or the
Dealers will deliver, upon request, copies of any amended Prospectus (and SAI)
to Customers whose Pilgrim Shares PAS or any Dealer is holding as record owner
and to deliver to such Customers copies of the annual and interim financial
reports and proxy solicitation materials of the Fund. Cortland agrees to furnish
to PAS and the Dealers as many copies of the Prospectus and SAI, annual and
interim financial reports and proxy solicitation materials as you may reasonably
request.
5. PAS represents that it and the Dealers are members in good standing of
the National Association of Securities Dealers, Inc. PAS agrees that neither PAS
nor any Dealer will offer Pilgrim Shares to persons in any jurisdiction in which
PAS or any such Dealer may not lawfully make such offer due to the fact that PAS
or any such Dealer has not registered under, or is not exempt from, the
applicable registration or licensing requirements of such jurisdiction.
6. The Fund has registered an indefinite number of Pilgrim Shares under the
Securities Act. Upon application, Cortland will inform PAS as to the states or
other jurisdictions in which Cortland believes the Pilgrim Shares have been
qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states, but Cortland shall assume no responsibility or
obligation as to PAS's right to sell Pilgrim Shares in any jurisdiction.
7. The Trust shall have full authority to take such action as it deems
advisable in respect of all matters pertaining to the offering of the Pilgrim
Shares, including the right in its discretion, without notice, to suspend sales
or withdraw the offering of Pilgrim Shares entirely.
<PAGE>
8. PAS understands and agrees that PAS and each Dealer, and not Cortland,
the Manager or the Fund, shall be responsible for obtaining and maintaining
taxpayer certifications under applicable law, including the satisfaction of any
penalties imposed for failure to obtain and maintain such information under and
in accordance with applicable law with respect to accounts established by PAS or
any Dealer. PAS also agrees that it will (i) maintain all records required by
law relating to transactions in Pilgrim Shares and, upon request by the Fund,
promptly make such of these records available to the Fund as the Trust may
reasonably request in connection with its operations; and (ii) promptly notify
Cortland if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Cortland and the Trust shall be under no liability to PAS or the Dealers
except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out PAS's obligations, PAS agrees to act in good faith
and without negligence. Nothing contained in this agreement is intended to
operate as a waiver by Cortland, the Manager and the Trust or PAS of compliance
with any provision of the Investment Company Act of 1940, as amended (the "1940
Act"), the Securities Act, the Securities Exchange Act of 1934, as amended, or
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder.
10. This Agreement may be terminated for cause on violation of any of the
provisions of this Agreement by either party, without penalty upon ten (10)
days' written notice to the other party and shall automatically terminate in the
event of its assignment, as defined in the 1940 Act. This Agreement may also be
terminated at any time for any reason or no reason without penalty by the vote
of a majority of the members of the Board of Directors of the Trust who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the plan of
distribution with respect to the Fund and any related agreement, or by the vote
of a majority of the outstanding voting securities of the Fund.
11. All communication to us should be sent to:
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020
<PAGE>
Any notice to you shall be duly given if mailed or telegraphed to you
at the following address:
Pilgrim America Securities, Inc.
10100 Santa Monica Boulevard
Los Angeles, California 90067
If the foregoing is in accordance with PAS's understanding, please sign
and return to Cortland a copy of this Agreement.
REICH & TANG DISTRIBUTORS L.P.
By Reich & Tang Asset Management, Inc.
General Partner
/s/ Richard De Sanctis
Richard De Sanctis
Vice President & Treasurer
Confirmed and accepted as of April 7, 1995:
PILGRIM AMERICA SECURITIES, INC.
By:/s/ Dennis C. Borecki
Dennis C. Borecki
President
<PAGE>
SCHEDULE
PRIMARY DEALER AGREEMENT
PILGRIM SHARES
For providing the services described in the Primary Dealer Agreement,
Cortland and the Fund will pay to you monthly fees at the annual rate, in the
aggregate, of .45% of the average daily net asset value of the Pilgrim Shares
class of the Fund.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 759699
<NAME> Cortland Trust, Inc.
<SERIES>
<NUMBER> 1
<NAME> Cortland General Money Market Fund
<S> <C>
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> YEAR
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<INVESTMENTS-AT-VALUE> 1001734602
<RECEIVABLES> 3254384
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1004988986
<PAYABLE-FOR-SECURITIES> 10005509
<SENIOR-LONG-TERM-DEBT> 0
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<DISTRIBUTIONS-OF-INCOME> 35628040
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3635190794
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 759699
<NAME> Cortland Trust, Inc.
<SERIES>
<NUMBER> 2
<NAME> U.S. Government Fund
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
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statements.
</LEGEND>
<CIK> 759699
<NAME> Cortland Trust, Inc.
<SERIES>
<NUMBER> 3
<NAME> Municipal Money Market Fund
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</TABLE>
