Registration No. 2-96456
Rule 497(c)
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CONNECTICUT DAILY TAX 600 FIFTH AVENUE
FREE INCOME FUND, INC. NEW YORK, N.Y. 10020
Class A Shares; Class B Shares (212) 830-5220
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PROSPECTUS
June 1, 1999
A money market fund whose investment objectives are to seek as high a level of
current income, exempt from Federal income tax and, to the extent possible, from
Connecticut personal income taxes, as is believed to be consistent with
preservation of capital, maintenance of liquidity and stability of principal.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
2 Risk/Return Summary: Investments, Risks, 7 Management, Organization
and Performance and Capital Structure
4 Fee Table 8 Shareholder Information
5 Investment Objectives, Principal Investment 16 Distribution Arrangements
Strategies and Related Risks 18 Financial Highlights
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
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The Fund seeks as high a level of current income, exempt from Federal
income tax and to the extent possible, from Connecticut personal income taxes,
as is believed to be consistent with preservation of capital, maintenance of
liquidity, and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.
Principal Investment Strategies
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The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality, debt obligations of:
(i) Connecticut, and its political subdivisions;
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) other states.
These debt obligations are collectively referred to throughout this
Prospectus as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total net
assets) in Connecticut Municipal Obligations, including Participation
Certificates therein. Participation Certificates evidence ownership of an
interest in the underlying Municipal Obligations and are purchased from banks,
insurance companies or other financial institutions.
Principal Risks
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o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o The amount of income the Fund generates will vary with changes in
prevailing interest rates.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in Connecticut Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Portfolio's concentration versus the
safety that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the risks
that an investment in Connecticut Municipal Obligations may entail. Payment
of interest and preservation of capital are dependent upon the continuing
ability of Connecticut issuers and/or obligators of state, municipal and
public authority debt obligations to meet their payment obligations. Risk
factors affecting the State of Connecticut are described in "Connecticut
Risk Factors" in the Statement of Additional Information.
Risk/Return Bar Chart and Table
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The following bar chart and table may assist you in your decision to invest
in the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A Shares over the last 10 calendar years. The table shows the
average annual return for the last one, five and ten year periods for both
classes. The table also includes the Fund's average annual total return since
inception for both classes. While analyzing this information, please note that
the Fund's past performance is not an indicator of how the Fund will perform in
the future. The Fund's current 7-day yield may be obtained by calling the Fund
toll-free at 1-800-221-3079.
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Connecticut Daily Tax Free Income Fund, Inc. - Class A (1),(2),(3)
[GRAPHIC OMITTED]
Calendar Year End % Total Return
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1989 5.59%
1990 5.09%
1991 3.72%
1992 2.20%
1993 1.70%
1994 2.18%
1995 3.04%
1996 2.59%
1997 2.74%
1998 2.55%
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(1) As of March 31, 1999, the Class A Shares of the Fund had a year-to-date
return of 0.50%.
(2) The Fund's highest quarterly return for its Class A Shares was 1.45%
for the quarter ended June 30, 1989; the lowest quarterly return for its
Class A Shares was .38% for the quarter ended March 31, 1993.
(3) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than if they had invested in the Fund directly.
Average Annual Total Returns - Connecticut Daily Tax Free Income Fund, Inc.
Class A Class B
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For the periods ended December 31, 1998
One Year 2.55% 2.75%
Five Years 2.62% N/A%
Ten Years 3.13% N/A%
Average Annual Total Return
Since Inception* 3.41% 2.85%
* Inception is 5/23/85 for Class A Shares and 10/10/96 for Class B Shares.
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
shares in the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Class A Shares Class B Shares
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Management Fees................................ .30% .30%
Distribution and Service (12b-1) Fees.......... .20% --%
Other Expenses................................. .38% .39%
Administration Fees.......................... .21% .21%
Total Annual Fund Operating Expenses........... .88% .69%
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 years 10 years
Class A: $90 $281 $488 $1,084
Class B: $70 $221 $384 $859
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
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The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from Federal
income tax and, to the extent possible, from Connecticut personal income taxes,
consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
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Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high
quality, debt obligations which include:
(i) Connecticut Municipal Obligations issued by or on behalf of the State of
Connecticut or any Connecticut local governments, or their
instrumentalities, authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities, agencies
and political subdivisions; and
(iii)Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These instruments are purchased by the Fund from banks, insurance
companies or other financial institutions and in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes.
The Fund may invest more than 25% of its assets in Participation
Certificates and other Connecticut Municipal Obligations.
Although the Fund will attempt to invest 100% of its total assets in
Municipal Obligations and Participation Certificates, the Fund reserves the
right to invest up to 20% of its total assets in taxable securities whose
interest income is subject to regular Federal, state and local income tax. The
kinds of taxable securities in which the Fund may invest are limited to
short-term, fixed income securities as more fully described in "Taxable
Securities" in the Statement of Additional Information.
Included in the same 20% of total assets in taxable securities, the Fund
may also purchase securities and participation certificates whose interest
income may be subject to the Federal alternative minimum tax.
To the extent suitable Connecticut Municipal Obligations are not available
for investment by the Fund, the Fund may purchase Municipal Obligations issued
by other states, their agencies and instrumentalities, the dividends on which
will be designated by the Fund as derived from interest income which will be, in
the opinion of bond counsel to the issuer at the date of issuance, exempt from
regular Federal income tax, but will be subject to Connecticut personal income
taxes.
The Fund will invest at least 65% of its total assets in Connecticut
Municipal Obligations, although the exact amount may vary from time to time. As
a temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment advisor. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer. The Fund shall not invest more than 5%
of its total assets in Municipal Securities or Participation Certificates issued
by a single issuer unless the Municipal Obligations are of the highest quality.
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With respect to 75% of its total assets, the Fund shall invest not more
than 10% of its total assets in Municipal Obligations or Participation
Certificates backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations
and stand-by commitments.
The Fund's investment manager considers the following factors when buying
and selling securities for the portfolio: (i) availability of cash, (ii)
redemption requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities but that have been determined by the Fund's Board of Directors to be
of comparable quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Directors of the Fund shall
reassess the security's credit risks and shall take such action as it determines
is in the best interest of the Fund and its shareholders. Reassessment is not
required, however, if the security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
For a more detailed description of (i) the securities that the Fund will
invest in, (ii) fundamental investment restrictions, and (iii) industry
regulations governing credit quality and maturity, please refer to the Statement
of Additional Information.
Risks
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The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Connecticut Municipal
Obligations. The Fund may still be exposed to the credit risk of the institution
providing the investment. Changes in the credit quality of the provider could
affect the value of the security and your investment in the Fund.
Because of the Fund's concentration in investments in Connecticut Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Connecticut and its political subdivisions.
The primary purpose of investing in a portfolio of Connecticut Municipal
Obligations is the special tax treatment accorded Connecticut resident
individual investors. Payment of interest and preservation of principal,
however, are dependent upon the continuing ability of the Connecticut issuers
and/or obligors of state, municipal and public authority debt obligations to
meet their obligations thereunder. Investors should consider the greater risk
of the Fund's concentration versus the safety that comes with a less
concentrated investment portfolio and should compare yields available on
portfolios of Connecticut issues with those of more diversified portfolios,
including out-of-state issues, before making an investment decision.
6
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Because the Fund may concentrate in Participation Certificates that may be
secured by bank letters of credit or guarantees, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such an investment may entail. These
characteristics and risks include extensive governmental regulations, changes in
the availability and cost of capital funds, and general economic conditions (see
"Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information). These factors may limit both the amounts
and types of loans and other financial commitments that may be made and the
interest rates and fees that may be charged. The profitability of this industry
is largely dependent upon the availability and cost of capital funds for the
purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Fund's investment advisor is in the process of working with
the Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment advisor does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment advisor
does not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at current levels, there can be no assurance
that steps taken in preparation for the Year 2000 will be sufficient to avoid an
adverse impact on the Fund. The Year 2000 problem may also adversely affect
issuers of the securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse effect on the Fund's
performance. The investment advisor is unable to predict what effect, if any,
the Year 2000 problem will have on such issuers. At this time, however, it is
generally believed that municipal issuers may be more vulnerable to Year 2000
issues or problems than will other issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999 the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the
Fund's portfolio of securities and makes decisions with respect to the purchase
and sale of investments, subject to the general control of the Board of
Directors of the Fund. Pursuant to the Investment Management Contract, the Fund
pays the Manager a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services.
Pursuant to the Administrative Services Contract, the Manager performs
clerical, accounting supervision and office service functions for the Fund. The
Manager provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of
the investment management and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
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In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Class A shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to both Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
(discussed herein) and from investors directly.
Pricing of Fund Shares
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The net asset value of each Class of the Fund's shares is determined as of
12 noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading (i.e. national holidays). The net asset value of
a Class is computed by dividing the value of the Fund's net assets for such
Class (i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued, but excluding capital stock and surplus)
by the total number of shares outstanding for such Class. The Fund intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. If fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's purchase
order. In order to maximize earnings on its portfolio, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require the immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Fund shares begin accruing income on the day the shares are issued to an
investor. The Fund reserves the right to reject any purchase order for its
shares. Certificates for Fund shares will not be issued to an investor.
Purchase of Fund Shares
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The Fund does not accept a purchase order until an investor's payment has
been converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Investors purchasing shares through a Participating Organization with which
they have an account become Class A shareholders. All other investors, and
investors who have accounts with Participating Organizations but do not wish to
invest in the Fund through them, may invest in the Fund directly as Class B
shareholders of the Fund. Class B shareholders do not receive the benefit of
the servicing functions performed by a Participating Organization. Class B
shares may also be offered to investors who purchase their shares through
Participating Organizations who, as fiduciaries, may not be legally permitted
to receive compensation from the Distributor or the Manager.
8
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The minimum initial investment in the Fund for both classes of shares is
(i) $1,000 for purchases through Participating Organizations - this may be
satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of their customers whose initial investments are less
than $1,000, (ii) $1,000 for securities brokers, financial institutions and
other industry professionals that are not Participating Organizations, and (iii)
$5,000 for all other investors. Initial investments may be made in any amount in
excess of the applicable minimums. The minimum amount for subsequent investments
is $100 unless the investor is a client of a Participating Organization whose
clients have made aggregate subsequent investments of $100.
Each shareholder, except those purchasing through Participating
Organizations, will receive a personalized monthly statement from the Fund
listing (i) the total number of Fund shares owned as of the statement closing
date, (ii) purchase and redemptions of Fund shares, and (iii) the dividends paid
on Fund shares (including dividends paid in cash or reinvested in additional
Fund shares).
Investments Through Participating
Organizations - Purchase of Class A Shares
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Investors may, if they wish, invest in the Fund through the Participating
Organizations with which they have accounts. "Participating Organizations" are
securities brokers, banks and financial institutions or other industry
professionals or organizations that have entered into shareholder servicing
agreements with the Distributor with respect to investment of their customer
accounts in the Fund. When instructed by its customer to purchase or redeem Fund
shares, the Participating Organization, on behalf of the customer, transmits to
the Fund's transfer agent a purchase or redemption order, and in the case of a
purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are
shareholders in the Fund ("Participant Investors") each purchase and redemption
of Fund shares for the customers' accounts. Also, Participating Organizations
may send periodic account statements to the Participant Investors showing (i)
the total number of Fund shares owned as of the statement closing date, (ii)
purchases and redemptions of Fund shares during the period covered by the
statement, and (iii) the income earned by Fund shares during the statement
period (including dividends paid in cash or reinvested in additional Fund
shares). Participant Investors whose Participating Organizations have not
undertaken to provide such statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than by investing in the Fund directly.
A Participant Investor should read this Prospectus in conjunction with the
materials provided by the Participating Organization describing the procedures
under which Fund shares may be purchased and redeemed through the Participating
Organization.
In the case of qualified Participating Organizations, orders received by
the Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
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Initial Direct Purchases of Class B Shares
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Investors who wish to invest in the Fund directly may obtain a current
prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
Mail
Investors may send a check made payable to "Connecticut Daily Tax Free
Income Fund, Inc." along with a completed subscription order form to:
Connecticut Daily Tax Free Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase order will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of
money among banks, investors should first obtain a new account number by
telephoning the Fund at 212-830-5220 (within New York) or at 800-221-3079
(outside New York) and then instruct a member commercial bank to wire money
immediately to:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-954-6
For Connecticut Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)
Fund Account #
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank so the wire
transfer can be accomplished before 12 noon, New York City time, on the same
day. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12 noon, New York City time, on a
Fund Business Day will be treated as a Federal Funds payment received on that
day.
Personal Delivery
Deliver a check made payable to "Connecticut Daily Tax Free Income Fund,
Inc." along with a completed subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Electronic Funds Transfers (EFT), Pre-
authorized Credit and Direct Deposit Privilege
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You may purchase shares of the Fund (minimum of $100) by having salary,
dividend payments, interest payments or any other payments designated by you,
federal salary, social security, or certain veteran's, military or other
payments from the federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up
Form for each type of payment that you desire to include in the Privilege. The
appropriate form may be obtained from your broker or the Fund. You may elect at
any time to terminate your participation by notifying in writing the
appropriate depositing entity and/or federal agency. Death or legal incapacity
will automatically terminate your participation in the Privilege. Further, the
Fund may terminate your participation in the Privilege upon 30 days' notice to
you.
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Subsequent Purchases of Shares
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Subsequent purchases can be made by bank wire, as indicated above, or by
mailing a check to:
Connecticut Daily Tax Free Income Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments
should clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the
Fund is still applicable, a shareholder may reopen an account without filing a
new subscription order form at any time during the year the shareholder's
account is closed or during the following calendar year.
Redemption of Shares
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A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation that it may require). Normally, payment for redeemed
shares is made on the same Fund Business Day after the redemption is effected,
provided the redemption request is received prior to 12 noon, New York City
time. However, redemption payments will not be effected unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which can take up to 15 days after
investment. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature. It should be signed and guaranteed by
an eligible guarantor institution which includes a domestic bank, a domestic
savings and loan institution, a domestic credit union, a member bank of the
Federal Reserve system or a member firm of a national securities exchange,
pursuant to the Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
Connecticut Daily Tax Free Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be
endorsed by the shareholder and all written requests for redemption must be
signed by the shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the
shareholder of record.
Checks
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By making the appropriate election on their subscription order form,
shareholders may request a supply of checks that may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of $250 or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's transfer agent to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. The use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Investors who
11
<PAGE>
purchase Fund shares by check may not be receive their redemption proceeds until
the check has cleared, which can take up to 15 days following the date of
purchase.
There is no charge to the shareholder for checks provided by the Fund. The
Fund reserves the right to impose a charge or impose a different minimum check
amount in the future, if the Board of Directors determines that doing so is in
the best interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.
Corporations and other entities electing the checking option are required
to furnish a certified resolution or other evidence of authorization in
accordance with the Fund's normal practices. Individuals and joint tenants are
not required to furnish any supporting documentation. Appropriate authorization
forms will be sent by the Fund or its agents to corporations and other
shareholders who select this option. As soon as the authorization forms are
filed in good order with the Fund's agent bank, it will provide the shareholder
with a supply of checks.
Telephone
The Fund accepts telephone requests for redemption from shareholders who
elect this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or, if in excess
of $1,000, to their bank accounts, both as set forth in the subscription order
form or in a subsequent written authorization. The Fund may accept telephone
redemption instructions from any person with respect to accounts of shareholders
who elect this service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. The Fund will employ reasonable procedures to confirm that telephone
redemption instructions are genuine, and will require that shareholders electing
such option provide a form of personal identification. Failure by the Fund to
employ such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone redemptions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220 (outside New York at 800-221-3079) and state: (i) the name of the
shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address, and
(v) the name of the person requesting the redemption. Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day
the redemption is effected, provided the redemption request is received before
12 noon, New York City time. Proceeds are sent the next Fund Business Day if
the redemption request is received after 12 noon, New York City time. The Fund
reserves the right to terminate or modify the telephone redemption service in
whole or in part at any time and will notify shareholders accordingly.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by
12
<PAGE>
check. Unless other instructions are given in proper form to the Fund's transfer
agent, a check for the proceeds of a redemption will be sent to the
shareholders' address of record. If a shareholder elects to redeem all the
shares of the Fund he owns, all dividends accrued to the date of such redemption
will be paid to the shareholder along with the proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Additional exceptions
include any period during which an emergency (as determined by the SEC) exists
as a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if
the net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period, a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount.
Specified Amount Automatic
Withdrawal Plan
- --------------------------------------------------------------------------------
Shareholders may elect to withdraw shares and receive payment from the Fund
of a specified amount of $50 or more automatically on a monthly or quarterly
basis. The monthly or quarterly withdrawal payments of the specified amount are
made by the Fund on the 23rd day of the month. Whenever such 23rd day of a month
is not a Fund Business Day, the payment date is the Fund Business Day preceding
the 23rd day of the month. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value on the Fund Business Day immediately preceding the date of payment.
To the extent that the redemptions to make plan payments exceed the number of
shares purchased through reinvestment of dividends and distributions, the
redemptions reduce the number of shares purchased on original investment, and
may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating on the subscription order
form. The election may also be made, changed or terminated at any later time by
sending a signature guaranteed written request to the transfer agent. Because
the withdrawal plan involves the redemption of Fund shares, such withdrawals
may constitute taxable events to the shareholder but the Fund does not expect
that there will be any realized capital gains.
Dividends and Distributions
- --------------------------------------------------------------------------------
The Fund declares dividends equal to all its net investment income
(excluding long-term capital gains and losses, if any, and amortization of
market discount) on each Fund Business Day and pays dividends monthly. There is
no fixed dividend rate. In computing these dividends, interest earned and
expenses are accrued daily.
Net realized capital gains, if any, are distributed at least annually and
in no event later than 60 days after the end of the Fund's fiscal year.
13
<PAGE>
All dividends and distributions of capital gains are automatically
invested, at no charge, in additional Fund shares of the same Class of shares
immediately upon payment thereof unless a shareholder has elected by written
notice to the Fund to receive either of such distributions in cash.
Because Class A shares bear the service fee under the Fund's 12b-1 Plan,
the net income of and the dividends payable to the Class A shares will be lower
than the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
Exchange Privilege
- --------------------------------------------------------------------------------
Shareholders of the Fund are entitled to exchange some or all of their
Class of shares in the Fund for shares of the same Class of certain other
investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser and which participate in the exchange privilege program with
the Fund. If only one Class of shares is available in a particular exchange
fund, the shareholder of the Fund is entitled to exchange their shares for the
shares available in that exchange fund. Currently the exchange privilege program
has been established between the Fund and California Daily Tax Free Income Fund,
Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund,
Inc., Florida Daily Municipal Income Fund, Georgia Daily Municipal Income Fund,
Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., 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 Virginia Daily
Municipal Income Fund, Inc. In the future, the exchange privilege program may be
extended to other investment companies which retain Reich & Tang Asset
Management L.P. as investment adviser or manager.
There is no charge for the exchange privilege or limitation as to frequency
of exchange. The minimum amount for an exchange is $1,000. However, shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Each Class of shares is exchanged at its
respective net asset value.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares of the same Class may be exchanged
only between investment company accounts registered in identical names. Before
making an exchange, the investor should review the current prospectus of the
investment company into which the exchange is to be made.
Instructions for exchanges may be made by sending a signature guaranteed
written request to:
Connecticut Daily Tax Free Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
212-830-5220 (within New York) or 800-221-3079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
Tax Consequences
- --------------------------------------------------------------------------------
The purchase of Fund shares will be the purchase of an asset. Dividends
paid by the Fund, that are designated by the Fund and derived from Municipal
Obligations and Participation Certificates, will be exempt from regular Federal
income tax, provided the Fund complies with Section 852(b)(5) of the Internal
Revenue Code, but may be subject to Federal alternative minimum
14
<PAGE>
tax. These dividends are referred to as exempt interest dividends. Exempt-
interest dividends derived from obligations issued by or on behalf of the State
of Connecticut or any Connecticut local governments, or their instrumentalities,
authorities or districts will be exempt from Connecticut personal income taxes,
provided that the Fund complies with Connecticut Law. Exempt-interest dividends
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that Connecticut is prohibited from taxing under the
Constitution, the laws of the United States of America or the laws of
Connecticut also should be exempt from Connecticut personal income taxes
provided the Fund complies with Connecticut law.
Dividends paid from taxable income, if any, and distributions of any
realized short-term capital gains (from tax-exempt or taxable obligations) are
taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares of the Fund.
The Fund does not expect to realize long-term capital gains, and thus does
not contemplate distributing "capital gain dividends" or having undistributed
capital gain income within the meaning of the Code. The Fund will inform
shareholders of the amount and nature of its income and gains in a written
notice mailed to shareholders not later than 60 days after the close of the
Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including
"exempt interest dividends" paid by the Fund, is to be added to adjusted gross
income to determine the amount of Social Security benefits includible in gross
income.
Interest on certain personal private activity bonds will constitute an item
of tax preference subject to the individual alternative minimum tax.
Corporations will be required to include in alternative minimum taxable income
75% of the amount by which their adjusted current earnings (including tax-exempt
interest) exceeds their alternative minimum taxable income (determined without
this tax item). In certain cases Subchapter S corporations with accumulated
earnings and profits from Subchapter C years will be subject to a tax on
"passive investment income", including tax-exempt interest.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in a taxable gain or loss for the
shareholder if the shareholder receives more or less than it paid for its
shares. An exchange pursuant to the exchange privilege is treated as a sale on
which the shareholder may realize a taxable gain or loss.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations. Battle
Fowler LLP has pointed out that the Internal Revenue Service has announced it
will not ordinarily issue advance rulings on the question of the ownership of
securities or participation interests therein subject to a put and could reach a
conclusion different from that reached by counsel.
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal government's taxing the interest earned on state
or other municipal bonds. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations.
The Fund may invest a portion of its assets in securities that generate
income that is not exempt from Federal or state income tax. Income exempt from
Federal income tax may be subject to state and local income tax.
Connecticut Income Taxes
The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day, Berry &
15
<PAGE>
Howard LLP, special Connecticut tax counsel to the Fund, exempt-interest
dividends correctly designated as derived from Connecticut Municipal Obligations
received by the Fund are not subject to the Connecticut tax on the Connecticut
taxable income of individuals, trusts and estates (the "Connecticut Personal
Income Tax").
Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund that are treated as ordinary
income for Federal income tax purposes are includible in a taxpayer's tax base
for the purposes of the Connecticut Personal Income Tax.
While capital gain dividends are not anticipated by the Fund, capital gain
dividends and amounts, if any, in respect of undistributed long-term capital
gains of the Fund would be includible in a taxpayer's tax base for purposes of
the Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that, in the case of
tax payers holding shares of the Fund as capital assets, capital gain dividends
derived from obligations issued by or on behalf of the State of Connecticut, its
political subdivisions, or any public instrumentality, state or local authority,
district or similar public entity created under Connecticut law are not subject
to the tax.
Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the Federal alternative minimum tax, other than
exempt-interest dividends, derived from Connecticut Municipal Obligations, may
be subject to the net Connecticut minimum tax.
All dividends paid by the Fund, including exempt-interest dividends are
includible in gross income for purposes of the Connecticut Corporation Business
Tax payable by companies taxed as corporations. However, the Corporation
Business Tax allows a deduction for a portion of amounts includible in gross
income thereunder to the extent they are treated as dividends other than
exempt-interest dividends or capital gain dividends for Federal income tax
purposes, but disallows deductions for expenses related to such amounts.
Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Class A shareholders. The Fund pays these fees from
its assets on an ongoing basis and therefore, over time, the payment of these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares, a service fee equal to .20% per annum of the
Class A shares' average daily net assets (the "Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly. Any portion of the fee may
be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
16
<PAGE>
The Plan and the Shareholder Servicing Agreement provide that the Fund
will pay for (i) telecommunications expenses including the cost of dedicated
lines and CRT terminals, incurred by the Distributor and Participating
Organizations in carrying out their obligations under the Shareholder Servicing
Agreement with respect to Class A shares, and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund, (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund, and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholding Servicing Fee (with
respect to Class A shares) and past profits, for the purposes enumerated in (i)
above. The Distributor will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
17
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A Year Ended January 31,
- ------- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................... 0.025 0.027 0.026 0.030 0.023
Less distributions:
Dividends from net investment income...... ( 0.025) ( 0.027) ( 0.026) ( 0.030) ( 0.023)
--------- --------- --------- --------- ---------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 2.52% 2.74% 2.59% 3.02% 2.29%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 182,227 $ 167,780 $ 136,606 $ 105,826 $ 81,801
Ratios to average net assets:
Expenses.................................. 0.88% 0.89% 0.91% 0.91% 0.88%
Net investment income..................... 2.48% 2.70% 2.56% 2.96% 2.25%
Administration fees waived................ -- -- -- 3.02% 2.02%
Expenses paid indirectly.................. -- -- 0.02% -- --
<CAPTION>
Year Ended October 10, 1996
CLASS B January 31, (Commencement of Offering) to
- ------- ----------------------------- January 31, 1997
1999 1998 ----------------
--------- ---------
<S> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year............ $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
Income from investment operations:
Net investment income..................... 0.027 0.029 0.009
Less distributions:
Dividends from net investment income...... ( 0.027) ( 0.029) ( 0.009)
--------- --------- ---------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00
========= ========= =========
Total Return.................................. 2.72% 2.96% 2.83%*
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 389 $ 4 $ 7
Ratios to average net assets:
Expenses.................................. 0.69% 0.67% 0.70%*
Net investment income..................... 2.50% 2.95% 2.80%*
Expenses paid indirectly.................. -- -- 0.02%*
* Annualized
</TABLE>
<PAGE>
CONNECTICUT
DAILY TAX
FREE INCOME
FUND, INC.
PROSPECTUS
June 1, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
A Statement of Additional Information (SAI) dated June 1, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI, the Annual and Semi-Annual Reports and material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
================================================================================
================================================================================
A current SAI has been filed with the Securities and Exchange Commission.
You may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
811-4265
CT699P
<PAGE>
PROSPECTUS June 1, 1999
[GRAPHIC OMITTED][GRAPHIC OMITTED]
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
Evergreen Class of Shares - distributed through Evergreen Distributor, Inc.
A money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and to the extent
possible, from Connecticut personal income taxes, as is believed to be
consistent with preservation of capital, maintenance of liquidity and stability
of principal.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Risk/Return Summary: Investments, Management, Organization and
Risks, and Performance 3 Capital Structure 8
Fee Table 5 Shareholder Information 8
Investment Objectives, Principal Investment Distribution Arrangements 13
Strategies, and Related Risks 6 Financial Highlights 14
</TABLE>
-2-
<PAGE>
- --------------------------------------------------------------------------------
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
- --------------------------------------------------------------------------------
Investment Objectives
The Fund seeks as high a level of current income, exempt from regular Federal
income tax and to the extent possible, from Connecticut personal income taxes,
as is believed to be consistent with preservation of capital, maintenance of
liquidity, and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing principally
in short-term, high quality, debt obligations of:
(i) Connecticut, and its political subdivisions,
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) other states.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total net
assets) in Connecticut Municipal Obligations, including Participation
Certificates therein. Participation Certificates evidence ownership of an
interest in the underlying Municipal Obligations and are purchased from banks,
insurance companies or other financial institutions.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o The amount of income the Fund generates will vary with changes in prevailing
interest rates.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in Connecticut Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Fund's concentration versus the safety
that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the risks
which an investment in Connecticut Municipal Obligations may entail. Payment
of interest and preservation of capital are dependent upon the continuing
ability of Connecticut issuers and/or obligators of state, municipal and
public authority debt obligations to meet their payment obligations. Risk
factors affecting the State of Connecticut are described in "Connecticut
Risk Factors" in the Statement of Additional Information.
Risk/Return Bar Chart And Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A shares over the last 10 calendar years. The table shows the
average annual total returns of the Fund's Class A shares for the last one, five
and ten year periods. The table also includes the Class A shares' average
annual total return. While analyzing this information, please note that the
Fund's past performance is not an indicator of how the Fund will perform in the
future. The Fund's current 7-day yield for its Class A shares may be obtained
by calling the Fund toll-free at 1-800-221-3079.
3
<PAGE>
- --------------------------------------------------------------------------------
Connecticut Daily Tax Free Income Fund, Inc. - Class A (1),(2),(3),(4)
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1989 5.59%
1990 5.09%
1991 3.72%
1992 2.20%
1993 1.70%
1994 2.18%
1995 3.04%
1996 2.59%
1997 2.74%
1998 2.55%
- --------------------------------------------------------------------------------
(1) The chart shows returns for the Class A shares of the Fund (which are not
offered by this prospectus). As of December 31, 1998, there were no
Evergreen shares issued by the Fund. All Classes of the Fund will have
substantially similar annual returns because the shares are invested in
the same portfolio of securities and the annual returns differ only to the
extent that the Classes do not have the same expenses. If the expenses of
the Evergreen shares are higher than the Class A shares, then your annual
returns may be lower.
(2) As of March 31, 1999, the Class A Shares of the Fund had a year-to-date
return of 0.50%.
(3) The Fund's highest quarterly return for its Class A Shares was 1.45%
for the quarter ended June 30, 1989; the lowest quarterly return for its
Class A Shares was .38% for the quarter ended March 31, 1993.
(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than if they had invested in the Fund directly.
Average Annual Total Returns - Connecticut Daily Tax Free Income Fund, Inc.
Class A
For the periods ended December 31, 1998
One Year 2.55%
Five Years 2.62%
Ten Years 3.13%
Average Annual Total Return
Since Inception* 3.41%
*Inception is 5/23/85 for Class A Shares.
4
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Evergreen shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Evergreen Shares
Management Fees................................ .30%
Distribution and Service (12b-1) Fees.......... .20%
* Other Expenses................................. .38%
Administration Fees.......................... .21%
------
Total Annual Fund Operating Expenses........... .88%
* Based on estimated amounts for the current fiscal year.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Evergreen Shares: $90 $281 $488 $1,084
5
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
- --------------------------------------------------------------------------------
Investment Objectives
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income, exempt from regular
Federal income tax and to the extent possible, from Connecticut personal income
taxes, consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
Generally
- ---------
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) Connecticut Municipal Obligations issued by or on behalf of the State of
Connecticut or any Connecticut local governments, or their
instrumentalities, authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities, agencies
and political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These instruments are purchased by the Fund from banks, insurance
companies or other financial institutions and in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes.
The Fund may invest more than 25% of its assets in Participation Certificates
and other Connecticut Municipal Obligations.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities whose interest income
is subject to regular Federal, state and local income tax. The kinds of taxable
securities in which the Fund may invest are limited to short-term, fixed income
securities as more fully described in "Taxable Securities" in the Statement of
Additional Information.
Included in the same 20% of total assets in taxable securities, the Fund may
also purchase, without limit, securities and participation certificates whose
interest income may be subject to the Federal alternative minimum tax.
To the extent suitable Connecticut Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states, their agencies and instrumentalities. The interest income from
these Municipal Obligations will be exempt from regular Federal income tax (in
the opinion of bond counsel to the issuers at the day of issuance), but will be
subject to the Connecticut Income Tax.
The Fund will invest at least 65% of its total assets in Connecticut Municipal
Obligations, although the exact amount may vary from time to time. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment advisor. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests,(iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities
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which have or are deemed to have a remaining maturity of 397 days or less. Also,
the average maturity for all securities contained in each individual portfolio
of the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but which
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
the security's credit risks and shall take such action as it determines is in
the best interest of the Fund and its shareholders. Reassessment is not
required, however, if the security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Connecticut Municipal
Obligations. The Fund may still be exposed to the credit risk of the institution
providing the investment. Changes in the credit quality of the provider could
affect the value of the security and your investment in the Fund.
The primary purpose of investing in a portfolio of Connecticut Municipal
Obligations is the special tax treatment accorded Connecticut resident
individual investors. Payment of interest and preservation of principal,
however, are dependent upon the continuing ability of the Connecticut issuers
and/or obligors of state, municipal and public authority debt obligations to
meet their obligations thereunder. Investors should consider the greater risk of
the Fund's concentration versus the safety that comes with a less concentrated
investment portfolio and should compare yields available on portfolios of
Connecticut issues with those of more diversified portfolios, including
out-of-state issues, before making an investment decision. Exempt-interest
derived from Connecticut Municipal Obligations will be exempt from the
Connecticut Income Tax. Exempt-interest dividends derived from Territorial
Municipal Obligations also should be exempt from the Connecticut Income Tax
provided the Fund complies with applicable Connecticut law. Other distributions
from the Fund may be subject to Connecticut Income tax. (See " Tax Consequences"
herein.)
Because of the Fund's concentration in investments in Connecticut Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Connecticut and its political subdivisions.
Because the Fund may concentrate in Participation Certificates which may be
secured by bank letters of credit or guarantees, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such an investment may entail. This includes
extensive governmental regulations, changes in the availability and cost of
capital funds, and general economic conditions (see "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information) which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the Year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be Year 2000 compliant. Although the Manager does not anticipate that the
Year 2000 issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the year 2000 will be sufficient to avoid an adverse impact on
the Fund. The Year 2000 problem may also adversely affect issuers of the
securities contained in the Fund, to varying
7
<PAGE>
degrees based upon various factors, and thus may have a corresponding adverse
affect on the Fund's performance. The Manager is unable to predict what affect,
if any, the Year 2000 problem will have on such issuers. At this time, however,
it is generally believed that municipal issuers may be more vulnerable to Year
2000 issues or problems than will other issuers.
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III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
- --------------------------------------------------------------------------------
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Pursuant to the Investment Management Contract, the Fund pays the
Manager a fee equal to .30% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets. The Manager, at its
discretion, may voluntarily waive all or a portion of the administrative
services fee. Any portion of the total fees received by the Manager may be used
to provide shareholder services and for distribution of Fund shares.
In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Evergreen shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to both Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
- --------------------------------------------------------------------------------
IV. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
Evergreen shares have been created for the primary purpose of providing a
Connecticut tax-free money market fund product for shareholders of certain funds
distributed by Evergreen Distributor, Inc. ("EDI"). Shares of the Fund, other
than Evergreen shares, are offered pursuant to a separate prospectus. Evergreen
shares are identical to other shares of the Fund, with respect to investment
objectives and yield, but differ with respect to certain other matters,
including shareholder services and purchase and redemption of shares.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
Pricing of Fund Shares
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading (i.e. national holidays). The net asset value of
a Class is computed by dividing the value of the Fund's net assets for such
Class (i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued, but excluding capital stock and surplus)
by the total number of shares outstanding for such Class. The Fund intends to
maintain a stable net asset value at $1.00 per share although there can be no
assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Directors will consider whether any action should be initiated. Although the
amortized cost method provides certainty in valuation, it may result in periods
during which the value of an instrument is higher or lower than the price an
investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset value
per share for each Class made after acceptance of the investor's purchase order.
In order to maximize earnings on its portfolio, the Fund normally
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<PAGE>
has its assets as fully invested as is practicable. Many securities in which the
Fund invests require the immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Accordingly, the Fund does not accept as subscription or invest an investor's
payment in portfolio securities until the payment has been converted into
Federal Funds. Fund shares begin accruing income on the day the shares are
issued to an investor. The Fund reserves the right to reject any purchase order
for its shares. Certificates for Fund shares will not be issued to an investor.
How to Buy Shares
Only Evergreen shares are offered through this Prospectus. You can purchase
shares of the Fund through broker-dealers, banks or other financial
intermediaries, or directly through Evergreen Distributor, Inc. ("EDI"). The
minimum initial investment is $1,000 which may be waived in certain situations.
There is no minimum for subsequent investments. In states where EDI is not
registered as a broker-dealer, shares of the Fund will only be sold through
other broker-dealers or other financial institutions that are registered.
Instructions on how to purchase shares of the Fund are set forth in the Share
Purchase Application.
The Fund does not accept a purchase order until an investor's payment has been
converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Application Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's Manager incurs.
If such investor is an existing shareholder, the Fund may redeem shares from his
or her account to reimburse the Fund or the Fund's Manager for any loss. In
addition, such investors may be prohibited or restricted from making further
purchase in any of the Evergreen mutual funds.
How To Redeem Shares
You may "redeem", i.e., sell your shares in the Fund to the Fund on any Fund
Business Day, either directly or through your financial intermediary. The price
you will receive is the net asset value next calculated after the Fund receives
your request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, the Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to ten days). Once a redemption request has been telephoned
or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to Evergreen Service Company which is the
registrar, transfer agent and dividend disbursing agent for the Fund. Stock
power forms are available from your financial intermediary, Evergreen Service
Company, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, financial intermediaries, fiduciaries and
surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to Evergreen Service
Company.
Shareholders may withdraw amounts of $1,000 or more from their accounts by
calling Evergreen Service Company at 800-423-2615 between the hours of 8:00 a.m.
to 5:30 p.m. (Eastern time) each Fund Business Day. Redemption requests made
after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. Such redemption requests must include the
shareholder's account name, as registered with the Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach Evergreen Service Company by telephone should follow the
procedures outlined above for redemption by mail.
The telephone redemption service is not available to shareholders automatically.
Shareholders wishing to use the telephone redemption service must indicate this
on the Share Purchase Application and choose how the redemption proceeds are to
be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in the
Fund at a designated commercial bank. Evergreen Service Company currently
9
<PAGE>
deducts a $5.00 wire charge from all redemption proceeds wired. This charge is
subject to change without notice. Redemption proceeds will be wired on the same
day if the request is made prior to 12 noon (Eastern time). Such shares,
however, will not earn dividends for that day. Redemption requests received
after 12 noon will earn dividends for that day, and the proceeds will be wired
on the following business day. A shareholder who decides later to use this
service, or to change instructions already given, should fill out a Shareholder
Services Form and send it to Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121 with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
Evergreen Service Company. Shareholders should allow approximately ten days for
such form to be processed. The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring some form of personal identification prior to acting upon
instructions and tape recording of telephone instructions. If the Fund fails to
follow such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine. The Fund reserves the right to
refuse a telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephone requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Evergreen
shares, without charge, with checks drawn on the Fund that will clear through
Evergreen Service Company. Shareholders will be subject to the Evergreen Service
Company rules and regulations governing such checking accounts. Checks will be
sent usually within ten business days following the date the account is
established. Checks may be made payable to the order of any payee in an amount
of $250 or more. The payee of the check may cash or deposit it like a check
drawn on a bank. (Investors should be aware that, as in the case with regular
bank checks, certain banks may not provide cash at the time of deposit, but will
wait until they have received payment from Evergreen Service Company.) When such
a check is presented to Evergreen Service Company for payment, Evergreen Service
Company, as the shareholder's agent, causes the Fund to redeem a sufficient
number of full and fractional shares in the shareholder's account to cover the
amount of the check. Checks will be returned by Evergreen Service Company if
there are insufficient or uncollectable shares to meet the withdrawal amount.
The check writing procedure for withdrawal enables shareholders to continue
earning income on the shares to be redeemed up to but not including the date the
redemption check is presented to Evergreen Service Company for payment.
Shareholders wishing to use this method of redemption should fill out the
appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to Evergreen Service Company, P.O. Box 2121,
Boston, Massachusetts 02106-2121. Shareholders requesting this service after an
account has been opened must contact Evergreen Service Company since additional
documentation will be required. Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
Shareholder Services
The Fund provides Evergreen shareholders with the following shareholder
services. For more information about these services or your account, contact
EDI or the toll-free number on the back of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment. Because the withdrawal
plan involves the redemption of Fund shares, such withdrawals may constitute
taxable events to the shareholder, but the Fund does not expect that there will
be any realized capital gains.
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<PAGE>
Investments Through Employee Benefit and Savings Plan. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. If a shareholder elects to redeem all
the shares of the Fund he owns, all dividends accrued to the date of such
redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon,
Eastern time, on any Fund Business Day becomes effective on the next Fund
Business Day.
The Fund has reserved the right to close an account that through redemptions has
remained below $1,000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
The redemption of shares may result in the investor's receipt of more or less
than he paid for his shares and, thus, in a taxable gain or loss to the
investor.
Dividends and Distributions
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and pays dividends monthly. There is no fixed dividend rate.
In computing these dividends, interest earned and expenses are accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically invested, at
no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Evergreen shares bear a service fee under the Fund's 12b-1 Plan, the net
income of and the dividends payable to the Evergreen shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect
to the service fees payable under the Plan, will be determined in the same
manner and paid in the same amounts.
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<PAGE>
Tax Consequences
The purchase of Fund shares will be a purchase of an asset. Dividends paid by
the Fund that are properly designated by the Fund and derived from Municipal
Obligations and Participation Certificates will be exempt from regular Federal
income tax, provided the Fund complies with section 852(b)(5) of the Internal
Revenue Code but may be subject to Federal alternative minimum tax. These
dividends are referred to as "exempt-interest dividends." Exempt interest
dividends derived from obligations issued by or on behalf of the state of
Connecticut or any Connecticut local governments, or their instrumentalities,
authorities or districts will be exempt from Connecticut personal income taxes,
provided the Fund complies with Connecticut law. Exempt interest dividends
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that Connecticut is prohibited from taxing under the
Constitution, the laws of the United States or the laws of Connecticut also
should be exempt from Connecticut personal income taxes, provided the Fund
complies with Connecticut law.
Dividends paid from taxable income and distributions of short-term capital gains
(from tax-exempt or taxable obligations) are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the Fund.
The Fund does not expect to realize long-term capital gains, and thus does not
contemplate distributing "capital gain dividends or having undistributed capital
gain income within the meaning of the Code".
The Fund will inform shareholders of the amount and nature of its income and
gains in a written notice mailed to shareholders not later than 60 days after
the close of the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including "exempt
interest dividends" paid by the Fund, is to be added to adjusted gross income to
determine the amount of Social Security benefits includible in gross income.
Interest on certain private activity bonds will constitute an item of tax
preference subject to the individual alternative minimum tax.
Corporations will be required to include in alternative minimum taxable income
75% of the amount by which their adjusted current earnings (including tax-exempt
interest) exceeds their alternative minimum taxable income (determined without
this tax item). In certain cases Subchapter S corporations with accumulated
earnings and profits from Subchapter C years will be subject to a tax on
"passive investment income", including tax-exempt interest.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in a taxable gain or loss for the
shareholder if the shareholder receives more or less than it paid for its
shares. An exchange pursuant to the exchange privilege is treated as a sale on
which a shareholder may realize a taxable gain or loss.
With respect to variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of the underlying Municipal Obligations and that the interest thereon
will be exempt from regular Federal income taxes to the Fund to the same extent
as the interest on the underlying Municipal Obligations. Battle Fowler LLP has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel.
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal government's taxing the interest earned on state
or other municipal bonds. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations.
The Fund may invest a portion of its assets in securities that generate income
that is not exempt from federal or state income tax. Income exempt from federal
income tax may be subject to state and local income tax.
Connecticut Income Taxes
The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day, Berry & Howard LLP, special
Connecticut tax counsel to the Fund, exempt-interest dividends correctly
designated as derived from Connecticut Municipal Obligations received by the
Fund are not subject to the Connecticut tax on the Connecticut taxable income of
individuals, trusts and estates (the "Connecticut Personal Income Tax").
12
<PAGE>
Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund that are treated as ordinary
income for Federal income tax purposes are includible in a taxpayer's tax base
for the purposes of the Connecticut Personal Income Tax.
While capital gain dividends are not anticipated by the Fund, capital gain
dividends and amounts, if any, in respect of undistributed long-term capital
gains of the Fund would be includible in a taxpayer's tax base for purposes of
the Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that, in the case of
taxpayers holding shares of the Fund as capital assets, capital gain dividends
derived from obligations issued by or on behalf of the State of Connecticut, its
political subdivisions, or any public instrumentality, state or local authority,
district or similar public entity created under Connecticut law are not subject
to the tax.
Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the Federal alternative minimum tax, other than
exempt-interest dividends, derived from Connecticut Municipal Obligations, may
be subject to the net Connecticut minimum tax.
All dividends paid by the Fund, including exempt-interest dividends are
includible in gross income for purposes of the Connecticut Corporation Business
Tax payable by companies taxed as corporations. However, the Corporation
Business Tax allows a deduction for a portion of amounts includible in gross
income thereunder to the extent they are treated as dividends other than
exempt-interest dividends or capital gain dividends for Federal income tax
purposes, but disallows deductions for expenses related to such amounts.
Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund in their own states and localities.
- --------------------------------------------------------------------------------
V. DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Rule 12b-1 Fees
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to Evergreen shareholders. The Fund pays these fees from its assets
on an ongoing basis and therefore, over time, the payment of these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Evergreen
shares of the Fund).
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Evergreen shares, a service fee equal to .20% per annum of the
Evergreen shares' average daily net assets (the Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly. Any portion of the fee may
be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Evergreen shares of the Fund. The
Class B shareholders will not receive the benefit of such services from
Participating Organizations and, therefore, will not be assessed a Shareholder
Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that the Fund will pay
for (i) telecommunications expenses including the cost of dedicated lines and
CRT terminals, incurred by the Distributor and Participating Organizations in
carrying out their obligations under the Shareholder Servicing Agreement with
respect to Class A shares, and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Evergreen
shares of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Evergreen shares. The Distributor may also make payments from
13
<PAGE>
time to time from its own resources, which may include the Shareholding
Servicing Fee (with respect to the Evergreen shares) and past profits, for the
purposes enumerated in (i)above. The Distributor will determine the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and
Distributor for any fiscal year under either the Investment Management Contract
in effect for that year or under the Shareholder Servicing Agreement in effect
for that year.
- --------------------------------------------------------------------------------
VI. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
in the Class A shares since there were no Evergreen shares issued during the
fiscal year ended January 31, 1999. The total returns in the table represent the
rate that an investor would have earned [or lost] on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by McGladrey and Pullen, LLP, whose report, along with the Fund's
financial statements, is included in the annual report, which is available upon
request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A Year Ended January 31,
- ------- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................... 0.025 0.027 0.026 0.030 0.023
Less distributions:
Dividends from net investment income...... ( 0.025) ( 0.027) ( 0.026) ( 0.030) ( 0.023)
--------- --------- --------- --------- ---------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 2.52% 2.74% 2.59% 3.02% 2.29%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 182,227 $ 167,780 $ 136,606 $ 105,826 $ 81,801
Ratios to average net assets:
Expenses.................................. 0.88% 0.89% 0.91% 0.91% 0.88%
Net investment income..................... 2.48% 2.70% 2.56% 2.96% 2.25%
Administration fees waived................ -- -- -- 3.02% 2.02%
Expenses paid indirectly.................. -- -- 0.02% -- --
</TABLE>
14
<PAGE>
A Statement of Additional Information (SAI) dated June 1, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and material incorporated by
reference without charge by calling the Fund at 1-800-221-3079. To request other
information, please call your financial intermediary or the Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
811-4265 537621 (REV03)
6/99
<PAGE>
[GRAPHIC OMITTED]
CHASE VISTA FUNDS
PROSPECTUS
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
Chase Vista Select Class of Shares - distributed through Vista Fund
Distributors, Inc.
June 1, 1999
A money market fund whose investment objectives are to seek as high a level of
current income exempt from Federal income tax and to the extent possible, from
Connecticut personal income taxes, as is believed to be consistent with
preservation of capital, maintenance of liquidity and stability of principal.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense
TABLE OF CONTENTS
2 Risk/Return Summary: Investments, Risks, 9 Management, Organization an
and Performance Capital Structure
5 Fee Table 10 Shareholder Information
6 Investment Objectives, Principal Investment 22 Distribution Arrangements
Strategies and Related Risks 24 Financial Highlights
<PAGE>
I. RISK/RETURN SUMMARY:
INVESTMENTS, RISKS, AND
PERFORMANCE
- -------------------------------------
Investment Objectives
The Fund seeks as high a level of current income exempt from Federal income tax
and to the extent possible, from Connecticut personal income taxes, as is
believed to be consistent with preservation of capital, maintenance of
liquidity, and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing principally
in short-term, high quality, debt obligations of:
(i) Connecticut, and its political subdivisions;
(ii) Puerto Rico and other United States Territories, and their political
subdivisions; and
(iii) other states.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total assets) in
Connecticut Municipal Obligations, including Participation Certificates therein.
Participation Certificates evidence ownership of an interest in the underlying
Municipal Obligations and are purchased from banks, insurance companies, or
other financial institutions.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can
each decline in value.
o The amount of income the Fund generates will vary with changes in
prevailing interest rates.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in Connecticut Municipal
Obligations, including Participation Certificates therein, investors should
also consider the greater risk of the Fund's concentration versus the
safety that comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the risks
that an investment in Connecticut Municipal Obligations may entail. Payment
of interest and preservation of capital are dependent upon the continuing
ability of Connecticut issuers and/or obligators of state, municipal and
public authority debt
2
<PAGE>
obligations to meet their payment obligations. Risk factors affecting the State
of Connecticut are described in "Connecticut Risk Factors" in the Statement of
Additional Information.
Risk/Return Bar Chart and Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual total returns of the
Fund's Class A shares over the last 10 calendar years. The table shows the
average annual total returns of the Fund's Class A shares for the last one,
five and ten year periods. The table also includes the Class A shares'
average annual total return since inception. While analyzing this information,
please note that the Fund's past performance is not an indicator of how the Fund
will perform in the future. The Fund's current 7-day yield for its Class A
shares may be obtained by calling the Fund toll-free at 1-800-221-3079.
3
<PAGE>
Connecticut Daily Tax Free Income Fund, Inc. - Class A (1),(2),(3),(4)
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1989 5.59%
1990 5.09%
1991 3.72%
1992 2.20%
1993 1.70%
1994 2.18%
1995 3.04%
1996 2.59%
1997 2.74%
1998 2.55%
- --------------------------------------------------------------------------------
(1) The chart shows returns for the Class A shares of the Fund (which are not
offered by this prospectus). As of December 31, 1998, there were no
Chase Vista Select shares issued by the Fund. All Classes of the Fund will
have substantially similar annual returns because the shares are invested in
the same portfolio of securities and the annual returns differ only to the
extent that the Classes do not have the same expenses. If the expenses of
the Chase Vista Select shares are higher than the Class A shares, then your
annual returns may be lower.
(2) As of March 31, 1999, the Class A Shares of the Fund had a year-to-date
return of 0.50%.
(3) The Fund's highest quarterly return for its Class A Shares was 1.45% for
the quarter ended June 30, 1989; the lowest quarterly return for its Class
A Shares was .38% for the quarter ended March 31, 1993.
(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than if they had invested in the Fund directly.
Average Annual Total Returns -
Connecticut Daily Tax Free Income Fund, Inc.
Class A
---------
For the periods ended December 31, 1998
One Year 2.55%
Five Years 2.62%
Ten Years 3.13%
Average Annual Total Return
Since Inception* 3.41%
*Inception is 5/23/85 for Class A Shares.
4
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
Chase Vista Select shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Chase Vista Select Shares
Management Fees .30%
Distribution and Service (12b-1) Fees .20%
*Other Expenses .38%
Administration Fees .21%
------
Total Annual Fund Operating Expenses .88%
* Based on estimated amounts for the current fiscal year.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Chase Vista Select Shares $90 $281 $488 $1,084
5
<PAGE>
II. INVESTMENT OBJECTIVES,
PRINCIPAL INVESTMENT
STRATEGIES AND
RELATED RISKS
- --------------------------------------
Investment Objectives
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from Federal
income tax and to the extent possible, from Connecticut personal income taxes,
consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
Generally
- ---------
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) Connecticut Municipal Obligations issued by or on behalf of the State of
Connecticut or any Connecticut local governments, or their
instrumentalities, authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico
and the Virgin Islands or their instrumentalities, authorities, agencies
and political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These instruments are purchased by the Fund from banks, insurance
companies or other financial institutions and in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes.
The Fund may invest more than 25% of its assets in Participation Certificates
and other Connecticut Municipal Obligations.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities whose interest income
is subject to regular Federal, state and local income tax. The kinds of taxable
securities in which the Fund may invest are limited to short-term, fixed income
securities as more fully described in "Taxable Securities" in the Statement of
Additional Information.
Included in the same 20% of total assets in taxable securities, the Fund may
also purchase securities and participation certificates whose interest income
may be subject to the Federal alternative minimum tax.
6
<PAGE>
To the extent suitable Connecticut Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states, their agencies and instrumentalities, the dividends on which will
be designated by the Fund as derived from interest income which will be, in the
opinion of bond counsel to the issuer at the date of issuance, exempt from
regular Federal income tax, but will be subject to Connecticut income tax.
The Fund will invest at least 65% of its total assets in Connecticut Municipal
Obligations, although the exact amount may vary from time to time. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment advisor. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the
7
<PAGE>
minimum required for purchase by the Fund. If this occurs, the Board of
Directors of the Fund shall reassess the security's credit risks and shall take
such action as it determines is in the best interest of the Fund and its
shareholders. Reassessment is not required, however, if the security is disposed
of or matures within five business days of the Manager becoming aware of the new
rating and provided further that the Board of Directors is subsequently notified
of the Manager's actions.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Connecticut Municipal
Obligations. The Fund may still be exposed to the credit risk of the institution
providing the investment. Changes in the credit quality of the provider could
affect the value of the security and your investment in the Fund.
Because of the Fund's concentration in investments in Connecticut Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Connecticut and its political subdivisions.
The primary purpose of investing in a portfolio of Connecticut Municipal
Obligations is the special tax treatment accorded Connecticut resident
individual investors. Payment of interest and preservation of principal,
however, are dependent upon the continuing ability of the Connecticut issuers
and/or obligors of state, municipal and public authority debt obligations to
meet their obligations thereunder. Investors should consider the greater risk of
the Fund's concentration versus the safety that comes with a less concentrated
investment portfolio and should compare yields available on portfolios of
Connecticut issues with those of more diversified portfolios, including
out-of-state issues, before making an investment decision.
Because the Fund may concentrate in Participation Certificates that may be
secured by bank letters of credit or guarantees, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such
8
<PAGE>
an investment may entail. These characteristics and risks include extensive
governmental regulations, changes in the availability and cost of capital funds,
and general economic conditions (see "Variable Rate Demand Instruments and
Participation Certificates" in the Statement of Additional Information). These
factors may limit both the amounts and types of loans and other financial
commitments that may be made and the interest rates and fees that may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Fund's investment advisor is in the process of working with
the Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment advisor does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment advisor
does not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at current levels, there can be no assurance
that steps taken in preparation for the Year 2000 will be sufficient to avoid an
adverse impact on the Fund. The Year 2000 problem may also adversely affect
issuers of the securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse effect on the Fund's
performance. The investment advisor is unable to predict what effect, if any,
the Year 2000 problem will have on such issuers. At this time, however, it is
generally believed that municipal issuers may be more vulnerable to Year 2000
issues or problems than will other issuers.
III. MANAGEMENT
ORGANIZATION AND
CAPITAL STRUCTURE
- -------------------------------------
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
9
<PAGE>
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Pursuant to the Investment Management Contract, the Fund pays the
Manager a fee equal to .30% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of the
investment management fee and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Chase Vista Select shares of the Fund under the Shareholder Servicing Agreement.
The fees are accrued daily and paid monthly. Investment management fees and
operating expenses, which are attributable to both Classes of shares of the
Fund, will be allocated daily to each Class of shares based on the percentage
of shares outstanding for each Class at the end of the day.
IV. SHAREHOLDER
INFORMATION
- -------------------------------------
Chase Vista Select shares have been created for the primary purpose of providing
a Connecticut tax-free money market fund product for shareholders of certain
funds distributed by Vista Fund Distributors, Inc. ("VFD"). Shares of the Fund,
other than Chase Vista Select shares, are offered pursuant to a separate
prospectus. Chase Vista Select shares are identical to other shares of the Fund,
with respect to investment objectives and yield, but differ with respect to
certain other matters, including shareholder services and purchase and
redemption of shares.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
(discussed herein) and from investors directly.
Pricing of Fund Shares
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except
10
<PAGE>
days on which the New York Stock Exchange is closed for trading (i.e. national
holidays). The net asset value of a Class is computed by dividing the value of
the Fund's net assets for such Class (i.e., the value of its securities and
other assets less its liabilities, including expenses payable or accrued, but
excluding capital stock and surplus) by the total number of shares outstanding
for such Class. The Fund intends to maintain a stable net asset value at $1.00
per share although there can be no assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Directors will consider whether any action should be initiated. Although the
amortized cost method provides certainty in valuation, it may result in periods
during which the value of an instrument is higher or lower than the price an
investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset value
per share for each Class made after acceptance of the investor's purchase order.
In order to maximize earnings on its portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require the immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve Bank (commonly known as "Federal Funds"). Fund
shares begin accruing income on the day the shares are issued to an investor.
The Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
Purchase of Fund Shares
The Fund does not accept a purchase order until an investor's payment has been
converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Investors may invest in Chase Vista Select shares through VFD or through dealers
with whom VFD has entered into agreements for this purpose as described herein.
Those who have accounts with Participating Organizations may invest in the Chase
Vista Select shares through their Participating Organizations in accordance with
the procedures established by the Participating Organizations. (See "Investments
Through Participating Organizations" herein.) Only Chase Vista Select shares
are offered through this Prospectus. Certain Participating Organizations are
compensated by the Distributor
11
<PAGE>
from its shareholder servicing fee and by the Manager from its management fee
for the performance of these services. An investor who purchase shares through
a Participating Organization that receives payment from the Manager or the
Distributor will become a Chase Vista Select shareholder. All other investors,
and investors who have accounts with Participating Organizations but who do not
wish to invest in the Fund through their Participating Organizations, may invest
in the Fund directly as Class B shareholders of the Fund and not receive the
benefit of the servicing functions performed by a Participating Organization.
Class B shares may also be offered to investors who purchase their shares
through Participating Organizations who, as fiduciaries, may not be legally
permitted to receive compensation from the Distributor or the Manager. The
Manager pays the expenses incurred in the distribution of Class B shares.
Participating Organizations whose clients become Class B shareholders will not
receive compensation from the Manager or Distributor for the servicing they may
provide to their clients. The minimum initial investment in the Chase Vista
Select shares is $2,500. Initial investments may be made in any amount in excess
of the applicable minimums. The minimum amount for subsequent investments is
$100.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent,
which accepts orders for purchases and redemptions from Participating
Organizations, VFD, and from dealers with whom VFD has entered into agreements
for this purpose.
Investments Through Participating Organizations - Purchase of Chase Vista Select
Shares
Investors may, if they wish, invest in the Fund through the Participating
Organizations with which they have accounts. "Participating Organizations" are
securities brokers, banks and financial institutions or other industry
professionals or organizations which have entered into shareholder servicing
agreements with the Distributor with respect to investment of their customer
accounts in the Fund. When instructed by its customer to purchase or redeem Fund
shares, the Participating Organization, on behalf of the customer, transmits to
the Fund's transfer agent a purchase or redemption order, and in the case of a
purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund ("Participating Investors") each purchase and redemption of Fund
shares for the customers' accounts. Also, Participating Organizations may send
periodic account statements to the Participating Investors showing (i) the total
number of Fund shares owned as of the statement closing date, (ii) purchases and
12
<PAGE>
redemptions of Fund shares during the period covered by the statement, and (iii)
the income earned by Fund shares during the statement period (including
dividends paid in cash or reinvested in additional Fund shares). Participant
Investors whose Participating Organizations have not undertaken to provide such
statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly, may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
Initial Direct Purchase of Chase Vista Select Shares
Investors may obtain a current prospectus and the order form necessary to open
an account by telephoning the Chase Vista Service Center at 1-800-34-VISTA.
Mail. To purchase shares of the "Chase Vista Select shares" send a check made
payable to "Chase Vista Select Shares of Connecticut Daily Tax Free Income Fund,
Inc." along with a completed subscription order form to:
Connecticut Daily Tax Free
Income Fund, Inc.
P.O. Box 419392
Kansas City, Missouri 64141-6392
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 non-member 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.
13
<PAGE>
Bank Wire. To purchase shares of the Chase Vista Select shares using the wire
system for transmittal of money among banks, investors should first telephone
the Fund at 1-800-34-VISTA to obtain a new account number. The investor should
then instruct a member commercial bank to wire the money immediately to:
DST Systems, Inc.
ABA #1010-0362-1
CHASE VISTA FUNDS
DDA #751-1-629
For Connecticut Daily Tax Free Income Fund, Inc.
Account of
Account #
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order form.
Investors planning to wire funds should instruct their bank so the wire transfer
can be accomplished before 12 noon, New York City time, on that same day. There
may be a charge by the investor's bank for transmitting the money by bank wire,
and there also may be a charge for use of Federal Funds. The Fund does not
charge investors in the Fund for its receipt of wire transfers. Payment in the
form of a "bank wire" received prior to 12 noon, New York City time, on a Fund
Business Day will be treated as a Federal Funds payment received on that day.
Subsequent Purchases of Chase Vista Select Shares
Subsequent purchases can be made either by bank wire or by mailing a check to:
Chase Vista Funds Service Center
P.O. Box 419392
Kansas City, Missouri 64141-6392
There is a $100 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 re-open an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
Redemption of Shares
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation that it may require). Normally, payment for redeemed
shares is made on the same Fund Business Day after the redemption is effected,
provided the redemption request is received prior to 12 noon, New York City
time. However, redemption payments will not be paid out unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which can take up to 15 days after
investment. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the
14
<PAGE>
shareholder to redeem by written request and to elect one or more of the
additional redemption procedures described below. A shareholder may only change
the instructions indicated on his original subscription order form by
transmitting a written direction to the Fund's transfer agent. Requests to
institute or change any of the additional redemption procedures will require a
signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature. It should be signed and guaranteed by
an eligible guarantor institution which includes a domestic bank, a domestic
savings and loan institution, a domestic credit union, a member bank of the
Federal Reserve system or a member firm of a national securities exchange,
pursuant to the Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written request to
the Fund addressed to:
Chase Vista Funds Service Center
P.O. Box 419392
Kansas City, Missouri 64141-6392
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the shareholder
of record.
Checks
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks that may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of $500 or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's transfer agent to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. The use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Investors who purchase Fund shares by check may not received their redemption
proceeds until the check has cleared, which can take up to 15 days following
the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank governing checking accounts.
15
<PAGE>
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.
Corporations and other entities electing the checking option are required to
furnish a certified resolution or other evidence of authorization in accordance
with the Fund's normal practices. Individuals and joint tenants are not required
to furnish any supporting documentation. Appropriate authorization forms will be
sent by the Fund or its agents to corporations and other shareholders who select
this option. As soon as the authorization forms are filed in good order with the
Fund's agent bank, it will provide the shareholder with a supply of checks.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or to their bank
accounts, both as set forth in the subscription order form or in a subsequent
written authorization. However, all telephone redemption instructions in excess
of $25,000 will be wired directly to such previously designated bank account.
The Fund may accept telephone redemption instructions from any person with
respect to accounts of shareholders who elect this service and thus such
shareholders risk possible loss of principal and interest in the event of a
telephone redemption not authorized by them. To provide evidence of telephone
instructions for Chase Vista Select Shares, the transfer agent will record
telephone conversations with shareholders. The Fund will employ reasonable
procedures to confirm that telephone redemption instructions are genuine, and
will require that shareholders electing such option provide a form of personal
identification. Failure by the Fund to employ such reasonable procedures may
cause the Fund to be liable for the losses incurred by investors due to
unauthorized or fraudulent telephone instructions.
A shareholder making a telephone withdrawal should call the Fund at
1-800-34-VISTA, and state: (i) the name of the shareholder appearing on the
Funds records, (ii) the shareholders account number with
16
<PAGE>
the Fund, (iii) the amount to be withdrawn, (iv) whether such amount is to be
forwarded to the shareholders designated bank account or address, and (v) the
name of the person requesting the redemption. Usually the proceeds are sent to
the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 12
noon, New York City time. Proceeds are sent the next Fund Business Day if the
redemption request is received after 12 noon, New York City time. The Fund
reserves the right to terminate or modify the telephone redemption service in
whole or in part at any time and will notify shareholders accordingly.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Additional exceptions
include any period during which an emergency (as determined by the SEC) exists
as a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholders or his
Participating Organizations account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period, a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares (without regard to the normal $100
requirement for an initial investment) to increase his total net asset value to
the minimum amount.
17
<PAGE>
Specified Amount Automatic
Withdrawal Plan
Shareholders who own $10,000 or more shares of the Fund may elect to withdraw
shares and receive payment from the Fund of a specified amount of $100 or more
automatically on a monthly or quarterly basis in an amount approved and
confirmed by the Manager. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value so that the designated payment is received on approximately the
first or fifteenth day of the month following the end of the selected payment
period. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder. However, the
Fund does not expect that there will be any realizable capital gains.
Dividends and Distributions
The Fund declares dividends equal to all its net investment income (excluding
long-term capital gains and losses, if any, and amortization of market discount)
on each Fund Business Day and pays dividends monthly. There is no fixed dividend
rate. In computing these dividends, interest earned and expenses are accrued
daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Funds fiscal year.
All dividends and distributions of capital gains are automatically invested, at
no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Chase Vista Select shares bear a service fee under the Fund's 12b-1
Plan, the net income of and the dividends payable to the Chase Vista Select
shares will be lower than the net income of and dividends payable to the Chase
Vista Select shares of the Fund. Dividends paid to each Class of shares of the
Fund will, however, be declared and paid on the same days at the same times and,
except as noted with respect to the service fees payable under the Plan, will be
determined in the same manner and paid in the same amounts.
Exchange Privilege
Shareholders of the Chase Vista Select shares may exchange at
18
<PAGE>
relative net asset value for Vista Shares of the Chase Vista U.S. Government
Money Market Fund, the Chase Vista 100% U.S. Treasury Securities Money Market
Fund, the Chase Vista Treasury Plus Money Market Fund, the Chase Vista Federal
Money Market Fund, the Chase Vista Prime Money Market Fund, the Chase Vista Cash
Management Fund, the Chase Vista Tax Free Money Market Fund, the Chase Vista New
York Tax Free Money Market Fund, the Chase Vista California Tax Free Money
Market Fund, and the Chase Vista Select shares of any Reich & Tang Asset
Management L.P. sponsored fund and may exchange at relative net asset value plus
any applicable sales charges, the Chase Vista Select shares of the Fund for the
shares of the non-money market Chase Vista Funds, in accordance with the terms
of the then-current prospectus of the fund being acquired. The prospectus of the
Chase Vista Fund into which shares are being exchanged should be read carefully
prior to any exchange and retained for future reference. With respect to
exchanges into a fund which charges a front-end sales charge, such sales charge
will not be applicable if the shareholder previously acquired his Chase Vista
Select shares by exchange from such fund. Under the exchange privilege, Chase
Vista Select shares may be exchanged for shares of other funds only if those
funds are registered in the states where the exchange may legally be made. In
addition, the account registration for the Chase Vista Funds into which Chase
Vista Select shares are being exchanged must be identical to that of the account
registration for the Fund from which shares are being redeemed. Any such
exchange may create a gain or loss to be recognized for Federal income tax
purposes. Normally, shares of the fund to be acquired are purchased on the
redemption date, but such purchase may be delayed by either Fund up to five
business days if the Fund determined that it would be disadvantaged by an
immediate transfer of the proceeds. (This privilege may be amended or terminated
at any time following 60 day" written notice.) Arrangements have been made for
the acceptance of instructions by telephone to exchange shares if certain
pre-authorizations or indemnifications are accepted and on file. Further
information is available from the Transfer Agent.
Tax Consequences
The purchase of Fund shares will be the purchase of an asset. Dividends paid by
the Fund, that are properly designated by the Fund and derived from Municipal
Obligations and Participation Certificates, will be exempt from regular Federal
income tax, provided the Fund complies with Section 852(b)(5) of the Internal
Revenue Code, but may be subject to Federal alternative minimum tax. These
dividends are referred to as exempt interest dividends. Exempt-interest
dividends derived from obligations issued by or on behalf of the State of
Connecticut or any Connecticut local governments, or their instrumentalities,
authorities or districts will be exempt from Connecticut personal income taxes,
19
<PAGE>
provided the Fund complies with Connecticut law. Exempt-interest dividends
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that Connecticut is prohibited from taxing under the
Constitution, the laws of the United States of America or the laws of
Connecticut also should be exempt from Connecticut personal income taxes
provided the Fund complies with Connecticut law.
Dividends paid from taxable income, if any, and distributions of any realized
short-term capital gains (from tax-exempt or taxable obligations) are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares of the Fund.
The Fund does not expect to realize long-term capital gains, and thus does not
contemplate distributing "capital gain dividends" or having undistributed
capital gain income within the meaning of the Code. The Fund will inform
shareholders of the amount and nature of its income and gains in a written
notice mailed to shareholders not later than 60 days after the close of the
Funds taxable year.
For Social Security recipients, interest on tax-exempt bonds, including "exempt
interest dividends" paid by the Fund, is to be added to adjusted gross income to
determine the amount of Social Security benefits includible in gross income.
Interest on certain private activity bonds will constitute an item of tax
preference subject to the individual alternative minimum tax. Corporations will
be required to include in alternative minimum taxable income 75% of the amount
by which their adjusted current earnings (including tax-exempt interest) exceeds
their alternative minimum taxable income (determined without this tax item). In
certain cases Subchapter S corporations with accumulated earnings and profits
from Subchapter C years will be subject to a tax on "passive investment income",
including tax-exempt interest.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in a taxable gain or loss for the
shareholder if the shareholder receives more or less than it paid for its
shares. An exchange pursuant to the exchange privilege is treated as a sale on
which the shareholder may realize a taxable gain or loss.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations. Battle
Fowler LLP has pointed out that the Internal Revenue Service has announced it
will not ordinarily issue advance rulings on the question of the ownership of
securities or participation interests
20
<PAGE>
therein subject to a put and could reach a conclusion different from that
reached by counsel.
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal governments taxing the interest earned on state
or other municipal bonds. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations.
The Fund may invest a portion of its assets in securities that generate income
that is not exempt from Federal or state income tax. Income exempt from Federal
income tax may be subject to state and local income tax.
Connecticut Income Taxes
The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day, Berry & Howard LLP, special
Connecticut tax counsel to the Fund, exempt-interest dividends correctly
designated as derived from Connecticut Municipal Obligations received by the
Fund are not subject to the Connecticut tax on the Connecticut taxable income of
individuals, trusts and estates (the "Connecticut Personal Income Tax").
Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund that are treated as ordinary
income for Federal income tax purposes are includible in a taxpayer's tax base
for purposes of the Connecticut Personal Income Tax.
While capital gain dividends are not anticipated by the Fund, capital gain
dividends and amounts, if any, in respect of undistributed long-term capital
gains of the Fund would be includible in a taxpayer's tax base for purposes of
the Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that, in the case of
taxpayers holding shares of the Fund as capital assets, capital gain dividends
derived from obligations issued by or on behalf of the State of Connecticut, its
political subdivisions, or any public instrumentality, state or local authority,
district or similar public entity created under Connecticut law are not subject
to the tax.
Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the Federal alternative minimum tax, other than
exempt-interest dividends, derived from Connecticut Municipal Obligations, may
be subject to the net Connecticut minimum tax.
All dividends paid by the Fund, including exempt-interest dividends are
includible in gross income for purposes of the Connecticut Corporation Business
Tax payable by companies taxed as corporations. However, the Corporation
Business Tax allows a deduction for a portion of amounts includible in gross
taxable income thereunder to
21
<PAGE>
the extent they are treated as dividends other than exempt-interest dividends or
capital gain dividends for Federal income tax purposes, but disallows deductions
for expenses related to such amounts.
Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund in their own states and localities.
V. DISTRIBUTION
ARRANGEMENTS
- --------------------------------------------------------------------------------
Rule 12b-1 Fees
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to the Chase Vista Select shareholders. The Fund pays these fees from
its assets on an ongoing basis and therefore, over time, the payment of these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Chase Vista
Select shares of the Fund).
Under the Distribution Agreement, the Distributor serves as distributor of the
Funds shares. For nominal consideration (i.e., $1.00) and as agent for the Fund,
the Distributor solicits orders for the purchase of the Funds' shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Chase Vista Select shares, a service fee equal to .20% per annum
of the Chase Vista Select shares average daily net assets (the "Shareholder
Servicing Fee") for providing personal shareholder services and for the
maintenance of shareholder accounts. The fee is accrued daily and paid monthly.
Any portion of the fee may be deemed to be used by the Distributor for payments
to Participating Organizations with respect to their provision of such services
to their clients or customers who are shareholders of the Chase Vista Select
shares of the Fund. The Class B shareholders will not receive the benefit of
such services from Participating Organizations and, therefore, will not be
assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that the Fund will pay
for (i) telecommunications expenses including the cost of dedicated lines and
CRT terminals, incurred by the Distributor and Participating Organizations in
carrying out their obligations under the Shareholder Servicing Agreement with
respect to Chase Vista Select shares, and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
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<PAGE>
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Chase Vista
Select shares of the Fund, (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Chase Vista Select
shares of the Fund, and (iii) to pay the costs of printing and distributing the
Fund's Prospectus to prospective investors, and to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Funds' Chase Vista Select shares. The Distributor may
also make payments from time to time from its own resources, which may include
the Shareholding Servicing Fee (with respect to Chase Vista Select shares) and
past profits, for the purposes enumerated in (i) above. The Distributor will
determine the amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Fund is required to pay to
the Manager and Distributor for any fiscal year under either the Investment
Management Contract in effect for that year or under the Shareholder Servicing
Agreement in effect for that year.
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<PAGE>
VI. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
in the Class A shares since there were no Chase Vista Select shares issued
during the fiscal year ended January 31, 1999. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A Year Ended January 31,
- ------- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................... 0.025 0.027 0.026 0.030 0.023
Less distributions:
Dividends from net investment income...... ( 0.025) ( 0.027) ( 0.026) ( 0.030) ( 0.023)
--------- --------- --------- --------- ---------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 2.52% 2.74% 2.59% 3.02% 2.29%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 182,227 $ 167,780 $ 136,606 $ 105,826 $ 81,801
Ratios to average net assets:
Expenses.................................. 0.88% 0.89% 0.91% 0.91% 0.88%
Net investment income..................... 2.48% 2.70% 2.56% 2.96% 2.25%
Administration fees waived................ -- -- -- 3.02% 2.02%
Expenses paid indirectly.................. -- -- 0.02% -- --
</TABLE>
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<PAGE>
A Statement of Additional Information (SAI) dated June 1, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and other material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
811-4265
PSMM6-1-399
[GRAPHIC OMITTED]
Chase Vista Funds
Chase Vista Funds Fulfillment Center
393 Manley Street
West Bridgewater, MA 02379-1039
<PAGE>
[logo: CHASE VISTA FUNDS (SM)]
New Account Application
Chase Vista Money Market Funds
(Vista Shares)
Please complete and mail to:
Chase Vista Funds Service Center, P.O. Box 419392,
Kansas City, MO 64141-6392
1. Account Registration
- --------------------------------------------------------------------------------
Please Print name clearly and exactly as account is to be registered
FOR INDIVIDUAL:
Note: To establish an account beneficiary, check TOD box below and designate
beneficiaries in the space provided, or include on a separate page:
_
[_] TOD___________________________________________________________
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
FOR JOINT ACCOUNT:
In the case of joint registration, this account will be registered joint tenants
with rights of survivorship and not tenants in common, unless otherwise stated
by the investor.
Note: To establish an account beneficiary, check TOD box below and designate
beneficiaries in the space provided, or include on a separate page:
_
[_] TOD___________________________________________________________
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
[logo CHASE] APP2-8-199
<PAGE>
[logo: CHASE VISTA FUNDS (SM)] New Account Application
Chase Vista Money Market Funds
(Vista Shares)
FOR A MINOR:
________________________ ___ _________________
[________________________] [___] [_________________]
Custodian First Name M.I. Last Name
Custodian for
________________________ ___ _________________
[________________________] [___] [_________________]
Minor's First Name M.I Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Minor's Social Security Number
__________________________
Under the [__________________________] Uniform Gifts/Transfers to Minors Act.
Name of State
FOR TRUST, CORPORATION, PARTNERSHIP OR OTHER LEGAL ENTITY:
The Registered owner is a:
_ _
[_] Corporation [_] Trust
_ _
[_] Partnership [_] Non-Profit or Charitable Organization
_
[_] Other______________________________________
____________________________________________________________________________
[____________________________________________________________________________]
Name of Entity (If a Trust, include date of agreement and type)
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
Authorized Individual
_ _ _ _ _ _ _ _ _ _ __________________________
[_] [_] [_] -[_] [_] -[_] [_] [_] [_] [_] [__________________________]
Tax I.D. Number Title
2. Mailing Address
- --------------------------------------------------------------------------------
________________________________________ ________________
[________________________________________] [________________]
Street Apt. No.
_______________________________ _______ ________________
[_______________________________] [_______] [________________]
City State Zip
_________________________ _________________________
[(_______)_________________] [(_______)_________________]
Daytime Phone Number Evening Phone Number
____________________________________________________________
[____________________________________________________________]
Country
<PAGE>
3. Initial Investment
$2,500 minimum initial investment per fund/account or $250 initial investment
with a $200 systematic monthly purchase
- --------------------------------------------------------------------------------
A. Please indicate the name of the Fund you wish to invest in and make your
check payable to the Fund(s).
Chase Vista Fund Name (Fund Number) Amount
_ ___________________________
[_] California Tax Free Money Market Fund (99) [$__________________________]
_ ___________________________
[_] Cash Management Money Market Fund (223) [$__________________________]
_ ___________________________
[_] Federal Money Market Fund (353) [$__________________________]
_ ___________________________
[_] New York Tax Free Money Market Fund (3) [$__________________________]
_ ___________________________
[_] Prime Money Market Fund (283) [$__________________________]
_ ___________________________
[_] Select Shares of Connecticut Daily [$__________________________]
Tax Free Income Fund (140)
_ ___________________________
[_] Select Shares of New Jersey Daily [$__________________________]
Municipal Income Fund (141)
_ ___________________________
[_] Tax Free Money Market Fund (2) [$__________________________]
_ ___________________________
[_] Treasury Plus Money Market Fund (678) [$__________________________]
_ ___________________________
[_] U.S. Government Money Market Fund (220) [$__________________________]
_ ___________________________
[_] 100% U.S. Treasury Securities [$__________________________]
Money Market Fund (677)
B. Please have your representative fill in this information if he/she opened
your account. This will avoid a duplicate order.
______________________________________ __________________________________
[______________________________________] [__________________________________]
Trade Date Confirm Number
____________________________________________________________________________
[____________________________________________________________________________]
Account Number
P
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<PAGE>
4. For Dealer Use Only
When opening your account through a representative, have him/her complete
this section
- --------------------------------------------------------------------------------
We guarantee the signature and legal capacity of the applicant.
____________________________________________________________________________
[____________________________________________________________________________]
Dealer/Company Name
__________________________________ ______________________________________
[__________________________________] [______________________________________]
Dealer Number Branch and Region Number (if applicable)
____________________________________________________________________________
[____________________________________________________________________________]
Address
__________________________________ ______________________________________
[__________________________________] [______________________________________]
Representative Name Rep. #
____________________________________________________________________________
[(_______)___________________________________________________________________]
Daytime Phone Number
____________________________________________________________________________
[____________________________________________________________________________]
Authorized Signature
5. Distributions
Please indicate how you would like to receive distributions (check only one)
- --------------------------------------------------------------------------------
_
1. [_] Dividends reinvested in additional shares
_
2. [_] Dividends automatically deposited to your registered bank account
(Please complete Section 7)
_
3. [_] Dividends mailed to your address in Section 2
6. Telephone Privileges
You will be able to execute telephone transactions by calling 1-800-34-VISTA
(800-348-4782) 24 hours a day for automated service, 8:30 am - 7 pm EST to
speak with a service representative
- --------------------------------------------------------------------------------
You will automatically receive:
[X] Yes [ ] No Telephone Purchases -- Your purchase will be deducted from the
account you designate in Section 7 -- $100 minimum.
[X] Yes [ ] No Telephone Exchanges -- Into established Chase Vista Fund(s)
-- $100 minimum. Into new Chase Vista Fund(s) --
$2,500 minimum.
[X] Yes [ ] No Telephone Redemptions -- Proceeds deposited in the bank account
you designate in Section 7 or mailed to your address -- maximum
check amount $25,000.
<PAGE>
-------------------------
staple voided check h |
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e |
7. Bank Account Designation
This section must be completed to permit certain options chosen in
Sections 5, 6, 8 and 9
- --------------------------------------------------------------------------------
Account name must match the name in Section 1. A blank/voided check is required
for account and bank routing information.
____________________________________________________________________________
[____________________________________________________________________________]
Name of Bank Branch
____________________________________________________________________________
[____________________________________________________________________________]
Bank Address City/State/Zip
____________________________________________________________________________
[____________________________________________________________________________]
Type of Account (Checking/Savings)
____________________________________________________________________________
[____________________________________________________________________________]
Account Number
_
[_] Please check this Box to confirm voided check is attached.
8. Systematic Investment Plan
Amounts (minimum $100) will be automatically drawn on your bank account and
invested in your Chase Vista Fund account
- --------------------------------------------------------------------------------
Authorization Form
Invest automatically the amount of $_________________ on or about the
___________ day. Purchases will be made monthly unless you wish to elect
quarterly by checking this box [_]. If the day you selected for your automatic
purchase falls on a holiday or a weekend, the purchase could be delayed. Funds
will be drawn from (check one):
1. [_] my/our bank account indicated in Section 7.
2. [_] my/our Chase Vista Fund Money Market Account and invested in another
Chase Vista Fund, subject to applicable sales charges.
_ _
Fund Name: _______________________________Class of Shares: [_] A [_] B
Your first automatic monthly investment will occur no sooner than two weeks
after the receipt of your application.
<PAGE>
9. Systematic Redemption Plan
This is a convenient way to receive payments from your fund account. This
Plan is subject to minimum account balances, minimum monthly or quarterly
redemptions, and any applicable sales charges dependent upon the class of
shares you own.
- --------------------------------------------------------------------------------
Please make payments of $_______________ prior to the first day of every:
[_] month or [_] quarter beginning with the month of _________________.
Your Application must be received in good order at least two weeks prior to
first actual redemption date.
Check One: [_] Redemption proceeds automatically deposited to the account you
designate in Section 7, or
[_] Issue check on the 25th of the month and make check
payable to:
____________________________________________________________________________
[____________________________________________________________________________]
Individual or Company Name
____________________________________________________________________________
[____________________________________________________________________________]
Street Address City/State/Zip
10. Checkwriting Authorization & Signature
- --------------------------------------------------------------------------------
_
[_] Check here if you would like checkwriting privileges. ($500 minimum per
check.) Only one signature will be required on joint accounts.
Checkwriting drafts will be issued 15 days after account is funded by check, 7
days if funded by Automated Clearing House Purchase.
11. Acknowledgment, Certification & Signatures
This section must be signed in order to open a Chase Vista Fund account
- --------------------------------------------------------------------------------
Under the penalties of perjury, the undersigned certifies that (1) he/she is a
citizen of [_] the United States or [_] (state country) ______________________,
(2) the Social Security Number or Taxpayer Identification Number shown in
Section 1 is correct, and (3) he/she is not subject to backup withholding either
because he/she has not been notified that he/she is subject to backup
withholding as a result of a failure to report all dividends, or the Internal
Revenue Service has notified him/her that he/she is no longer subject to backup
withholding. (If the undersigned is subject to backup withholding, cross out the
words after (3) above.)
By signing this Application, the undersigned (1) appoints his/her broker-dealer
or shareholder servicing agent, and/or authorized sub-agent, as his/her agent
for all transactions on his/her behalf with any Chase Vista Fund; (2) certifies
that he/she has received, reviewed and accepts this Application (including the
services described herein) and the current prospectus(es) of the Chase Vista
Fund(s) in which he/she is investing and accepts the related statement(s) of
additional information; and (3) agrees that all statements in this Application
apply to shares of any Chase Vista Fund or Chase Vista Select Shares of other
funds into which his/her shares are transferred.
Subject to the terms and conditions herein and in the applicable Fund's
prospectus and statement of additional information, the undersigned releases
and agrees to hold harmless the Chase Vista Funds and its agents and/or
sub-agents against any claim, liability, loss, damage, and expense for any act
or failure to
<PAGE>
act in connection with Fund shares, any related investment account, privileges
or services, and oral and written instructions relating thereto. Shareholders
should be aware that Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account.
The undersigned certifies that he/she (1) was not offered any advice or
recommendation on investing in any Fund by any commercial bank; and (2)
understands that (i) no investment account established with respect to the Chase
Vista Funds is a deposit account and neither such account nor Fund shares are
FDIC insured or insured by the Federal Reserve Board or any other agency; (ii)
Fund shares are not obligations of, endorsed by, nor guaranteed by, Chase or any
commercial bank; and (iii) the undersigned must make his/her own investment
decisions and assume all risk of loss -- including possible loss of principal --
resulting from decisions to purchase, exchange or sell shares of any Fund(s).
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
_ _
Check One: [_] U.S. Citizen [_] Resident Alien
_
[_] Non-Resident Alien; Country of Tax Residency ___________________
Individual or Custodial Accounts
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Individual or Custodian Date
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Joint Tenant (if any) Date
Corporations, Partnerships, Trusts, etc.
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Corporate Officer, General Partner, Trustee, etc. Date
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- --------------------------------------------------------------------------------
Please Complete the Following Sections if You Are an Institutional Investor Only
- --------------------------------------------------------------------------------
12. Person(s) Authorized To Conduct Transactions
- --------------------------------------------------------------------------------
The following persons ("Authorized Person(s)") are currently officers, trustees,
general partners, or other authorized agents of the Shareholder. Any _____* of
the Authorized Person(s) is, by lawful and appropriate action of the
Shareholder, a person entitled to give instructions regarding purchases and
redemptions or to make inquiries, regarding your Account.
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
<PAGE>
DST Systems, Inc. ("DST") may, without inquiry, act upon the instructions
(whether verbal, written, or provided by wire, telecommunication, or any other
process) of any person claiming to be an Authorized Person. Neither DST nor any
entity on behalf of which DST is acting shall be liable for any claims or
expenses (including legal fees) or for any losses, resulting from actions taken
upon any instructions believed to be genuine. DST may continue to rely on the
instructions made by any person claiming to be an Authorized Person until it is
informed through an amended Application that the person is no longer an
Authorized Person and it has a reasonable period (not to exceed one week) to
process the amended Application. Provisions of this Application shall be equally
applicable to any successor of DST.
*If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from any
one Authorized Person. Written instructions will require signatures of the
number of Authorized Persons indicated in this space.
13. Certificate of Authority
- --------------------------------------------------------------------------------
Institutional Investors must complete one of the following two Certificates of
Authority.
A. FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
(With a Board of Directors or Board of Trustees).
I, ____________________________________, Secretary of the above-named
Shareholder, do hereby certify that a meeting on _______________, at which a
quorum was present throughout, the Board of Directors (Board of Trustees) of the
shareholder duly adopted a resolution which is in full force and effect and in
accordance with the Shareholder's charter and by-laws, which resolution did the
following: (1) empowered the officer/trustee executing this Application to do
so, on behalf of the Shareholder; (2) empowered the above-named Authorized
Person(s) to effect securities transactions for the Shareholder on the terms
described above; (3) authorized the Secretary to certify, from time to time, the
names and titles of the officers of the Shareholder and to notify DST when
changes in officers occur; and (4) authorized the Secretary to certify that such
a resolution has been duly adopted and will remain in full force and effect
until DST receives a duly enacted amendment to the Certification form.
Witness my hand and seal on behalf of the Shareholder this _______ day
of ___________________, 19_____
Secretary_________________________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the Shareholder.
____________________________________________________________________________
[____________________________________________________________________________]
Certifying Officer of the Corporation or Unincorporated Association
B. PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all the general partners/trustees of the
Shareholder and that they have done the following under the authority of the
Shareholder's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application to do so on behalf of the
shareholder; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the Shareholder on the terms described above; and
(3) authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the shareholder and to notify DST when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until DST receives a further duly executed certification. If there
are not enough spaces here for all the necessary signatures, complete a separate
certificate containing the language of Certificate B and attach it to the
Application.
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
<PAGE>
CONNECTICUT
DAILY TAX FREE
INCOME FUND, INC. 600 Fifth Avenue, New York, NY 10020
(212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1999
RELATING TO THE CONNECTICUT DAILY TAX FREE INCOME FUND, INC.,
EVERGREEN SHARES OF CONNECTICUT DAILY TAX FREE INCOME FUND, INC. AND THE
CHASE VISTA SELECT SHARES OF THE CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
PROSPECTUSES DATED JUNE 1, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current
Prospectuses of Connecticut Daily Tax Free Income Fund, Inc., Evergreen Shares
of Connecticut Daily Tax Free Income Fund, Inc. and Chase Vista Select Shares of
Connecticut Daily Tax Free Income Fund, Inc. (each, the "Fund"), dated June 1,
1999, and should be read in conjunction with each Fund's Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at (800) 221-3079. The Financial Statements of the
Fund have been incorporated by reference into the SAI from Fund's Annual Report.
The Annual Report is available, without charge, upon request by calling the
toll-free number provided. The material relating to Purchase, Redemption and
Pricing of Shares has been incorporated by reference to the Prospectus for each
class of shares.
If you wish to invest in Evergreen Shares of the Fund, you should obtain a
separate Prospectus by writing to State Street Bank and Trust Company, P.O. Box
9021, Boston, Massachusetts 02205-9827 or by calling toll free 1-(800) 807-2840.
If you wish to invest in Chase Vista Select Shares of the Connecticut Daily Tax
Free Income Fund, Inc. you should obtain a separate prospectus by writing to
Chase Vista Service Center, P.O. Box 419392, Kansas City, Missouri 64141-6392 or
by calling (800) 34-VISTA.
This Statement of Additional Information is incorporated by reference into the
respective Prospectus in its entirety.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Table of Contents
- ----------------------------------------------------------------------------------
Fund History....................................2 Capital Stock and Other Securities.....................18
Description of the Fund and its Investments Purchase, Redemption and Pricing Shares................18
and Risks.....................................2 Taxation of the Fund...................................19
Management of the Fund.........................11 Underwriters...........................................21
Control Persons and Principal Holders of Calculation of Performance Data........................21
Securities...................................13 Financial Statements...................................22
Investment Advisory and Other Services.........14 Description of Ratings.................................23
Brokerage Allocation and Other Practices.......17 Taxable Equivalent Yield Tables........................24
</TABLE>
<PAGE>
I. FUND HISTORY
The Fund was incorporated on March 8, 1985 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund. The Fund's investment objectives are to seek as
high a level of current income exempt from regular Federal tax and Connecticut
personal income taxes consistent with preserving capital, maintaining liquidity
and stabilizing principal. No assurance can be given that these objectives will
be achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the State of Connecticut, other states,
territories and possessions of the United States and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from regular Federal income taxation ("Municipal Obligations")
and in (ii) Participation Certificates in Municipal Obligations purchased from
banks, insurance companies or other financial institutions (which, in the
opinion of Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated
as the owner of an interest in the underlying Municipal Obligations for Federal
income tax purposes). Dividends that are properly designated by the Fund as
derived from Municipal Obligations and Participation Certificates will be exempt
from regular Federal income tax provided the Fund qualifies as a regulated
investment company and complies with Section 852(b)(5) of the Internal Revenue
Code of 1986 (the "Code"). Although the Supreme Court has determined that
Congress has the authority to tax the interest on bonds such as the Municipal
Obligations, existing law excludes such interest from regular Federal income
tax. However, such interest, including "exempt-interest dividends" may be
subject to the Federal alternative minimum tax.
Securities, the interest income on which is subject to regular Federal, state
and local income tax, will not exceed 20% of the value of the Fund's total
assets. (See "Federal Income Taxes" herein.) Exempt-interest dividends that are
correctly identified by the Fund as derived from obligations issued by or on
behalf of the State of Connecticut or any Connecticut local governments, or
their instrumentalities, authorities or districts ("Connecticut Municipal
Obligations") will be exempt from Connecticut personal income taxes.
Exempt-interest dividends correctly identified by the Fund as derived from
obligations of Puerto Rico and the Virgin Islands, as well as any other types of
obligations that Connecticut is prohibited from taxing under the Constitution,
the laws of the United States of America or the Connecticut Constitution
("Territorial Municipal Obligations"), also should be exempt from Connecticut
personal income taxes provided the Fund complies with applicable Connecticut
laws. (See "Connecticut Income Taxes" herein.) To the extent that suitable
Connecticut Municipal Obligations are not available for investment by the Fund,
the Fund may purchase Municipal Obligations issued by other states, their
agencies and instrumentalities. The dividends on these will be designated by the
Fund as derived from interest income which will be, in the opinion of bond
counsel to the issuer at the date of issuance, exempt from regular Federal
Income Tax but will be subject to Connecticut personal income taxes. Except as a
temporary defensive measure during periods of adverse market conditions as
determined by the Manager, the Fund will invest at least 65% of its assets in
Connecticut Municipal Obligations, although the exact amount of the Fund's
assets invested in such securities will vary from time to time. The Fund seeks
to maintain an investment portfolio with a dollar-weighted average maturity of
90 days or less and to value its investment portfolio at amortized cost and
maintain a net asset value at $1.00 per share of each Class. There can be no
assurance that this value will be maintained.
The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in Municipal Obligations and in Participation
Certificates, the Fund reserves the right to invest up to 20% of the value of
its total assets in securities, the interest income on which is subject to
regular Federal, state and local income tax. The Fund will invest more than 25%
of its assets in Participation Certificates purchased from banks in industrial
revenue bonds and other Connecticut Municipal Obligations. In view of this
"concentration" in bank Participation Certificates in Connecticut Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
2
<PAGE>
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
Securities means: (i) securities which have or are deemed to have remaining
maturities of 397 days or less and rated in the two highest short-term rating
categories by any two nationally recognized statistical rating organizations
("NRSROs") or in such categories by the only NRSRO that has rated the Municipal
Obligations (collectively, the "Requisite NRSROs"); or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities. While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its shareholders. However, reassessment is not required if the
security is disposed of or matures within five business days of the Manager
becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is determined to
no longer present minimal credit risks, or an event of insolvency occurs with
respect to the issues of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% its total
assets in Municipal Obligations issued by a single issuer unless the Municipal
Obligations are of the highest quality.
The Fund intends to qualify as a "regulated investment company" under the Code.
The Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, regulated investment company securities and other
securities which is limited in respect of any one issuer to not more than 5% in
value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than Government
securities or regulated investment company securities. The limitations described
in this paragraph regarding qualification as a "regulated investment company"
are not fundamental policies and may be revised to the extent applicable Federal
income tax requirements are revised. (See "Federal Income Taxes" herein.)
Description Of Municipal Obligations
As used herein, "Municipal Obligations" include the following as well as
"Variable Rate Demand Instruments" and "Participation Certificates".
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1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities"). They
generally have a maturity at the time of issue of one year or more and are
issued to raise funds for various public purposes such as construction of a
wide range of public facilities, to refund outstanding obligations and to
obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds include states,
counties, cities, towns and other governmental units. The principal of, and
interest on revenue bonds are payable from the income of specific projects
or authorities and generally are not supported by the issuer's general power
to levy taxes. In some cases, revenues derived from specific taxes are
pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by public
authorities to provide funding for various privately operated industrial
facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on IRBs is generally exempt, with certain exceptions, from
regular Federal income tax pursuant to Section 103(a) of the Code, provided
the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Federal Income Taxes" herein.) IRBs are, in most cases,
revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the facilities financed
by the bonds or other guarantor to meet its financial obligations and, in
certain instances, the pledge of real and personal property as security for
payment. If there is no established secondary market for the IRBs, the IRBs
or the Participation Certificates in IRBs purchased by the Fund will be
supported by letters of credit, guarantees or insurance that meet the
definition of Eligible Securities at the time of acquisition and provide the
demand feature which may be exercised by the Fund at any time to provide
liquidity. Shareholders should note that the Fund may invest in IRBs
acquired in transactions involving a Participating Organization. In
accordance with Investment Restriction 6 herein, the Fund is permitted to
invest up to 10% of the portfolio in high quality, short-term Municipal
Obligations (including IRBs) meeting the definition of Eligible Securities
at the time of acquisition that may not be readily marketable or have a
liquidity feature.
2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes are
issued by local agencies and are guaranteed by the United States Department
of Housing and Urban Development. Project notes are also secured by the full
faith and credit of the United States. The Fund's investments may be
concentrated in Municipal Notes of Connecticut issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing. They are paid from general revenues
of municipalities or are refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the event
OF default by the issuer of the commercial paper.
4. Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such
as fire and sanitation vehicles, telecommunications equipment and other
capital assets. Municipal Leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sale contracts (which normally provide for title to
the leased asset to pass eventually to the governmental issuer) have evolved
as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the
issuance of debt. The debt-issuance limitations of many state constitutions
and statutes are deemed to be inapplicable because of the inclusion in many
leases or contracts of "non-appropriation" clauses. These clauses provide
that the governmental issuer has no obligation to make future payments under
the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. To reduce
this risk, the Fund will only purchase Municipal Leases subject to a
non-appropriation clause where the payment of principal and accrued
interest is backed by an unconditional irrevocable letter of credit, a
guarantee, insurance or other comparable undertaking of an approved
financial institution. These types of Municipal Leases may be considered
illiquid and subject to the 10% limitation of investments in illiquid
securities set forth under "Investment Restrictions" contained herein. The
Board of Directors
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may adopt guidelines and delegate to the Manager the daily function of
determining and monitoring the liquidity of Municipal Leases. In making
such determination, the Board and the Manager may consider such factors as
the frequency of trades for the obligation, the number of dealers willing
to purchase or sell the obligations and the number of other potential
buyers and the nature of the marketplace for the obligations, including the
time needed to dispose of the obligations and the method of soliciting
offers. If the Board determines that any Municipal Leases are illiquid,
such lease will be subject to the 10% limitation on investments in illiquid
securities.
5. Any other Federal tax-exempt, and to the extent possible, Connecticut gross
income tax-exempt obligations issued by or on behalf of states and municipal
governments and their authorities, agencies, instrumentalities and political
subdivisions whose inclusion in the Fund would be consistent with the Fund's
investment objectives, policies and risks described herein and permissible
under Rule 2a-7 under the 1940 Act.
Subsequent to its purchase by the Fund, a rated Municipal Obligation may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall promptly
reassess whether the Municipal Obligation presents minimal credit risks and
shall cause the Fund to take such action as the Board of Directors determines is
in the best interest of the Fund and its shareholders. However, reassessment is
not required if the Municipal Obligation is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
In addition, in the event that a Municipal Obligation (i) is in default, (ii)
ceases to be an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is
determined to no longer present minimal credit risks, or an event of insolvency
occurs with respect to the issues of a portfolio security or the provider of any
Demand Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
Variable Rate Demand Instruments and Participation Certificates
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations. They provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised at any
time or at specified intervals not exceeding 397 days depending upon the terms
of the instrument. Variable rate demand instruments that can not be disposed of
properly within seven days in the ordinary course of business are illiquid
securities. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily up to 397 days. The adjustments are
based upon the "prime rate" of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. The Fund decides
which variable rate demand instruments it will purchase in accordance with
procedures prescribed by its Board of Directors to minimize credit risks. A fund
utilizing the amortized cost method of valuation under Rule 2a-7 of the 1940 Act
may purchase variable rate demand instruments only if (i) the instrument is
subject to an unconditional demand feature, exercisable by the Fund in the event
of a default in the payment of principal or interest on the underlying
securities, that is an Eligible Security or (ii) the instrument is not subject
to an unconditional demand feature but does qualify as an Eligible Security and
has a long-term rating by the Requisite NRSROs in one of the two highest rating
categories, or if unrated, is determined to be of comparable quality by the
Fund's Board of Directors. The Fund's Board of Directors may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase Participation Certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A Participation Certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable
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letter of credit or guaranty of a bank (which may be the bank issuing the
Participation Certificate, a bank issuing a confirming letter of credit to that
of the issuing bank, or a bank serving as agent of the issuing bank with respect
to the possible repurchase of the certificate of participation) or insurance
policy of an insurance company that the Board of Directors of the Fund has
determined meets the prescribed quality standards for the Fund. The Fund has the
right to sell the Participation Certificate back to the institution. Where
applicable, the Fund can draw on the letter of credit or insurance after no more
than 30 days notice either at any time or at specified intervals not exceeding
397 days (depending on the terms of the participation), for all or any part of
the full principal amount of the Fund's participation interest in the security
plus accrued interest. The Fund intends to exercise the demand only (i) upon a
default under the terms of the bond documents, (ii) as needed to provide
liquidity to the Fund in order to make redemptions of Fund shares or (iii) to
maintain a high quality investment portfolio. The institutions issuing the
Participation Certificates will retain a service and letter of credit fee (where
applicable) and a fee for providing the demand repurchase feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the participations were purchased by the Fund. The total fees
generally range from 5% to 15% of the applicable prime rate or other interest
rate index. With respect to insurance, the Fund will attempt to have the issuer
of the Participation Certificate bear the cost of the insurance. However, the
Fund retains the option to purchase insurance if necessary, in which case the
cost of insurance will be an expense of the Fund subject to the expense
limitation (see "Expense Limitation" herein). The Manager has been instructed by
the Fund's Board of Directors to continually monitor the pricing, quality and
liquidity of the variable rate demand instruments held by the Fund, including
the Participation Certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to which
the Fund may subscribe. Although these instruments may be sold by the Fund, the
Fund intends to hold them until maturity, except under the circumstances stated
above (see "Federal Income Taxes" herein).
In view of the "concentration" of the Fund in Participation Certificates in
Connecticut Municipal Obligations, which may be secured by bank letters of
credit or guarantees, an investment in the Fund should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. Banks are subject to extensive governmental
regulations which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit. The Fund may invest 25% or more of the net assets of any portfolio in
securities that are related in such a way that an economic, business or
political development or change affecting one of the securities would also
affect the other securities. This includes, for example, securities the interest
upon which is paid from revenues of similar type projects, or securities the
issuers of which are located in the same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The portfolio may contain variable maximum rates set by state law,
which limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent state law contains such limits,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Additionally, the portfolio may contain variable rate
demand Participation Certificates in fixed rate Municipal Obligations. The fixed
rate of interest on these Municipal Obligations will be a ceiling on the
variable rate of the Participation Certificate. In the event that interest rates
increase so that the variable rate exceeds the fixed rate on the Municipal
Obligations, the Municipal Obligations can no longer be valued at par and may
cause the Fund to take corrective action, including the elimination of the
instruments from the portfolio. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rates"*, or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
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* The prime rate is generally the rate charged by a bank to its most
creditworthy customers for short-term loans. The prime rate of a particular bank
may differ from other banks and will be the rate announced by each bank on a
particular day. Changes in the prime rate may occur with great frequency and
generally become effective on the date announced.
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For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) the period remaining until the instrument's next interest
rate adjustment. The maturity of a variable rate demand instrument will be
determined in the same manner for purposes of computing the Fund's
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to be an Eligible Security it will be sold in the market or through
exercise of the repurchase demand feature to the issuer.
When-Issued Securities
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate received on
these Municipal Obligations are each fixed at the time the buyer enters into the
commitment although delivery and payment of the Municipal Obligations normally
take place within 45 days after the date of the Fund's commitment to purchase.
Although the Fund only makes commitments to purchase when-issued Municipal
Obligations with the intention of actually acquiring them, the Fund may sell
these securities before the settlement date if deemed advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way; that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it will not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
income tax.
Stand-by Commitments
When the Fund purchases Municipal Obligations, it may also acquire stand-by
commitments from banks and other financial institutions. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at the Fund's option a
specified Municipal Obligation at a specified price with same day settlement. A
stand-by commitment is the equivalent of a "put" option acquired by the Fund
with respect to a particular Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally will be (i) the acquisition cost of the Municipal Obligation (excluding
any accrued interest that the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the security, plus (ii) all interest accrued on the
security since the last interest payment date during the period the security was
owned by the Fund. Absent unusual circumstances relating to a change in market
value, the Fund will value the underlying Municipal Obligation at amortized
cost. Accordingly, the amount payable by a bank or dealer during the time a
stand-by commitment is exercisable will be substantially the same as the market
value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment will be unconditional and
unqualified. A stand-by commitment will not be transferable by the Fund,
although it can sell the underlying Municipal Obligation to a third party at any
time.
The Fund expects stand-by commitments to generally be available without the
payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio will not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after the
acquisition of each stand-by commitment.
The Fund will enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks. If the issuer of the Municipal Obligation does not meet the eligibility
criteria,
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the issuer of the stand-by commitment will have received a rating which meets
the eligibility criteria or, if not rated, will present a minimal risk of
default as determined by the Board of Directors. The Fund's reliance upon the
credit of these banks and broker-dealers will be supported by the value of the
underlying Municipal Obligations held by the Fund that were subject to the
commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income tax
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment. The acquisition
of a stand-by commitment will not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments the Fund may enter into are subject to certain risks.
These include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation (see
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
Taxable Securities
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its total
assets in securities of the kind described below. The interest income from such
securities is subject to regular Federal or Connecticut state income tax, under
any one or more of the following circumstances: (i) pending investment of
proceeds of sales of Fund shares or of portfolio securities, (ii) pending
settlement of purchases of portfolio securities, and (iii) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% in such taxable securities when, in the opinion
of the Manager, it is advisable to do so because of adverse market conditions
affecting the market for Municipal Obligations. The kinds of taxable securities
in which the Fund may invest are limited to the following short-term,
fixed-income securities (maturing in 397 days or less from the time of
purchase): (i) obligations of the United States Government or its agencies,
instrumentalities or authorities, (ii) commercial paper meeting the definition
of Eligible Securities at the time of acquisition, (iii) certificates of deposit
of domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to any Municipal Obligations or other securities which
the Fund is permitted to own. (See "Federal Income Taxes" herein.)
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund will acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon.
Additionally, the Fund or its custodian shall have possession of the collateral,
which the Fund's Board believes will give it a valid, perfected security
interest in the collateral. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Fund's Board believes that the collateral underlying repurchase
agreements may be more susceptible to claims of the seller's creditors than will
be the case with securities owned by the Fund. It is expected that repurchase
agreements will give rise to income which will not qualify as tax-exempt income
when distributed by the
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<PAGE>
Fund. The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment, together with illiquid securities held by the
Fund, exceeds 10% of the Fund's total net assets. (See Investment Restriction
Number 6 herein.) Repurchase agreements are subject to the same risks described
herein for stand-by commitments.
Connecticut Risk Factors
As referred to in the Prospectus, the safety of an investment in the Fund
depends importantly on the fiscal stability of Connecticut and its subdivisions,
agencies, instrumentalities or authorities, which issue the Connecticut
Municipal Obligations in which the Fund's investments are concentrated.
The following information is only a summary of risk factors associated with
Connecticut. It has been compiled from official government statements and other
publicly available documents. Although the Sponsors have not independently
verified the information, they have no reason to believe that it is not correct
in all material respects.
Manufacturing has historically been of prime economic importance to Connecticut
(sometimes referred to as the "State"). The State's manufacturing industry is
diversified, with transportation equipment (primarily aircraft engines,
helicopters and submarines) the dominant industry, followed by fabricated
metals, non-electrical machinery, and electrical equipment. As a result of a
rise in employment in service-related industries and a decline in manufacturing
employment, however, manufacturing accounted for only 17.09% of total
non-agricultural employment in Connecticut in 1997. Defense-related business
represents a relatively high proportion of the manufacturing sector. On a per
capita basis, defense awards to Connecticut have traditionally been among the
highest in the nation, and reductions in defense spending have had a substantial
adverse impact on Connecticut's economy.
The average annual unemployment rate in Connecticut increased from a low of 3.0%
in 1988 to a high of 7.6% in 1992 and, after a number of important changes in
the method of calculation, was reported to be 5.8% in 1996. Average per capita
personal income of Connecticut residents increased in every year from 1989 to
1997, rising from $25,443 to $36,434. However, pockets of significant
unemployment and poverty exist in several Connecticut cities and towns.
At the end of the 1990-1991 fiscal year, the General Fund had accumulated an
unappropriated deficit of $965,712,000. For the seven fiscal years ended June
30, 1998, the General Fund ran operating surpluses, based on the State's
budgetary method of accounting, of approximately $110,200,000, $113,500,000,
$19,700,000, $80,500,000, $250,000,000 $262,600,000, and $312,900,000,
respectively. General Fund budgets for the biennium ending June 30, 1999, were
adopted in 1997. General Fund expenditures and revenues are expected to exceed
budgeted amounts for the 1998-1999 fiscal year, and a surplus of more than
$170,000,000 is expected, but the Governor is recommending spending
modifications that would reduce the projected surplus to $30,000,000.
During 1991, the State issued a total of $965,710,000 Economic Recovery Notes.
The notes were to be payable no later than June 30, 1996, but as part of the
budget adopted for the biennium ended June 30, 1997, payment of the notes
scheduled to be paid during the 1995-1996 fiscal year was rescheduled to be made
over the four fiscal years ending June 30, 1999. The outstanding notes were
$78,055,000 as of December 1, 1998.
The State's primary method for financing capital projects is through the sale of
general obligation bonds. These bonds are backed by the full faith and credit of
the State. As of December 1, 1998, the State had authorized direct general
obligation bond indebtedness totaling $12,398,200,000, of which $11,057,371,000
had been approved for issuance by the State Bond Commission and $9,814,857,000
had been issued. As of December 1, 1998, net State direct general obligation
indebtedness outstanding was $6,837,131,000.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The University is authorized to issue bonds totaling $962,000,000
to finance the improvements. The University's bonds will be secured by a State
debt service commitment, the aggregate amount of which is limited to
$382,000,000 for bonds issued in the four fiscal years ending June 30, 1999, and
$580,000,000 for bonds issued in the six fiscal years ending June 30, 2005.
In addition, the State has limited or contingent liability on a significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Housing Finance Authority, the Connecticut
Development Authority, the Connecticut Higher Education Supplemental Loan
Authority, the Connecticut Resources Recovery Authority and the Connecticut
Health and Educational Facilities Authority. Such bonds have also been issued by
the cities of Bridgeport and West Haven and the Southeastern Connecticut Water
Authority. As of December 1, 1998, the amount of the bonds outstanding on which
the State has limited or contingent liability totaled $4,054,900,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2002, is currently estimated to be
$12.6
9
<PAGE>
billion, to be met from federal, state and local funds. The State expects to
finance most of its $5.1 billion share of such cost by issuing $4.6 billion of
special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
The State's general obligation bonds are rated Aa3 by Moody's and AA by Fitch.
On October 8, 1998, Standard & Poor's upgraded its ratings of the State's
general obligation bonds from AA- to AA.
The State, its officers and its employees are defendants in numerous lawsuits.
Although it is not possible to determine the outcome of these lawsuits, the
Attorney General has opined that an adverse decision in any of the following
cases might have a significant impact on the State's financial position: (i) a
class action by the Connecticut Criminal Defense Lawyers Association claiming a
campaign of illegal surveillance activity and seeking damages and injunctive
relief; (ii) an action on behalf of all persons with traumatic brain injury who
have been placed in certain State hospitals, and other persons with acquired
brain injury who are in the custody of the Department of Mental Health and
Addiction Services, claiming that their constitutional rights are violated by
placement in state hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; (iii) litigation involving claims by Indian tribes
to portions of the State's land area; and (iv) an action by certain students and
municipalities claiming that the State's formula for financing public education
violates the State's Constitution and seeking a declaratory judgment and
injunctive relief.
As a result of litigation on behalf of black and Hispanic school children in the
City of Hartford seeking "integrated education" with the Greater Hartford
metropolitan area, on July 9, 1996, the State Supreme Court directed the
legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The Superior Court recently ordered
the State to show cause as to whether there has been compliance with the Supreme
Court's ruling. The fiscal impact of this decision might be significant but is
not determinable at this time.
The State's Department of Information Technology is reviewing the State's Year
2000 exposure and developing plans for modification or replacement of existing
software that it believes will prevent significant operations problems. There is
a risk that the plan will not be completed on time, that planned testing will
not reveal all problems, or that systems of others on whom the State relies will
not be timely updated. If the necessary remediations are not completed in a
timely fashion, the Year 2000 problem may have a material impact on the
operations of the State.
General obligation bonds issued by municipalities are payable primarily from ad
valorem taxes on property located in the municipality. A municipality's property
tax base is subject to many factors outside the control of the municipality,
including the decline in Connecticut's manufacturing industry. Certain
Connecticut municipalities have experienced severe fiscal difficulties and have
reported operating and accumulated deficits. The most notable of these is the
City of Bridgeport, which filed a bankruptcy petition on June 7, 1991. The State
opposed the petition. The United States Bankruptcy Court for the District of
Connecticut held that Bridgeport has authority to file such a petition but that
its petition should be dismissed on the grounds that Bridgeport was not
insolvent when the petition was filed. State legislation enacted in 1993
prohibits municipal bankruptcy filings without the prior written consent of the
Governor.
In addition to general obligation bonds backed by the full faith and credit of
the municipality, certain municipal authorities finance projects by issuing
bonds that are not considered to be debts of the municipality. Such bonds
may be repaid only from revenues of the financed project, the revenues from
which may be insufficient to service the related debt obligations.
Regional economic difficulties, reductions in revenues and increases in expenses
could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
Investment Restrictions
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that would be
affected by such a change." The term "majority of the outstanding shares" of the
Fund means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. The Fund may not:
1. Make portfolio investments other than as described under "Description of
the Fund and its Investments and Risks". Any other form of Federal
tax-exempt investment must meet the Fund's high quality criteria, as
determined by the Board of Directors, and be consistent with the Fund's
objectives and policies.
10
<PAGE>
2. Borrow money. This restriction shall not apply to borrowings from banks
for temporary or emergency (not leveraging) purposes. This includes the
meeting of redemption requests that might otherwise require the untimely
disposition of securities, in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing
was made. While borrowings exceed 5% of the value of the Fund's total
assets, the Fund will not make any investments. Interest paid on borrowings
will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in
an amount up to 15% of the value of its total assets and only to secure
borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in
the purchase and sale of put, call, straddle or spread options or in
writing such options. However, securities subject to a demand obligation
and stand-by commitments may be purchased as set forth under "Description
of the Fund and its Investments and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand feature.
The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment together with securities that are not
readily marketable held by the Fund exceed 10% of the Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests. This shall
not prevent the Fund from investing in Municipal Obligations secured by
real estate or interests in real estate.
8. Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under "Description of the
Fund and its Investments and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers" in any
single industry. The Fund may invest more than 25% of its assets in
Participation Certificates and there shall be no limitation on the
purchase of those Municipal Obligations and other obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities. When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those of
the government creating the issuing entity and a security is backed only by
the assets and revenues of the entity, the entity will be deemed to be the
sole issuer of the security. Similarly, in the case of an industrial
revenue bond, if that bond is backed only by the assets and revenues of the
non-government user, then such non-government user will be deemed to be the
sole issuer. If, however, in either case, the creating government or some
other entity, such as an insurance company or other corporate obligor,
guarantees a security or a bank issues a letter of credit, such a guarantee
or letter of credit will be considered a separate security and will be
treated as an issue of such government, other entity or bank. Immediately
after the acquisition of any securities subject to a Demand Feature or
Guarantee (as such terms are defined in Rule 2a-7 of the 1940 Act), with
respect to 75% of the total assets of the Fund, not more than 10% of the
Fund's assets may be invested in securities that are subject to a Guarantee
or Demand Feature from the same institution. However, the Fund may only
invest more than 10% of its assets in securities subject to a Guarantee or
Demand Feature issued by a Non-Controlled Person (as such term is defined
in Rule 2a-7 of the 1940 Act).
11. Invest in securities of other investment companies. The Fund may purchase
unit investment trust securities where such unit trusts meet the
investment objectives of the Fund and then only up to 5% of the Fund's net
assets, except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with a permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, employs the Manager to serve as investment manager
of the Fund. The Manager provides persons satisfactory to the Fund's
11
<PAGE>
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager
or employees of the Manager or its affiliates. Due to the services performed by
the Manager, the Fund currently has no employees and its officers are not
required to devote their full-time to the affairs of the Fund.
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.
Steven W. Duff, 45 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank which he was
associated with from June 1981 to August 1994. Mr. Duff is also President and a
Director/Trustee of 13 other funds in the Reich & Tang Fund Complex, President
of Back Bay Funds, Inc., Director of Pax World Money Market Fund, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc., and President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
Dr. W. Giles Mellon, 68 - Director of the Fund, is Professor of Business
Administration in the Graduate School of Management, Rutgers University which he
has been associated with since 1966. His address is Rutgers University Graduate
School of Management, 92 New Street, Newark, New Jersey 07102. Dr. Mellon is
also a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Robert Straniere, 58 - Director of the Fund, has been a member of the New York
State Assembly and a partner with the Straniere Law Firm since 1981. His address
is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a
Director/Trustee of 15 other funds in the Reich & Tang Fund Complex, and
Director of Life Cycle Mutual Funds, Inc.
Dr. Yung Wong, 60 - Director of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly General Partner
of Abacus Partners Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (a provider of telecommunications equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a Director/Trustee of 15 other funds in the Reich & Tang Fund
Complex, and is also a Trustee of Eclipse Financial Asset Trust.
Molly Flewharty, 48 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 16
other funds in the Reich & Tang Fund Complex.
Lesley M. Jones, 50 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of 13
other funds in the Reich & Tang Fund Complex.
Dana E. Messina, 42 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated with from
December 1980 to September 1993. Ms. Messina is also Vice President of 14 other
funds in the Reich & Tang Fund Complex.
Dawn Fischer 52 - Vice President of the Fund, is a Managing Director of
Thornburg Management Co., Inc. with which she has been associated since August
1982. Her address is 119 East Marcy Street, Suite 202, Santa Fe, New Mexico
87501. Ms. Fischer is also Secretary and Assistant Treasurer of Thornburg
Investment Trust and Secretary of Limited Term Municipal Fund, Inc.
Bernadette N. Finn, 51 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. which she was
associated with from September 1970 to September 1993. Ms. Finn is also
Secretary of 13 other funds in the Reich & Tang Fund Complex, and a Vice
President and Secretary of 5 funds in the Reich & Tang Fund Complex.
Richard DeSanctis, 42 - Treasurer of the Fund, has been Assistant Treasurer of
NEIC since September 1993. Mr. DeSanctis was formerly Controller of Reich &
Tang, Inc., from January 1991 to September 1993 and Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. DeSanctis is also Treasurer of 17 other
funds in the Reich & Tang Fund Complex, and is Vice President and Treasurer of
Cortland Trust, Inc.
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<PAGE>
Rosanne Holtzer, 34 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of 18
other funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the period ended January 31, 1999, all of which consisted of directors' fees
paid to the three disinterested directors, pursuant to the terms of the
Investment Management Contract (see "Investment Advisory and Other Services"
herein).
Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $3,000 and a fee of $500 for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund. (See "Compensation Table".)
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name of Person, Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation From
Position From the Fund Benefits Accrued as Part Benefits Upon Retirement Fund and Fund Complex Paid
of Fund Expenses to Directors*
Dr. W. Giles Mellon, $5,000 0 0 $58,500 (16 Funds)
Director
Robert Straniere, $5,000 0 0 $58,500 (16 Funds
Director
Dr. Yung Wong, $5,000 0 0 $58,500 (16 Funds)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending January 31, 1999. 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.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On May 1, 1999 there were 169,334,854 Class A shares of the Fund outstanding,
824,317 Class B shares outstanding and no Evergreen or Chase Vista Select
shares outstanding. As of May 1, 1999, the amount of shares owned by all
officers and directors of the Fund, as a group, was less than 1% of the
outstanding shares. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding shares as of May 1, 1999:
Nature of
Name and Address % of Class Ownership
Class A Shares
IFTC /Vista Mutual Funds 26% Beneficial
C/O Vista Institutional Dept.
127 West 10th Street
Kansas City, MO 64105
Evergreen Invest Services 17% Beneficial
201 S. College Street
Charlotte, NC 28288-1195
Class B Shares
Federick R. Walsh, Jr. 46% Record
19 Dingletown Road
Greenwich, CT 06830
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<PAGE>
P.F. Koehler 27% Record
P.O. Box 269
Cos Cob, CT 06807
Lewco Securities Corp. 16% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Barry & Barbara Schwimmer 6% Record
16 Cranbury Road
Westport, CT 06880
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was, as of May 31, 1999, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $13.4
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of eighteen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaced
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the Manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management
Limited Partnerships, Greystone Partners, L.P. Harris Associates, L.P. Jurika &
Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McCullough, L.P., and Westpeak Investment Advisors, L.P. These affiliates in
the aggregate are investment advisors or managers of more that 80 other
registered investment companies.
The recent name change did not result in a change of control of the Manager and
has no impact upon the Manager's performance of its responsibilities and
obligations.
On July 17, 1998, the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the annual continuance of the Investment Management Contract
and extended the term to July 31, 1999. It is continued in force thereafter for
successive twelve-month periods beginning each August 1, provided that such
majority vote of the Fund's outstanding voting securities or by a majority of
the directors who are not parties to the Investment Management Contract or
interested persons of any such party, by votes cast in person at a meeting
called for the purpose of voting on such matter.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
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<PAGE>
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The Investment Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
Under the Investment Management Contract, the Manager receives from the Fund a
fee (the "Management Fee") equal to .30% per annum of the Fund's average daily
net assets. The fees are accrued daily and paid monthly. The Manager, at its
discretion, may voluntarily waive all or a portion of the Management Fee.
Pursuant to the Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities, and (iii) perform such other services as
the Fund may from time to time request of the Manager. The personnel rendering
such services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee (the "Administrative Services Fee") equal
to .21% per annum of the Fund's average daily net assets. For the Funds' fiscal
years ended January 31, 1999, 1998 and 1997, the Manager received a fee of
$364,904, $291,418and $252,612.
For the Fund's fiscal years ended January 31, 1999, 1998 and 1997, the fee paid
to the Manager under the Investment Management Contract was $521,291, $416,312
and $360,874, respectively, of which none was voluntarily waived. The Fund's net
assets at the close of business on January 31, 1999 totaled $182,616,236. The
Manager may waive its rights to any portion of the Management Fee and may use
any portion of the Management Fee for purposes of shareholder and administrative
services and distribution of the Fund's shares.
The Manager at its discretion may waive its rights to any portion of the
Management Fee or the Administrative Services Fee and may use any portion of the
management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares. There can be no assurance that such fees will
be waived in the future (see "Distribution and Service Plan" herein).
Investment management fees and operating expenses which are attributable to both
Classes of the Fund will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, the Manager from its Management Fee and the Fund
itself. Expenses incurred in the distribution of Class B shares and the
servicing of Class B shares shall be paid by the Manager.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract, (See
"Distribution and Service Plan" herein), to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Fund's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the Fund
for its excess expenses as described above, the Fund has, under the Investment
Management Contract, confirmed its obligation for payment of all its other
expenses. This includes all operating expenses, taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, SEC registration fees and expenses, state securities laws
registration fees and expenses, expenses of preparing and printing the Fund's
prospectus for delivery to existing shareholders and of printing application
forms for shareholder accounts, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein. The management of the Fund intends to do so
whenever it appears advantageous to the Fund. The Fund's expenses for employees
and for such services are among the expenses subject to the expense limitation
described above.
15
<PAGE>
Distribution And Service Plan
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC requires that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Evergreen and
Chase Vista Select shares) with Reich & Tang Distributors, Inc., (the
"Distributor"), as distributor of the Fund's shares.
The Class A, Evergreen and Chase Vista Select shares will be offered to
investors who desire certain additional shareholder services from Participating
Organizations that are compensated by the Fund's Manager and Distributor for
such services. For its services under the Shareholder Servicing Agreement, the
Distributor receives from the Fund a fee equal to .20% per annum of the Fund's
average daily net assets of the Class A, Evergreen and Chase Vista Select shares
of the Fund (the "Shareholder Servicing Fee"). The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for purposes of distribution of the Fund's Class A, Evergreen and Chase Vista
Select shares and for payments to Participating Organizations with respect to
servicing their clients or customers who are Class A, Evergreen and Chase Vista
Select shareholders of the Fund. The Class B shareholders will not receive the
benefit of such services from Participating Organizations and, therefore, will
not be assessed a Shareholder Servicing Fee.
The following information applies only to the Class A shares of the Fund. For
the Fund's fiscal year ended January 31, 1999, the amount payable to the
Distributor under the Distribution and Service Plan and Shareholder Servicing
Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled
$347,225, none of which was waived. During the same period, the Manager and
Distributor made payments under the plan totaling $597,374, of which $577,094
was paid to or on behalf of Participating Organizations. For the Fund's fiscal
year ended January 31, 1998, the amount payable to the Distributor under the
Distribution and Service Plan and Shareholder Servicing Agreement adopted
thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled $277,469, none of
which was waived. During the same period, the Manager and Distributor made
payments under the plan totaling $524,519, of which $494,812 was paid to or on
behalf of Participating Organizations. For the Fund's fiscal year ended January
31, 1997, the amount payable to the Distributor under the Distribution and
Service Plan and Shareholder Servicing Agreement adopted thereunder pursuant to
Rule 12b-1 under the 1940 Act, totaled $240,579, none of which was waived.
During the same period, the Manager and Distributor made payments under the plan
totaling $485,247, of which $430,874 was paid to or on behalf of Participating
Organizations. The excess of such payments over the total payments the
Distributor received from the Fund under the Plan represents distribution and
servicing expenses funded by the Manager from its own resources including the
management fee. For the fiscal year ended January 31, 1999, the total amount
spent pursuant to the Plan for Class A shares was .34% of the average daily net
assets of the Fund, of which .20% of the average daily net assets was paid by
the Fund to the Distributor, pursuant to the Shareholder Servicing Agreement and
an amount representing .14% was paid by the Manager (which may be deemed an
indirect payment by the Fund).
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, the Fund will
pay for (i) telecommunications expenses, including the cost of dedicated lines
and CRT terminals, incurred by the Participating Organizations and Distributor
in carrying out their obligations under the Shareholder Servicing Agreement with
respect to the Class A shares and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee, and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A, Evergreen and Chase Vista
Select shares of the Fund, (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Fund's shares, and
(iii) to pay the costs of printing and distributing the Fund's prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee and past profits for
the purpose enumerated in (i) above. The Distributor determines the amount of
such payments made pursuant to the Plan, provided that such
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payments will not increase the amount which the Fund is required to pay to the
Manager or the Distributor for any fiscal year under the Investment Management
Contract or the Shareholder Servicing Agreement in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan was most recently approved on January 21, 1999 to continue in effect
for one year. Thereafter it may continue in effect for successive annual periods
provided it is approved by the Class A, Evergreen and Chase Vista Select
shareholders or by the Board of Directors. This includes a majority of directors
who are not interested persons of the Fund and who have no direct or indirect
interest in the operation of the Plan or in the agreements related to the Plan.
The Plan further provides that it may not be amended to increase materially the
costs which may be spent by the Fund for distribution pursuant to the Plan
without Class A, Evergreen and Chase Vista Select shareholder approval, and the
other material amendments must be approved by the directors in the manner
described in the preceding sentence. The Plan may be terminated at any time by a
vote of a majority of the disinterested directors of the Fund or the Fund's
Class A, Evergreen and Chase Vista Select shareholders.
Custodian And Transfer Agent
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020, is transfer agent and dividend agent for the shares of the Fund. State
Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827
is the registrar, transfer agent and dividend disbursing agent for the Evergreen
Shares of the Fund. DST Systems, Inc., 127 West 10th Street, Kansas City,
Missouri 64105 is transfer agent and dividend disbursing agent for the Chase
Vista Select shares of the Fund. The custodian and transfer agents do not assist
in, and are not responsible for, investment decisions involving assets of the
Fund.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Matters in connection with Connecticut law are passed upon by Day, Berry and
Howard LLP, Cityplace, Hartford, Connecticut 06103.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade at the best
price and execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases Participation
Certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the Participation Certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund are made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition,
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when purchases or sales of the same security for the Fund and for other
investment companies managed by the Manager occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price advantage
available to large denomination purchasers or sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the shares into separate series of
stock, one for each of the portfolios that may be created. Each share of any
series of shares when issued has equal dividend, distribution and liquidation
rights within the series for which it was issued and each fractional share has
those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares of all series have identical voting rights,
except where, by law, certain matters must be approved by a majority of the
shares of the unaffected series. Shares will be voted in the aggregate. There
are no conversion or preemptive rights in connection with any shares of the
Fund. All shares, when issued in accordance with the terms of the offering, will
be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder. The Fund is subdivided into four classes of
common stock: Class A, Class B, Evergreen Class and Chase Vista Select Class.
Each share, regardless of class, represents an interest in the same portfolio of
investments and has identical voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations, qualifications, designations and
terms and conditions, except: (i) the Class A, Class B, Evergreen Class and
Chase Vista Select Class have different class designations, (ii) only the Class
A, Evergreen and Chase Vista Select shares are assessed a service fee pursuant
to the Rule 12b-1 Distribution and Service Plan of the Fund of .20% of each
Class' shares' average daily net assets, (iii) only the holders of the Class A
shares are entitled to vote on matters pertaining to the Plan and any related
agreements in accordance with provisions of Rule 12b-1, and (iv) the exchange
privilege permits stockholders to exchange their shares only for shares of the
same class of an investment company that participates on an exchange privilege
program with the Fund except for the Evergreen Class, which does not offer an
exchange privilege. Payments that are made under the Plan will be calculated and
charged daily to the appropriate class prior to determining daily net asset
value per share and dividends/distributions.
Under its Articles of Incorporation, the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so. In
that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
or special meetings only (i) for the election (or re-election) of directors,
(ii) for approval of the revised investment advisory contracts with respect to a
particular class or series of stock, (iii) for approval of the Fund's
distribution agreement with respect to a particular class or series of stock,
and (iv) upon the written request of shareholders entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act, including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the Directors may consider necessary or
desirable. Each Director serves until his successor is elected or qualified or
until such Director sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to the purchase, redemption and pricing of shares for each
Class of shares is located in the Shareholder Information section of each
prospectus and is hereby incorporated by reference.
Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. The net asset value of a Class is computed
by dividing the value of the Fund's net assets for such Class (i.e., the value
of
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its securities and other assets less its liabilities, including expenses payable
or accrued but excluding capital stock and surplus) by the total number of
shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Directors will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the value of an instrument
is higher or lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Directors determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Description of the Fund
and its Investments and Risks" herein.)
IX. TAXATION OF THE FUND
Federal Income Taxes
The Fund has elected to qualify under the Code as a "regulated investment
company" that distributes "exempt-interest dividends" and intends to continue to
qualify as long as qualification is in the best interests of its shareholders
because qualification as a regulated investment company relieves the Fund of
liability for Federal income taxes to the extent its earnings are distributed in
accordance with the applicable provisions of the Code.
The Fund's policy is to distribute as dividends each year 100% and in no event
less than 90% of its net tax-exempt interest income. Exempt-interest dividends
are dividends paid by the Fund that are attributable to interest on obligations,
the interest on which is exempt from regular Federal income tax, and are
designated by the Fund as exempt-interest dividends in a written notice mailed
to the Fund's shareholders not later than 60 days after the close of its taxable
year. The percentage of the total dividends paid by the Fund during any taxable
year that qualifies as exempt-interest dividends will be the same for all
shareholders receiving dividends during the year.
Exempt-interest dividends are excludable from the Fund's shareholders' gross
income under Section 103(a) of the Code, although the amount of such interest
will have to be disclosed on the shareholder's federal tax return. However, a
shareholder should consult tax advisors with respect to whether exempt-interest
dividends retain the exclusion under Section 103 of the Code if such shareholder
will be treated as a "substantial user" or "related person" under Section 147(a)
of the Code with respect to some or all of the "private activity" bonds, if any,
held by the Fund. If a shareholder receives an exempt-interest dividend with
respect to any share and such share has been held for six months or less, then
any loss on the sale or exchange of such share will be disallowed to the extent
of the amount of such exempt-interest dividend. The Code provides that interest
on indebtedness incurred, or continued, to purchase or carry certain tax-exempt
securities, such as shares of the Fund, is not deductible. Therefore, among
other consequences, a certain proportion of interest on indebtedness incurred,
or continued, to purchase or carry securities on margin may not be deductible
during the period an investor holds shares of the Fund. For Social Security
recipients, interest on tax-exempt bonds, including exempt-interest dividends
paid by the Fund, is added to adjusted gross income for purposes of computing
the amount of social security benefits includible in gross income. The amount of
tax-exempt interest received, including exempt-interest dividends will have to
be disclosed on the shareholders' Federal income tax returns. Taxpayers are
required to include as an item of tax preference for purposes of the Federal
alternative minimum tax all tax-exempt interest on "private activity" bonds
(generally, a bond issue in which more than 10% of the proceeds are used in a
non-governmental trade or business, other than Section 501(c)(3) bonds) issued
after August 7, 1986. Thus, this provision will apply to any portion of the
exempt-interest dividends from the Fund's assets that are attributable to such
private activity bonds less any deductions (not allowable in computing Federal
Income Tax) which would have been allowable if such interest were includable in
gross income. Corporations are required to increase their alternative minimum
taxable income for purposes of calculating their alternative minimum tax
liability by 75% of the amount by which the adjusted current earnings (which
will include tax-exempt interest) of the corporation exceeds its alternative
minimum taxable income
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(determined without this item). In addition, in certain cases, Subchapter S
corporations with accumulated earnings and profits from Subchapter C years are
subject to a minimum tax on excess "passive investment income," which includes
tax-exempt interest.
Although not intended, it is possible that the Fund may realize short-term or
long-term capital gains or losses from its portfolio transactions. The Fund may
also realize short-term or long-term capital gains upon the maturity or
disposition of securities acquired at discounts resulting from market
fluctuations. Short-term capital gains are taxable to shareholders as ordinary
income when they are distributed. Any net capital gains (the excess of net
realized long-term capital gain over net realized short-term capital loss) will
be distributed annually to the Fund's shareholders. The Fund will have no tax
liability with respect to distributed net capital gains and the distributions
will be taxable to shareholders as long-term capital gains regardless of how
long the shareholders have held Fund shares. However, Fund shareholders who at
the time of such a net capital gain distribution have not held their Fund shares
for more than 6 months, and who subsequently dispose of those shares at a loss,
are required to treat such loss as a long-term capital loss to the extent of the
net capital gain distribution. Distributions of net capital gain will be
designated as a "capital gain dividend" in a written notice mailed to the Fund's
shareholders not later than 60 days after the close of the Fund's taxable year.
Capital gains realized by corporations are generally taxed at the same rate as
ordinary income. Generally, capital gains are taxable at a maximum rate of 20%
to non-corporate shareholders who have a holding period of more than 12 months.
Corresponding maximum rate rules apply with respect to capital gains dividends
distributed by the Fund, without regard to the length of time shares have been
held by the shareholder.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
net long-term capital gain over net short-term capital loss) for each taxable
year. These distributions will be taxable to shareholders as ordinary income.
The Fund will be subject to Federal income tax on any undistributed investment
company taxable income. To the extent such income is distributed it will be
taxable to shareholders as ordinary income. Expenses paid or incurred by the
Fund will be allocated between tax-exempt and taxable income in the same
proportion as the amount of the Fund's tax-exempt income bears to the total of
such exempt income and its gross income (excluding from gross income the excess
of capital gains over capital losses). If the Fund does not distribute at least
98% of its ordinary income and 98% of its capital gain net income for a taxable
year, the Fund will be subject to a nondeductible 4% excise tax on the excess of
such amounts over the amounts actually distributed.
If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund is generally required to withhold 31% of taxable
interest, dividend payments, and proceeds from the redemption of shares of the
Fund.
Dividends and distributions to shareholders are treated in the same manner for
Federal income tax purposes whether received in cash or reinvested in additional
shares of the Fund.
With respect to the variable rate demand instruments, including Participation
Certificates therein, the Fund has obtained and is relying on the opinion of
Battle Fowler LLP, counsel to the Fund, that it will be treated for Federal
income tax purposes as the owner of an interest in the underlying Municipal
Obligations and the interest thereon will be exempt from regular Federal income
taxes to the Fund and its shareholders to the same extent as interest on the
underlying Municipal Obligation. Battle Fowler LLP has pointed out that the
Internal Revenue Service has announced that it will not ordinarily issue advance
rulings on the question of ownership of securities or participation interests
therein subject to a put and, as a result, the Internal Revenue Service can
reach a conclusion different from that reached by counsel.
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered, and that there is no constitutional prohibition against the Federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the Federal government to
regulate and control bonds such as Municipal Obligations and to tax the interest
on such bonds in the future. The decision does not, however, affect the current
exemption from regular income taxation of the interest earned on the Municipal
Obligations in accordance with Section 103 of the Code.
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal is introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends will be adversely affected
and the Fund will reevaluate its investment objective and policies and consider
changes in the structure.
Connecticut Income Taxes
The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. With respect to "exempt-interest dividends" that are paid by the
Fund, in the opinion of Day, Berry & Howard
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LLP, special Connecticut tax counsel to the Fund, exempt-interest dividends
correctly designated as derived from Connecticut Municipal Obligations received
by the Fund are not subject to the Connecticut Personal Income Tax.
Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund (including, if any, capital gain
dividends) are includible in the tax base for the Connecticut Personal Income
Tax except that, in the case of taxpayers holding shares of the Fund as capital
assets, capital gain dividends derived from obligations issued by or on behalf
of the State of Connecticut, its political subdivisions, or any public
instrumentality, state or local authority, district or similar public entity
created under Connecticut law are not subject to the tax.
Exempt-interest dividends, except those derived from Connecticut Municipal
Obligations, are subject to the net Connecticut minimum tax. Exempt-interest
dividends derived from Connecticut Municipal Obligations are not exempt from the
Connecticut Corporation Business Tax payable by companies taxed as corporations.
Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, solicits orders for the purchase of the Fund's
shares, provided that any subscriptions and orders are not binding on the Fund
until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution will result in loss to shareholders or change in
the Fund's net asset value. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register ad dealers pursuant to state
law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's yield figure,
which is based on a chosen seven-day period, is computed as follows: the Fund's
return for the seven-day period is obtained by dividing the net change in the
value of a hypothetical account having a balance of one share at the beginning
of the period by the value of such account at the beginning of the period
(expected to always be $1.00). This is multiplied by (365/7) with the resulting
annualized figure carried to the nearest hundredth of one percent. For purposes
of the foregoing computation, the determination of the net change in account
value during the seven-day period reflects (i) dividends declared on the
original share and on any additional shares, including the value of any
additional shares purchased with dividends paid on the original share, and (ii)
fees charged to all shareholder accounts. Realized capital gains or losses and
unrealized appreciation or depreciation of the Fund's portfolio securities are
not included in the computation. Therefore, annualized yields may be different
from effective yields quoted for the same period.
The Fund's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.
The Fund may from time to time advertise its tax equivalent current yield. The
tax equivalent yield for each Class is computed based upon a 30-day (or one
month) period ended on the date of the most recent balance sheet included in
this Statement of Additional Information. It is computed by dividing that
portion of the yield of the Fund (as computed
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pursuant to the formulae previously discussed) which is tax exempt by one minus
a stated income tax rate and adding the quotient to that portion, if any, of the
yield of the Fund that is not tax exempt. The tax equivalent yield for the Fund
may also fluctuate daily and does not provide a basis for determining future
yields.
The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor needs to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt. See "Taxable Equivalent
Yield Table" herein.
The Fund's Class A shares' yield for the seven day period ended January 31, 1999
was 2.13%, which is equivalent to an effective yield of 2.15%. The Fund's Class
B shares' yield for the seven day period ended January 31, 1999 was 2.32%, which
is equivalent to an effective yield of 2.34%. There is no seven-day yield
available for the Evergreen and Chase Vista Select shares since these shares
were not yet in existence as of January 31, 1999.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended January
31, 1999 and the report therein of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
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DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s Two Highest Municipal Bond
Ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con. ( c ) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s Two Highest Ratings of State
and Municipal Notes and Other Short-Term Loans:
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used are as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services Two Highest Debt Ratings:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s Two Highest Commercial Paper
Ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
- --------------------------------------
* As described by the rating agencies.
23
<PAGE>
CORPORATE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective until December 31, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
Corporate $0- $50,001- $75,001- $100,001- $335,001- $10,000,001- $15,000,001- $18,333,334
Return 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 and over
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
Federal
Tax Rate 15.00% 25.00% 34.00% 39.00% 34.00% 35.00% 38.00% 35.00%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
State
Tax Rate 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
Combined
Marginal
Tax Rate 22.23% 31.38% 39.61% 44.19% 39.61% 40.53% 43.27% 40.53%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------- -------------------------------------------------------------------------------------------------------------
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
- ---------------------- -------------------------------------------------------------------------------------------------------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
2.00% 2.57% 2.91% 3.31% 3.58% 3.31% 3.36% 3.53% 3.36%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -------------
2.50% 3.21% 3.64% 4.14% 4.48% 4.14% 4.20% 4.41% 4.20%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -----------
3.00% 3.86% 4.37% 4.97% 5.37% 4.97% 5.04% 5.29% 5.04%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ----------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
3.50% 4.50% 5.10% 5.80% 6.27% 5.80% 5.88% 6.17% 5.88%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -----------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
4.00% 5.14% 5.83% 6.62% 7.17% 6.62% 6.73% 7.05% 6.73%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -----------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -----------
4.50% 5.79% 6.56% 7.45% 8.06% 7.45% 7.57% 7.93% 7.57%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- -----------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
5.00% 6.43% 7.29% 8.28% 8.96% 8.28% 8.41% 8.81% 8.41%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
5.50% 7.07% 8.01% 9.11% 9.85% 9.11% 9.25% 9.70% 9.25%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
6.00% 7.71% 8.74% 9.94% 10.75% 9.94% 10.09% 10.58% 10.09%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
6.50% 8.36% 9.47% 10.76% 11.65% 10.76% 10.93% 11.46% 10.93%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
7.00% 9.00% 10.20% 11.59% 12.54% 11.59% 11.77% 12.34% 11.77%
- ---------------- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
24
<PAGE>
TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective until December 31, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- ---------------------- ----------------- ---------------- ---------------- ------------------- --------------- ---------------
Single $0- $10,001- $25,751- $62,451- $130,250- $283,151
Return 10,000 25,750 62,450 130,250 283,150 and over
- ---------------------- ----------------- ---------------- ---------------- ------------------- --------------- ---------------
- ---------------------- ----------------- ---------------- ---------------- ------------------- --------------- ---------------
Joint $0- $20,001- $43,051- $104,051- $158,551- $283,151
Return 20,000 43,050 104,050 158,551 283,150 and over
- ---------------------- ----------------- ---------------- ---------------- ------------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Rate Is. . .
- ------------------------------------------------------------------------------------------------------------------------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
Federal
Tax Rate 15.00% 15.00% 28.00% 31.00% 36.00% 39.60%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
State
Tax Rate 3.00% 4.50% 4.50% 4.50% 4.50% 4.50%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
Combined
Tax Rate 17.55% 18.83% 31.24% 34.11% 38.88% 42.32%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields
With Taxable Income Yields
- ------------------------------------------------------------------------------------------------------------------------------
- ---------------------- -------------------------------------------------------------------------------------------------------
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
- ---------------------- -------------------------------------------------------------------------------------------------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
2.00% 2.43% 2.46% 2.91% 3.04% 3.27% 3.47%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
2.50% 3.03% 3.08% 3.64% 3.79% 4.09% 4.33%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
3.00% 3.64% 3.70% 4.36% 4.55% 4.91% 5.20%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
3.50% 4.24% 4.31% 5.09% 5.31% 5.73% 6.07%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
4.00% 4.85% 4.93% 5.82% 6.07% 6.54% 6.93%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
4.50% 5.46% 5.54% 6.54% 6.83% 7.36% 7.80%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
5.00% 6.06% 6.16% 7.27% 7.59% 8.18% 8.67%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
6.00% 7.28% 7.39% 8.73% 9.11% 9.82% 10.40%
- --------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
6.50% 7.88% 8.01% 9.45% 9.86% 10.63% 11.27%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
7.00% 8.49% 8.62% 10.18% 10.62% 11.45% 12.14%
- ---------------------- ----------------- ---------------- ----------------- --------------- ---------------- -----------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
25
<PAGE>
